EXHIBIT 99.2
The Agreement and Plan of Merger has been included to provide investors and
security holders with information regarding its terms. It is not intended to
provide any other factual information about NICE. The representations,
warranties and covenants contained in the Agreement and Plan of Merger were made
only for purposes of such agreement and as of the specific dates therein, were
solely for the benefit of the parties to such agreement, and may be subject to
limitations agreed upon by the contracting parties, including being qualified by
confidential disclosures exchanged between the parties in connection with the
execution of the Agreement and Plan of Merger. The representations and
warranties may have been made for the purposes of allocating contractual risk
between the parties to the agreement instead of establishing those matters as
facts, and may be subject to standards of materiality applicable to the
contracting parties that differ from those applicable to investors. Investors
are not third party beneficiaries under the Agreement and Plan of Merger and
should not rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state of facts or
condition of NICE, Nemo Acquisitions Ltd. or Actimize Ltd. or any of their
respective subsidiaries or affiliates. Moreover, information concerning the
subject matter of the representations and warranties may change after the date
of the Agreement and Plan of Merger, which subsequent information may or may not
be fully reflected in NICE's public disclosures.
AGREEMENT AND PLAN OF MERGER
Among
Nice Systems Ltd.,
Nemo Acquisitions Ltd.
and
Actimize Ltd.
Dated as of July 2, 2007
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of July 2,
2007, entered into by and among NICE SYSTEMS LTD., an Israeli company
("PARENT"), NEMO ACQUISITIONS LTD., an Israeli company and a wholly owned
subsidiary of Parent ("MERGER SUB), and ACTIMIZE LTD., an Israeli company (the
"COMPANY"; Parent, Merger Sub and the Company are collectively referred to as
the "PARTIES").
RECITALS
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with Sections 314-327 of the Companies Law, 5759-1999 (the
"COMPANIES LAW"), the Parties intend to effect the merger of the Company and
Merger Sub, pursuant to which Merger Sub will cease to exist and the Company
will become a wholly-owned subsidiary of Parent; and
WHEREAS, the respective boards of directors of each of Parent, Merger Sub
and the Company have approved the merger of Merger Sub with and into the Company
(the "MERGER") upon the terms and subject to the conditions set forth in this
Agreement and have approved and declared advisable this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition and essential inducement for Parent's and Merger Sub's
willingness to enter into this Agreement, each of the Company's shareholders
identified in SCHEDULE 1.1 has executed a voting and proxy agreement in the form
attached hereto as EXHIBIT A, pursuant to which such shareholders have agreed to
vote in favor of, approve and adopt this Agreement, the Merger and the other
transactions contemplated by this Agreement and the other Transaction Documents
(as hereinafter defined); and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a further condition and essential inducement for Parent's and Merger Sub's
willingness to enter into this Agreement, the individuals identified in SCHEDULE
1.2 hereto are executing an employment addendum (the "EMPLOYMENT ADDENDUMS"),
for their continuing employment with the Parent or any Subsidiary thereof
following the Effective Time; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a further condition and essential inducement for Parent's and Merger Sub's
willingness to enter into this Agreement, certain of the individuals identified
in SCHEDULE 1.2 hereto are also executing a commitment annex (the "COMMITMENT
ANNEX"); and
WHEREAS, the Parties desire to make certain representations, warranties,
covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants, and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement and the applicable provisions of the Companies Law, at the
Effective Time (as defined in Section 1.2 hereof), Merger Sub shall be merged
with and into the Company in accordance with Sections 314 through 327 of the
Companies Law, and the separate corporate existence of Merger Sub shall
thereupon cease. The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "SURVIVING CORPORATION"), and the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger in
accordance with the Companies Law.
1.2. EFFECTIVE TIME; CLOSING. Unless otherwise mutually agreed in writing
between the Parties, the closing of the Merger (the "CLOSING") shall take place,
subject to the terms and conditions of this Agreement, at the offices of
Goldfarb, Levy, Eran, Meiri & Co., 0 Xxxxxxxx Xxxxxx Xxx Xxxx 00000, Xxxxxx,
at a time and date to be designated by the Parties (the "CLOSING DATE") which
shall be no later than the 2nd (second) business day after the satisfaction or
waiver of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions, and subject to Section 7.4 hereof) or
at such other time, date and location as the Parties hereto shall mutually
agree. For purposes of this Agreement, the term "BUSINESS DAY" shall mean any
day other than a Friday, Saturday or a day on which banks are required or
authorized to close in the State of Israel.
The Merger shall become effective upon the issuance by the Registrar of
Companies of the State of Israel (the "COMPANIES REGISTRAR") of a certificate
evidencing the completion of the Merger in accordance with Section 323(5) of the
Companies Law (the "EFFECTIVE TIME").
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ARTICLE II
ARTICLES OF ASSOCIATION
OF THE SURVIVING CORPORATION
2.1. THE ARTICLES OF ASSOCIATION. The Articles of Association of Merger Sub
as in effect immediately prior to the Effective Time shall be the Articles of
Association of the Surviving Corporation (the "CHARTER"), until duly amended as
provided therein or by applicable law.
ARTICLE III
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
3.1. DIRECTORS. The directors of the Surviving Corporation immediately
after the Effective Time, and until their respective successors are duly
elected, and qualified or their earlier death, resignation or removal in
accordance with the Articles of Association of the Surviving Corporation, shall
be the respective individuals who are directors of Merger Sub immediately prior
to the Effective Time.
3.2. OFFICERS. The officers of the Company immediately prior to the
Effective Time shall, immediately after the Effective Time, remain the officers
of the Surviving Corporation until their respective successors are duly elected
and qualified or their earlier death, resignation or removal.
ARTICLE IV
CONSIDERATION
4.1. AGGREGATE MERGER CONSIDERATION. Upon the terms and subject to the
conditions of this Agreement, the aggregate amount of consideration payable as
set forth in this Agreement in connection with the Merger shall be USD
282,000,000 (Two Hundred Eighty Two Million United States Dollars) (the
"AGGREGATE MERGER CONSIDERATION"), for all of the issued and outstanding share
capital of the Company on a Fully Diluted Basis as of the Closing Date, subject
to adjustments as set forth in Section 4.2(c) hereof, and payable as provided in
this Agreement. In this Agreement, any reference to "FULLY DILUTED BASIS" or
"COMPANY FULLY DILUTED SHARE CAPITAL" means (a) all issued and outstanding
Company Shares (as hereinafter defined), (b) all vested options (including,
without limitations, options granted under the Company ESOPs (as hereinafter
defined)), warrants and other vested rights to acquire Company Shares or
exchangeable for Company Shares (whether exercised or not), including options
which shall, in accordance with their terms, become vested and exercisable as a
result of the transactions described in this Agreement (collectively, the
"VESTED OPTIONS"), and (c) outstanding restricted stock not subject to
repurchase by the Company issued under the Company ESOPs or which shall, in
accordance with their terms, be released from the Company's repurchase right as
a result of the transactions described in this Agreement (the "VESTED RESTRICTED
STOCK" and together with the Company Shares and the Vested Options shall
hereinafter be referred to as the "COMPANY SECURITIES"), but excluding any
Unvested Options (as hereinafter defined) or outstanding restricted stock
subject to vesting or repurchase by the Company as of the Effective Time issued
under the Company ESOPs (the "UNVESTED RESTRICTED STOCK" and together with the
Vested Restricted Stock, the "COMPANY RESTRICTED STOCK").
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4.2. ALLOCATION OF THE AGGREGATE MERGER CONSIDERATION. The Aggregate Merger
Consideration shall be allocated as follows:
(a) USD 227,100,000 (Two Hundred Twenty Seven Million and Xxx Xxxxxxx
Xxxxxxxx Xxxxxx Xxxxxx Dollars) of the Aggregate Merger Consideration shall
be payable to the holders at the Effective Time of the issued and fully
paid Company Securities as set forth in the Consideration Allocation Table
to be delivered by the Company to Parent concurrently with the execution of
this Agreement (the "CONSIDERATION ALLOCATION TABLE") in cash (the
"AGGREGATE CASH CONSIDERATION"), subject to and in accordance with the
provisions of Section 4.3 hereof.
(b) USD 54,900,000 (Fifty Four Million and Nine Hundred Thousand
United States Dollars) of the Aggregate Merger Consideration shall be
payable to the holders at the Effective Time of the issued and fully paid
Company Securities as set forth in Consideration Allocation Table in the
form of validly issued, fully paid and nonassessable ordinary shares, NIS
1.00 par value per share, of Parent (the "PARENT ORDINARY SHARES" and the
"AGGREGATE PARENT SECURITIES CONSIDERATION", respectively"), subject to and
in accordance with the provisions of Section 4.3 hereof. For the purpose of
calculating the Aggregate Parent Securities Consideration, the value of
each Parent Ordinary Share shall be equal to USD 36.22 (Thirty Six United
States Dollars and Twenty Two Cents) per Parent Ordinary Share (being the
average daily closing prices of such Parent Ordinary Share on NASDAQ on
each trading day between (and including) June 11, 2007 and June 22, 2007)
(the "TRAILING SIGNING AVERAGE PRICE"). The parties acknowledge that the
number of Parent Ordinary Shares to be issued for the Aggregate Parent
Securities Consideration is 1,515,737.
(c) Prior to the Closing, the Company and Parent shall finalize the
Consideration Allocation Table. From the payment of the Aggregate Cash
Consideration due to the holders of the Cashed Out Securities, Parent shall
deduct and retain the exercise price of each such Cashed Out Security.
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4.3. CONVERSION OF COMPANY SECURITIES. At the Effective Time and as a
result of the Merger: (a) each one of the issued and fully paid Company Shares
shall, by virtue of the Merger and without any action on the part of the
Company, Parent, Merger Sub or the holder thereof, be converted into the right
to receive such Company Share's share as set forth in Consideration Allocation
Table of the Aggregate Cash Consideration and the Aggregate Parent Securities
Consideration (together, and as adjusted pursuant to Section 4.2(c), the "PER
SHARE CONSIDERATION" as to such share), and payable as provided in this
Agreement; (b) each certificate representing any of the Company Shares, each
non-certificated Company Share registered in the Company's shareholders register
and the registration of any holder of a Company Share in the Company's
shareholders register shall thereafter only represent the right to receive, with
respect to each Company Share, upon surrender of such certificate(s) (or
affidavit in lieu thereof) in accordance with this Agreement and subject to the
other terms of this Agreement, the Per Share Consideration, without any interest
thereon, (c) the Vested Options and Vested Restricted Stock shall be treated as
set forth in Section 4.10(a) hereof, and (d) the Unvested Options and Unvested
Restricted Stock shall be treated as set forth in Section 4.10(b) hereof.
Holders of Company Shares shall have the right to elect to receive Parent
Ordinary Shares or American Depositary Shares corresponding to a similar number
of Parent Ordinary Shares by providing the Company with a written notice of
their election at least 10 (ten) days prior to the Closing, provided however,
that any holder of Company Shares failing to so notify the Company shall be
deemed to have elected to receive American Depositary Shares. All fees (if any)
of the Depositary incurred to issue the American Depositary Shares shall be
borne by Parent.
In this Agreement, any reference to "COMPANY SHARES" means (a) each
issued and outstanding share of the Company's Ordinary Shares, NIS 0.01 par
value (the "COMPANY ORDINARY SHARES"); (b) each issued and outstanding
share of the Company's Ordinary A Shares, NIS 0.01 par value (the "COMPANY
ORDINARY A SHARES"); (c) each issued and outstanding share of the Company's
Series A Preferred Shares, NIS 0.01 par value (the "SERIES A PREFERRED
SHARES"); (d) each issued and outstanding share of the Company's Series A1
Preferred Shares, NIS 0.01 par value (the "SERIES A1 PREFERRED SHARES");
(e) each issued and outstanding share of the Company's Series B Preferred
Shares, NIS 0.01 par value (the "SERIES B PREFERRED SHARES"); and (f) each
issued and outstanding share of the Company's Series C Preferred Shares,
NIS 0.01 par value (the "SERIES C PREFERRED SHARES", and together with the
Series A Preferred Shares, the Series A1 Preferred Shares, the Series B
Preferred Shares and the Series C Preferred Shares, the "COMPANY PREFERRED
SHARES").
4.4. EXCHANGE PROCEDURES
(a) No later than the Closing Date, Parent shall deposit with a paying
agent selected by Parent and approved in writing by Company (the "PAYING
AGENT") (I) cash in United States Dollars in an amount equal to the
Aggregate Cash Consideration payable to the holders of the Company
Securities in accordance with the provisions of Section 4.3 hereof and (II)
such number of Parent Company Shares equal to the Aggregate Parent
Securities Consideration payable to the holders of the Company Securities
in accordance with the provisions of Section 4.3 hereof. Any Paying Agent
selected will have facilities in Israel and the US to receive the Company
Shares and the related documents. Parent shall provide Company with
reasonable time to review and comment on the paying agent agreement to be
entered into with the Paying Agent, which agreement shall be made in
accordance with the applicable terms set forth herein.
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(b) As soon as reasonably practicable after the Effective Time (but in
no event later than 3 (three) days following the Effective Time), Parent
and the Surviving Corporation shall mail (via express mail or fedex): (i)
to each Person who was, at the Effective Time, a holder of record of
Company Shares (A) a letter of transmittal, in customary form, which shall
specify that delivery shall be effective only upon delivery of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Company Shares (the "CERTIFICATES") to Parent and
that risk of loss and title to the Certificates shall remain with the
holder of the Company Shares until such delivery, and (B) instructions for
effecting the surrender of such Certificates in exchange for a portion of
the Aggregate Merger Consideration. Upon surrender of a Certificate and/or
letter of transmittal (or other documentation in compliance with Section
4.6 hereof), as applicable, to Paying Agent together, with respect to
holders of Certificates, with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other
documents as may reasonably be required by Paying Agent or Parent (after
consultation with the Company), each holder of Company Shares delivering
such documents shall be entitled to receive in exchange therefor: (A) its
respective portion of the Aggregate Merger Consideration; plus (B) cash in
lieu of fractional shares of Parent Ordinary Shares pursuant to Section 4.5
hereof; minus (C) any required tax withholdings in accordance with Section
4.7 hereof, such payments to be made in immediately available funds by wire
transfer (which will be the form of payment for any shareholder so
requesting) or check in accordance with the instructions, and delivered in
person or by mail to the address, specified in the applicable letter of
transmittal. No later than 15 (fifteen) business days after the date
hereof, Parent shall deliver the form of letter of transmittal to the
Company and prior to the Closing shall make such changes to the form as the
Company shall reasonably request. For the avoidance of doubt, it is hereby
clarified that no interest will be paid or will accrue on the amount
payable upon the surrender of any such Certificate. If payment is to be
made to a person other than the registered holder of the certificate
surrendered, it shall be a condition of such payment that the certificate
so surrendered shall be properly endorsed or otherwise in proper form for
transfer and that the person requesting such payment shall pay any transfer
or other taxes required by reason of the payment to a person other than the
registered holder of the certificate surrendered or establish to the
reasonable satisfaction of Parent, the Surviving Corporation or the Paying
Agent that such tax has been paid or is not applicable. The exchange
procedures shall comply with such procedures as may be required by Israeli
Tax Law and the Israeli Withholding Tax Ruling, if obtained, and shall
permit Parent (after consultation with the Company) to require holders to
provide any information as is reasonably needed to comply with the Israeli
Withholding Tax Ruling, if obtained. Any interest (if any) accrued on the
Aggregate Merger consideration between the deposit thereof with the Paying
Agent in accordance with Section 4.4(a) above and until the release thereof
to the holders of the Company Shares in accordance with this Section 4.4(b)
shall be paid to Parent. Paying Agent will provide Parent and the Company a
bi-weekly report of the distributions made by the Paying Agent during such
period.
(c) As soon as reasonably practicable after the Effective Time (but in
no event later than 3 (three) days following the Effective Time), Paying
Agent shall deliver to the Company and/or the "Section 102 Plan" trustee,
as applicable, for the benefit of the holders of the Cashed Out Options the
cash consideration due for such Cashed Out Options based on a certificate
of a duly authorized officer of the Company approved in writing by Parent.
The Company and/or the "Section 102 Plan" trustee (as may be required under
the Israeli Option Tax Pre-Ruling) shall distribute such consideration to
the holders of the Cashed Out Options and withhold applicable tax.
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(d) 180 (one hundred and eighty) days following the Effective Time,
Parent shall be entitled to cause Paying Agent to deliver to it any funds
(including any interest received with respect thereto) made available to
Paying Agent that have not been disbursed to holders of Certificates or
agreements formerly representing Company Shares outstanding on the
Effective Time, and thereafter such holders shall be entitled to look to
Parent and the Surviving Corporation with respect to the consideration
payable upon due surrender of their Certificates or agreements.
(e) Notwithstanding the foregoing, neither Paying Agent nor any Party
hereto shall be liable to any holder of Certificates formerly representing
Company Shares for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) The costs and expenses associated with Paying Agent and the
performance of its duties shall be borne by the Parent (directly or as
set-off of the interest) and shall not be deducted from the Aggregate
Merger Consideration.
4.5. FRACTIONAL SHARES. No fractional shares of Parent Ordinary Shares will
be issued pursuant to this Agreement, but in lieu thereof each holder of Company
Shares who would otherwise be entitled to a fractional share of Parent Ordinary
Shares hereunder (after aggregating all fractional shares of Parent Ordinary
Shares to be received by such holder) shall receive from Parent an amount of
cash (rounded to the nearest whole cent) equal to the product of (a) such
fractional share multiplied by (b) the Trailing Signing Average Price, less the
amount of any withholding taxes which may be required thereon.
4.6. LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by Paying Agent or Parent, an agreement, in customary form, to
indemnify against any claim that may be made against the Paying Agent or Parent
or the Surviving Corporation with respect to such Certificate, Paying Agent will
deliver in exchange for such lost, stolen or destroyed Certificate the portion
of the Aggregate Merger Consideration with respect to the Company Shares
formerly represented thereby.
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4.7. WITHHOLDING RIGHTS. Each of Parent and the Surviving Corporation or
the Paying Agent (as applicable) shall be entitled, with respect to payments
made by each such entity, to deduct and withhold from the Aggregate Merger
Consideration (or any part thereof) and any other amounts otherwise payable
pursuant to this Agreement such amounts as Parent in good faith determines must
be required to be deducted or withheld with respect to the making of such
payment under the Israeli Income Tax Ordinance, the United States Internal
Revenue Code of 1986 (the "US CODE"), the rules and regulations promulgated
thereunder or under any other applicable Law, provided that no withholding under
Israeli Tax law will be made from any consideration payable hereunder to a
holder of Company Securities to the extent that such holder has provided Parent
with a valid exemption or ruling issued by the Israeli Tax Authority prior to
the time such payment is made and provided that with respect to any withholding
under the laws or regulations of the State of Israel, the Paying Agent, Parent
and the Surviving Corporation shall act in accordance with the Israeli
Withholding Tax Ruling, if obtained. Payment from the Parent to the Paying Agent
shall be made without any withholding. The exchange procedures, including the
form of letter of transmittal, shall also provide for the collection from the
holders of Companies Securities of W-8's, W-9's or other customary documentation
under the U.S. Code to satisfy withholding obligations that may otherwise have
been required thereunder. If the Israeli Option Tax Pre-Ruling is obtained,
then, with respect to any Vested Options held in trust under a "Section 102
Plan" at the Effective Time, the Paying Agent will make payment of the
consideration that such holder is entitled to receive in exchange for such
Vested Options directly to the "Section 102 Plan" trustee in accordance with the
terms of such ruling. All other payments to holders of Vested Options who are
employees of the Company or its Subsidiaries shall be made by the Paying Agent
to the Company, who shall make such payments to such holders in accordance with
the terms herein and withhold the appropriate tax. To the extent that amounts
are so withheld by the Surviving Corporation or Parent, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holders of Companies Securities, in respect to which such
deduction and withholding was made by the Surviving Corporation or Parent, as
the case may be. Any amounts deducted and withheld pursuant to this Section 4.7
shall be remitted to the appropriate Taxing authority in accordance with
applicable Law and notice thereof shall be provided to the applicable holder.
