<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Wiztec Solutions Ltd.
(Name of Issuer)
Ordinary Shares
New Israeli Shekel 1 Par Value
(Title of Class of Securities)
M98105-105
(CUSIP Number)
William D. Baskett III
General Counsel and Secretary
Convergys Corporation
201 East Fourth Street
Cincinnati, Ohio 45202
513-723-2444
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
February 16, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g) check the
following box [ ].
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SCHEDULE 13D
CUSIP No.............................................................M98105-105
- --------------------------------------------------------------------------------
1. Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(Entities Only) Convergys Corporation
I.R.S. ID No. 31-1598292
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds
WC
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Ohio
- --------------------------------------------------------------------------------
7. Sole Voting Power
4,750,200
Number of Shares
Beneficially Owned 8. Shared Voting Power
by Each 0
Reporting
Person with 9. Sole Dispositive Power
4,750,200
10. Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned By Each Reporting Person
4,750,200
- --------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
70.0%
- --------------------------------------------------------------------------------
14. Type of Reporting Person
HC
- --------------------------------------------------------------------------------
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SCHEDULE 13D
CUSIP No. ............................................................M98105-105
- --------------------------------------------------------------------------------
1. Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(Entities Only) Convergys Information Management Group Inc.
I.R.S. ID. No. 31-1069790
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds
AF
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization Ohio
- --------------------------------------------------------------------------------
11. Sole Voting Power
4,750,200
Number of Shares
Beneficially Owned 12. Shared Voting Power
by Each 0
Reporting
Person with 13. Sole Dispositive Power
4,750,200
14. Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned By Each Reporting Person
4,750,200
- --------------------------------------------------------------------------------
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
70.0%
- --------------------------------------------------------------------------------
14. Type of Reporting Person
CO
3
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Item 1. Security and Issuer
This Statement on Schedule 13D relates to Ordinary Shares each with New
Israeli Shekel 1 Par Value of Wiztec Solutions Ltd. ("Wiztec"), a company
limited by shares duly registered under the laws of the State of Israel, with
its principal executive offices at 8 Maskit Street, Herzlia, 46776 Israel.
Item 2. Identity and Background
This Statement is being filed by Convergys Corporation ("Convergys"), an
Ohio corporation, and Convergys Information Management Group Inc., formerly
known as Cincinnati Bell Information Systems Inc., ("Convergys IMG"), an Ohio
corporation and wholly owned subsidiary of Convergys. Convergys is a holding
company and Convergys IMG provides customized billing solutions using
proprietary software development expertise and high volume processing
capabilities. The principal offices of Convergys are located at 201 East Fourth
Street, Cincinnati, Ohio 45202. The principal offices of Convergys IMG are
located at 1400 Commerce Center, 600 Vine Street, Cincinnati, Ohio 45202.
The information required by Instruction C to Schedule 13D with respect to
executive officers and directors of Convergys and Convergys IMG is contained in
Annex A hereto and incorporated by reference herein.
During the last five years, neither Convergys, Convergys IMG nor any of the
persons referred to on Annex A (i) have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which any such person was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The total amount of funds required by Convergys IMG to purchase the shares
acquired pursuant to the Stock Purchase Agreement, dated as of August 19, 1997,
among Convergys IMG, Wiztec and certain shareholders of Wiztec (the "First
Purchase Agreement") was $11,000,000. Convergys IMG obtained all such funds from
its parent corporation at the time, Cincinnati Bell Inc. Cincinnati Bell Inc.
advanced such funds to Convergys IMG from its working capital. The total amount
of funds required by Convergys IMG to purchase the shares to be acquired
pursuant to the Agreement, dated as of February 16, 1999, among Convergys IMG,
certain shareholders of Wiztec and Formula Systems (1985) Ltd. (the "Second
Purchase Agreement") is $52,615,550. Convergys IMG will obtain all such funds
from its parent corporation, Convergys. Convergys will advance such funds to
Convergys IMG from its working capital.
Item 4. Purpose of Transaction
In August 1997, Convergys IMG entered into a strategic relationship with
Wiztec for the purpose of adding billing capabilities for Convergys IMG in the
global and direct broadcast satellite marketplaces. The strategic relationship
between Convergys IMG and Wiztec includes marketing
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and development agreements. Convergys IMG and Wiztec entered a Marketing and
Licensing Agreement, dated as of August 19, 1997, pursuant to which Wiztec
granted Convergys IMG a non-exclusive right to use, license and market Wiztec's
proprietary software, which provides comprehensive subscriber management systems
to multi-channel subscription television system operators. Convergys IMG and
Wiztec also entered into a Joint Development Agreement, dated as of August 19,
1997, under which Convergys IMG and Wiztec committed to cooperate and use their
funds, knowledge and personnel to jointly develop a "next generation" customer
care and billing system for North American and international markets.
In addition, pursuant to the First Purchase Agreement, Convergys IMG
purchased 1,300,000 Ordinary Shares of Wiztec for the aggregate purchase price
of $11,000,000 and was granted an option (the "Option"), exercisable until
October 1999, to purchase that number of Ordinary Shares, which would result in
Convergys IMG owning 51% of Wiztec's Ordinary Shares. If Convergys IMG had
exercised the Option, certain Wiztec shareholders would have been subject to a
call option (the "Call Option") exercisable by Convergys IMG, pursuant to which
such shareholders would have been required to sell all of their remaining
Ordinary Shares of Wiztec to Convergys IMG. In addition, such shareholders would
have had a put option (the "Put Option"), enabling such shareholders to sell all
of their remaining Ordinary Shares of Wiztec to Convergys IMG. If Convergys IMG
would have purchased all of the Ordinary Shares pursuant to the Purchase
Agreement, including the Option and either the Put Option or the Call Option, it
would own approximately 70% of Wiztec's issued and outstanding Ordinary Shares.
On February 16, 1999, to replace the above-described options, the parties
entered into the Second Purchase Agreement, pursuant to which Convergys will
purchase from certain Wiztec shareholders and Formula Systems (1985) Ltd.
3,450,200 Ordinary Shares of Wiztec, at $15.25 per share, for an aggregate
purchase price of $52,615,550. This transaction is scheduled to close on March
2, 1999. Convergys IMG's purpose for purchasing the securities of Wiztec is to
acquire a majority ownership interest in Wiztec. Upon the closing of the
transaction, it is anticipated that three members of the Board of Directors of
Wiztec will resign and will be replaced by three directors proposed by Convergys
IMG. In addition, in the future, Convergys IMG or its affiliates may acquire
additional Ordinary Shares of Wiztec though open market purchases or other
means.
Item 5. Interest in Securities of the Issuer.
(a) Convergys and Convergys IMG beneficially own a total of 4,750,200 Ordinary
Shares of Wiztec, which represents 70.0% of the Ordinary Shares of Wiztec
outstanding as of February 16, 1999.
(b) Convergys IMG directly has and Convergys indirectly has sole power to vote
and direct the disposition of 1,300,000 Ordinary Shares.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
5
<PAGE> 6
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
For information regarding such contracts, arrangements, understandings or
relationships, see Item 4 above.
Item 7. Material to be Filed as Exhibits.
(1) Filing Agreement, dated February 23, 1999.
(2) Stock Purchase Agreement, dated August 19, 1997.
(3) Agreement, dated February 16, 1999.
(4) Commitment to File Schedules and Exhibits.
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SIGNATURES
After reasonable inquiry and to the best of their knowledge and belief, the
undersigned certify that the information set forth in this Statement is true,
complete and correct. In executing this Statement, the undersigned agree, to the
extent required by Rule 13d-1(f), that this Statement is being filed on behalf
of each of the reporting persons herein.
Dated: February 25, 1999
Convergys Corporation
By: /s/ William D. Baskett III
--------------------------
Name: William D. Baskett III
Title: General Counsel and Secretary
Convergys Information Management Group Inc.
By: /s/ Roy T. Heggland
-------------------
Name: Roy T. Heggland
Title: Senior Vice President and General Counsel
EXHIBIT INDEX
No. Description
- --- -----------
(1) Filing Agreement, dated February 23, 1999.
(2) Stock Purchase Agreement, dated August 19, 1997.
(3) Agreement, dated February 16, 1999.
(4) Commitment to File Schedules and Exhibits.
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<PAGE> 8
ANNEX A
The following tables contain the name and all other required information
concerning the directors and executive officers of Convergys and Convergys IMG,
all of whom are United States citizens.
<TABLE>
<CAPTION>
CONVERGYS
NAME ADDRESS OFFICE/TITLE OCCUPATION
<S> <C> <C> <C>
Charles S. Mechem, Jr. 201 East Fourth Street, Chairman and Director Chairman and Director
Cincinnati, Ohio 45202
James F. Orr 201 East Fourth Street, President and Chief Executive President and Chief
Cincinnati, Ohio 45202 Officer and Director Executive Officer and
Director
William D. Baskett III 201 East Fourth Street, General Counsel and Secretary General Counsel and Secretary
Cincinnati, Ohio 45202
Stephen G. Rolls 201 East Fourth Street, Chief Financial Officer Chief Financial Officer
Cincinnati, Ohio 45202
Robert P. Komin 201 East Fourth Street, Vice President Finance and Vice President Finance and
Cincinnati, Ohio 45202 Treasurer Treasurer
John F. Barrett 201 East Fourth Street, Director President/CEO of The Western
Cincinnati, Ohio 45202 Southern Life Insurance
Company
Judith G. Boynton 201 East Fourth Street, Director Chief Financial Officer of
Cincinnati, Ohio 45202 Polaroid Corporation
Gary C. Butler 201 East Fourth Street, Director President and Chief
Cincinnati, Ohio 45202 Operating Officer of
Automatic Data Processing,
Inc.
Roger L. Howe 201 East Fourth Street, Director Retired Chairman of U.S.
Cincinnati, Ohio 45202 Precision Lens, Inc.
Steven C. Mason 201 East Fourth Street, Director Retired Chairman, CEO and
Cincinnati, Ohio 45202 President of Mead Corporation
Brian H. Rowe 201 East Fourth Street, Director Retired Chairman of General
Cincinnati, Ohio 45202 Electric Aircraft Division
of the General Electric
Company
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
CONVERGYS INFORMATION MANAGEMENT GROUP INC.
NAME ADDRESS OFFICE/TITLE OCCUPATION
<S> <C> <C> <C>
Robert J. Marino 1400 Commerce Ctr. President and Director President
600 Vine Street
Cincinnati, Ohio 45202
Brian C. Henry 1400 Commerce Ctr. Chief Operating Officer Chief Operating Officer
600 Vine Street
Cincinnati, Ohio 45202
James F. Orr 201 East Fourth Street, Director President and Chief
Cincinnati, Ohio 45202 Executive Officer of
Convergys
Roy T. Heggland 1400 Commerce Ctr. Senior Vice President, Senior Vice President and
600 Vine Street General Counsel and Director General Counsel
Cincinnati, Ohio 45202
James A. Dahmus 1400 Commerce Ctr. Director Senior Vice President and
600 Vine Street Controller
Cincinnati, Ohio 45202
</TABLE>
<PAGE> 1
EXHIBIT 1
Filing Agreement dated February 23, 1999
Re: Joint Filing of Schedule 13D
The undersigned hereby agree that:
(i) each of them is individually eligible to use the Schedule 13D
attached hereto;
(ii) the attached Schedule 13D is filed on behalf of each of them; and
(iii) each of them is responsible for the timely filing of such Schedule
13D and any amendments thereto, and for the completeness and accuracy of the
information therein concerning itself; but none of them is responsible for the
completeness and accuracy of the information concerning the other persons making
the filing, unless it knows or has reason to believe that such information is
inaccurate.
Convergys Corporation
By:/s/ William D. Baskett III
--------------------------
Name: William D. Baskett III
Title: General Counsel and Secretary
Convergys Information Management Group Inc.
By:/s/ Roy T. Heggland
-------------------
Name: Roy T. Heggland
Title: Senior Vice President and General Counsel
<PAGE> 1
EXHIBIT 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
August 19, 1997, by and among WIZTEC SOLUTIONS LTD., a company limited by shares
duly registered under the laws of the State of Israel (the "Company"), the
holders of the Company's ordinary shares (the "Ordinary Shares") set forth on
Schedule I attached hereto (the "Sellers"), ARGOTEC LTD., a company limited by
shares duly registered under the laws of the State of Israel ("Argotec"), and
CINCINNATI BELL INFORMATION SYSTEMS INC., an Ohio corporation (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the issuance and allotment of
530,000 Ordinary Shares (the "Company Shares") and the Sellers have agreed to
the sale of 770,000 Ordinary Shares (the "Sellers' Shares" and, collectively
with the Company Shares, the "Shares");
WHEREAS, the Purchaser desires to purchase the Shares on the
terms and conditions set forth herein; and
WHEREAS, the Company and the Sellers desire to sell the Shares to the
Purchaser on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 COMPANY SHARES. Subject to the terms and conditions hereof, the
Company agrees to issue and allot to the Purchaser, and the Purchaser agrees to
purchase from the Company, all of the Company Shares in consideration of the
payment of $4,505,000 (the "Company Consideration"). Payment of the Company
Consideration will be made on the
<PAGE> 2
Closing Date by international wire transfer (SWIFT) of immediately available
funds to the Company's account no. 0755612818 at ABA no. 02600274 at Bank Leumi
Trust Company of New York.