4.8. CONVERSION OF MERGER SUB SECURITIES. Upon and by virtue of the Merger,
each issued and outstanding ordinary share of Merger Sub shall be converted into
and become one fully paid and nonassessable Company Ordinary Share.
4.9. CANCELLATION OF TREASURY STOCK. Each Company Security that is owned by
the Company immediately prior to the Effective Time shall automatically be
cancelled and retired and shall cease to exist and no consideration shall be
delivered or deliverable in exchange therefor.
4.10. COMPANY OPTIONS
(a) VESTED OPTIONS. Each Vested Option and Vested Restricted Stock
outstanding immediately prior to the Effective Time, shall by virtue of the
Merger and without any further action on the part of any holder thereof be
cancelled immediately prior to the Effective Time (the "CASHED OUT
SECURITIES"), and in consideration for such cancellation the holder thereof
shall have the right to receive, as soon as practicable following the
Effective Time, promptly upon the surrender to the Company of such Vested
Option and/or Vested Restricted Stock, an amount in cash (less any
withholding taxes) equal to the product of (A) the number of Company Shares
subject to such Vested Option and/or Vested Restricted Stock immediately
prior to the Effective Time and (B) the amount, if any, by which the
Ordinary Per Share Consideration exceeds the exercise price per Company
Share subject to such Vested Option and/or Vested Restricted Stock (the
"CASHED OUT AMOUNT") (it being agreed and acknowledged that the exercise
price for the Vested Restricted Stock is $0.00, as such stock was
previously purchased for cash). Notwithstanding the above, the Vested
Options and Vested Restricted Stock held by the individuals who are party
to the Employment Addendums shall be treated as set forth therein.
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(b) ASSUMPTION OF UNVESTED OPTIONS AND UNVESTED RESTRICTED STOCK. At
the Effective Time, each option to purchase Company Shares which is
outstanding but unvested immediately prior to the Effective Time and which
does not have accelerating vesting as a result of this Agreement and the
transactions contemplated hereby (each, an "UNVESTED OPTION" and together
with the Vested Options, the "COMPANY OPTIONS") and each Unvested
Restricted Stock shall be assumed by Parent, and the Unvested Options and
Unvested Restricted Stock shall be converted into an option to purchase
shares of Parent Ordinary Shares or into restricted stock of Parent (the
"PARENT RESTRICTED STOCK"), as the case may be, in such number and at such
exercise price as provided below (except that the Parent Restricted Stock
shall not have any purchase price or exercise price) and otherwise having
the same terms and conditions as in effect immediately prior to the
Effective Time (except to the extent that such terms, conditions and
restrictions may be altered in accordance with their terms as a result of
the Merger contemplated hereby and except that all references in each such
Unvested Option or Unvested Restricted Stock to Company shall be deemed to
refer to Parent):
i. The number of shares of Parent Ordinary Shares or Parent
Restricted Stock to be subject to the new option or restricted stock
(as the case may be) shall be equal to the product of: (x) the number
of Company Ordinary Shares or Company Restricted Stock subject to the
applicable original Company ESOP immediately prior to the Effective
Time and (y) the Exchange Ratio;
ii. The exercise price per share of Parent Ordinary Shares under
the new option shall be equal to: (x) the exercise price per share of
such Company Ordinary Shares in effect under the applicable original
Company ESOP immediately prior to the Effective Time divided by (y)
the Exchange Ratio; and
iii. In effecting such assumption and conversion, the aggregate
number of shares of Parent Ordinary Shares or Parent Restricted Stock
(as the case may be) to be subject to each assumed Company Option or
Company Restricted Stock will be rounded down, if necessary, to the
next whole share and the aggregate exercise price shall be rounded up,
if necessary, to the next whole cent.
Any adjustments provided herein with respect to the Company Options
(whether vested or not) or the Company Restricted Stock shall be effected
in a manner consistent with applicable Law and, to the extent applicable,
that maintains any intended favorable tax treatment relating to such
options or restricted stock that existed prior to such adjustment and in
accordance with the Israeli Option Tax Pre-Ruling, if obtained. The
assumption of the outstanding Company Options and Company Restricted Stock
in the Merger and their conversion into options for Parent Ordinary Shares
or Parent Restricted Stock (as the case may be) will not result in any
accelerated vesting of those options, the shares purchasable thereunder or
restricted stock, and the vesting schedule in effect for each Company
Option and each Company Restricted Stock (except as provided by their
terms) immediately prior to the Effective Time shall remain in full force
after the assumption thereof by Parent.
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For the purpose of this Agreement the term "EXCHANGE RATIO" means the
quotient obtained by dividing (a) Per Share Consideration payable to the
holders of the Company Ordinary Shares as set forth on the Consideration
Allocation Table (the "ORDINARY PER SHARE CONSIDERATION") by (b) the
Trailing Signing Average Price.
Prior to the Effective Time, Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of Parent Ordinary
Shares subject to the Company Options and Company Restricted Stock assumed
in accordance with Section 4.10 hereof. Parent shall file a registration
statement on Form S-8 (or any successor form) or another appropriate form
with respect to the Parent Ordinary Shares subject to such Company Options
and Company Restricted Stock promptly following the Closing Date, but in no
event no later than 5 (five) business days thereafter, shall allow such
registration statement to become effective upon filing and shall use its
best efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Company
Options and Company Restricted Stock remain outstanding. To the extent that
resales of Parent Ordinary Shares subject to Company Restricted Stock may
not be effected pursuant to the Registration Statement on Form S-8
referenced above for any reason, Parent shall register the resale on the
open market of such shares on another registration statement which is
suitable for such purpose and cause such registration statement to be
effective at the time any such shares vest and to maintain with respect to
any such shares such effectiveness for a period of not less than one year
thereafter (as the case may be).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In this Agreement, any reference to a "MATERIAL ADVERSE EFFECT" means, when
used in connection with the Company or the Parent, any change, effect, event,
occurrence, condition, development or state of facts that individually or
together with any other change, effect, event, occurrence, condition,
development or state of facts (i) has, or is reasonably likely to have, a
substantial, material and long term adverse effect on the business, results of
operations or financial condition or prospects of such party and its
Subsidiaries, taken as a whole, other than any change, effect, event,
occurrence, condition, development or state of facts arising from or relating to
(A) general economic conditions, (B) the industry in which such party operates
in general, (C) the negotiation, execution, announcement, pendency or
performance of this Agreement or the consummation of the Merger, including (1)
the impact thereof on relationships, contractual or otherwise, with customers,
suppliers, distributors or partners, and (2) any resulting shortfalls or
declines in revenue, margins or profitability, (D) any declaration of war by or
against, or an escalation of hostilities involving, or an act of terrorism
against, any country where such party or its major sources of supply have
material operations or where such party has sales, (E) changes in applicable
Laws or in generally accepted accounting principles or accounting standards, or
changes in general legal, regulatory or political conditions, (F) any action
taken by Parent, the Company or any of their respective Subsidiaries as
contemplated or permitted by this Agreement or with the Parent's consent, in the
case of the Company, or the Company's consent in the case of the Parent, or any
failure to take action which failure results from Parent's refusal to grant its
consent to such action pursuant to Section 6.1, (G) with respect to the Company,
any resignation or termination of employees of the Company or its Subsidiaries,
or (H) any decrease in, or lack of, bookings, or (ii) that prevents the
consummation of the Merger. Clause (G) above shall not derogate from the
provisions of Section 7.2(f).
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Notwithstanding anything to the contrary contained in this Agreement, but
without limiting the provisions contained in clauses (A) through (G) above, for
purposes of determining whether the conditions set forth in Sections 7.1(c),
7.2(a), and 7.2(c) have been satisfied and whether Parent may terminate this
Agreement pursuant to Section 8.4, a "Material Adverse Effect" shall be deemed
to have occurred with respect to the Company pursuant to clause (i) of the
definition thereof if (and only if) the applicable change, effect, event,
occurrence, condition, development or state of facts (or aggregation of changes,
effects, events, occurrences, conditions, developments or states of facts)
relates to the Company and/or its Subsidiaries and has resulted in or would
reasonably be expected to result in aggregate liabilities (net of insurance
coverage) relating to the Company and its Subsidiaries or reduction in value of
the Company and its Subsidiaries equal to at least USD 30,000,000 (Thirty
Million United States Dollars).
In this Agreement, any reference to "KNOWLEDGE" of any Person which is not
an individual means the actual knowledge of such Person's directors and
executive officers and the knowledge that any of such individuals would be
reasonably expected to have in the due and diligent conduct of their respective
duties.
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that
the representations, warranties and statements contained in this Article V
(including any of its sections and subsections) are true and correct, except as
expressly set forth in the disclosure schedule delivered by the Company to
Parent and Merger Sub on or before the date of this Agreement (the "COMPANY
DISCLOSURE SCHEDULE"). It is specifically agreed that no exception or limitation
with respect to any of the representations, warranties and statements contained
in this Article V shall be valid, even if the same has been brought to the
attention of Parent and Merger Sub or their advisors, unless such exception or
limitation is expressly set forth in the Company Disclosure Schedule. The
Company Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article V. For purposes of
this Article V, and unless explicitly provided otherwise, the term "COMPANY"
shall be deemed to include each of the Company's Subsidiaries.
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5.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION; SUBSIDIARIES
5.1.1 SECTION 5.1.1 of the Company Disclosure Schedule sets forth (A)
each of the Company's Subsidiaries; and (B) the Company's or its
Subsidiaries' capital stock, equity interest or other direct or indirect
ownership interest in any other Person.
5.1.2 Each of the Company and its Subsidiaries is a company with
limited liability duly organized, validly existing and, where applicable,
is in good standing under the Laws (as defined in Section 5.10 hereof) of
its respective jurisdiction of organization and has all requisite corporate
or similar power and authority and all necessary government, municipal and
other approvals to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted and as proposed to be
conducted, in all material respects, and is qualified to do business and,
where applicable, is in good standing as a foreign corporation in each
jurisdiction where the ownership, leasing or operation of its properties or
assets or the conduct of its business requires such qualification.
5.1.3 Attached as SCHEDULE 5.1.3 hereto are complete and correct
copies of the Company's and each of its Subsidiaries' Memorandum of
Association, Articles of Association, Certificates of Incorporation and
Bylaws or comparable governing documents (collectively, the "CORPORATE
DOCUMENTS"), each as amended to the date hereof, and each as so delivered
is in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of its Corporate
Documents.
5.1.4 SECTION 5.1.4 of the Company Disclosure Schedule contains a
correct and complete list of: (A) the locations of all sales office,
manufacturing facilities, and any other office or facilities of the Company
and its Subsidiaries; (B) all jurisdictions in which the Company and any of
its Subsidiaries maintain any employees and/or any independent contractors;
and (C) the jurisdiction of incorporation of the Company and each
Subsidiary and all jurisdictions in which the Company and any Subsidiary is
duly qualified and licensed to transact business as a foreign corporation.
As used in this Agreement, the term (x) "PERSON" means, any individual,
sole proprietorship, partnership, firm, entity, limited partnership, limited
liability company, unlimited liability company, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, body, corporation,
or federal, governmental, municipal or national entity, and where the context
requires, any of the foregoing when acting as trustee, executor, administrator
or legal representative; and (y) "SUBSIDIARY" means, with respect to any Person,
any other Person of which at least a majority of the securities or ownership
interests having by their terms ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions or constituting
a majority of the voting power in the general meeting of the shareholders of
such Person is directly or indirectly owned or controlled by such Person or by
one or more of its Subsidiaries.
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5.2 CAPITAL STRUCTURE
5.2.1 The registered and authorized share capital of the Company
consists of NIS 937,871.29 divided into: (A) 60,000,000 Company Ordinary
Shares, of which 3,076,000 are also designated as Ordinary A Shares, of
which 4,021,427 Ordinary Shares (including the Company Restricted Stock)
are outstanding as of the date hereof and of which 3,076,000 Ordinary A
Shares are outstanding as of the date hereof; (B) 628,400 Series A
Preferred Shares, of which 628,400 Series A Preferred Shares are
outstanding as of the date hereof; (C) 2,157,500 Series A1 Preferred
Shares, of which 2,157,500 Series A1 Preferred Shares are outstanding as of
the date hereof; (D) 15,001,229 Series B Preferred Shares, of which
15,001,229 Series B Preferred Shares are outstanding as of the date hereof;
and (E) 16,000,000 Series C Preferred Shares, of which 12,815,421Series C
Preferred Shares are outstanding as of the date hereof. SECTION 5.2.1 of
the Company Disclosure Schedule accurately sets forth, as of the date
hereof: (i) the name of each Person that is the record owner of any Company
Shares; (ii) each such shareholder's country and, if applicable, state of
residence opposite that shareholder's name; and (iii) the number of such
Company Shares or other securities of the Company so owned by such Person,
and the number of Ordinary Shares that would be owned by such Person
assuming conversion of all the Preferred Shares or any other security or
instrument of the Company (including, without limitations, any option,
restricted stock or warrant granted to Such Person) convertible or
exchangeable into or exercisable for Ordinary Shares so owned by such
Person giving effect to all anti-dilution and similar adjustments; and (iv)
the name of each shareholder that is an "investor" as defined in the First
Addendum to the Israeli Securities Law, 5728-1968.
5.2.2 Except as set forth in SECTION 5.2.2 of the Company Disclosure
Schedule, all of the outstanding Company Shares have been duly authorized
and validly issued, are fully paid and nonassessable and are free and clear
of any lien, charge, pledge, security interest, claim or any other
encumbrance or third party's rights of any kind or nature whatsoever (a
"LIEN") known to the Company. All of the outstanding Company Shares have
been issued in compliance with all applicable securities laws and corporate
laws. The Company does not hold any dormant shares and no shares are held
in treasury by the Company or held by any of its Subsidiaries.
5.2.3 Except as set forth in SECTION 5.2.3 of the Company Disclosure
Schedule, the Company has no Company Shares reserved for issuance or
otherwise issuable under any other options, warrants or other convertible
or exercisable instruments (including restricted shares), except that, as
of the date hereof, there are 16,240,398 Ordinary Shares reserved for
issuance pursuant to the Company ESOPs. The "COMPANY ESOPS" means the
Company's Adrem B.I. Solutions Ltd. 2000 Share Option Plan and the
Company's 2003 Omnibus Stock Option and Restricted Stock Incentive Plan
(the "2003 COMPANY ESOP"). SECTION 5.2.3 of the Company Disclosure Schedule
contains a correct and complete list as of the date hereof of each
outstanding stock option, warrant, restricted share grant, and any other
stock related rights, issued under the Company ESOPs, including the holder,
date of grant, term, number of Company Ordinary Shares and, where
applicable, exercise price and vesting schedule (including terms of
acceleration).
5.2.4 The Company is the owner of all outstanding shares of capital
stock of each Subsidiary and such shares have been duly authorized and
validly issued, are fully paid and nonassessable and are free and clear of
any Lien. All of the shares of capital stock of each Subsidiary have been
issued in compliance with all applicable securities laws and corporate
laws.
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5.2.5 Except as set forth in SECTION 5.2.5 of the Company Disclosure
Schedule, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements, calls, commitments or rights
of any kind or nature whatsoever that obligate the Company or any of its
Subsidiaries to issue, sell or purchase any shares of capital stock or
other securities of the Company and/or any of its Subsidiaries or any
securities or obligations convertible or exchangeable into or exercisable
for, or giving any Person a right to subscribe for, receive or acquire, any
securities of the Company or any of its Subsidiaries, and no securities or
obligations evidencing such rights are authorized, issued or outstanding.
Upon any issuance of any Company Ordinary Shares in accordance with the
terms of the Company ESOPs, such Company Ordinary Shares will be duly
authorized, validly issued, fully paid and nonassessable. The Company does
not have outstanding any bonds, debentures, notes or other obligations, the
holders of which have the right to vote (or convertible or exchangeable
into or exercisable for securities having the right to vote) with the
shareholders of the Company on any matter. Except as set forth in SECTION
5.2.5 of the Company Disclosure Schedule and without derogating from the
generality of the aforesaid, there are no contracts, commitments or
agreements relating to the voting, purchase or sale of any shares of
capital stock or other securities of the Company and/or any of its
Subsidiaries between the Company and/or any Subsidiary thereof and any
shareholder of the Company or any other Person.
5.2.6 Neither the Company nor any of its Subsidiaries committed or
agreed to acquire, any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, limited liability company, joint
venture or any other Person.
5.3 CORPORATE AUTHORITY; APPROVAL AND FAIRNESS
5.3.1 The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of Merger and the other transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company, and, except for the shareholder
approvals specified in Section 5.3.2 below, no further corporate action is
required on the part of the Company to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company. This Agreement constitutes, assuming the due
authorization, execution and delivery by the other parties hereto, the
valid and legally binding obligation of the Company, enforceable against
the Company in accordance with its terms, except to the extent that such
enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws, now or hereafter in
effect, affecting creditors' rights generally.
5.3.2 The approval of the holders of (i) 60% (sixty percent) of all
the Preferred Shares voting together as a single class; and (ii) the
majority outstanding shares of each class of Company Shares present and
voting thereon, and (iii) the majority outstanding shares of all the
Company Shares voting together as a single class, present and voting
thereon, are the only shareholders votes necessary to approve and adopt
this Agreement and the Merger.
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5.3.3 The board of directors of the Company has: (A) unanimously
determined that the Merger is in the best interests of the Company and its
shareholders, approved this Agreement and the Merger and the other
transactions contemplated hereby and resolved to recommend adoption of this
Agreement to the holders of the Company Shares, and directed that this
Agreement be submitted to the holders of Company Shares for their approval;
and (B) made all other affirmative determinations required to be made by it
in connection with this Agreement and the Merger under the Companies Law,
5759-1999 and any other applicable Law. A copy of the resolution of the
board of Directors of the Company approving the Merger and the other
transactions contemplated by this Agreement and the other Transaction
Documents has been provided to Parent.
5.4 GOVERNMENTAL FILINGS; NO VIOLATIONS; THIRD PARTY CONSENTS
5.4.1 Other than the necessary notices, reports, filings, consents,
registrations, approvals, permits or authorizations listed in SECTION 5.4.1
of the Company Disclosure Schedule, no notices, reports or other filings
are required to be made by the Company or any of its Subsidiaries with, nor
are any consents, registrations, approvals, permits or authorizations
required to be obtained from, any domestic or foreign federal, national,
governmental, municipal or regulatory authority, agency, commission, body,
court or other legislative, executive, judicial or quasi-judicial
governmental, municipal or regulatory entity (each a "GOVERNMENTAL
ENTITY"), by the Company or its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company and the
consummation of the Merger and the other transactions contemplated hereby,
or in connection with the continuing operation of the business of the
Company and its Subsidiaries immediately following the Effective Time.
5.4.2 The execution, delivery and performance of this Agreement by the
Company does not, and the consummation of the Merger and the other
transactions contemplated hereby will not, constitute or result in: (A) a
breach or violation of, or a default under, the Corporate Documents of the
Company or of any of its Subsidiaries; (B) with or without notice, lapse of
time or both, a breach or violation of, a termination (or right of
termination) or a default under, the creation or acceleration of any
obligations or the creation of a Lien on any of the properties and assets
of the Company or any of its Subsidiaries pursuant to any agreement, lease,
license, contract, note, mortgage, indenture, arrangement or other
obligation, written or oral (each, a "CONTRACT"), including a Material
Contract (as defined below), binding upon the Company or any of its
Subsidiaries or, assuming (solely with respect to performance of this
Agreement and consummation of the Merger and the other transactions
contemplated hereby) compliance with the matters referred to in Section
5.4.1 hereof, under any Law to which the Company or any of its Subsidiaries
is subject; or (C) any change in the rights or obligations of any party
under any Contract binding on the Company or any of its Subsidiaries except
to the extent such breach, violation, termination or default would not, in
the case of clauses (B) or (C), is not material to the Company.
- 15 -
5.4.3 SECTION 5.4.3 of the Company Disclosure Schedule sets forth a
correct and complete list of all Contracts entered by the Company or any of
its Subsidiaries pursuant to which any notice, consent, waiver or approval
are or may be required prior to consummation of the transactions
contemplated by this Agreement.
5.5 COMPANY FINANCIAL STATEMENTS
5.5.1 Attached as SECTION 5.5.1(A) of the Company Disclosure Schedule
are the audited consolidated balance sheets of the Company as of December
31, 2005 and December 31, 2006 and the related consolidated statements of
income and cash flows for the 3 (three) years in the period ended December
31, 2006, accompanied by the report of the Company's independent public
accountants thereon (the "FINANCIAL STATEMENTS"). Attached as SECTION
5.5.1(B) of the Company Disclosure Schedule are the unaudited consolidated
balance sheet of the Company as of March 31, 2007 (the "BALANCE SHEET
DATE") and the related consolidated statements of income and cash flows for
the three months then ended (the "UNAUDITED INTERIM FINANCIAL STATEMENTS"
or the "COMPANY CURRENT BALANCE SHEET"). The Financial Statements
(including the related notes thereto) and the Unaudited Interim Financial
Statements are true and complete in all material respects and in accordance
with generally accepted accounting principles in the United States ("US
GAAP") applied on a consistent basis throughout the periods involved, and
fairly present in all material respects in accordance with US GAAP the
consolidated financial position of the Company and its Subsidiaries as at
the date thereof and the consolidated results of its operations and cash
flows for the period indicated.
5.5.2 Without derogating from the generality of Section 5.5.1 hereof,
the Company and each of its Subsidiaries maintain a standard system of
accounting established and administered in accordance with US GAAP. The
Company and each of its subsidiaries maintain a system of internal
accounting sufficient to provide reasonable assurance that: (A)
transactions are executed in accordance with management's general or
specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with US GAAP and
to maintain accountability for its assets; (C) access to assets is
permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The Company has made available to
Parent and Merger Sub complete and correct copies of, all written
descriptions of, and all policies, manuals and other documents
promulgating, such internal accounting control.
Neither the Company nor any of its Subsidiaries, nor to the Company's
Knowledge, the Company's independent auditors, are aware of (A) any material
weakness in the system of internal controls utilized by the Company and its
Subsidiaries, (B) any fraud, whether or not material, that involves the
Company's management or other employees who have a role in the preparation of
financial statements or the internal controls utilized by the Company and its
Subsidiaries, or (C) any material claim or allegation regarding any of the
foregoing.
- 16 -
5.5.3 Except as set forth in SECTION 5.5.3 of the Company Disclosure
Schedule, there is no liability, indebtedness, expense, deficiency, claim,
guaranty, or obligation, whether accrued, absolute, contingent,
anticipated, or otherwise, whether due or to become due, which individually
or in the aggregate: (A) has not been reflected in or reserved against in
the Company Current Balance Sheet to the extent required by U.S. GAAP; (B)
has not arisen in the ordinary course of business consistent with past
practices since the Balance Sheet Date, or (C) exceeds USD50,000 (Fifty
Thousand United States Dollars) individually or USD250,000 (Two Hundred and
Fifty Thousand United States Dollars) in the aggregate.
5.5.4 SECTION 5.5.4 of the Company Disclosure Schedule sets forth the
Company's good faith estimation of the Company's net working capital (as
defined under US GAAP) as of the date hereof.
5.6 NO CHANGES. Except as set forth in SECTION 5.6 of the Company
Disclosure Schedule, since the Balance Sheet Date and prior to the date hereof,
there has not been, occurred or arisen any:
5.6.1 material transaction by the Company or any of its Subsidiaries
except in the ordinary course of business and consistent with past
practices;
5.6.2 amendment or change to the Corporate Documents of the Company or
any of its Subsidiaries;
5.6.3 capital expenditure or capital commitment by the Company or any
of its Subsidiaries not in the ordinary course of business or in excess of
USD250,000 (Two Hundred and Fifty Thousand United States Dollars);
5.6.4 destruction of, damage to, or loss of any material assets of the
Company or any of its Subsidiaries (whether or not covered by insurance);
5.6.5 work stoppage, labor strike or other labor trouble, or any
action, suit, claim, labor dispute or grievance, whether pending or
threatened, relating to any labor, safety or discrimination matter
involving the Company or any of its Subsidiaries, including, without
limitation, charges of wrongful termination of employment or other unlawful
labor practices or actions;
5.6.6 change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company or any of
its Subsidiaries other than as required by US GAAP;
5.6.7 material revaluation by the Company or any of its Subsidiaries
of any of their respective assets;
5.6.8 declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or
any of its Subsidiaries or any direct or indirect redemption, purchase or
other acquisition by the Company or any of its Subsidiaries of its share
capital;
- 17 -
5.6.9 increase in the salary or other compensation payable or to
become payable by the Company or any of its Subsidiaries to any of its
officers, directors or employees, independent contractors or advisors, or
the declaration, payment or commitment or obligation of any kind for the
payment, by the Company or any of its Subsidiaries, of a bonus or other
additional salary or compensation in any form to any such person;
5.6.10 Contract to which the Company or any of its Subsidiaries is a
party or by which it or any of its assets is bound and which is material to
the business of the Company or any of its Subsidiaries, or any termination,
extension, amendment or modification of the terms of any such Contract,
other than Contracts entered into in connection with the transactions
contemplated hereby, all of which have been revealed to Parent and Merger
Sub prior to the date hereof;
5.6.11 sale, lease, license or other disposition of any of the
material assets or properties of the Company or any of its Subsidiaries
(other than in the ordinary course of business) or any creation of any
security interest in assets or properties of the Company or any of its
Subsidiaries;
5.6.12 loan by the Company or any of its Subsidiaries to any person or
entity, incurring by the Company or any of its Subsidiaries of any
indebtedness, guaranteeing by the Company or any of its Subsidiaries of any
indebtedness, issuance or sale of any debt securities of the Company or any
of its Subsidiaries or guaranteeing of any debt securities of others;
5.6.13 waiver or release of any right or claim of the Company or any
of its Subsidiaries, including any material write-off or other compromise
of any account receivable of the Company or any of its Subsidiaries;
5.6.14 notice of any claim or potential claim of ownership by any
Person, other than the Company or any of its Subsidiaries, of any of the
Company Intellectual Property (as defined below) owned by or developed or
created by the Company or any of its Subsidiaries or of infringement by the
Company or any of its Subsidiaries of any other Person's Intellectual
Property;
5.6.15 issuance or sale, or contract to issue or sell, by the Company
or any of its Subsidiaries of any shares of capital stock or securities
exchangeable, convertible or exercisable therefore, or any securities,
warrants, options or rights to purchase any of the foregoing, except as set
forth in SECTION 5.6 of the Company Disclosure Schedule;
5.6.16 (A) sale by the Company or any of its Subsidiaries of any
Company Intellectual Property or the entering into of any license
agreement, security agreement, assignment or other conveyance or option,
with respect to Company Intellectual Property with any person or entity
(other than customer license agreements entered into in the ordinary course
of business consistent with past practice and listed on SECTION 5.6 of the
Company Disclosure Schedule), or (B) the purchase or other acquisition of
any Intellectual Property or the entering into of any license agreement,
security agreement, assignment or other conveyance or option with respect
to the Intellectual Property of any Person, or (C) the change in pricing or
royalties set or charged by the Company or any of its Subsidiaries to its
customers or licensees or, to the Company's Knowledge, in pricing or
royalties set or charged by persons who have licensed Intellectual Property
to the Company or any of its Subsidiaries;
- 18 -
5.6.17 any event or condition of any kind or nature whatsoever that
has had or is reasonably likely to have a Material Adverse Effect with
respect to the Company or any of its Subsidiaries; or
5.6.18 agreement by the Company or any of its Subsidiaries to do any
of the things described in the preceding Sections 5.6.1 through 5.6.17.
5.7 LITIGATION AND LIABILITIES
5.7.1 Except as set forth in SECTION 5.7 of the Company Disclosure
Schedule, there are no civil, criminal, arbitration or administrative
proceedings involving the Company or any Subsidiary, including, to the
Company's Knowledge. claims for which the Company or any Subsidiary may be
vicariously liable. No such proceedings and no claims of any kind or nature
are pending or, to the Knowledge of the Company, threatened by or against
the Company, any Subsidiary or the directors or officers of the Company or
any Subsidiary (in their capacity as such) or in respect whereof the
Company or any Subsidiary is or might be liable to indemnify any party
concerned, and, to the Knowledge of the Company, there are no facts
reasonably likely to give rise to any such proceedings.
5.7.2 Except as set forth in SECTION 5.7.2 of the Company Disclosure
Schedule, neither the Company nor any Subsidiary is subject to any order or
judgment given by any court or any other Governmental Entity or has been a
party to any undertaking or assurance given to any court or any other
Governmental Entity which is still in force nor, to the Company's
Knowledge, are there any facts or circumstances (with or without the giving
of notice or lapse of time) which would be likely to result in the Company
or such Subsidiary becoming subject to such an order or judgment or being
required to be a party to any such undertaking or assurance.
5.7.3 Except as set forth in SECTION 5.7.3 of the Company Disclosure
Schedule, none of the Company, any Subsidiary, the directors of the Company
or such Subsidiary or, to the Company's Knowledge, any Employees thereof
are the subject of any investigation, enquiry, process or request for
information in respect of any of the activities of the Company or any
Subsidiary by any competent authority and no such procedures are pending
or, to the Company's Knowledge, threatened and, to the Company's Knowledge,
there are no facts which are reasonably likely to give rise to any such
proceedings.
5.7.4 Neither the Company nor any Subsidiary has, in the 3-year period
preceding the date hereof, manufactured or sold products which to the
Company's Knowledge, are or would be in any material respect, faulty or
defective, or which otherwise do not comply in any material respect with
any warranties or representations expressly or impliedly made by the
Company or such Subsidiary.
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5.8 EMPLOYEE AND EMPLOYEE BENEFIT MATTERS
5.8.1 A list of all the directors, officers, employees and independent
contractors (including, without limitations, consultants) of the Company
and each of its Subsidiaries (each, an "EMPLOYEE") and their present
compensation and remuneration packages, is set forth in SECTION 5.8.1 of
the Company Disclosure Schedule, which particulars show all benefits
including salaries (or compensation for independent contractors), social
benefits, bonuses, commissions, profit shares, automobile and benefits in
kind payable or which the Company or any of its Subsidiaries is bound to
provide (whether now or in the future) to each such Employee, and are true,
accurate and complete in all material respects.
5.8.2 Except as set forth in SECTION 5.8.2 of the Company Disclosure
Schedule, no key-Employee has been dismissed in the last six months or has
given notice of termination of his employment, and no material independent
contractor has been terminated in the last six months or has given notice
of termination of his engagement. There are no, and except as set forth in
SECTION 5.8.2 of the Company Disclosure Schedule there were not in the
past, any claims from or on behalf of the any Employee threatened or
pending against the Company or any of its Subsidiaries.
5.8.3 SECTION 5.8.3 of the Company Disclosure Schedule includes the
forms of contracts under which substantially all the Employees are engaged
(each, a "STANDARD EMPLOYMENT AGREEMENT") and a true and accurate list of
any Employee who entered into a Contract with the Company or any of its
Subsidiaries (as the case may be) which differs in any material way from
the Standard Employment Agreement. Copies of all forms of Standard
Employment Agreements and any other employment Contract of the employees
listed in Section 5.8.3 have previously been delivered to Parent.
5.8.4 Except as set forth in SECTION 5.8.4 of the Company Disclosure
Schedule, there are no Contracts for the payment of any pensions,
allowances, lump sums, or other like benefits on retirement or on death or
termination or during periods of sickness or disablement for the benefit of
any officer or former officer or Employee or former Employee or independent
contractor or former independent contractor of the Company or any
Subsidiary or for the benefit of the dependents of any such individual in
operation, unless such payment is due under any applicable law.
5.8.5 The Company and each of its Subsidiaries have complied with all
legislative or other official provisions relating to the Employees and
their terms and conditions of employment except as would not have a Company
Material Adverse Effect, and has made all deductions and payments to the
local or foreign Income Tax Authorities (collectively, "INCOME TAX
AUTHORITIES"), the Israeli National Insurance Institute any other relevant
Governmental Entity required to be made by Law or any other deductions or
payments required by Law.
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5.8.6 The Company's and each Subsidiaries' contingent severance pay
liability and any other monetary liability to the Employees in accordance
with US GAAP is duly reflected in the Financial Statements and the
Unaudited Interim Financial Statements as of their respective dates. All
other liabilities of the Company and its Subsidiaries to the Employees in
accordance with US GAAP were properly reserved for in its Financial
Statements and Unaudited Interim Financial Statements as of their
respective dates. Any Employee, which is subject to the provisions of
Section 14 of the Severance Pay Law (5723-1963) with respect to such
statutory severance pay is signed on a general approval of the labor
minister form, promulgated under said Section 14.
5.8.7 A complete list of all of the outstanding Shares and options
granted to or purchased by any Employee, and their respective vesting
schedules, as of the Closing, is set forth in SECTION 5.8.7 of the Company
Disclosure Schedule. Except as set forth therein, as of the Closing neither
the Company nor any Subsidiary thereof operate any share incentive scheme,
share option scheme or profit sharing scheme for the benefit of any of
their respective Employees.
5.8.8 Except as set forth in SECTION 5.8.8 of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger and the other transactions contemplated
thereby, will result in any payment (including any bonus, golden parachute
or severance payment) to any Employee or former Employee, or materially
increase the benefits payable under any Contract, or result in any
acceleration of the time of payment or vesting of any such benefits, except
as provided therein.
5.8.9 Except as set forth in SECTION 5.8.9 of the Company Disclosure
Schedule, the Company and each of its Subsidiaries is in compliance in all
material respects with all applicable employment laws and Contracts
relating to employment (or engagement, in respect of independent
contractors), employment practices, wages, bonuses and terms and conditions
of employment, including employee compensation matters.
5.8.10 Except as set forth in SECTION 5.8.10 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a member in
any employers' organization and no claim or request has been made towards
the Company or any of the Subsidiaries by any such organization. Neither
the Company nor any Subsidiary thereof is a party to, or bound by, any
collective bargaining agreement or similar labor arrangement or union
contract or extension order (excluding such extension orders that apply to
all employers in the Israeli market) with respect to any of the Employees,
and no collective bargaining agreement is being negotiated by the Company
or any Subsidiary. No labor union or other representative organization has
been certified or recognized as the collective bargaining representative of
any Employees. There are no union organizing campaigns or representation
proceedings or campaigns in process or threatened with respect to any
Employees. To the Company's Knowledge, there are no existing or threatened
labor strikes, work stoppages, organized slowdowns, unfair labor practice
charges or complaints or labor arbitration proceedings affecting any of the
Employees.
- 21 -
5.8.11 The Company has not been informed by any current or former
Employee that such Employee is or was in violation of any term of any
employment (or engagement, in respect of or independent contractors)
contract, patent disclosure agreement, proprietary information agreement,
non-competition agreement, or any other similar contract, agreement or
restrictive covenant relating to the right of any such Employee to be
employed (or engagement, in respect of or independent contractors) by the
Company or any of its Subsidiaries and the Company has not received any
notice in writing from any third party relating to the foregoing.
5.8.12 (a) SECTION 5.8.12(A) of the Company Disclosure Schedule lists
each employee benefit plan or arrangement, including each "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and any other pension plan,
deferred compensation plan, stock option plan, bonus plan, stock purchase
plan, medical, hospitalization, disability or other fringe benefit, change
in control, severance or termination pay plan, policy or arrangement,
funded or unfunded, which Company and the Subsidiaries maintain or
contribute to with respect to the employees and former employees of the
Company or the Subsidiaries, employed or formerly employed within the
United States (each, an "U.S. EMPLOYEE PLAN"). Except as set forth in
SECTION 5.8.12(A) of the Company Disclosure Schedule, none of the U.S.
Employee Plans is subject to Title IV of ERISA or Section 412 of the US
Code, and neither the Company, the Subsidiaries nor any ERISA Affiliate (as
defined below) maintains, sponsors or contributes to, or within the past 5
(five) years, has maintained, sponsored contributed to, any "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA or any other
employee benefit plans subject to Title IV of ERISA or Section 412 of the
US Code.
(b) With respect to each of the U.S. Employee Plans disclosed in
SECTION 5.8.12(A) of the Company Disclosure Schedule, the Company has
provided or made available to Parent true and complete copies of the
following documents: (i) the plan documents and related trust
agreements, (ii) the most recent summary plan description and all
subsequent summary material modifications, (iii) the three most recent
Form 5500 filings (including schedules and financial statements) for
each U.S. Employee Plan required to file such form, and (iv) the most
recent IRS favorable determination letter for each U.S. Employee Plan
intended to be a qualified plan under Section 401(a) of the US Code.
Except as would not have a Company Material Adverse Effect, each of
the U.S. Employee Plans has been operated and administered in
compliance with its terms and in accordance with all applicable laws
and the Company has made, or caused to be made, all contributions and
premium payments required to be made thereunder, and there exist no
claims for payment or other actions with respect to any U.S. Employee
Plan (except for benefits payable on claims in the ordinary course of
plan administration). None of the U.S. Employee Plans is subject to
any investigation, audit proceeding or other inquiry of any kind or
nature by, before or on behalf of any governmental authority.
(c) Except as would not have a Company Material Adverse Effect,
neither the Company nor any of its Subsidiaries or, to the Company's
Knowledge, any other "disqualified person" (within the meaning of
Section 4975 of the US Code) or any "party in interest" (within the
meaning of Section 3(14) of ERISA), has engaged in any "prohibited
transaction" (within the meaning of Section 4975 of the US Code or
Section 406 of ERISA) with respect to or relating to any U.S. Employee
Plan. Except as would not have a Company Material Adverse Effect,
neither the Company nor any Subsidiary or, to the Company's Knowledge,
any other fiduciary (as defined in Section 3(21) of ERISA) of any U.S.
Employee Plan has any liability for breach of fiduciary duty or other
failure to act or comply in connection with the administration or
investment of the assets of any U.S. Employee Plan.
- 22 -
(d) Except to set forth in SECTION 5.8.12(D) of the Company
Disclosure Schedule, the transactions contemplated by this Agreement
will not cause the acceleration of vesting in, or payment of, any
benefits under any U.S. Employee Plan and shall not otherwise
accelerate or increase any liability under any U.S. Employee Plan.
(e) With respect to any Employee Benefit Plans which are "group
health plans" under Section 4980B of the US Code or ERISA Section
607(1) and related regulations, there has been timely compliance with
all material requirements imposed by COBRA (as defined below), and
neither the Company, the Subsidiaries nor any ERISA Affiliates has
Knowledge of any liability that could be expected to be incurred
arising from the Company's, any of its Subsidiaries' or any ERISA
Affiliates' obligations under COBRA or any similar state law. None of
the U.S. Employee Plans provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for the Affected
Employees of former employees of the Company or Subsidiaries for
periods extending beyond their retirement or other termination of
service, other than coverage mandated by applicable law. The Company
has caused the group health plans of the Company and its Subsidiaries
to become compliant with the Health Insurance Portability and
Accountability Act and the regulations promulgated thereunder in all
material respects.
(f) For purposes hereof, (i) "COBRA" means Part 6 of Subtitle B
of 1986, as amended through the date hereof; and (ii) "ERISA
AFFILIATE" means any Person that at any relevant time prior to the
Effective Time is considered a single employer with the Company or any
of its Subsidiaries under Section 414 of the US Code.