1.2 SELLERS' SHARES. Subject to the terms and conditions hereof, each
Seller agrees to sell to the Purchaser, and the Purchaser agrees to purchase
from each Seller, the number of Ordinary Shares set forth opposite each Seller's
name on Schedule I attached hereto in consideration of the payment of the amount
set forth on Schedule I (the "Seller Consideration" and, collectively, the
"Sellers' Consideration"). Payment of each Seller's Consideration will be made
on the Closing Date by international wire transfer (SWIFT) of immediately
available funds to such Seller's account as indicated on Schedule I.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING DATE. The closing of the sale and purchase of the Shares
(the "Closing") shall take place on October 6, 1997 (the "Closing Date"). The
Closing will take place at the offices of the Company or at such other time,
place or date as shall be mutually agreed to in writing by the parties.
2.2 DELIVERIES BY COMPANY. At the Closing, the Company will deliver to
the Purchaser:
2.2.1 a certificate representing the Company Shares registered in
the name of the Purchaser;
2.2.2 two originals of the Marketing License Agreement, in
substantially the form attached hereto as Exhibit A (the "License Agreement");
2.2.3 two originals of the Joint Development Agreement, in
substantially the form attached hereto as Exhibit B (the "Joint Development
Agreement");
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2.2.4 the Company's Memorandum of Incorporation and Articles of
Association certified by counsel for the Company;
2.2.5 a copy certified by counsel for the Company of a resolution
of the Board of Directors of the Company, taken at a meeting at which the
Sellers were not present and to which the Sellers revealed the nature of their
interest in this transaction, (i) authorizing the execution, delivery and
performance of this Agreement, the License Agreement, the Joint Development
Agreement and the Registration Rights Agreement, as Amended (as defined in
Section 2.2.11 below), and stating that the Board of Directors believes that the
execution of such agreements is not adverse to the good of the Company and (ii)
allotting the Company Shares;
2.2.6 the opinion of Goldfarb, Levy, Eran & Co., counsel for the
Company, dated as of the Closing Date, in substantially the form attached hereto
as Exhibit C;
2.2.7 certification from the Office of the Chief Scientist of the
Ministry of Trade and Industry and of the Israel Investments Center according to
which such organizations have approved the Purchaser's acquisition by issue and
by transfer of the Company Shares and the Sellers' Shares and further, according
to which those organizations have approved the acquisition by transfer of a
total of fifty-one percent (51%) or such higher percentage of the Ordinary
Shares in the Company in the event of the exercise of the Option in accordance
with Article 11 below and the exercise of the call option in accordance with
Section 11.2 below;
2.2.8 a protocol of the Audit Committee of the Company approving
the execution of this Agreement, the License Agreement, the Joint Development
Agreement and the Registration Rights Agreement, as Amended (as defined in
Section 2.2.11 below);
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2.2.9 a protocol of an extraordinary General Meeting of the
Company's shareholders at which the following resolutions were made and
effective with respect to subsections 2.2.9.1 and 2.2.9.2 only if the Closing
occurs:
2.2.9.1 to appoint a nominee of the Purchaser as a director
of the Company;
2.2.9.2 henceforth, that the number of directors of the
Company will not be more than seven; and
2.2.9.3 to approve the execution of this Agreement, the
License Agreement, the Joint Development Agreement and the Registration Rights
Agreement, as Amended;
2.2.10 the approval of Hampshire Securities for the issuance
and sale of the Company Shares, the transfer of the Sellers' Shares, the grant
of the Option and the Pledge Agreement;
2.2.11 two originals of the Registration Rights Agreement,
as Amended (the "Registration Rights Agreement, as Amended"), in substantially
the form attached hereto as Exhibit D, executed by Argotec, Dan Goldstein, Gad
Goldstein, Shai Beilis, Gur Shomron (collectively the "Shareholders") and the
Company amending and restating the Registration Rights Agreement by and among
the Company and the Shareholders dated April 16, 1996 (the "Registration Rights
Agreement"); and
2.2.12 copies of executed proprietary information and
inventions/technology agreements from each independent contractor and consultant
listed in Schedule II attached hereto.
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2.3 DELIVERIES BY EACH SELLER. At the Closing, each Seller will deliver
to the Purchaser:
2.3.1 certificates representing the Sellers' Shares, duly endorsed,
or accompanied by stock powers duly executed in blank, and otherwise in form
acceptable for transfer on the books of the Company and any documents which are
necessary for the transfer to the Purchaser of good title to Sellers' Shares;
and
2.3.2 in the case of Sellers who are parties thereto, two originals
of the Registration Rights Agreement, as Amended.
2.4 DELIVERIES BY ARGOTEC. At the Closing, Argotec will deliver to the
Purchaser:
2.4.1 two originals of the Pledge Agreement, in substantially the
form attached hereto as Exhibit E (the "Pledge Agreement"), together with (i)
pledges on the Argotec Reserved Shares as that term is used in the Pledge
Agreement which indicate registration with the Registrar of Companies in
accordance with Clause 2 of the Pledge Agreement, (ii) a copy of notices to the
Company of such registrations from Argotec countersigned by the Company in
accordance with Clause 2 of the Pledge Agreement and (iii) a copy of trust
instruction letters from Argotec countersigned by the Attorney in accordance
with Clause 3 of the Pledge Agreement;
2.4.2 the opinion of Goldfarb, Levy, Eran & Co., counsel to
Argotec, that Argotec's signatures on this Agreement and on the Pledge Agreement
were duly authorized by Argotec's Board of Directors and legally bind Argotec in
accordance with their terms; and
2.4.3 two originals of the Registration Rights Agreement, as
Amended.
2.5 DELIVERIES BY THE PURCHASER. At the Closing, the Purchaser will
deliver to the Company (unless otherwise indicated):
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2.5.1 the Company Consideration;
2.5.2 to the Sellers, the Sellers' Consideration;
2.5.3 two originals of the License Agreement;
2.5.4 two originals of the Joint Development Agreement;
2.5.5 a certified copy of corporate resolutions and other
corporate proceedings taken by the Board of Directors of the Purchaser
authorizing the execution, delivery and performance of this Agreement, the
License Agreement and the Joint Development Agreement and all actions necessary
or desirable hereunder and thereunder; and
2.5.6 the opinion of Roy T. Heggland, counsel for the Purchaser,
dated as of the date hereof, in substantially the form attached hereto as
Exhibit F.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as disclosed in the disclosure schedule attached hereto
(the "Disclosure Schedule"), which identifies the specific sections to which
each such disclosure relates, the Company and Argotec hereby represent and
warrant to the Purchaser as follows:
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and has paid in full its annual fees to the
Registrar of Companies. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the License Agreement, the Joint Development Agreement and the
Registration Rights Agreement, as Amended, to issue and allot the Company
Shares, to carry out the provisions of this Agreement, the License Agreement,
the Joint Development Agreement and the Registration Rights Agreement, as
Amended, and to carry on its business as presently conducted and as presently
proposed to be conducted. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all
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<PAGE> 7
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the financial condition, business, operations or prospects of the Company and
its subsidiaries as a whole ("Material Adverse Effect"). The Company owns no
equity securities of any other corporation, limited partnership or similar
entity. The Company is not a participant in any joint venture, partnership or
similar arrangement. The Company has no right to become the owner of equity
securities in any other corporation nor is it the beneficial owner, directly or
indirectly, of any other corporation.