5.9 INSOLVENCY. No insolvency proceedings of any kind have been filed
against the Company or any Subsidiary and neither the Company nor any Subsidiary
has stopped payment or is insolvent or unable to pay its debts as and when they
fall due.
5.10 COMPLIANCE WITH LAWS; PERMITS; TAKEOVER STATUTE
5.10.1 Except as set forth in SECTION 5.10.1 of the Company Disclosure
Schedule, the businesses of each of the Company and its Subsidiaries have
not been, and are not being, conducted in a violation of any federal,
state, local or foreign law, statute or ordinance, common law or any rule,
regulation, standard, judgment, order, writ, injunction, decree,
arbitration award, agency requirement, license or permit of any
Governmental Entity (collectively, "LAWS") applicable to the Company or any
of its Subsidiaries which is material to the Company or its business. No
investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending or, to the Company's
Knowledge, threatened, nor has any Governmental Entity indicated an
intention to conduct the same and, to the Company's Knowledge, there is no
reasonable basis therefore. No material change is required in the Company's
or any of its Subsidiaries' processes, properties, assets or procedures in
connection with any such Laws, and the Company has not received any notice
or communication of any noncompliance with any such Laws that has not been
cured as of the date hereof. In addition, no "fair price," "moratorium,"
"control share acquisition" mandatory price or other similar anti-takeover
statute or regulation (each a "TAKEOVER STATUTE") or any anti-takeover
provision in the Company's Articles of Association is applicable to the
Company, the Company Securities, the Merger or the other transactions
contemplated by this Agreement or the other Transaction Documents.
"TRANSACTION DOCUMENTS" means this Agreement or under any other agreement,
exhibit or document attached or ancillary to this Agreement.
- 23 -
5.10.2 SECTION 5.10.2 of the Company Disclosure Schedule contains a
correct and complete list of all permits, certifications, approvals,
registrations, consents, authorizations, franchises, variances, exemptions
and orders ("PERMITS") necessary or appropriate to conduct the Company's
and each Subsidiary's business as presently conducted, or as presently
proposed to be conducted. The Company and its Subsidiaries each has
obtained and is in compliance with all Permits.
5.11 ENVIRONMENTAL MATTERS
5.11.1 No Hazardous Material (as defined below) is present, as a
result of the actions or omissions of the Company or any of its
Subsidiaries, in, on or under any property, including the land and the
improvements, ground water and surface water, that the Company or any of
its Subsidiaries has at any time owned, operated, occupied or leased.
Neither the Company nor any Subsidiary thereof has notified any
Governmental Entity or third party, or been required under any Law or
Contract to notify any Governmental Entity or third party, of any Release
(as defined below) of any Hazardous Material.
5.11.2 At all times, the Company and each of the Subsidiaries have
transported, stored, used, manufactured, disposed of, released or exposed
their respective Employees or others to Hazardous Materials in material
compliance with all Environmental Laws, the Company and each of its
Subsidiaries are currently in compliance, and within applicable statutes of
limitation, have been in compliance, in all material respects, with all
applicable Environmental Laws, and there are no Hazardous Materials located
at any location operated by the Company that could reasonably be expected
to require investigation, removal, remedial or corrective action by the
Company or any of its Subsidiaries or that would reasonably be likely to
result in liabilities of, or losses, damages or costs (including, response
costs, corrective action costs, damages for personal injury or property
damage, or natural resource damages), in each case that are material to the
Company or any of its Subsidiaries under any Environmental Law.
5.11.3 The Company and each of the Subsidiaries currently hold all
environmental approvals, permits, licenses, clearances, authorizations and
consents (the "ENVIRONMENTAL PERMITS") necessary for the conduct of their
business as such business is currently being conducted, and are, and within
applicable statutes of limitations have been, in material compliance with
all such Environmental Permits, and neither the Company nor any of its
Subsidiaries has received written notice that any Environmental Permit
possessed by the Company or any of its Subsidiaries will be revoked,
suspended or will not be renewed. To the Company's Knowledge, no
environmental report, closure activity, investigation or assessment, and no
notification to or approval, consent or authorization from, any
Governmental Entity with jurisdiction regarding environmental matters or
Hazardous Materials is required to be obtained by the Company or any of its
Subsidiaries in connection with any of the transactions contemplated
hereby.
- 24 -
5.11.4 No Environmental Claim (as defined below) against the Company
or its Subsidiaries is pending or threatened. The Company is not aware of
any fact or circumstance, including any Release, which could reasonably be
expected to involve the Company or any of its Subsidiaries in an
Environmental Claim that would be reasonably likely to impose upon the
Company or any of its Subsidiaries any material liability, including,
without limitation, any material liability that the Company and/or any of
its Subsidiaries may have retained or assumed either contractually or by
operation of law.
5.11.5 The Company has made available to Parent and its authorized
representatives all records and files, including but not limited to, all
assessments, reports, studies, analyses, audits, tests and data available
to the Company concerning the existence of Hazardous Materials or any other
environmental concern at properties, assets and facilities currently or
formerly owned, operated or leased by the Company or any of its
Subsidiaries or any predecessor in interest, or concerning compliance by
the Company and/or any of its Subsidiaries with, or liability under, any
Environmental Laws.
5.11.6 As used in this Agreement:
"ENVIRONMENTAL CLAIM" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims,
Liens, investigations, proceedings or notices of noncompliance or violation
by any person or entity (including any Governmental Entity) alleging
liability or potential liability (including, without limitation, potential
responsibility for or liability for enforcement costs, investigatory costs,
monitoring costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries, fines or penalties) arising out of, based on or
resulting from: (A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by the Company or any of its
Subsidiaries; or (B) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or (C) any and all claims by
any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of or exposure to any Hazardous Materials.
"ENVIRONMENTAL LAWS" means all Israeli, US, European, UK and other
foreign (to the extent applicable) Laws now or previously in effect
regulating, relating to, or imposing liability or standard of conduct
concerning pollution, the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health and safety (including,
without limitation, noise emissions) as it relates to exposure to Hazardous
Materials, including, without limitation, Laws relating to Releases or
threatened Releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
- 25 -
"HAZARDOUS MATERIALS" means: (A) any petroleum or petroleum products,
radioactive materials, asbestos, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBs") in regulated concentrations; and (B) any
chemicals, materials or substances which are now defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," or words of similar import, under
any Environmental Law; (c) any other chemical, material, substance, mixture
or waste, which is regulated under any Environmental Law in a jurisdiction
in which the Company or any of its Subsidiaries operates, and (d) any other
substance that may give rise to liability under any Environmental Law.
"RELEASE" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
5.12 TAX MATTERS
5.12.1 Except as set forth in SECTION 5.12.1 of the Company Disclosure
Schedule, each of the Tax Returns (as defined below) required to be filed
by or on behalf of the Company and each of its Subsidiaries with any
Governmental Entity with respect to any taxable period before the date
hereof (the "GROUP COMPANY RETURNS"): (i) has been filed on or before the
applicable due date (including any extensions of such due date); and (ii)
has been properly prepared and correct and complete in all material
respects. All amounts owed by each of the Company and its Subsidiaries,
whether or not shown on the Group Company Returns, have been timely and
fully paid, and the Company and each of its Subsidiaries have made adequate
provision in their Financial Statements, to the extent required by GAAP for
any Taxes (as defined below) that are not yet due and payable for all
taxable periods, or portions thereof, ending on or before the date of this
Agreement.
5.12.2 The Company and each of its Subsidiaries have made available to
Parent and Merger Sub correct and complete copies of all Group Company
Returns, examination reports and statements of deficiencies for taxable
periods, or transactions consummated, for which the applicable statutory
periods of limitations have not expired.
5.12.3 Except as set forth in SECTION 5.12.3 of the Company Disclosure
Schedule, there are no outstanding Contracts extending or waiving the
statutory period of limitations applicable to any claim for, or the period
for the collection, assessment or reassessment of, Taxes due from the
Company or any of its Subsidiaries for any taxable period and no request
for any such waiver or extension is currently pending.
- 26 -
5.12.4 Except as set forth in SECTION 5.12.4 of the Company Disclosure
Schedule, no audit or other proceeding by any Governmental Entity is
pending or, to the Company's Knowledge, threatened with respect to any
amount of Taxes due from or with respect to the Company or any of its
Subsidiaries and, to the Knowledge of the Company, there is no reasonable
basis for any such additional Taxes due. No Governmental Entity (including
the Investment Center) has given notice of its intention to assert any
deficiency or claim for additional amounts of Taxes against the Company or
any of its Subsidiaries. No claim has been made against the Company or any
of its Subsidiaries by any Governmental Entity in a jurisdiction where the
Company or any of its Subsidiaries does not file Tax Returns that the
Company or any of its Subsidiaries is or may be subject to taxation by that
jurisdiction. All deficiencies for Taxes asserted or assessed against the
Company or any of its Subsidiaries have been fully and timely paid, settled
or properly reflected in the Company Current Balance Sheet.
5.12.5 There are no Liens for Taxes upon the properties and assets of
the Company and its Subsidiaries, except for statutory Liens for current
Taxes not yet due.
5.12.6 The Company and its Subsidiaries have each withheld from their
respective Employees, independent contractors, creditors, shareholders and
third parties, and timely paid to the appropriate taxing authority, proper
and accurate amounts in all material respects for all periods ending on or
before the date hereof in compliance with all Tax withholding and remitting
provisions of applicable Laws. The Company and each of its Subsidiaries
have each complied in all material respects with all Tax information
reporting provisions under applicable Laws.
5.12.7 Except as set forth in SECTION 5.12.7 of the Company Disclosure
Schedule, the Company and each of its Subsidiaries is in compliance in all
respects with all transfer pricing requirements in all jurisdictions in
which the Company or any of its Subsidiaries does business (including,
without limitations, such requirements as to documentation).
5.12.8 The Company believes, after reasonable diligence and inquiry,
that it qualifies as an industrial Company according to the meaning of that
term in the Law for Encouragement of Industry.
5.12.9 SECTION 5.12.9 of the Company Disclosure Schedule lists: (A)
each Tax or other incentive granted to or enjoyed by the Company or any of
its Subsidiaries under the Laws of the State of Israel (the "INCENTIVES"),
and (B) all material undertakings of the Company and any of its
Subsidiaries given in connection with the Incentives, (C) the commencement
year for each Approved Enterprise approval under the Israeli Law for
Encouragement of Capital Investment, 1959. The Company and each of its
Subsidiaries have complied, in all material respects, with all requirements
to be entitled to claim all Incentives. Subject to receipt of the
Investment Center approval and other approvals from Governmental Entities
required herein, and assuming the compliance by the Company and the Company
Subsidiaries, after Closing, with all applicable regulations and no change
in the operation of the Company's or any Company Subsidiary's business by
Parent in a manner which is material to the continued entitlement to such
tax incentives, the consummation of the Merger and the other transactions
contemplated hereby will not affect the continued qualification for the
Incentives or the terms or duration thereof or require any recapture of any
previously claimed Israeli Tax incentive, and no consent, authorization or
approval of any Governmental Entity is required prior to the consummation
of the Merger and the other transactions contemplated hereby in order to
preserve the entitlement of Company or its Subsidiaries to any such Israeli
Tax incentive.
- 27 -
5.12.10 The Company has not received any indication specifically
directed to the Company from any Israeli Tax Authority that the
consummation of the Merger and the other transactions contemplated hereby
would affect the Company's ability to offset for Israeli Tax purposes in
the future any and all losses accumulated by the Company as of the Closing.
5.12.11 Except as set forth in SECTION 5.12.11 of the Company
Disclosure Schedule, the Company currently complies and has historically
complied in all material respects with all the relevant requirements of
Section 102 of the Israeli Income Tax Ordinance and the regulations
promulgated thereunder, with respect to any option or any share issued
pursuant to the provisions of such section, and the Company has complied in
all material respects with the requirements of Section 3(i) of the Israeli
Income Tax Ordinance with respect to the grant of options or shares to
independent contractors or "Controlling Shareholders" (as defined in said
section).
5.12.12 Neither the Company nor any of its Subsidiaries is a
Controlled Foreign Corporation under Section 75B of the Israeli Income Tax
Ordinance.
5.12.13 SECTION 5.12.13 of the Company Disclosure Schedule lists all
Israeli Tax rulings, Contracts and arrangements issued to or agreed by the
Company or any of its Subsidiaries. The Company and each of its
Subsidiaries have complied in all respects and continues to comply in all
respects with all conditions and requirements of any Tax ruling, Contract
or arrangement with the Israeli Tax authorities or any other Israeli
Governmental Entity (including the Investment Center).
5.12.14 The Company and each of its Subsidiaries have not undertaken
since January 1, 2007 any transaction that will require special reporting
in accordance with the Israeli Income Tax Regulations (Tax Planning
Requiring Reporting)(Temporary Provisions), 2006, regarding reportable tax
planning.
5.12.15 The Company, its shareholders and each of its Subsidiaries are
not subject to any restrictions or limitations pursuant to Part E2 (change
of structure and merger) of the Israeli Income Tax Ordinance.
5.12.16 The Company and each of its Subsidiaries have not entered into
any "listed transactions" as defined in Section 1.6011-4(b)(2) of the
United States Treasury Regulations, and the Company and its Subsidiaries
have properly disclosed all reportable transaction as required by Section
1.6011-4 of the United States Treasury Regulations.
5.12.17 No Subsidiary is, or ever has been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the US
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of
the US Code.
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5.12.18 No Subsidiary is liable for the Taxes of another Person (i)
under Section 1.1502-6 of the United States Treasury Regulations (or
comparable provisions of state, local or other law), (ii) as a transferee
or successor, or (iii) by Contract or indemnity.
5.12.19 Neither the Company nor any of its Subsidiaries has
distributed stock of another Person, or has had its stock distributed to
another Person, in a transaction that was purported or intended to be
governed in whole or in part by Section 355 of the US Code.
5.12.20 Except as set forth in SECTION 5.12.20 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a
party to any Contract or plan that has resulted, or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the US Code or any
comparable provision of state, local or other Law.
5.12.21 Neither the Company nor any of its Subsidiaries has
participated in an international boycott within the meaning of Section 999
of the US Code.
5.12.22 The Company is not, and to its Knowledge has never been, a
passive foreign investment company within the meaning of Section 1297 of
the US Code.
5.12.23 In relation to Value Added Tax ("VAT"):
(a) Allegro UK Limited (the "UK SUBSIDIARY") is a registered and
taxable person for the purposes of Value Added Tax Act 1994 (VATA);
(b) no default surcharge notice has been served on the UK
Subsidiary under section 59 VATA 1994;
(c) the UK Subsidiary has not made an election pursuant to
paragraph 2 of Schedule 10 VATA 1994;
(d) no asset of the UK Subsidiary is a capital item under the
provisions of Part XV of the Value Added Tax Regulations; and
(e) the UK Subsidiary has not registered, and is not required to
register, for VAT (or its equivalent) purposes in any country other
than the United Kingdom.
5.12.24 All documents in the UK Subsidiary's possession or whose
production the UK Subsidiary is entitled to and which attract stamp duty
have been duly stamped.
5.12.25 The UK Subsidiary has not entered into a land transaction
where there may be an obligation in the future to make a return in
accordance with Section 80 Finance Xxx 0000.
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5.12.26 Except as set forth in SECTION 5.8.12(A) of the Company
Disclosure Schedule, the UK Subsidiary has not established, operated (nor
is it a participant in) any bonus, share option, profit related pay or
other scheme or arrangement whether or not approved by HM Revenue &
Customs, for the benefit of its current or former directors or employees or
any of them.
5.12.27 The UK Subsidiary has not been a party to or otherwise
involved in any transaction, scheme or arrangement the sole or main purpose
or one of the main purposes was avoiding or deferring a tax liability nor
was it advised in writing that there was a risk that the UK Subsidiary
could be liable to Tax or increased Tax as a result of the Xxxxxxx v Xxxxxx
line of cases.
5.12.28 For purposes of this Agreement, the following terms have the
following meanings:
"TAX" or "TAXES" shall mean (i) any federal, state, local or municipal
or other tax in any jurisdiction (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, estimated
tax, unemployment tax, national health insurance payment, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, profits tax, alternative minimum tax, environmental tax,
capital stock tax, severance tax, occupation tax, windfall profits tax,
social security payment, disability tax, withholding tax or payroll tax),
levy, assessment, tariff, duty (including any customs duty), deficiency or
fee, and any related charge or amount (including any fine, penalty,
interest or inflation linkage), imposed, assessed or collected by or under
the authority of any Governmental Body; and (ii) any transferee liability
in respect of any items described in the foregoing clause (i).
"TAX RETURN" means, any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification,
form, election, certificate or other document or information, and any
amendment or supplement to any of the foregoing, filed with or submitted
to, or required to be filed with or submitted to, any Governmental Entity
relating to any Taxes.
5.13 GRANTS, INCENTIVES AND SUBSIDIES
5.13.1 Without derogating from Section 5.12.9 hereof, SECTION 5.13.1
of the Company Disclosure Schedule provides a complete list of all pending
and outstanding grants, incentives and subsidies (collectively, "GRANTS")
from the Government of the State of Israel or any agency thereof, or from
any U.S. or other foreign Governmental Entity, granted to the Company or
any of its Subsidiaries, including, without limitation, (A) Approved
Enterprise Status from the Investment Center (including all letters of
approval provided by the Investment Center, and details regarding the
period for which tax incentives apply and the nature of such tax
incentives), and (B) grants from the Office of the Chief Scientist in the
Israeli Ministry of Industry, Trade & Labor (the "OCS") (including all
letters of approval provided by the OCS).
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5.13.2 The Company has delivered to Parent, prior to the date hereof,
correct copies of all documents evidencing Grants submitted and/or received
by the Company, any of its Subsidiaries or any of their representatives and
of all letters of approval, and supplements thereto, granted to the Company
or any of its Subsidiaries and any other applicable correspondence. Without
limiting the generality of the above, SECTION 5.13.2 of the Company
Disclosure Schedule includes the aggregate amounts of the Grants, and the
aggregate outstanding obligations thereunder of the Company or any of its
Subsidiaries with respect to royalties, or the outstanding amounts to be
paid by the OCS or any other relevant Governmental Entity to the Company or
any of its Subsidiaries.
5.13.3 The Company and each of its Subsidiaries, as applicable, are in
compliance in all material respects with the terms and conditions of their
respective Grants and the Laws applicable thereto and have duly fulfilled
in all material respects all the undertakings relating thereto.
5.14 INTELLECTUAL PROPERTY
5.14.1 Except as set forth in SECTION 5.14.1 of the Company Disclosure
Schedule, the Company owns or has, free and clear of conditions or other
restrictions or any requirement of any present or future royalty,
maintenance, support or other payments, all Intellectual Property rights
necessary to carry out, or that otherwise are material to, the current
business of the Company and its Subsidiaries and had, during the relevant
periods, all Intellectual Property rights necessary to carry out, or that
otherwise were material to, the business of the Company and its
Subsidiaries. SECTION 5.14.1 of the Company Disclosure Schedule sets forth
all (A) Registered (as such term is defined below) and/or material
Intellectual Property (as defined below) owned by the Company, indicating
for each Registered item the registration or application number and the
applicable filing jurisdiction (collectively, the "REGISTERED INTELLECTUAL
PROPERTY"); and (B) material Intellectual Property Contracts (other than
licenses for commercial "off-the-shelf" or "shrink-wrap" software that has
not been modified or customized for the Company or any of its
Subsidiaries). Except as set forth in SECTION 5.14.1 of the Company
Disclosure Schedule, the Company has exclusive ownership of all
Intellectual Property owned by it, free and clear of all Liens, exclusive
licenses and non-exclusive licenses other than those granted in connection
with the sale of products in the ordinary course of business. The
Intellectual Property owned by the Company is valid, subsisting and
enforceable, and is not subject to any outstanding order, judgment, decree
or Contract affecting the Company's use thereof or its rights thereto. In
the case of Intellectual Property not owned by the Company or any
Subsidiary but necessary for the operation of the Company's or any
Subsidiary's business as currently conducted, the Company or any Subsidiary
has the right to use such Intellectual Property pursuant to a Contract set
forth on SECTION 5.14.5 of the Company Disclosure Schedule and such
Contracts do not require prior approval of the other party thereto, expect
as set forth in SECTION 5.4.3 of the Company Disclosure Schedule.
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5.14.2 (i) Except as set forth on SECTION 5.14.2 of the Company
Disclosure Schedule, with respect to each item of Registered Intellectual
Property, (a) title recordation documents, including assignments and
changes of name; and (b) registration, maintenance and renewal fees in
connection with such Registered Intellectual Property, have been made and
are current and all necessary documents and certificates in connection with
such Registered Intellectual Property have been filed with the relevant
patent, trademark or copyright authorities in Israel, United States or
abroad for the purposes of maintaining such Registered Intellectual
Property. The Company or any Subsidiary have taken all reasonable steps
necessary to preserve and maintain all right, title and interest in and to
the Registered Intellectual Property and as of the date hereof, no loss,
cancellation, abandonment or expiration of any of the Registered
Intellectual Property is threatened, or pending, (ii) all of the Registered
Intellectual Property is valid and enforceable; and (iii) no claim by any
third party contesting the validity, enforceability, use or ownership of
any of the Registered Intellectual Property has been made, is currently
outstanding or is threatened in writing.
5.14.3 To the Company's Knowledge, neither the Company nor any of its
Subsidiaries has infringed or otherwise violated the Intellectual Property
rights of any third party. Neither the Company nor any of its Subsidiaries
has received any notice or claim challenging the Company's ownership of any
of the Intellectual Property owned or used by the Company or any of its
Subsidiaries or claiming that the Company or any of its Subsidiaries
infringes or misappropriates the Intellectual Property of any third party,
and to the Company's Knowledge, there are no facts reasonably likely to
give rise to any such claims. To the Company's Knowledge, no third party
has infringed, misappropriated, engaged in unauthorized use or otherwise
violated in any material respect any of the Company Intellectual Property.
5.14.4 The Company and each of its Subsidiaries have taken reasonable
measures to protect the confidentiality of all Trade Secrets (as defined
below) that are owned by the Company or any Subsidiary thereof, and to the
Company's Knowledge, such Trade Secrets have not been used, disclosed to or
discovered by any Person except pursuant to valid and appropriate
non-disclosure and/or license agreements entered into in the ordinary
course of business which, to the Company's Knowledge, have not been
breached. To the Company's Knowledge, none of the Company's or any of its
Subsidiary's current employees or independent contractors has any patents
issued or applications pending for any device, process, design or invention
of any kind now used or needed by the Company or any Subsidiary in the
furtherance of its business, which patents or applications have not been
assigned to the Company. All of the Company's and each Subsidiary's current
and prior employees and independent contractors have executed valid
intellectual property, confidentiality and assignment agreements for the
benefit of the Company substantially in the forms which the Company has
prior to the date of this Agreement provided to Parent and Merger Sub for
their review.
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5.14.5 SECTION 5.14.5 of the Company Disclosure Schedule contains a
correct and complete list of all Contracts to which any the Company and any
of its Subsidiaries is a party with respect to any Intellectual Property,
including but not limited to all licenses or similar agreements or
arrangements, in effect as of the date hereof, in which the Company or any
Subsidiary is a licensor or licensee of any Intellectual Property, other
than licenses for commercial "off-the-shelf" or "shrink-wrap" software that
has not been modified or customized for the Company or any of its
Subsidiaries. Each of the Contracts, licenses, or similar agreements or
arrangements described in SECTION 5.14.5 of the Company Disclosure Schedule
is in full force and effect and is the legal, valid and binding obligation
of the Company or any Subsidiary, enforceable in accordance with its terms,
except as may be limited by general principals of equity, bankruptcy or
insolvency laws. Neither the Company nor any Subsidiary is in material
default under any Contract, license, or similar agreement or arrangements
described in SECTION 5.14.5 of the Company Disclosure Schedule, nor to the
Company's Knowledge, is any other party to any Contract, license, or
similar agreements or arrangements described in SECTION 5.14.5 of the
Company Disclosure Schedule in default thereunder, and to the Company's
Knowledge no event has occurred that with the lapse of time or the giving
of notice or both would constitute a material default thereunder. No party
to any of the Contracts, licenses, or similar agreements or arrangements
described in SECTION 5.14.5 of the Company Disclosure Schedule has made a
written material claim or demand against the Company or any Subsidiary for
penalties or exercised any termination rights with respect thereto. Except
as set forth in SECTION 5.14.5 of the Company Disclosure Schedule, no
Person who has licensed Intellectual Property to the Company or any of its
Subsidiaries has ownership rights or license rights to improvements made by
the Company and/or any of its Subsidiaries in such Intellectual Property
which has been licensed to the Company and/or any of its Subsidiaries.
Without derogating from the provisions of Section 5.14.4 hereof, to the
extent that any Intellectual Property has been developed or created by any
Person other than the Company or any of its Subsidiaries (including but not
limited to employees, independent contractors and consultants, and former
employees, independent contractors and consultants of the Company or its
Subsidiaries) for the benefit of the Company, the Company or the relevant
Subsidiary has a written Contract with such Person with respect thereto and
the Company thereby has obtained ownership of, and is the exclusive owner
of, all such Intellectual Property by operation of law or by valid
assignment.
5.14.6 SECTION 5.14.6 of the Company Disclosure Schedule lists all
Contracts between the Company or any of its Subsidiaries and any other
Person: (i) wherein or whereby the Company or any Subsidiary has agreed to,
or assumed, any obligation or duty to warrant, indemnify, reimburse,
defend, hold harmless, guaranty or otherwise assume or incur any obligation
or liability or provide a right of rescission with respect to the
infringement or misappropriation by the Company or any Subsidiary or such
other Person of the Intellectual Property of any Person other than the
Company, or (ii) containing a covenant not to compete or otherwise limiting
its ability to use or exploit fully any of the Intellectual Property.
5.14.7 Neither the Company nor any of its Subsidiaries have granted
any licenses or other rights to third parties to use the Intellectual
Property owned, used or held by the Company or any Subsidiary thereof other
than non-exclusive licenses granted in the ordinary course of business.
5.14.8 The IT Assets (as defined below) operate and perform in all
material respects for the needs of the business as conducted in accordance
with their documentation and functional specifications and otherwise as
required by the Company in connection with its business and have not caused
a malfunction or failure within the past 3 (three) years. To the Company's
Knowledge, no Person has gained unauthorized access to the IT Assets. The
Company and its Subsidiaries have purchased a sufficient number of seat
licenses for all licenses or similar agreement relating to the IT Assets.
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5.14.9 SECTION 5.14.9 of the Company Disclosure Schedule identifies
any and all licenses entered into by the Company with regard to any third
party source code. The company has source code for each version of software
that is both owned by it and currently being used by it. The source code
for such software will compile into object code or otherwise is capable of
being installed and operated. Once compiled and/or installed, such software
will have the features, functions and performance described in the
documentation pertaining to it and will execute on the computer platforms
for which it is designed. Except as set forth in SECTION 5.14.9 of the
Company Disclosure Schedule, none of the software owned by the Company
contains any shareware, open source code, or other software whose use
requires disclosure or licensing of Intellectual Property to or from the
public or third parties including but not limited to any GNU or GPL
libraries or code. Except as set forth in SECTION 5.14.9 of the Company
Disclosure Schedule, no source code for any Software Product (as defined
below) has been delivered, licensed, made available or otherwise
transferred by the Company to any Person (including any escrow agent) who
is not, as of the date of this Agreement, an employee of the Company.
Except as set forth in SECTION 5.14.9 of the Company Disclosure Schedule,
the Company does not have any duty or obligation (whether present,
contingent or otherwise) to deliver, license or make available the source
code for any Software Products to any escrow agent or other Person who will
not be, as of immediately following the Closing, an employee of the
Company.
5.14.10 SECTION 5.14.10 of the Company Disclosure Schedule contains a
complete and accurate list, together with applicable Export Control
Classification Number (ECCN), of all software that is sold, licensed,
leased or otherwise distributed by the Company or its Subsidiaries (the
"SOFTWARE PRODUCTS") indicating in each case, the name, owner and most
recent version of the Software Product and information regarding any
third-party code that is embedded in such Software Product. The Company and
its Subsidiaries are in compliance with all United States laws, rules, and
regulations governing the export of technology. For the avoidance of doubt,
software that is obtained under a "limited license" or open source license,
shall be considered "third-party code".
5.14.11 None of the Company's Intellectual Property contains any "back
door," "drop dead device," "time bomb," "Trojan horse," "virus," or "worm"
(as such terms are commonly understood in the software industry) or any
other code designed or intended to have, or capable of performing, any of
the following functions: (A) disrupting, disabling, harming or otherwise
impeding in any manner the operation of, or providing unauthorized access
to, a computer system or network or other device on which such code is
stored or installed; or (B) damaging or destroying any data or file without
the user's consent, but the Company does include license keys to ensure
that the Company's software is not used beyond the scope of the license
granted.
5.14.12 Except as set forth in SECTION 5.14.12 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is,
nor as a result of the execution or delivery of this Agreement, or
performance of the Company's obligations hereunder, will the Company or any
Subsidiary be, in any violation of any license, sublicense, or other
Contract relating to the Company Intellectual Property.
- 34 -
5.14.13 Except as set forth in SECTION 5.14.13 of the Company
Disclosure Schedule, the Company or any Subsidiary has collected, used,
imported, exported and protected all personally identifiable information,
and aggregate or anonymous information relating to individuals protected by
law, in accordance with the privacy policies of the Company or any
Subsidiary and in accordance with applicable law.
5.14.14 Except as set forth in SECTION 5.14.14 of the Company
Disclosure Schedule, the consummation of the transaction contemplated
hereby will not, in and of itself, result in the loss or impairment of the
Company's or any Subsidiary's right to own or use any of the Company
Intellectual Property or the termination, modification or extension of, or
result in a default under any Contract, license, or other agreement
relating to the Company Intellectual Property.
5.14.15 There are no orders, injunctions, judgments, doctrines,
decrees, rulings, writs, assessments, or arbitration awards: (i) which
specifically direct the Company or any Subsidiary by name or (ii) which the
Company or any Subsidiary is a party which restrict, in any respect, the
right to use any of the Company Intellectual Property.
5.14.16 For purposes of this Agreement, the following terms have the
following meanings:
"INTELLECTUAL PROPERTY" means all of the following in any jurisdiction
throughout the world: (A) registered and unregistered trademarks, service
marks, brand names, certification marks, collective marks, d/b/a's,
Internet domain names, logos, symbols, trade dress, assumed names,
fictitious names, trade names, and other indicia of origin, all
applications and registrations for the foregoing, and all goodwill
associated therewith and symbolized thereby, including all renewals of
same; (B) inventions and discoveries, whether patentable or not, and all
patents, registrations, invention disclosures and applications therefor,
including divisions, continuations, continuations-in-part and renewal
applications, and including renewals, extensions and reissues; (C)
confidential information, discoveries, concepts, ideas, research and
development, trade secrets and know-how, processes, schematics, business
methods, formulae, drawings, prototypes, models, designs, customer lists
and supplier lists (collectively, "TRADE SECRETS"); (D) copyrightable works
of authorship, and registrations and applications therefor, and all
renewals, extensions, restorations and reversions thereof; and (E) moral
rights and all other intellectual property or proprietary rights.
"COMPANY INTELLECTUAL PROPERTY" means any Intellectual Property that
is owned by or exclusively licensed to the Company or any of its
Subsidiaries.
"IT ASSETS" means the Company's and the Subsidiaries' computers,
computer software, firmware, middleware, servers, workstations, routers,
hubs, switches, data communications lines, and all other information
technology equipment, and all associated documentation.
- 35 -
"REGISTERED" means issued by, registered with, renewed by or the
subject of a pending application before any Governmental Entity or Internet
domain name registrar.
5.15 INSURANCE. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent in the businesses in which they are engaged.
SECTION 5.15 of the Company Disclosure Schedule lists all insurance policies and
fidelity bonds covering the assets, business, equipment, properties, operations,
employees, independent contractors, officers and directors of each the Company
and each of its Subsidiaries. There is no, and had not been in the past 3
(three) years, any material claim by the Company or any Subsidiary pending under
any of such policies or bonds as to which coverage has been questioned, denied
or disputed. The Company and its Subsidiaries are in compliance, in all material
respects, with the terms of such policies and instruments in all respects; and
there are no claims by the Company or any of its Subsidiaries under any such
policy or bond as to which any insurer is denying liability or defending under a
reservation of rights clause; neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for during the last 3
(three) years; and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Company Material Adverse Effect.
5.16 MATERIAL CONTRACTS
5.16.1 As of the date of this Agreement, except as described in the
relevant subsection of SECTION 5.16 of the Company Disclosure Schedule
neither the Company nor any of its Subsidiaries is a party to or bound by:
5.16.1.1 any Contract that involves or that could reasonably be
expected to involve (x) aggregate payments by the Company or any of
its Subsidiaries, or the receipt by the Company or any of its
Subsidiaries, of USD 250,000 (Two Hundred and Fifty Thousand United
States Dollars) or more individually or in the aggregate and that is
not cancelable without penalty within 30 (thirty) days, (y) minimum
purchase commitments by the Company or any of its Subsidiaries, or (z)
ongoing service or support obligations (other than contracts entered
into in the ordinary course of business) that are not cancelable
without penalty or refund within 30 (thirty) days;
5.16.1.2 any lease of real or personal property;
5.16.1.3 any Contract for the acquisition of or investment in
capital equipment for an aggregate purchase price or investment value
of USD 250,000 (Two Hundred and Fifty Thousand United States Dollars)
or more;
5.16.1.4 (x) any Contract authorizing the distribution or resale
by any Person of any of the Company's and its Subsidiaries' products
or services and any other dealer, agency, joint marketing, development
Contract; or (y) any Contract for the sale or rental of products or
services that is reasonably likely to result in payments to the
Company and its Subsidiaries;
- 36 -
5.16.1.5 any partnership, joint venture or other similar Contract
relating to the formation, creation, operation, management or control
of any partnership or joint venture;
5.16.1.6 any Contract relating to the leasing, licensing,
disposition or acquisition of properties or assets or any interest in
any business enterprise outside the ordinary course of business of the
Company or any of its Subsidiaries;
5.16.1.7 any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other Contracts or instruments
relating to the borrowing of money or extension of credit or the
deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset);
5.16.1.8 any guarantee, indemnity, security or other Contracts
pursuant to which the Company or any Subsidiary agrees to become
directly or contingently liable for any obligation of any other
Person;
5.16.1.9 any guarantee, indemnity, security or other Contracts
pursuant to which any third party agrees to become directly or
contingently liable for any obligation of the Company or any
Subsidiary;
5.16.1.10 any power of attorney given by the Company or any
Subsidiary with respect to any asset or business of the Company or
such Subsidiary;
5.16.1.11 any Contract, instrument or deed pursuant to which a
third party is entitled or authorized to bind or commit the Company or
any Subsidiary to any obligation;
5.16.1.12 any non-competition Contract or other Contract that (w)
purports to limit in any material respect either the type of business
in which the Company or any of Subsidiaries (or, after the Effective
Time, Parent or its Subsidiaries) may engage or the manner or
locations in which any of them may so engage in any business, (x)
could require the disposition of any material assets, line of business
or product line of the Company or any of its Subsidiaries or, after
the Effective Time, Parent or any of its Subsidiaries, (y) grants
"most favored nation" status including any that, following the Merger,
would apply to Parent and its Subsidiaries, including the Company and
its Subsidiaries, or (z) prohibits or limits the rights of the Company
or any of its Subsidiaries or, after the Effective Time, Parent or any
of its Subsidiaries, in any material respect to make, sell or
distribute any products or services, or use, transfer, license,
distribute or enforce any of their respective Intellectual Property
rights;
5.16.1.13 any Contract to which the Company or any of its
Subsidiaries is a party containing a standstill or similar agreement
(which are either in effect today or have been signed and will become
effective) pursuant to which the Company has agreed not to acquire
assets or securities of the other party or any of its affiliates;
- 37 -
5.16.1.14 any Contract between the Company or any of its
Subsidiaries and any director or officer of the Company or its
Subsidiaries or any Person beneficially owning 5% (five percent) or
more of the outstanding shares of the Company;
5.16.1.15 any Contract providing for indemnification by the
Company or any of its Subsidiaries of any Person other than license
agreements with customers entered into in the ordinary course of
business and consistent with past practice;
5.16.1.16 any Contract that contains a put, call or similar right
pursuant to which the Company or any of its Subsidiaries could be
required to purchase or sell, as applicable, any equity interests of
any Person or any properties or assets;
5.16.1.17 any Contract or any other arrangement of any kind or
nature whatsoever with any Government Entity; or
5.16.1.18 any other Contract or group of related Contracts that,
if terminated or subject to a default by any party thereto, would,
individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect (the Contracts described in Section
5.15.1.1-5.16.1.18, together with all exhibits and schedules to such
Contracts, being the "MATERIAL CONTRACTS").
5.16.2 A true and correct copy of each Material Contract has
previously been delivered to Parent and Merger Sub and as of the date
hereof each such Contract is a valid and binding agreement of the Company
or one of its Subsidiaries, as the case may be, and is in full force and
effect, and neither the Company nor any of its Subsidiaries nor, to the
Company's Knowledge, any other party thereto is in default or breach in any
respect under the terms of any such Contract. No party to a Material
Contract has made a formal or written claim to the effect that the Company
or any Subsidiary thereof has failed to perform an obligation thereunder
nor has any such party notified the Company or any of its Subsidiaries of
an intention to terminate or not renew any such Material Contracts.
5.17 PROPERTY
5.17.1 Except as set forth in SECTION 5.17.1 of the Company Disclosure
Schedule, the Company and its Subsidiaries have good and marketable title
to, or, in the case of securities and investments, a "security entitlement"
(as defined in the Uniform Commercial Code) in, or in the case of leased
property, a valid leasehold interest in, all of its respective property
(whether real or personal, tangible or intangible, and including securities
and investments) and assets purported to be owned or leased by it or any of
its Subsidiaries. All properties and assets used in the operations of the
Company and each of its Subsidiaries are reflected in the Company Current
Balance Sheet as of such date to the extent US GAAP requires the same to be
reflected. SECTION 5.17.1 of the Company Disclosure Schedule also contains
a correct and complete list of any and all Liens on any of the properties
or assets of the Company or any of its Subsidiaries, indicating the secured
obligation, the details of the underlying Contract (copies of all such
Contracts have previously been delivered to Parent and Merger Sub), the
scope and nature of the Lien and the property or assets covered by such
Lien.
- 38 -
5.17.2 The lease Contracts entered into by the Company and its
Subsidiaries in connection with their premises are in full force and effect
and, to the Knowledge of the Company, there are no existing defaults of the
Company and its Subsidiaries or any other party to the leases thereunder,
and neither the Company nor its Subsidiaries has received or given notice
of default or claimed default with respect to such leases, nor is there, to
the Knowledge of the Company, any event that with notice or lapse of time,
or both, would constitute a default thereunder. Other than the lease
Contracts referred to above and in SECTION 5.17.3 of the Company Disclosure
Schedule, the Company and its Subsidiaries have no other interests of any
type in any real property.