3.2 CAPITALIZATION. The authorized capital of the Company as of the date of
this Agreement consists of 8,000,000 Ordinary Shares each with New Israeli
Shekel ("NIS") 1 Par Value, 6,070,000 shares of which are issued and
outstanding, 140,000 underwriters warrants, all of which are issued and
outstanding, 400,000 options authorized pursuant to the Company's Incentive
Plan, 339,662 of which are issued and outstanding, 500,000 options authorized
pursuant to the Company's Subsidiary Incentive Plan, 75,000 of which are issued
and outstanding, 331,200 Series A Options ("BSI"), all of which are issued and
outstanding, and 440,000 options authorized pursuant to the Company's 1997
Option Plan, 203,000 of which are issued and outstanding. All issued and
outstanding Ordinary Shares (i) have been duly authorized and validly issued,
(ii) are fully paid and nonassessable, and (iii) (a) to the extent issued and
sold to United States residents, were issued in compliance with all applicable
United States state and federal securities laws and (b) were issued in
compliance with the laws of the State of Israel concerning the issuance of
securities. Other than as set forth in this Section 3.2, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or shareholder agreements, or agreements of
any kind for the
7
<PAGE> 8
purchase or acquisition from the Company of any of its equity securities. When
issued on the Closing Date, the Company Shares will be duly authorized, validly
issued, fully paid and nonassessable, will be issued in compliance with all
applicable United States federal and state securities laws and the laws of the
State of Israel (assuming the representations and warranties of the Purchaser
hereunder are true and correct), and will be free of any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever
(collectively, "Liens"), other than (i) any liens created by the Purchaser, (ii)
transfer restrictions in Article 10 below and (iii) transfer restrictions under
United States federal and state securities and Israeli securities laws
(collectively, "Permitted Liens").
3.3 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. The Company has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement, the License Agreement, the Joint Development
Agreement and the Registration Rights Agreement, as Amended. All action on the
part of the Company, its officers, directors and Audit Committee necessary for
the authorization of this Agreement, the License Agreement, the Joint
Development Agreement and the Registration Rights Agreement, as Amended, the
performance of all obligations of the Company hereunder and thereunder and the
authorization, allottment, issuance and delivery of the Company Shares pursuant
hereto has been taken other than shareholder approval thereof. The Company is
not a "company" as defined in Section ( ) 96 of the Israeli Companies Ordinance,
Section ( ) 96 does not apply to the transactions contemplated by this Agreement
and, accordingly, this Agreement, the License Agreement, the Joint Development
Agreement and the Registration Rights Agreement, as Amended, need to be approved
only by a simple majority of the Company's shareholders voting at an
extraordinary
8
<PAGE> 9
general meeting. The approval referred to in the preceding sentence is the only
shareholder approval necessary to validate this Agreement and it shall have been
obtained as of the Closing Date. This Agreement has been duly executed and
delivered by the Company and (assuming the due authorization, execution and
delivery hereof by the Purchaser, Argotec and each Seller) and, following due
authorization by the Company's shareholders in accordance with this Section 3.3,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights; (ii) as limited by
general principles of equity including principles of commercial reasonableness,
good faith and fair dealing that restrict the availability of equitable
remedies; and (iii) as rights to indemnity and contribution hereunder may be
limited by United States state or federal securities or Israeli securities laws
or principles of public policy. On the Closing Date, the License Agreement, the
Joint Development Agreement and the Registration Rights Agreement, as Amended,
shall be duly executed and delivered by the Company and (assuming the due
authorization, execution and delivery thereof on the Closing Date by the
Purchaser, Argotec and each Seller, as applicable) and following due
authorization by the Company's shareholders in accordance with this Section 3.3
shall constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
(ii) as limited by general principles of equity including principles of
commercial reasonableness, good faith and fair dealing that restrict the
availability of equitable remedies; and (iii) as rights to indemnity and
contribution hereunder may be limited by United States state or federal
securities laws or Israeli securities
9
<PAGE> 10
laws or principles of public policy. The sale of the Company Shares is not
subject to any preemptive rights or rights of first refusal that have not been
properly waived or complied with. The execution and delivery by the Company of
this Agreement, the License Agreement, the Joint Development Agreement and the
Registration Rights Agreement, as Amended, the consummation of the transactions
contemplated hereby and thereby and the performance by the Company hereof and
thereof in accordance with its terms and their respective terms will not (i)
require the consent, approval, notification, or registration with any third
party, including governmental authorization except for compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and, except as otherwise expressly set forth herein and except for such
approvals and registrations as may be required in connection with the Company's
performance of its obligations under Section 12, below; (ii) conflict with or
result in any breach or violation of any of the terms and conditions of, or
constitute (or with notice or lapse of time or both would constitute) a default,
under any applicable law, statute, code, ordinance, regulation, or other
requirement or order of any governmental body applicable to the Company, or any
contract to which the Company is a party or by which or to which the Company's
assets are bound or subject, except for such breaches, violations and defaults
which will not have a Material Adverse Effect; or (iii) result in the creation
of any lien on any of the Company's assets.
3.4 FINANCIAL STATEMENTS. The balance sheets of the Company as of December
31, 1996 and the related statements of income, shareholders' equity and cash
flows for the year then ended, including the notes thereto, which have been
audited by Kesselman & Kesselman and Shlomo Ziv & Co., independent certified
public accountants, and delivered to the Purchaser, present fairly in all
material respects the financial position of the Company at such dates and the
results of operations and cash flows of the Company for the years then ended, in
each case in
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accordance with Israeli generally accepted accounting principles ("Israeli
GAAP") consistently applied for the periods covered thereby. (The foregoing
financial statements of the Company as of December 31, 1996 and for the year
then ended are sometimes herein called the "Annual Financials," the balance
sheet included in the Annual Financials is sometimes herein called the "Balance
Sheet," and December 31, 1996 is sometimes herein called the "Balance Sheet
Date.") The unaudited balance sheet of the Company as of March 31, 1997, and the
related income statement for the 3 month period then ended, which have been
delivered to the Purchaser, present fairly in all material respects the
financial position of the Company as of such date and the results of operations
of the Company for the 3 month period then ended, in each case in conformity
with Israeli GAAP applied on a basis consistent with that of the Audited
Financials (subject to year-end adjustments that may be required upon audit,
which adjustments, taken in the aggregate, will not have a Material Adverse
Effect on such financial statements and the absence of footnotes). (The
foregoing financial statements of the Company as of March 31, 1997 are sometimes
herein called the "Interim Financials," the balance sheet included in the
Interim Financials is sometimes herein called the "Interim Balance Sheet," and
March 31, 1997 is sometimes herein called the "Interim Balance Sheet Date.")
3.5 ABSENCE OF CERTAIN LIABILITIES.
3.5.1 As of the Balance Sheet Date, the Company did not have any direct
or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation
or responsibility, known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise, of a kind required by Israeli GAAP to be set forth on a financial
statement or in the notes thereto in excess of $50,000 in any
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single instance and $200,000 in the aggregate, including without limitation any
tax liabilities, which were not accurately and fully reflected or reserved
against in the Balance Sheet.
3.5.2 As of the Interim Balance Sheet Date, the Company did not have
any direct or indirect indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, known or unknown, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise, of a kind required by Israeli GAAP to be set forth on
an interim financial statement or in the notes thereto in excess of $50,000 in
any single instance and $200,000 in the aggregate, including without limitation
any tax liabilities, which were not accurately and fully reflected or reserved
against in the Interim Balance Sheet.
3.6 AGREEMENTS; ACTION.
3.6.1 Except for agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Ordinary Shares under the Company's stock option plans and standard
non-compete and proprietary information agreements, there are no written, or to
the Company's Knowledge, oral agreements or understandings between the Company
and any of its officers, directors, affiliates or any affiliate thereof of the
kind required to be disclosed in the Company's annual and periodic filings made
with the Securities and Exchange Commission (the "SEC");
3.6.2 There are no written, or to the Company's Knowledge, oral
agreements, understandings, instruments, contracts, judgments, orders, writs or
decrees to which the Company is a party or to which it is bound which could
reasonably be expected to involve (i) obligations (contingent or otherwise) of,
or payments to, the Company in excess of $50,000 (other than payments of or to
the Company arising from purchase, sale or license agreements
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entered into in the ordinary course of business), or (ii) the license of any
patent, copyright, trade secret or other proprietary right to or from the
Company other than in connection with licenses of Company products granted by
the Company in the ordinary course of business, or (iii) provisions materially
restricting or affecting the development, manufacture or distribution of the
Company's products or services, or (iv) indemnification by the Company with
respect to infringements of proprietary rights other than in connection with
licenses of Company products granted by the Company in the ordinary course of
business; and
3.6.3 Other than with the Purchaser, the Company has not engaged
in the past three (3) months in any discussion (i) with any representative of
any corporation or corporations regarding the consolidation or merger of the
Company with or into any such corporation or corporations, (ii) with any
corporation, partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all of the
assets of the Company, or a transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company is
disposed of, or (iii) regarding any other form of acquisition, liquidation,
dissolution or winding up of the Company.
3.7 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the Company
to any Company officer (noseh misrah), director, beneficial holder of 5% or more
of Ordinary Shares or with respect to any Company employee in an amount greater
than or equal to $50,000 per year other than (i) for payment of salary
(including bonus) and commissions for services rendered and (ii) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company).
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3.8 CHANGES. Since the Balance Sheet Date, there has not been:
3.8.1 Any change in the assets, liabilities, financial condition or
operations of the Company, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had or is expected
to have a Material Adverse Effect;
3.8.2 Any resignation or termination of any key officers and/or key
employees of the Company and the Company, to the best of its Knowledge (as
defined in Section 14.14 below), does not know of the impending resignation or
termination of employment of any such officer;
3.8.3 Any material change, except in the ordinary course of business,
in the contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
3.8.4 Any damage, destruction or loss, whether or not covered by
insurance, which has had or which could reasonably be expected to have a
Material Adverse Effect;
3.8.5 Any waiver by the Company of a right valued at greater than
$50,000 or of a debt in excess of $50,000 owed to it, other than write-offs of
bad debts in the ordinary course of business and for which reserves exist;
3.8.6 Any direct loans made by the Company or any direct or indirect
subsidiary of the Company in excess of $50,000 to any shareholder, employee,
officer or director of the Company;
3.8.7 Any material change in any compensation arrangement or agreement
with any employee, officer, director or 5% beneficial shareholder;
3.8.8 Any declaration or payment of any dividend or other distribution
of the assets of the Company;
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3.8.9 Any debt, obligation or liability incurred, assumed or guaranteed
by the Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
3.8.10 Any change in any material agreement to which the Company is a
party or by which it is bound which could reasonably be expected to have a
Material Adverse Effect;
3.8.11 To the Company's Knowledge, any change in Israeli law or any
rules promulgated thereunder that has had a Material Adverse Effect;
3.8.12 Any other event or condition of any character that, either
individually or cumulatively, has had a Material Adverse Effect; or
3.8.13 Any agreements or commitments by the Company to do any of the
foregoing.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its properties and assets (other than properties and assets
leased from third parties), both real and personal, including the properties and
assets reflected in the Balance Sheet, and good title to its leasehold estates,
in each case, other than as set forth in the Disclosure Schedule, subject to no
mortgage, pledge, lien, lease, encumbrance or charge, except for liens on taxes
not due and payable.
3.10 PATENTS AND TRADEMARKS. As to each domestic and foreign patent, patent
application, trade name, trademark, unpatented invention, service mark,
trademark registration, trademark application, service mark registration,
service mark application, registered copyright, copyright registration applied
for and copyright in software (whether registered or not), owned by the Company
(collectively, the "Intellectual Property"), the Disclosure Schedule contains a
complete list thereof specifying (i) the title of the work, if any; (ii) the
application or registration
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numbers, if any; and (iii) a brief description thereof. If any domestic or
foreign patent, patent application, trade name, trademark, unpatented invention,
service mark, trademark registration, trademark application, service mark
registration, service mark application, registered copyright, copyright
registration applied for and copyright in software (whether registered or not)
was acquired by licenses, including but not limited to patent licenses, know-how
licenses, and software licenses (other than licenses for off-the-shelf software
used in the office environment), such licenses are likewise identified in the
Disclosure Schedule (collectively, "Licensed Intellectual Property"). Complete
and correct copies of each application for or registration of each such
Intellectual Property and each such license have been made available for
inspection to the Purchaser prior to execution of this Agreement. To the
Company's Knowledge, there is no claim of infringement or threat of claim of
infringement which in any material way affects the Company's rights in or to any
Intellectual Property or Licensed Intellectual Property.
With respect to the Intellectual Property:
3.10.1 the Company is the sole and exclusive owner of the entire right,
title and interest in and to the Intellectual Property used in the operation of
its business (including, but not limited to, the exclusive right to use,
enhance, modify and license the same);
3.10.2 the Intellectual Property and all rights appurtenant thereto are
free of any and all liens, claims, security interests and other encumbrances of
any nature or kind;
3.10.3 no interests or rights in or to the source code of any software
have been pledged or hypothecated by the Company to any third party;
3.10.4 all material registrations, filings and issuances relating to
the Intellectual Property remain in full force and effect;
3.10.5 to the Company's Knowledge, the Company has not disclosed trade
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secrets used in the operation of its business to any third party on a
non-confidential basis; and
3.10.6 the Intellectual Property and trade secrets, together with the
Licensed Intellectual Property, constitute all intellectual property necessary
for the Company to carry on its business as presently conducted.