5.17.3 The Company is the lawful leaseholder of the properties
described in SECTION 5.17.3 of the Company Disclosure Schedule (the "LEASED
PROPERTY"). SECTION 5.17.3 of the Company Disclosure Schedule contains a
description of the Leased Properties, (including their size and location),
the name of the lessor, the start and end dates of the Lease, and the rent
payable under such Lease. Except as set forth in SECTION 5.17.3 of the
Company Disclosure Schedule, there is no outstanding Tax, levy or charge of
any kind whatsoever in connection with the Company's or its Subsidiaries'
use or right in such properties, and neither the Company nor any of its
Subsidiaries is under any obligation to pay such Taxes, levies or charges
to any third party, including any Governmental Entity, including the
Israeli Land Administration, except as provided for in such lease
agreement. Except as set forth in SECTION 5.17.3 of the Company Disclosure
Schedule, the Company and its Subsidiaries have obtained all required
approvals, authorizations and permits from any competent authority in
connection with all real property held by it or to which it is entitled or
in which it has rights (including building permits) and all of such
approvals, authorizations and permits are in full force and effect. There
are no outstanding claims or proceedings commenced by any third party
(including any competent authority) in connection with the Company's and
its Subsidiaries' possession or use of the Leased Properties and no
indictment was filed against the Company, any of its Subsidiaries or any of
their respective officer or directors in connection therewith.
5.17.4 The assets that are used by the Company and each of its
Subsidiaries or which are leased, subleased, licensed to, owned or
otherwise occupied by the Company and each of its Subsidiaries, are in good
condition, repair and (where applicable) proper working order, having
regard to their use and age and the effect of reasonable wear and tear.
5.18 CUSTOMERS
5.18.1 Prior to the date hereof, no customer of the Company or any of
its Subsidiaries has cancelled or otherwise terminated, or made any threat
to cancel or otherwise terminate any license agreement with the Company or
the relevant Subsidiary, and no such customer or has notified the Company
of its intention to cancel or otherwise terminate any license agreement
with the Company or any of its Subsidiary.
5.18.2 Neither the company nor any of its Subsidiaries has sold or
otherwise released for distribution any of any customer files and other
customer information relating to such the Company's or its Subsidiaries'
current and former customers (the "CUSTOMER INFORMATION"). No Person other
than the Company and its Subsidiaries possesses any claims or rights with
respect to use of the Customer Information.
- 39 -
5.19 WARRANTIES/PRODUCT LIABILITY. Except as set forth in SECTION 5.19 of
the Company Disclosure Schedule and except as specifically reflected, reserved
against or otherwise disclosed in the Company Current Balance Sheet: (A) there
is no notice, demand, claim, action, suit, inquiry, hearing, proceeding, notice
of violation or investigation from, by or before any Government Entity relating
to any product, including the packaging and advertising related thereto,
designed, formulated, manufactured, processed, sold or placed in the stream of
commerce by the Company or its Subsidiaries or any services owned and provided
by the Company or its Subsidiaries (a "PRODUCT"), or claim or lawsuit involving
a Product which is pending or threatened by any Person, and (B) there has not
been, nor is there under consideration by the Company, any Product recall or
post-sale warning of a material nature concerning any Product. All Products
comply in all material respects with applicable authorization by any
Governmental Entity and Laws, and there have not been and there are no such
material defects or deficiencies in such Products.
5.20 FCPA. Neither the Company nor any of its Subsidiaries nor, to the
Company's Knowledge, any director, officer, agent , independent contractor or
employee of the Company or any of its Subsidiaries is aware of or has taken any
action, directly or indirectly, that would result in a violation by such persons
of the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and
regulations thereunder ("FCPA") including, without limitation, making use of the
mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any "foreign official" (as such term is defined
in the FCPA) or any foreign political party or official thereof or any candidate
for foreign political office, in contravention of the FCPA; the Company and its
Subsidiaries have conducted their businesses in compliance with the FCPA (as
applicable) and the Company has no Knowledge of any violation of the FCPA by any
of its Subsidiaries.
5.21 OFAC. Neither the Company nor any of its Subsidiaries nor, to the
Company's Knowledge, any director, officer, agent , independent contractor,
joint venture, partner or employee of the Company or any of its Subsidiaries, is
owned or controlled by the government of a country subject to OFAC sanctions or
currently named on the list of specially designated nationals et al. list
maintained and available at xxxx://xxx.xxxxx.xxx/xxxxxxx/xxxxxxxxxxx/xxxx/xxx
/t11sdn.pdf.
5.22 MINUTE BOOKS AND REGISTERS. Except as set forth in SECTION 5.22 of the
Company Disclosure Schedule, the minutes of the Company and each Subsidiary
thereof furnished to counsel for Parent and Merger Sub are the only minutes of
the Board of Directors and shareholders of the Company and each of its
Subsidiaries and contain true and accurate copies of all resolutions adopted by
the Board of Directors (or committees thereof) of such companies and its
shareholders since the time of incorporation of the Company and each Subsidiary.
The share register and the register of directors of the Company and each
Subsidiary, if applicable, completely and accurately set forth the information
required to be included therein.
- 40 -
5.23 NO CONFLICT OF INTEREST
5.23.1 Other than as described in SECTION 5.23.1 of the Company
Disclosure Schedule, except for: (A) relationships with the Company or any
of its Subsidiaries as an officer, director, independent contractor or
employee thereof (and compensation by the Company or any of its
Subsidiaries in consideration of such services) in accordance with the
terms of their employment or engagement; and (B) relationships with the
Company as shareholders or option holders therein, to the Knowledge of the
Company, none of the directors or officers, or the shareholders of the
Company, or any known member of any of their families or affiliates, is
presently a party to, or was a party to, any transaction, Contract or
arrangement with the Company or any of its Subsidiaries.
5.23.2 Except as set forth in SECTION 5.23.2 of the Company Disclosure
Schedule, neither the Company nor any Subsidiary thereof is indebted,
directly or indirectly, to any of the Company's shareholders nor to the
Company's or its Subsidiaries' employees, independent contractors, officers
or directors or to their respective family members or affiliates, in any
amount whatsoever other than in connection with expenses or advances of
expenses incurred in the ordinary course of business or relocation expenses
of employees or payments in accordance with existing employment Contracts
or benefit plans. No shareholder of the Company, nor any employee,
independent contractors, officer or director of the Company or any of its
Subsidiaries, or any members of their families or affiliates, are, directly
or indirectly, indebted to the Company or any of its Subsidiaries.
5.23.3 Except as set forth in SECTION 5.23.3 of the Company Disclosure
Schedule, to the Knowledge of the Company, none of the Company's or its
Subsidiaries' officers, directors or shareholders has any known interest in
any property, real or personal, tangible or intangible, including
inventions, copyrights, trademarks, or trade names, used in or pertaining
to the business of the Company, its Subsidiaries or any supplier,
distributor, or customer of the Company or any of its Subsidiaries, except
for the normal rights of a shareholder, and except for rights under the
Company ESOPs.
5.23.4 Except as set forth in SECTION 5.23.4 of the Company Disclosure
Schedule, to the Knowledge of the Company, none of the Company's or its
Subsidiaries' officers, directors or shareholders has any direct or
indirect ownership interest in any Person with which the Company any Group
Company is affiliated or with which the Company or any Subsidiary has a
business relationship, or any Person which competes with the Company or any
Subsidiary except that such employees, independent contractors, officers
and directors may own stock in (but not exceeding 2% (two percent) of the
outstanding capital stock of) any publicly traded companies that may
compete with the Company or any Subsidiary.
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5.24 BROKERS AND FINDERS. Except as set forth in SECTION 5.24 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
nor, any director, officer, agent, employee or independent contractors, of the
Company or any of its Subsidiaries has employed or made any Contract on behalf
of the Company with any broker, finder or similar agent or any Person, which
will result in the obligation of the Company or Parent or Merger Sub to pay any
finder's fee, brokerage fees or commission or similar payment in connection with
the Merger or the other transactions contemplated in this Agreement.
5.25 INVESTOR STATUS. To the Company's Knowledge, based on representations
provided to the Company by its shareholder, the shareholders of the Company set
forth on SECTION 5.25 of the Company Disclosure Schedule are each an "accredited
investor" as defined in Rule 501(a) under the Securities Act. To the Company's
Knowledge, each such stockholder is not a registered broker-dealer under Section
15 of the Exchange Act
5.26 FULL DISCLOSURE. The representations or warranties made by the Company
in this Agreement (as qualified and modified by the Company Disclosure Schedule)
when read together as a whole, do not contain any untrue statement of a material
fact, nor omits to state any material fact necessary in order to make the
statements contained herein, in the light of the circumstances under which made,
not misleading.
B) REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent and
Merger Sub hereby represent and warrants to the Company that:
5.27 INCORPORATION. Parent is a company existing under the laws of the
State of Israel. Merger Sub is a company existing under the laws of the State of
Israel. Each of Parent and Merger Sub has all necessary corporate or legal
power, authority and capacity to enter into this Agreement and to carry out its
obligations under this Agreement.
5.28 AUTHORITY TO TRANSACT. Each of the Parent and Merger Sub has the
capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the Merger. All corporate action on the part of the
Parent and Merger Sub necessary for the authorization and execution of this
Agreement, the consummation of the Merger and the performance of all of the
Parent's and Merger Sub's obligations hereunder have been taken, or shall be
taken prior to the Closing Date. This Agreement constitutes and, when signed by
its duly authorized representatives, all other documents contemplated hereby
will constitute, valid and legally binding obligations of Parent and Merger Sub,
enforceable in accordance with their terms. Other than as set forth herein
regarding the approval by the shareholder of Merger Sub, no further vote or
other action of the shareholders of Parent is required by applicable Law
(including NASDAQ rules and regulations), the Articles of Association and
Memorandum of Association of Parent in order for Parent and Merger Sub to
consummate the Merger and the transactions contemplated hereby.
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5.29 EXECUTION OF AGREEMENT. The execution and delivery of this Agreement
by Parent and Merger Sub does not, and the consummation of the transactions
contemplated hereby will not, violate any provisions of the Charter or similar
documents of Parent or Merger Sub.
5.30 NO CONFLICT; REQUIRED FILINGS AND CONSENTS
5.30.1 The execution and delivery of this Agreement by each of Parent
and Merger Sub does not, and the performance of this Agreement by each of
Parent and Merger Sub shall not, (i) conflict with or violate the Parent
Charter Documents or equivalent organizational documents of any of Parent's
Subsidiaries, or (ii) subject to (x) receipt of required regulatory,
administrative and governmental approvals set forth in Section 5.30.2 and
6.11 hereof, and (y) delivery of the documents the Companies Registrar as
described in Sections 6.4 hereof, conflict with or violate any Law
applicable to Parent, Merger Sub or any of their subsidiaries or by which
it or their respective properties are bound, or (iii) conflict with, result
in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, require any notice or
consent pursuant to any material Contract to which Parent, Merger Sub or
any of their subsidiaries is a party or by which Parent, Merger Sub or any
of their subsidiaries or their or any of their respective properties are
bound, except to the extent such conflict, violation, breach, failure to
give notice or obtain consent, default, impairment rights, losses or Liens
or other effect would not, in the case of clauses (ii) or (iii), reasonably
be expected to prevent the consummation of the Merger.
5.30.2 The execution and delivery of this Agreement by each of Parent
and Merger Sub does not, and the performance of this Agreement and the
transactions contemplated hereby by each of Parent and Merger Sub shall
not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity except for applicable
requirements, if any, of (A) the approval of the Investment Center, (B) the
notification of the OCS, (C) any securities Laws obligations with respect
to the Parent Ordinary Shares or Parent Restricted Stock, including,
without limitations, the receipt of the Israeli Securities Exemption; (D)
delivery of the required notices described in Sections 6.4 and 6.11. The
Parent is eligible under applicable laws, including securities laws and
NASDAQ rules and regulations to file and register the Parent Ordinary
Shares issued as part of the Aggregate Merger Consideration on Form F-3.
5.31 ABSENCE OF LITIGATION. There are no material claims, actions, suits,
proceedings or investigations pending or, to the knowledge of Parent or Merger
Sub, threatened against Parent or Merger Sub or any property or rights of Parent
or Merger Sub or any of their subsidiaries, by or before any Governmental
Entity, including any investigation in respect of any material violation of
securities laws, breach of fiduciary duty or similar violation by the Parent,
any Subsidiary of the Parent or any of its officers, directors, employees or
agents, except as would not reasonably be expected to prevent the consummation
of the Merger.
5.32 OWNERSHIP AND OPERATIONS OF MERGER SUBSIDIARY. Parent, directly or
indirectly, owns of record and beneficially owns all outstanding shares of
Merger Sub. Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, and has engaged in no other business or other
activities or incurred any liabilities, other than as contemplated herein.
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5.33 FINANCING. Parent has and will have, immediately prior to, from and
after the Effective Time, sufficient cash on-hand and available through existing
liquidity facilities (without restrictions on drawdown that would delay payment
of the Aggregate Cash Consideration) to make payment of the Aggregate Cash
Consideration and any other amounts payable hereunder and to consummate the
transactions contemplated hereby.
5.34 SEC FILINGS
5.34.1 Since January 1, 2003, the Parent has filed all reports,
schedules, forms, registration statements and other documents required to
be filed by Parent with the U.S. Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended, (the "SECURITIES
ACT"), the Exchange Act and applicable rules and regulations of the SEC
thereunder (such filings, the "PARENT REPORTS").
5.34.2 As of their respective filing dates, the Parent Reports
complied, in all material respects, with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and applicable
rules and regulations of the SEC thereunder, and, did not contain any
untrue statement of a material fact or omit to state a 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.
5.35 ISSUANCE OF PARENT STOCK. The Parent Ordinary Shares to be issued
pursuant to this Agreement to the holders of the Company Securities have been
duly authorized, and when issued, will be validly issued, fully paid and
nonassessable and not subject to preemptive rights.
5.36 SEPARATE BUSINESS UNIT. It is the Parent's current intent that the
Surviving Corporation act as a separate and independent business unit. The above
shall not be deemed to limit the absolute discretion of Parent in exercising its
corporate governance powers with respect to the Company.
ARTICLE VI
COVENANTS
6.1. INTERIM OPERATIONS. (a) The Company covenants and agrees as to itself
and its Subsidiaries that after the date hereof and until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time
(unless otherwise approved in writing by Parent, which approval will not be
unreasonably (being determined based on a reasonable acquirer) withheld or
delayed, and except as otherwise expressly contemplated by this Agreement) and
except as required by applicable Laws, the business of the Company and its
Subsidiaries shall be conducted in the ordinary and usual course and in
accordance with past practices and, to the extent consistent therewith, the
Company and its Subsidiaries shall use their respective reasonable best efforts
to preserve their business organizations intact and maintain existing relations
and goodwill with Governmental Entities, customers, suppliers, distributors,
creditors, lessors, employees, independent contractors and business associates
and keep available the services of the Company's and its Subsidiaries' present
employees and agents. Without limiting the generality of the foregoing and in
furtherance thereof, from the date of this Agreement until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time,
except (A) as otherwise expressly required by this Agreement, (B) as the Parent
may approve in writing (which approval will not be unreasonably (being
determined based on a reasonable acquirer) withheld or delayed), the Company
will not and will not permit its Subsidiaries to:
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(i) adopt or propose any change in the Company's or any of its
Subsidiary's Articles of Association or other applicable governing
instruments;
(ii) merge or consolidate itself or any of its Subsidiaries with
any other Person;
(iii) acquire assets from any other Person with a value or
purchase price in the aggregate in excess of USD 50,000 (Fifty
Thousand United States Dollars) in any transaction or series of
related transactions, other than acquisitions pursuant to Contracts in
effect as of the date of this Agreement and set forth in the Company
Disclosure Schedule and other than in the ordinary course of business;
(iv) issue, sell, pledge, dispose of, grant, transfer, encumber,
or authorize the issuance, sale, pledge, disposition, grant, transfer,
lease, license, guarantee or encumbrance of, any shares of its capital
stock or of any its Subsidiaries, or securities convertible or
exchangeable into or exercisable for any shares of such capital stock,
or any options, warrants or other rights of any kind or nature
whatsoever to acquire any shares of such capital stock or such
convertible or exchangeable securities, including (without
limitations) any options pursuant to the Company ESOPs other than the
issuance of Company Shares pursuant to the exercise of Vested Options,
and other than has been agreed upon in writing by the Parties;
(v) create or incur any Lien on any of its assets or any of its
Subsidiaries;
(vi) make any loans, advances or capital contributions to or
investments in any Person (other than between the Company and its
Subsidiaries) except for travel advances in the ordinary course and
excluding cash management consistent with past practice;
(vii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock or enter into any agreement with
respect to the voting of its capital stock;
(viii) reclassify, split, combine, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock
or securities convertible or exchangeable into or exercisable for any
shares of its capital stock;
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(ix) incur any indebtedness for borrowed money or guarantee such
indebtedness of another Person, or issue or sell any debt securities
or warrants or other rights of any kind or nature whatsoever to
acquire any of its debt securities or of any of its Subsidiaries,
except for: (A) indebtedness for borrowed money incurred in the
ordinary course of business consistent with past practices not to
exceed USD 50,000 (Fifty Thousand United States Dollars) in the
aggregate, or (B) guarantees incurred in compliance with this Section
6.1 by it of indebtedness of its wholly-owned Subsidiaries;
(x) make or authorize any capital expenditure, except for capital
expenditures not exceeding USD 20,000 (Twenty Thousand United States
Dollars) individually, and except for capital expenditures in the
ordinary course of business consistent with past practices;
(xi) make any changes with respect to accounting policies or
procedures, except as required by changes in applicable generally
accepted accounting principles or applicable Law;
(xii) settle any litigation or other proceedings before a
Governmental Entity other than a settlement reimbursable from
insurance including a full release of the Company and its affiliates,
as applicable and other than settlements not exceeding USD25,000
(Twenty Five Thousand United States Dollars) individually or USD50,000
(Fifty Thousand United States Dollars) in the aggregate;
(xiii) other than as required by Law, make any material Tax
election or make any application with any Governmental Entity or,
except as set forth herein, seek any tax ruling from a Governmental
Entity (and following consultation with Parent), excluding filings of
Tax returns in the ordinary course of business;
(xiv) transfer, sell, lease, license, mortgage, pledge,
surrender, encumber, divest, cancel, abandon or allow to lapse or
expire or otherwise dispose of any of its assets, product lines or
businesses or of its Subsidiaries, including capital stock of any of
its Subsidiaries and sales of obsolete assets and except for sales,
leases, licenses or other dispositions of assets with a fair market
value not in excess of USD 50,000 (Fifty Thousand United States
Dollars) individually or USD 50,000 (Fifty Thousand United States
Dollars) in the aggregate, other than pursuant to Contracts in effect
as of the date of this Agreement and other than for licenses,
distribution or similar agreements with customers (directly or
indirectly) entered into in the ordinary course of business;
(xv) except as required by applicable Law or any Contract or
existing benefit plan existing as of the date hereof, (i) grant or
provide any severance or termination payments or benefits to any of
its or its Subsidiaries' directors, officers or any employee or
independent contractor or of any of its Subsidiaries, except in the
ordinary course of business consistent with past practice, (ii)
increase the compensation, bonus or pension, welfare, severance or
other benefits of, pay any bonus to, or make any new equity awards to
any of its or its Subsidiaries' directors, executive officers or any
employee or independent contractor or of any of its Subsidiaries,
excluding bonuses or salary increases to up to 20 Employees (to which
the Company is required) up to an aggregate annualized amount of
$200,000, (iii) establish, adopt, amend or terminate any of its
benefit plans or amend the terms of any outstanding equity-based
awards (except for suspension of exercise of options), (iv) take any
action to accelerate the vesting or payment, or fund or in any other
way secure the payment, of compensation or benefits under any of its
benefit plans, to the extent not already provided in any such benefit
plans, (v) change any actuarial or other assumptions used to calculate
funding obligations with respect to any benefit plan or to change the
manner in which contributions to such plans are made or the basis on
which such contributions are determined, except as may be required by
GAAP; or (vi) forgive any loans to any of its or of any of its
Subsidiaries' directors, officers, employees or independent
contractors;
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(xvi) take any action or omit to take any action that might
result in any of the conditions to the Merger set forth in Article VII
not being satisfied;
(xvii) take any action, or agree to make any action, which, under
applicable law or under the Company's past practice, would require the
approval or consent of the Company's board of directors and/or
shareholders; or
(xviii) agree, authorize or commit to do any of the foregoing.