With respect to the Licensed Intellectual Property
3.10.7 to the Company's Knowledge, the parties granting licenses to
Company under Licensed Intellectual Property had full authority to do so;
3.10.8 to the Company's Knowledge, the Company has the right under the
licenses to practice the Licensed Intellectual Property;
3.10.9 to the Company's Knowledge, the Licensed Intellectual Property
and all rights appurtenant thereto are free of any and all liens, claims,
security interests and other encumbrances of any nature or kind; and
3.10.10 to the Company's Knowledge, all registrations, filing and
issuances relating to the Licensed Intellectual Property remain in full force
and effect.
There are no pending or, to the Knowledge of the Company, threatened
proceedings or litigation or other adverse claims against the Company with
respect to the Intellectual Property or trade secrets of the Company, and to the
Company's Knowledge, there are no threatened proceedings or litigation or other
adverse claims with respect to the Licensed Intellectual Property. During the
past two years the Company has not received any notices or claims which claim
infringement by the Company of any domestic or foreign patents, patent
applications, patent licenses, know-how licenses, trade marks, copyrights,
copyright registrations or applications, trade secrets or other confidential
proprietary information. Except as described in the Disclosure Schedule, the
Company does not believe that there are any claims which may be
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asserted against the Company for infringement of any such third party
intellectual property, trade secrets or other proprietary information. To the
Company's Knowledge, no person or entity is infringing the Intellectual Property
or trade secrets of the Company.
To the Company's Knowledge, no person has claimed that any key employee
employed by the Company has, in respect of his or her activities to date,
violated any of the terms or conditions of his or her prior employment contract
with such third party, or disclosed or utilized any trade secrets or proprietary
information or documentation of such third party, or interfered in the
employment relationship between such third party and any of its employees.
To the Company's Knowledge, none of the Company's key employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with his duties to the
Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement, the License
Agreement, the Joint Development Agreement or the Registration Rights Agreement,
as Amended, nor the carrying on of the Company's business by the employees of
the Company, will, to the Company's Knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any employee is now obligated.
The Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its employees
made prior to their employment by the Company, except for inventions, trade
secrets or proprietary information that have been assigned to the Company.
Except in his or her capacity as shareholder of the Company, no present
officer or former officer, partner or affiliate of the Company has or, to the
Company's Knowledge,
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claims to have (i) any interest in the Company's assets, including without
limitation, the Intellectual Property and trade secrets used in the operation of
its business, or (ii) any contract, commitment, arrangement or understanding
with the Company with respect to the Intellectual Property. To the Company's
Knowledge, no present officer of the Company has any ownership or stock
interest, directly or indirectly, in any other enterprise, firm, corporation,
trust or any other entity which is engaged in any line or lines of business
which are the same as, or similar to, or competitive with, the Company's
business. For purposes of this representation, ownership of not more than five
percent of the voting stock of any publicly-held company whose stock is listed
on any recognized securities exchange or traded over the counter shall be
disregarded.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation or
default of any term of its Articles of Association. In addition, the Company is
not in violation or default of any term of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is party or
by which it is bound or of any judgment, decree, order, writ or any statute,
rule or regulation applicable to the Company except for violations and defaults
which would not have a Material Adverse Effect. The execution, delivery, and
performance of and compliance with this Agreement, the License Agreement, the
Joint Development Agreement and the Registration Rights Agreement, as Amended,
and the issuance and sale of the Company Shares pursuant hereto, will not result
in a violation or default of any term of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is a party or
by which it is bound or of any judgment, decree, order, writ or any statute,
rule or regulation applicable to the Company except for violations and defaults
which would not have a Material Adverse Effect or result in the creation of any
Lien upon any of the properties or assets of the
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Company or the suspension, revocation, impairment, forfeiture or nonrenewal of
any permit license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties which suspension,
revocation, impairment, forfeiture or nonrenewal would have a Material Adverse
Effect.
3.12 LITIGATION. There is no action, suit, proceeding or to the Company's
Knowledge investigation pending against the Company. In addition, to the
Company's Knowledge, there is no action, suit, proceeding or investigation
currently threatened against the Company that questions the validity of this
Agreement, the License Agreement, the Joint Development Agreement, or the
Registration Rights Agreement, as Amended, or the right of the Company to enter
into any of such agreements, or to consummate the transactions contemplated
hereby or thereby, or which could reasonably be expected to result, either
individually or in the aggregate, in any Material Adverse Change, or any change
in the current equity ownership of the Company. The foregoing includes, without
limitation, actions pending or threatened involving the prior employment of any
of the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality which has had or is reasonably expected to have a Material
Adverse Effect. There is no material action, suit, proceeding or investigation
by the Company currently pending or which the Company intends to initiate.
3.13 TAX MATTERS. "Tax" or "Taxes" shall mean any federal, state, local,
national, municipal or other tax (whether income, value added, sales, use,
franchise, transfer, withholding, excise, real or personal property, employment
or any other kind of tax), assessment, levy, fee,
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impost, withholding or other governmental charge and shall include all interest
and penalties thereon. "Tax Return(s)" shall mean all returns, declarations,
reports, statements and other documents, including supporting documents,
required to be filed with respect to Taxes. The Company has timely filed in the
appropriate place all Tax Returns that are required to be filed on or before the
date of the Closing, and all such Tax Returns are true, correct and complete in
all material aspects. The Company has made timely payment of all Taxes required
to be paid, including all deficiencies and assessments, if any, heretofore
levied or assessed except to the extent being challenged in good faith as
described in the Disclosure Schedule. The Company has duly withheld, collected
and timely deposited, paid over or held for payment to the proper governmental
authorities all Taxes required to be withheld or collected by the Company. The
Company has not received any claim, proposal or assessment from any taxing
authority for any deficiencies for any Tax or governmental charge that could
result in, or that have resulted in, the imposition of a lien by any taxing
authority on property or rights to property owned by the Company. To the
Company's Knowledge, there are no examinations by any taxing authority of or
relating to the Company and no material basis for any such examination exists.
The Company has never received final assessments or temporary tax assessments.
3.14 EMPLOYEES. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Company's Knowledge, threatened with respect to the Company. The Company has
supplied a copy of a representative contract with its current employees to the
Purchaser prior to the date hereof. There is no current employee of the Company
who has not signed a contract with the Company. To the Company's Knowledge, no
employee of the Company, nor any consultant with whom the Company has
contracted, is in material violation of any term of any employment contract,
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proprietary information and inventions/technology agreement, or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's Knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company has not received any notice alleging that any such violation has
occurred. No employee has a right to any compensation following termination of
employment with the Company, except to severance pay (pitzuei piturin) and other
benefits which may be owed to such employee under Israeli law or custom. The
Company has no Knowledge that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any officer,
key employee or group of key employees in the twelve-month period following the
Closing.
3.15 ASSIGNMENT AND AGREEMENT CONCERNING NONDISCLOSURE OF PROPRIETARY
INFORMATION. Each independent contractor and consultant of the Company has
executed a proprietary information and inventions/technology agreement.
3.16 OBLIGATIONS OF MANAGEMENT. To the Company's Knowledge, each officer of
the Company, except the Chairman of the Board, is currently devoting one hundred
percent (100%) of his or her business time to the conduct of the business of the
Company. The Company has no Knowledge of any officer or key employee of the
Company planning to work less than full time at the Company in the 12 month
period following the Closing.
3.17 REGISTRATION RIGHTS. Other than pursuant to the Registration Rights
Agreement, the Company is presently not under any obligation, and has not
granted any rights, to effect a registration statement by preparing and filing a
registration statement or similar document in
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compliance with the Securities Act of 1933, as amended (the "Securities Act"),
for any of the Company's presently outstanding securities or any of its
securities that may hereafter be issued.
3.18 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
have a Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement, the License Agreement, the Joint Development
Agreement and the Registration Rights Agreement, as Amended, and the issuance of
the Company Shares, except such as has been duly and validly obtained or filed
or will be duly and validly obtained or filed prior to the Closing, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could reasonably be expected to have a
Material Adverse Effect.
3.19 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 6.3 hereof, the offer, sale and
issuance of the Company Shares to the Purchaser are exempt from the registration
requirements of the Securities Act and from the obligation to publish a
prospectus under the laws of the State of Israel and are exempt from the
registration, permit or qualification requirements of all applicable state
securities laws. Neither the Company nor any agent on its behalf has solicited
or will solicit any offers to sell or has offered to sell or will offer to sell
all or any part of the Company Shares to any person or persons so as to bring
the sale of such Company Shares by the Company within the registration
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provisions of the Securities Act, applicable state securities laws or securities
laws of the State of Israel.
3.20 FULL DISCLOSURE. This Agreement, the Exhibits and Disclosure Schedule
hereto, and all other documents delivered by the Company to the Purchaser or
their attorneys or agents in connection herewith or with the transactions
contemplated hereby, do not contain any untrue statements of a material fact nor
omit to state a material fact necessary in order to make the statements
contained herein not misleading. The License Agreement, the Joint Development
Agreement and the Registration Rights Agreement, as Amended, and all other
documents to be delivered at the Closing by the Company to the Purchaser or
their attorneys or agents in connection therewith or with the transactions
contemplated thereby, will not contain any untrue statements of a material fact
nor omit to state a material fact necessary in order to make the statements
contained therein not misleading.
3.21 MINUTE BOOKS. The minute books of the Company provided to the
Purchaser contain a complete summary of all meetings of directors and
shareholders since the time of incorporation.
3.22 INSURANCE. Section 3.22 of the Disclosure Schedule sets forth and
briefly describes the risks covered, the amounts of coverage, the names of
insurers and the costs of the insurance maintained by the Company with respect
to its assets, properties and business. All of such policies are valid,
enforceable and in full force and effect.
3.23 EMPLOYEE BENEFIT PLANS. Neither the Company nor any of the "employee
pension benefit plans" (the "Plans"), as such term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 and the rules and
regulations thereunder (collectively, and as from time to time in effect,
"ERISA"), established or maintained or to which contributions have been
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made by the Company, nor any trust created thereunder, nor, to the knowledge of
the Company, any other trustee or administrator thereof, has engaged in a
"prohibited transaction," as such term is defined in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder (the "Code"), which could subject the Plans or any of
them, any such trust, or any trustee or administrator thereof, or any party
dealing with the Plans or any such trust, to a material tax or penalty on
prohibited transactions imposed by said Section 4975 or to any similar provision
under ERISA. Each Plan maintained by the Company intended to comply with
Sections 401 and 501 of the Code complies in form and operation with all
applicable requirements of the Code. Each Plan has been administered and
operated, at all times during its existence, in accordance with its terms and in
compliance with ERISA and the Age Discrimination in Employment Act and the
regulations promulgated thereunder. Neither the Company nor any of its
directors, officers, employees or any other fiduciary has committed any breach
of fiduciary responsibility imposed by ERISA or any other applicable law that
would subject the Company or any of its directors, officers or employees to
liability under ERISA or any other applicable law. There is no litigation,
arbitration, claim (other than routine benefit claims) or other proceeding or
investigation pending or, to the knowledge of the Company, threatened (or any
basis therefor) with respect to any Plan. None of the Plans or trusts has been
terminated in a manner with respect to which the Company has or may incur
liability, nor have there been any "reportable events," as that term is defined
in Section 4043 of ERISA, since the effective date of ERISA. No Plan which is
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code had an accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of such Plan to which Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the
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Code applied, nor would have had an accumulated funding deficiency on such date
if such year were the first year of such Plan to which Part 3 of Subtitle B of
Title I of ERISA or Section 412 of the Code applied. No liability to the Pension
Benefit Guaranty Corporation has been or is expected by the Company to be
incurred by the Company with respect to any Plan, and there has been no event or
condition which presents a risk of termination of any Plan by the Pension
Benefit Guaranty Corporation. The present value of all benefits under each Plan
subject to Title IV of ERISA, as determined in accordance with Statement 87 of
the Financial Accounting Standards Board, does not exceed the current value of
the assets of such Plan by an amount greater than $25,000. The Company is not
and has never been a party to any multi-employer plan, as such term is defined
in Section 4001(a)(3) of ERISA. The execution, delivery and performance of this
Agreement and the offer, issue and sale by the Company, and the purchase by the
Company, of the Shares shall not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code with respect to such
plans.
3.24 APPROVED ENTERPRISE STATUS. On November 19, 1995 and December 9, 1996,
the Company received certification of expansions of its existing enterprise as
"Approved Enterprises." The Company is in conformance in all material respects
with the conditions of the certifications (kitvei ishur) issued on such dates,
including reporting obligations and with the law governing Approved Enterprises,
such certifications remain in full force and effect and the Company remains
fully entitled to the benefits to which it is entitled as an Approved Enterprise
under such certifications. The Israeli taxing authorities have not challenged
the Company's status as an approved enterprise.
3.25 OFFICE OF THE CHIEF SCIENTIST. On May 20, 1992, prior to the Company's
incorporation, the Company's predecessor, a division of Digital Equipment (DEC)
Ltd., received
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authorization to receive funding from the Office of the Chief Scientist of the
Ministry of Trade and Industry (the "Chief Scientist") with regard to research
and development of earlier versions of certain components of its program and in
fact received such funding. The Company assumed the liabilities of the Company's
predecessor towards the office of the Chief Scientist with regard to such
funding. The Company is in conformance in all material respects with the
condition of its certifications from the Chief Scientist and of the law
governing companies which have received funding from the Chief Scientist,
including reporting obligations, and owes royalties in accordance with the law
up to a maximum of US $162,000.
3.26 DIRECTORS AND OFFICERS. The Disclosure Schedule lists the names of the
directors and the names and offices held by the officers.
3.27 DIGITAL AGREEMENT. The Company has performed fully all of its
obligations, acquired by assignment from Digital Equipment (DEC) Ltd.