(b) Without derogating from the provisions of Section 6.1(a) above,
the Company shall, prior to making any written or oral communications to
any of its or of any of its Subsidiaries' directors, officers, employees or
independent contractors pertaining to compensation or benefit matters that
are affected by the transactions contemplated by this Agreement or the
other Transaction Documents, provide Parent with a copy of the intended
communication and provide Parent a reasonable period of time to review and
comment on the communication (to the extent reasonable under the
circumstances), and the Parties hereto shall cooperate in providing any
such mutually agreeable communication.
(c) It is agreed and acknowledged that the provisions of this Section
6.1 shall not serve as a basis with respect to the continued operations of
the Surviving Corporation following the Effective Time.
6.2. NO SOLICITATION OR NEGOTIATION
(a) Without derogating from the generality of any other agreement
between the Parties hereto regarding the subject matter hereof, until the
earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, neither the Company nor any of its Subsidiaries
nor (i) their shareholders, directors officers and employees, or (ii) their
agents, independent contractors and advisers who are authorized by the
Company (the "RESTRICTED PARTIES") shall directly or indirectly: initiate,
solicit or knowingly encourage any inquiry or the making of any proposal or
offer that constitutes, or could reasonably be expected to lead to, any
Acquisition Proposal (as defined below); engage in, continue or otherwise
participate in any discussions or negotiations regarding, or provide any
non-public information or data to any Person who has made or proposed to
make, any Acquisition Proposal; or otherwise knowingly facilitate any
effort or attempt to make an Acquisition Proposal. To the extent such
Acquisition Proposal has already been made or is being discussed, the
Restricted Parties shall immediately cease any such discussion relating to
an Acquisition Proposal.
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For purposes of this Section 6.2 an "ACQUISITION PROPOSAL" shall mean:
(i) any proposal or offer with respect to a merger, joint venture,
partnership, consolidation, dissolution, liquidation, tender offer,
recapitalization, reorganization, share exchange, business combination,
sale of all or substantially all the assets or similar transaction outside
the ordinary course of business involving the Company or any of its
Subsidiaries; or (ii) any proposal or offer to acquire in any manner,
directly or indirectly, any voting power of the equity securities of the
Company or any material assets (including, without limitation, equity
interests in the Company's Subsidiaries) of the Company, in each case other
than the transactions contemplated by this Agreement.
(b) NOTICE. Without derogating from the generality of the aforesaid,
the Company will promptly (and, in any event, within one (1) business days
notify Parent if any third party has made any bona fide inquiries,
proposals or offers with respect to an Acquisition Proposal indicating, in
connection with such notice, the name of such third party and the material
terms and conditions of any proposals or offers (including, if applicable,
and subject to any applicable confidentiality obligations, copies of any
written requests, proposals or offers, including proposed agreements).
6.3. FINANCIAL DATA. As soon as practical but by no later than July 31,
2007, Company shall provide Parent with unaudited consolidated balance sheet of
the Company as of June 30, 2007 and the related consolidated statements of
income and cash flows for the 3 (three) months then ended. In addition, as from
the date hereof and until the Closing Date the Company shall provide Parent with
monthly management reports by no later than 10 (ten) business days from the end
of each calendar month for the preceding month (for the month of July and
forward) and with bi-weekly reports setting forth new bookings for Company
licenses on each Monday for the preceding two weeks.
6.4. MERGER PROPOSAL. (i) Promptly after the execution and delivery of this
Agreement but no later than 2 business days thereafter: (a) each of the Company
and Merger Sub shall cause a merger proposal (in the Hebrew language) in form
reasonably agreed upon by the Parties (the "MERGER PROPOSAL") to be executed in
accordance with Section 316 of the Companies Law; and (b) each of the Company
and Merger Sub shall deliver the Merger Proposal to the Companies Registrar in
accordance with the provisions of Section 317(a) of the Companies Law. The
Company shall cause a copy of the Merger Proposal to be delivered to each of its
secured creditors, if any, no later than three (3) days after the date on which
the Merger Proposal is delivered to the Companies Registrar, and shall promptly
inform its non-secured creditors of the Merger Proposal and its contents in
accordance with the provisions of Section 318 of the Companies Law and the
regulations promulgated thereunder. Promptly after the Company complies with the
preceding sentence, the Company and Merger Sub shall inform the Companies
Registrar, in accordance with the provisions of Section 317(b) of the Companies
Law, that notice was given to their creditors under Section 318 of the Companies
Law and the regulations promulgated thereunder.
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(ii) Promptly after the execution and delivery of this Agreement but
no later than 2 business days thereafter, each of the Company and Merger
Sub shall take all actions necessary under any applicable Law to call
(promptly after the execution and delivery of this Agreement), give notice
of and hold a meeting and/or class meetings (as applicable) of the
shareholders of the Company and Merger Sub, as applicable, to vote on the
approval of this Agreement, the Merger and the other transactions
contemplated hereunder or ancillary thereto. Subject to the notice
requirements of the Companies Law and the applicable Charters, the meeting
and/or class meetings (as applicable) of the shareholders of the Company
and Merger Sub shall be held on a date selected by Parties (in
consultation) as promptly as practicable after the date of this Agreement,
and in no event, no later than 15 (fifteen) days after the date hereof.
Parent (as the sole shareholder of Merger Sub) shall adopt a resolution to
approve the Agreement, the Merger and the other transactions contemplated
hereby. Within three (3) days after the approval of the Merger by the
shareholders of the Company and Merger Sub, each of the Company and Merger
Sub shall deliver to the Companies Registrar its shareholders approval
notice in accordance with the provisions of Section 317(b) of the Companies
Law informing the Companies Registrar that the Merger was approved by the
shareholders of the Company (or Merger Sub, as applicable) at the meeting
and/or class meetings of the shareholders of the Company (or Merger Sub, as
applicable).
6.5. PROXY SOLICITATION. The Company shall use best efforts to solicit from
its shareholders proxies in favor of the approval of this Agreement, the Merger
and the other transactions contemplated by this Agreement or the other
Transaction Documents in any shareholder meeting held for the purpose of
approving the said transactions and any adjournment thereof (the "COMPANY
SHAREHOLDERS MEETING"). The Company shall call, notice, convene, hold, conduct
and solicit all proxies in connection with such Company Shareholders Meetings in
compliance with all applicable legal requirements, including the Companies Law,
any applicable securities law and the Articles of Association of the Company.
6.6. OTHER ACTIONS. Subject to the terms and conditions set forth in this
Agreement, the Company, Parent and Merger Sub shall cooperate with each other
and use (and shall cause their respective Subsidiaries to use) their respective
reasonable best efforts to take or cause to be taken all actions, and do or
cause to be done all things, reasonably necessary, proper or advisable on its
part under this Agreement and the applicable Laws to consummate and make
effective the Merger and the other transactions contemplated by this Agreement
and the other Transaction Documents as soon as practicable, including preparing
and filing as promptly as practicable all documentation to effect all necessary
notices, reports and other filings and to obtain as promptly as practicable all
consents, registrations, approvals, permits and authorizations necessary or
advisable to be obtained from any third party and/or any Governmental Entity in
order to consummate the Merger or any of the other transactions contemplated by
this Agreement and the other Transaction Documents.
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6.7. CONFIDENTIALITY; ACCESS. The parties acknowledge that the Company and
Parent have previously executed a Confidentiality Agreement (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms except as otherwise provided
herein, and Parent shall cause Merger Sub to comply with the terms thereof.
During the period prior to the Closing, the Company agrees that Parent, its
agents and representatives are given reasonable access to the books and records
of the Company (including financial, corporate, operations and sales books,
books of account, sales and purchase records, lists of suppliers and customers,
and plans including all data and information, financial or otherwise stored on
computer-related or other electronic media) of the Company and its Subsidiaries
and to the premises of the Company and its Subsidiaries during normal working
hours upon reasonable prior notice and the Company shall, upon request, furnish
such information regarding the business and affairs of the Company and its
Subsidiaries as Parent may require. All such access shall be made in a manner so
as not to interfere with the business of the Company.
6.8. PUBLICITY. The initial press release regarding the Merger shall be a
joint press release by the Parties and thereafter the Company and Parent shall
consult with each other prior to issuing any press releases or otherwise making
public announcements with respect to the Merger and the other transactions
contemplated by this Agreement and the other Transaction Documents and prior to
making any filings with any third party and/or any Governmental Entity with
respect thereto, except as may be required by Law or by obligations pursuant to
any listing agreement with or rules of any national securities exchange or by
the request of any Government Entity (in which case reasonable efforts to
consult with the other Party will be made prior to any such release or public
statement).
6.9. EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement and the other Transaction Documents
shall be paid by the Party incurring such expense, provided however, that the
Company shall not pay any Excess Brokerage Fees, and any such Excess Brokerage
Fees shall be paid exclusively by the shareholders of the Company. If the Excess
Brokerage Fees are not settled prior to the Closing Date, such Excess Brokerage
Fees shall be deducted from the Aggregate Merger Consideration.
For this purpose, "EXCESS BROKERAGE FEES" means any expenses incurred by
the Company or any of its Subsidiaries in connection with any finder's fee,
brokerage fees or commission or similar payment in connection with the Merger or
the other transactions contemplated in this Agreement or the other Transaction
Documents in excess of the lesser of: (a) USD 2,500,000 (Two Million and Five
Hundred Thousand United Stated Dollars); and (b) 50% (fifty percent) of such
finder's fee, brokerage fees or commission or similar payments; except that
Excess Brokerage Fees shall not include reasonable reimbursable expenses of the
entities listed in SECTION 5.24 of the Company Disclosure Schedule in the
anticipated amounts set forth therein which shall be borne by the Company.
6.10. TAKEOVER STATUTE. If any Takeover Statute is or may become applicable
to the Merger or the other transactions contemplated by this Agreement or the
other Transaction Documents, each of Parent and the Company and its Board of
Directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise act to eliminate or minimize
the effects of such statute or regulation on such transactions.
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6.11. ISRAELI APPROVALS
(a) GOVERNMENT FILINGS. Each Party to this Agreement shall use all
reasonable efforts to deliver and file, as promptly as practicable after
the date of this Agreement, each notice, report or other document required
to be delivered by such Party to, or filed by such Party with, any Israeli
Governmental Entity with respect to the Merger. The Company and Parent
shall use all reasonable efforts to obtain, as promptly as practicable
after the date of this Agreement, the Israeli Tax Authority Approval, the
Investment Center Approval, the OCS Notification and any other consents and
approvals that may be required pursuant to under any applicable Law in
connection with the consummation of the Merger and consummation of any
other transactions contemplated hereunder. In this connection Parent shall
provide to the Investment Center and to the OCS any information, and shall
execute any undertakings, customarily requested by such authorities in
connection with such approval and notification.
(b) LEGAL PROCEEDINGS. The Company and Parent each shall: (i) give the
other Parties prompt notice of the commencement of any legal proceeding by
or before any Governmental Entity with respect to the Merger or which
directly or indirectly affect or jeopardize the Merger; (ii) keep the other
Parties informed as to the status of any such legal proceeding; and (iii)
promptly inform the other Parties of any communication from the
Commissioner of Israeli Restrictive Trade Practices, the Investment Center,
the OCS, the Israeli Securities Authority, the Israeli Tax Authority, the
Companies Registrar or any other Israeli Governmental Entity regarding the
Merger.
(c) ISRAELI OPTIONS TAX RULING. As soon as reasonably practicable
after the execution of this Agreement, the Company shall cause its Israeli
counsel and/or Israeli consultants to prepare and file with the Israeli Tax
Authority an application for a ruling confirming that (A) the payment of
the Per Share Consideration for Vested Options that are subject to the
statutory minimum trust period under Section 102 of the Israeli Income Tax
Ordinance will not result in a requirement for an immediate Israeli tax
payment and that the Israeli taxation will be deferred until completion of
such statutory trust period and release of the consideration, as
applicable; and (B) that the assumption of Company Options under Section
4.10 above will not result in a requirement for an immediate Israeli tax
payment and that the statutory trust period under Section 102 of the
Israeli Income Tax Ordinance for any Company Option that are assumed by
Parent will continue uninterrupted from the original date of grant of such
Company Option and will not recommence as a result of the transactions
contemplated herein; which ruling may be subject to customary conditions
regularly associated with such a ruling (the "ISRAELI OPTIONS TAX RULING").
Each of the Company and Parent shall cause their respective Israeli
counsel, advisors and accountants to coordinate all activities and to
cooperate with each other with respect to the Company's preparation and
filing of such application and in the preparation of any written or oral
submissions that may be necessary, proper or advisable to obtain the
Israeli Options Tax Ruling. Subject to the terms and conditions hereof, the
Company shall use commercially reasonable efforts to promptly take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable Law to obtain the Israeli
Options Tax Ruling, as promptly as practicable.
- 51 -
(d) SHAREHOLDER TAX RULING. As soon as reasonably practicable after
the execution of this Agreement, Company shall instruct its Israeli
counsel, advisors and accountants to prepare and file with the Israeli
Income Tax Commissioner an application for a ruling either (x) exempting
Parent, Paying Agent and Surviving Corporation from any obligation to
withhold Israeli tax at source from any consideration payable or otherwise
deliverable pursuant to this Agreement to the holders of Company Shares as
part of the Aggregate Merger Consideration; or (y) clearly instructing
Parent, Paying Agent or Surviving Corporation how such withholding at
source is to be executed, and in particular, with respect to the classes or
categories of holders of Company Shares from which tax is to be withheld,
the rate or rates of withholding to be applied (the "ISRAELI WITHHOLDING
TAX RULING"). Each of the Company and Parent shall cause their respective
Israeli counsel, advisors and accountants to coordinate all activities and
to cooperate with each other with respect to the Company's preparation and
filing of such application and in the preparation of any written or oral
submissions that may be necessary, proper or advisable to obtain the
Israeli Withholding Tax Ruling. Subject to the terms and conditions hereof,
the Company shall use commercially reasonable efforts to promptly take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable Law to obtain the Israeli
Withholding Tax Ruling, as promptly as practicable.
(e) ISRAELI SECURITIES EXEMPTION. As promptly as practicable after the
date hereof, Parent shall cause its Israeli counsel to prepare and file
with the Israeli Security Authority an application for an exemption from
the requirements of the Israeli Securities Law concerning the publication
of a prospectus in respect of the conversion of the Unvested Options and
Unvested Restricted Shares into options to purchase shares of Parent
Ordinary Shares or into Parent Restricted Stock in accordance with the
provisions of Section 4.10(b) hereof, in both cases pursuant to Section 15D
of the Israeli Securities Law 5728-1968 (the "ISRAELI SECURITIES
EXEMPTION"). The Company shall cooperate and cause its representatives to
cooperate with Parent in connection with the preparation and filing of such
application and in the preparation of any written or oral submissions that
may be necessary, proper or advisable to obtain the Israeli Securities
Exemption. Subject to the terms and conditions hereof, the Parent shall use
commercially reasonable efforts to promptly take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable under applicable Law to obtain the Israeli Securities Exemption,
as promptly as practicable.
(f) REGULATORY FILINGS. Each of the Company and Parent shall cause all
documents that it is responsible for filing with any Governmental Entity
under this Section 6.11 to comply as to form and substance in all material
respects with the applicable Law. Whenever any event occurs which is
required to be set forth in an amendment or supplement to any such document
or filing, the Company or Parent, as the case may be, shall promptly inform
the other of such occurrence and cooperate in filing with the applicable
Government Entity, such amendment or supplement.
- 52 -
6.12. INSURANCE. The Company will use reasonable best efforts to maintain
in force at the Effective Time policies of insurance of the same character and
coverage as those described in the Company Disclosure Schedule and the Company
will promptly notify Parent in writing of any changes in such insurance coverage
occurring prior to the Effective Time.
6.13. D&O INDEMNIFICATION AND INSURANCE
(a) All rights to indemnification by the Company existing in favor of
those Persons who are or were directors and officers of the Company as of
or prior to the date of this Agreement (the "INDEMNIFIED PERSONS") for
their acts and omissions as directors and officers of the Company occurring
prior to the Effective Time, as provided in any indemnification agreements
between the Company and said Indemnified Persons (as in effect as of the
date of this Agreement) (collectively, the "INDEMNIFICATION DOCUMENTS"),
shall survive the Merger and be observed by the Surviving Corporation to
the fullest extent available under the Indemnification Documents and
applicable law for a period of 7 (seven) years from the date on which the
Merger becomes effective, and Parent shall cause the Surviving Corporation
to so observe such rights (including, to the extent necessary, by providing
funds to ensure such observance).
(b) The Parties acknowledge that prior to the Effective Time, the
Company shall purchase a "tail" insurance policy for a period of seven (7)
years after the Effective Time, under the directors' and officers'
liability insurance maintained by the Company as of the date of this
Agreement (the "EXISTING D&O POLICY") for the benefit of the Indemnified
Persons with respect to claims arising from or related to facts or events
that occurred at or before the Effective Time on terms and conditions to be
approved by Parent (such approval not to be unreasonably withheld); and
Parent and the Surviving Corporation shall continue to maintain such tail
insurance in effect for such period.
(c) The obligations under this Section shall not be terminated or
modified in such a manner as to adversely affect any Indemnified Person
without the consent of such affected Indemnified Person (it being expressly
agreed that the Indemnified Persons shall be third party beneficiaries of
this Section 6.13).
6.14. RESTRICTION ON SALE OF PARENT ORDINARY SHARES ISSUED BY VIRTUE OF THE
MERGER. During the 90-day period following the effective date of the
registration statement on Form F-3 contemplated herein, each of the Company's
shareholder shall not sell more than 1/90 of the aggregate number of Parent
Ordinary Shares issued to such shareholder by virtue of the Merger on any given
day (which number shall be rounded up to the nearest round lot), provided that
nothing herein shall limit a shareholder's right to sell Parent Ordinary Shares
under other applicable exemptions (excluding the Form F-3 registration
statement). The foregoing notwithstanding, nothing shall prohibit the Company's
shareholders from engaging in hedging transactions provided that any settlement
of such transactions during the 90-day period referenced in the preceding
sentence shall comply with the sale limitations referenced therein.
- 53 -
6.15. REGISTRATION OF PARENT SECURITIES CONSIDERATION
(a) Parent will, within 5 (five) business days from the Effective
Time, file an Automatic Shelf Registration Statement on Form F-3 (or on
such other form as may be available or applicable to Parent) with the SEC
for the public sale by the shareholders of the Company of the Parent
Ordinary Shares that constitute the Parent Securities Consideration and
will use its best efforts to cause the aforementioned registration
statement to become effective as promptly as possible and in no event, no
later than 37 (thirty seven) days following the Effective Time, provided
that such sale shall in any event be subject to the restrictions set forth
in Section 6.14 hereof. Parent shall keep such registration statement
continuously effective under the Securities Act until the expiration of 6
(six) months (the "REGISTRATION PERIOD") from the date the registration
statement is declared effective by the SEC. Following the registration
statement being declared effective in connection with the sale of Parent
Company Shares and ADRs, or otherwise if an earlier exemption is available
to a shareholder, Parent will remove promptly following the request of any
shareholder any restrictive legend which Parent may have placed on the
certificates representing Parent Ordinary Shares (or ADR's) which may have
been issued in connection with the Merger.
(b) Parent agrees to indemnify and hold harmless the shareholders and,
where applicable, their directors and officers and any Person who controls
the shareholders within the meaning of Section 15 of the Securities Act of
1933 or Section 20 of the Securities Exchange Act of 1934, as amended, and
the successors and assigns of all of the foregoing Persons from any and all
losses directly or indirectly caused by any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement, any prospectus or prospectus supplement and, if applicable and
permitted to be used in connection with any transaction, any free writing
prospectus, including in each case, any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading (each , a "VIOLATION"), provided however,
that the Parent shall not be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with
such registration by such shareholder.
(c) Each of the shareholders, severally and not jointly, shall
indemnify and hold harmless Parent and, where applicable, its directors and
officers and any Person who controls Parent within the meaning of Section
15 of the Securities Act of 1933 or Section 20 of the Securities Exchange
Act of 1934, as amended, and the successors and assigns of all of the
foregoing Persons from any and all losses directly or indirectly caused by
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such shareholder relating to such shareholder and
the ownership of its shares under an instrument duly executed by such
shareholder and stated to be specifically for use in connection with such
registration.
- 54 -
(d) Upon the happening of any pending corporate development or similar
event, that, in the judgment of the Parent's board, renders it advisable to
suspend the use of the registration statement, Parent may suspend use of
the registration statement, on written notice to each holder (which notice
will not be required to disclose the content of any material non-public
information and will indicate the date of the beginning and end of the
intended period of suspension, if known), in which case each such holder
shall discontinue disposition of the Parent Ordinary Shares covered by the
registration statement until copies of a supplemented or amended
registration statement are distributed to the holders or until the holders
are advised in writing by Parent that sales of Parent Ordinary Shares under
the registration statement may be resumed. In the event of any suspension,
Parent will use its reasonable best efforts to cause the use of the
registration statement so suspended to be resumed as soon as possible after
delivery of a suspension notice to the shareholders. In no event shall a
suspension period exceed 30 (thirty) days at any one time or 90 (ninety)
days during the 6 (six) month period commencing on the date the
registration statement is declared effective by the SEC. In the event of
any such suspension, the Registration Period shall be extended by the
length of such suspension period.
6.16. MERGER SUB OBLIGATIONS. Parent shall cause Merger Sub to comply with
all of its obligations under this Agreement and the other Transaction Documents.
6.17. EMPLOYMENT TERMS AND RETENTION PLAN.
(a) It is Parent's intent to cause the Surviving Corporation to
provide individuals who are employed by the Company and the Company
Subsidiaries immediately prior to the Effective Time with the same
employment terms provided to such employees immediately prior to the
Effective Time.
(b) The main terms and conditions of a retention plan for the benefit
of the employees of the Company and its Subsidiaries have been agreed prior
to the signing of this Agreement.
6.18. FILING OF TAX RETURNS. The Company will use reasonable best efforts
to prepare and file those tax returns listed in SECTION 6.18 of the Company
Disclosure Schedule prior to the Closing so as to conform with any applicable
Law. The Company shall provide Parent with copies of such tax returns (and any
annual tax returns required to be filed prior to the Effective Time) prior to
their filings, and shall use reasonable best efforts to provide such copies a
reasonable time in advance of their filings.
6.19. STOCK EXCHANGE LISTING. Parent shall use reasonable best efforts to
cause the Parent Ordinary Shares or the ADR's that represent the underlying
Parent Ordinary Shares issuable under Article IV to be approved for issuance and
listing on NASDAQ and the TASE (only with respect to Parent Ordinary Shares), in
each case subject to official notice of issuance, as promptly as practicable
after the date hereof, and in any event prior to the Closing.
- 55 -
ARTICLE VII
Conditions Precedent
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. Subject to
Section 7.4 below, the respective obligation of each Party to effect the Merger
is subject to the satisfaction or waiver at or prior to the Effective Time of
each of the following conditions:
(a) SHAREHOLDERS APPROVAL. This Agreement, the Merger and the other
transactions contemplated by this Agreement and the other Transaction
Documents shall have been duly approved by the requisite vote of the
shareholders of the Company, as required by Law and the Company's Charter.
(b) CONSENTS. The Investment Center Approval, the OCS Notification and
the Israeli Securities Exemption, will have been filed, occurred, or been
obtained.
(c) THIRD PARTY CONSENTS. All approvals or consents of any other third
party required to be obtained by Company in connection with or for the
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been obtained, except as would not have a Material
Adverse Effect on the Company.
(d) NO RESTRAINTS. No court or other Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
(and be in effect) after the date of this Agreement any Law (whether
temporary, preliminary or permanent) that is in effect and restrains,
enjoins or otherwise prohibits consummation of the Merger (collectively, an
"ORDER").
(e) ISRAELI STATUTORY WAITING PERIODS. At least 50 (fifty) days shall
have elapsed after the filing of the Merger Proposals with the Companies
Registrar and at least 30 (thirty) days shall have elapsed after the
approval of the Merger by the shareholders of the Company and Merger Sub.
(f) CERTIFICATE OF MERGER. The Company and Merger Sub shall have
received the Certificate of Merger from the Companies Registrar.
7.2. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. Subject to Section
7.4 below, the obligations of Parent and Merger Sub to effect the Merger are
also subject to the satisfaction or waiver by Parent at or prior to the
Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company shall be true and correct (without giving effect to any
materiality qualifications) in all respects as of the date of this
Agreement and at and as of the Effective Time as though made at and as of
the Effective Time, except for such failures to be true and correct as
would not have individually or in the aggregate a Material Adverse Effect
on the Company; provided however, that representations and warranties that
are made as of a particular date or period shall be true and correct only
as of such date or period except for such failures to be true and correct
as would not have individually or in the aggregate a Material Adverse
Effect on the Company.
- 56 -
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement and the other Transaction Documents at or prior
to the Closing Date, including, without limitation, the covenants set forth
in Article VI above, except for such breaches or obligations which would
not have, or reasonably be expected to have, a monetary effect on the
Company exceeding an amount of USD 750,000 (Seven Hundred and Fifty
Thousand United States Dollars) in the aggregate.
(c) NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement,
there shall not have occurred a Company Material Adverse Effect.
(d) LEGAL OPINION. Parent shall have received the opinion of Israeli
counsel to the Company, dated as of the Closing Date, in form and substance
reasonably satisfactory to Parent's counsel; provided however that such
opinion shall by its terms expire and be of no further force and effect
upon completion of the Closing (and Parent hereby agrees and acknowledges
that such opinion shall expire and be of no further force and effect upon
completion of the Closing).
(e) EMPLOYMENT ADDENDUMS. The Employment Addendums and Commitment
Annexes entered into with the individuals identified in SCHEDULE 1.2 shall
not have been terminated by such individuals.
(f) EMPLOYEES. No more than 25% (twenty five percent) of the employees
identified in SCHEDULE 7.2(F) of the Company Disclosure Schedule shall have
terminated his or her employment with the Company or the applicable
Subsidiary (not due to any planned reduction post the Closing in such
employee's current terms of employment or responsibilities, which was
communicated by the Parent (or its representatives) to such employee);
provided however, that remaining in the same position under the same terms
of employment with the Company (as a wholly owned direct on indirect
Subsidiary of Parent) following the Closing shall not be deemed a reduction
or other change in an Employee's terms of employment or position.
(g) RESIGNATION LETTERS. Each director of the Company and each of its
Subsidiaries shall have delivered a resignation letter effective as of the
Closing, in the from attached hereto as SCHEDULE 7.2(G), which such letter
shall include, inter alia, the written acknowledgment from each such
resigning director that as of the Closing Date he or she has no complaints,
claims, legal demands, actions and any similar proceeding including claims
for all actual losses, liabilities, deficiencies, damages, costs or
expenses, or actions in respect thereof (including reasonable legal fees
and expenses) (collectively, "DAMAGES") (the "CLAIMS") whether against the
Company, the Subsidiaries and any and all Persons on their behalf and
whether in respect of compensation for loss of office, damages, loans or
otherwise, except for (i) Claims in connection with claims not known to him
or her of third parties for which he/she is entitled to indemnification or
advance of expenses by the Company pursuant to an Indemnification Document
in force immediately prior to such resignation, (ii) Claims in connection
with Claims known to him or her of third parties which have been expressly
disclosed to Parent in this Agreement (including the Company Disclosure
Schedules) for which he or she is entitled to indemnification or advance of
expenses by the Company pursuant to the Indemnification Document, and (iii)
Claims as an employee of the Company or a Subsidiary thereof, to the extent
such director is an employee.
- 57 -
(h) TERMINATION OF CERTAIN AGREEMENTS. The Company shall have
delivered to Parent evidence in a form reasonably satisfactory to Parent
that the Amended and Restated Shareholders Rights Agreement, dated December
31, 2003, as amended, shall have been terminated as of the Effective Time.
(i) WARRANTS. The holders of the warrants to purchase Company Ordinary
Shares listed in Section 5.2.3 of the Company Disclosure Schedule, shall
have consented to the cash-out of such warrants at the Closing, in
accordance with the provisions set forth in Section 4.10(a).
(j) COMPANY OFFICER CERTIFICATE. The Company shall deliver to Parent a
Company Officer Certificate executed by the Company's Chief Executive
Officer, in the form attached hereto as SCHEDULE 7.2(I), confirming on
behalf of the Company that all the conditions set forth in this Section 7.2
have been fully satisfied.
7.3. CONDITIONS TO OBLIGATION OF THE COMPANY. Subject to Section 7.4 below,
the obligation of the Company to effect the Merger is subject to the
satisfaction or waiver by the Company at or prior to the Closing Date of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent set forth in this Agreement shall be true and correct (without
giving effect to any materiality qualifications) in all respects as of the
date of this Agreement and at and as of the Effective Time as though made
at and as of the Effective Time, except for such failures to be true and
correct as would not have individually or in the aggregate a material and
extraordinary adverse effect on the Parent; provided however, that
representations and warranties that are made as of a particular date or
period shall be true and correct only as of such date or period except for
such failures to be true and correct as would not have individually or in
the aggregate a material and extraordinary adverse effect on the Parent.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date.
(c) PARENT OFFICER CERTIFICATE. The Company shall have received a
certificate executed by an officer of Parent, in the form attached hereto
as SCHEDULE 7.3(C) confirming that all the conditions set forth in this
Section 7.3 have been fully satisfied.
- 58 -
7.4. EARLY COMPLIANCE AND WAIVER. Notwithstanding anything to the contrary
in this Agreement, at such time when both (i) the condition set forth in Section
7.1(a) has been met, and assuming that on such date the conditions set forth in
Sections 7.2(a), 7.2(b), 7.2(c), 7.2(e), 7.2(f), 7.2(g), 7.2(h), 7.2(j), 7.3(a),
7.3(b) and 7.3(c) have been met (as of and for such date and not as of the
Effective Time or Closing Date), and (ii) at least 30 days have elapsed from the
date hereof, are fulfilled (the "COMPLIANCE DATE") then from the Compliance Date
onwards, the Closing of the Merger and the obligation of the Parties to effect
the Merger shall only be subject to the conditions set forth in Sections 7.1(b),
7.1(d), 7.1(e), 7.1(f), 7.2(b) 7.2(d), 7.2(i), 7.2(j) (only with respect to
fulfillment of Section 7.2(b)) and, 7.3(b) and 7.3(c) (only with respect to
fulfillment of Section 7.3(b)) being met and complied with and not to any other
condition or compliance whatsoever.
ARTICLE VIII
Termination
8.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by the shareholders of the Company referred to in
Section 7.1(a) hereof, by mutual written consent of the Company and Parent.
8.2. TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by either Parent or the Company if (i) the Merger shall not have been
consummated by December 31, 2007 (the "TERMINATION DATE"), or (ii) any Order
permanently restraining, enjoining or otherwise prohibiting consummation of the
Merger shall become final and non-appealable; provided, that the right to
terminate this Agreement pursuant to clause (i) of this Section 8.2 shall not be
available to any Party whose failure to fulfill any obligation under this
Agreement, has been the cause of, or results in, the failure of the Merger to be
consummated by such time.
8.3. TERMINATION BY THE COMPANY. Subject to Section 7.4 above, this
Agreement may be terminated and the Merger may be abandoned by the Company at
any time prior to the Effective Time (or Compliance Date, as applicable), if
there has been a Parent Material Adverse Effect, and such Parent Material
Adverse Effect is not curable or, if curable, is not cured within 10 (ten)
business days from the date the Company gives Parent written notice thereof,
unless Parent has elected the Cash Alternative, in which case this Section 8.3
shall not apply.
8.4. TERMINATION BY PARENT. Subject to Section 7.4 above, this Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time (or Compliance Date, as applicable) by Parent if there has been a
Company Material Adverse Effect, and such Company Material Adverse Effect is not
curable or, if curable, is not cured within 10 (ten) business days from the date
Parent gives the Company written notice thereof such breach.
8.5. EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article VIII,
this Agreement shall become void and of no effect (except for this Section 8.5
and Article IX, which will survive such termination) with no liability to any
Person on the part of any Party hereto (or of any of its representatives or
affiliates); provided however, and notwithstanding anything in the foregoing to
the contrary, that except as otherwise provided herein, (a) no such termination
shall relieve any Party hereto of any liability or damages to the other Party
hereto resulting from any material breach of this Agreement; and (b) any
confidentiality undertaking entered into by the Parties in connection with this
Agreement shall remain in full force and effect subject only to the provisions
of such confidentiality undertaking.
- 59 -
ARTICLE IX
Miscellaneous and General
9.1. SURVIVAL. This Article IX and the agreements of the Company, Parent
and Merger Sub contained in Article III, Article IV, Sections 6.9 (Expenses),
6.11(c), 6.11(d), 6.13, 6.14 and 6.15 shall survive the consummation of the
Merger. All other representations, warranties, covenants and agreements in this
Agreement shall not survive the consummation of the Merger or the termination of
this Agreement.
9.2. MODIFICATION OR AMENDMENT. Subject to any limitations under applicable
Law, at any time prior to the Effective Time, this Agreement may be amended,
modified or supplemented in writing by the Parties hereto.
9.3. WAIVER OF CONDITIONS. The conditions to each of the Parties'
obligations to consummate the Merger are for the sole benefit of such Party and
may be waived by such Party in whole or in part to the extent permitted by
applicable Law.
9.4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement. The
exchange of a fully executed Agreement (in counterparts or otherwise) by
facsimile of by electronic delivery (including, without limitation, in .pdf or
other scan format) shall be sufficient to bind the parties to the terms and
conditions of this Agreement.
9.5. GOVERNING LAW AND VENUE. This agreement shall be governed and
construed in accordance with the laws of the State of Israel, without regard to
conflict of laws principles thereof, provided however that the definition of
Material Adverse Effect shall be interpreted and construed in accordance with
the laws of the State of New York, without regard to conflict of laws principles
thereof. Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this letter may be brought against any of the
Parties exclusively in the District Court of Tel Aviv, and each of the Parties
consents to the exclusive jurisdiction of such courts in any such action or
proceeding and waives any objection to venue laid therein.
9.6. NOTICES. Any notice, request, instruction or other document to be
given hereunder by any Party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
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if to Parent or Merger Sub:
Nice Systems Ltd.
0 Xxxxxxx Xxxxxx, X.X.Xxx 000
Xx'xxxxx 00000
Tel: x000-0-0000000
Fax: x000-0-0-0000000
Attn.: Yechiam Xxxxx, General Counsel
with a copy to:
Goldfarb, Levy, Eran, Meiri & Co., Law Offices
0 Xxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx
Fax: x000-0-000-0000
Attention: Xxxxx Xxxxxxxxxxxxx, Adv.
if to the Company:
Actimize Ltd.
94 Em Hamoshavot, Petach Tikva
Tel: x000-0-000-0000
Fax: x000-0-000-0000
Attn.: Xxxxx Xxxxxx
with a copy to:
Meitar Liquornik Geva & Leshem Xxxxxxxxx
00 Xxxx Xxxxxx Xxxxxx Xxxx
Xxxxx Xxx 00000, Israel
Tel: 000-0-000-0000
Fax: 000-0-000-0000
Attention: Xxxxx Xxxxxxx, Adv.
or to such other Persons or addresses as may be designated in writing by the
Party to receive such notice as provided above. Any notice, request, instruction
or other document given as provided above shall be deemed given to the receiving
Party upon actual receipt, if delivered personally; three (3) business days
after deposit in the mail, if sent by registered or certified mail; upon
confirmation of successful transmission if sent by facsimile (provided that if
given by facsimile such notice, request, instruction or other document shall be
followed up within one (1) business day by dispatch pursuant to one of the other
methods described herein); or on the next business day after deposit with an
overnight courier, if sent by an overnight courier.
- 61 -
9.7. ENTIRE AGREEMENT. This Agreement (including any exhibits, annexes and
schedules hereto) constitutes the entire agreement, and supersedes all other
prior agreements, understandings, representations and warranties both written
and oral, among the parties, with respect to the subject matter hereof.
9.8. NO THIRD PARTY BENEFICIARIES. Excluding the obligations under Sections
6.13, 6.14, and 6.15, the Parties hereto hereby agree that their respective
representations, warranties and covenants set forth herein are solely for the
benefit of the other Parties hereto, in accordance with and subject to the terms
of this Agreement and this Agreement is not intended to, and does not, confer
upon any Person other than the Parties hereto any rights or remedies hereunder,
including, without limitation, the right to rely upon the representations and
warranties set forth herein. The representations and warranties in this
Agreement are the product of negotiations among the Parties hereto and are for
the sole benefit of the Parties hereto. Any inaccuracies in such representations
and warranties are subject to waiver by the Parties hereto in accordance with
Article VIII hereto without notice or liability to any other Person. In some
instances, the representations and warranties in this Agreement may represent an
allocation among the Parties hereto of risks associated with particular matters
regardless of the knowledge of any of the Parties hereto. Consequently, Persons
other than the Parties hereto may not rely upon the representations and
warranties in this Agreement as characterizations of actual facts or
circumstances as of the date of this Agreement or as of any other date.
9.9. OBLIGATIONS OF PARENT AND OF THE COMPANY. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. INTERPRETATION; CONSTRUCTION. (a) The table of contents and headings
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Where a reference in this Agreement is made to a Section,
Schedule, Annex or Exhibit, such reference shall be to a Section of or Schedule,
Annex, Exhibit to this Agreement unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
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(b) The Parties have participated jointly in negotiating and drafting
this Agreement. In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties, and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any
provision of this Agreement.
9.12. ASSIGNMENT. This Agreement shall not be assignable by operation of
law or otherwise without the prior written approval of the other parties;
provided however, that Parent may assign its right and obligations hereunder to
any Subsidiary of Parent, provided that prior to such assignment, the Parent
provide the Company a guarantee, in form and substance reasonable acceptable to
the Company. Any purported assignment in violation of this Agreement is void.
9.13. DELAYS OR OMISSIONS; WAIVER. The rights of a Party may be waived by
such Party only in writing and specifically; the conduct of any one of the
Parties shall not be deemed a waiver of any of its rights pursuant to this
Agreement or as a waiver or consent on its part as to any breach or failure to
meet any of the terms of this Agreement or as an amendment hereto. A waiver by a
Party in respect of a breach by the other Party of its obligations shall not be
construed as a justification or excuse for a further breach of its obligations.
No delay or omission to exercise any right, power, or remedy accruing to any
Party hereto upon any breach or default by the other under this Agreement shall
impair any such right or remedy nor shall it be construed to be a waiver of any
such breach or default, or any acquiescence therein or in any similar breach or
default thereafter occurring.
[Signatures Page Immediately Follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties hereto as of the date first written
above.
NICE SYSTEMS LTD.
By /s/ Xxxx Xxxxx
----------------------------
Name: Xxxx Xxxxx
Title: CEO
----------------------------
----------------------------
By /s/ Xxxxx Xxxxxx
----------------------------
Name: Xxxxx Xxxxxx
Title: CFO
NEMO ACQUISITIONS LTD.
By /s/ Xxxx Xxxxx
----------------------------
Name: Xxxx Xxxxx
Title: Director
----------------------------
----------------------------
By /s/ Xxxxx Xxxxxx
----------------------------
Name: Xxxxx Xxxxxx
Title: Director
ACTIMIZE LTD.
By /s/ Avi Zeevi
----------------------------
Name: Avi Zeevi
Title:
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