("Digital"), to the assignees of Business Systems, Inc. ("BSI") under the
agreement between Digital and "BSI", dated June 28, 1991 (the "BSI Agreement").
3.28 DIGITAL ROYALTY. The Company, Argotec and Formula Systems (1985) Ltd.
("Formula"), have performed fully in all material respects all their obligations
under the Agreement of January 29, 1997 between Digital Equipment Corporation,
Digital Equipment (DEC) Ltd., Argotec and Formula and have performed fully all
their obligations under Addendum No. 1 of the same date to that agreement (the
agreement and the addendum will be collectively referred to as "the Digital
Agreement").
3.29 CONSULTANTS AND INDEPENDENT CONTRACTORS. Schedule II attached hereto
lists each consultant and independent contractor that has been retained by the
Company since 1995 to aid in the development of Intellectual Property.
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4. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Except as disclosed in the Disclosure Schedule, which identifies the
specific sections to which each such disclosure relates, Sellers, severally and
not jointly, hereby represent and warrant to the Purchaser as follows:
4.1 TITLE TO SELLERS' SHARES. Each Seller owns, beneficially and of record,
free and clear of any Lien except Permitted Liens, the number of Sellers' Shares
set forth opposite its name on Schedule I hereto. Such Sellers' Shares are not
subject to any voting trust agreement or other contract, including contracts
restricting or otherwise relating to the voting, dividend rights or disposition
of the Sellers' Shares.
4.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Each Seller has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and the Registration Rights Agreement, as Amended, if
applicable. All action on the part of each Seller necessary for the
authorization of this Agreement and the Registration Rights Agreement, as
Amended, if applicable, and the performance of all obligations of each Seller
and the authorization, sale and delivery of the Sellers' Shares pursuant hereto
and thereto has been taken. This Agreement has been duly executed and delivered
by each Seller and (assuming the due authorization, execution and delivery
hereof by the Company, the Purchaser, Argotec and each other Seller) constitutes
a valid and binding obligation of each Seller enforceable against each Seller in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; (ii) as limited by general
principles of equity including principles of commercial reasonableness, good
faith and fair dealing that restrict the availability of equitable remedies; and
(iii) as rights to indemnity and contribution hereunder may be limited by United
States state or
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federal securities laws or Israeli laws or principles of public policy. On the
Closing Date, the Registration Rights Agreement, as Amended, if applicable,
shall be duly executed and delivered by each Seller and (assuming the due
authorization, execution and delivery thereof on the Closing Date by each other
Seller, if applicable, and the Company) shall constitute valid and binding
obligations of each Seller enforceable against each Seller in accordance with
its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (ii) as limited by general principles of
equity including principles of commercial reasonableness, good faith and fair
dealing that restrict the availability of equitable remedies; and (iii) as
rights to indemnity and contribution hereunder may be limited by United States
state or federal securities laws or Israeli laws or principles of public policy.
The execution and delivery by each Seller of this Agreement and the Registration
Rights Agreement, as Amended, if applicable, the consummation of the
transactions contemplated hereby and thereby and the performance by such Seller
hereof and thereof in accordance with its terms and their respective terms will
not (i) require the consent, approval or notification of, or registration with,
any third party, including governmental authorization; (ii) conflict with or
result in any material breach or violation of any of the terms and conditions
of, or constitute (or with notice or lapse of time or both would constitute) a
material default under, any applicable law, statute, code, ordinance, regulation
or other requirement or order of any governmental body applicable to such Seller
or to the Sellers' Shares held by such Seller, or any contract to which such
Seller is a party or by or to which such Seller is or the Seller's Shares held
by such Seller are bound or subject; or (iii) result in the creation of any
Lien, except Permitted Liens, on such Seller's Shares. As of the Closing Date,
the Company will have received all
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necessary shareholder approval under Israeli law to authorize and validate this
Agreement and the Registration Rights Agreement, as Amended.
5. REPRESENTATIONS AND WARRANTIES OF ARGOTEC.
Except as disclosed in the Disclosure Schedule, which identifies the
specific sections to which each such disclosure relates, Argotec hereby
represents and warrants to the Purchaser as set forth in Sections 5.1 and 5.2
below:
5.1 ARGOTEC'S AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Argotec has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement, the Pledge Agreement and the Registration Rights
Agreement, as Amended. All action on the part of Argotec, its officers,
directors and shareholders necessary for the authorization of this Agreement,
the Pledge Agreement and the Registration Rights Agreement, as Amended, and the
performance of all obligations of Argotec pursuant hereto and thereto has been
taken. This Agreement has been duly executed and delivered by Argotec and
(assuming the due authorization, execution and delivery hereof by the Company,
the Purchaser and each Seller) constitutes a valid and binding obligation of
Argotec enforceable against Argotec in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
(ii) as limited by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing that restrict the
availability of equitable remedies; and (iii) as rights to indemnity and
contribution hereunder may be limited by United States state or federal
securities or Israeli laws or principles of public policy. On the Closing Date,
the Pledge Agreement and the Registration Rights Agreement, as Amended, shall be
duly executed and delivered by Argotec and (assuming the due authorization,
execution and delivery thereof on the Closing Date by the
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Purchaser and each Seller, if applicable) shall constitute valid and binding
obligations of Argotec enforceable against Argotec in accordance with its
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (ii) as limited by general principles of
equity including principles of commercial reasonableness, good faith and fair
dealing that restrict the availability of equitable remedies; and (iii) as
rights to indemnity and contribution hereunder may be limited by United States
state or federal securities laws or Israeli laws or principles of public policy.
The execution and delivery by Argotec of this Agreement, the Registration Rights
Agreement, as Amended, and the Pledge Agreement, the consummation of the
transactions contemplated hereby and thereby and the performance by Argotec
hereof and thereof in accordance with its and their respective terms will not
(i) require the consent, approval or notification of, or registration with, any
third party, including governmental authorization; (ii) conflict with or result
in any material breach or violation of any of the terms and conditions of, or
constitute (or with notice or lapse of time or both would constitute) a material
default under, any applicable law, statute, code, ordinance, regulation or other
requirement or order of any governmental body applicable to Argotec, or any
contract to which Argotec is a party or by or to which Argotec is bound or
subject; or (iii) result in the creation of any Lien on any Ordinary Shares
owned by Argotec, other than the Lien created by the Pledge Agreement. The
Company is not a "company" as defined in Section 96 of the Israeli Companies
Ordinance, Section 96 does not apply to the transactions contemplated by this
Agreement and, accordingly, this Agreement, the License Agreement, the Joint
Development Agreement and the Registration Rights Agreement, as amended, need to
be approved only by a simple majority of the Company's shareholders voting at an
extraordinary general meeting. The approval referred to in the
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preceding sentence is the only shareholder approval necessary to validate this
Agreement and it shall have been obtained as of the Closing Date.
5.2 RESERVED SHARES. Argotec owns, beneficially and of record, free and
clear of any Lien, 2,852,000 Ordinary Shares represented by certificates
numbered _______ to _____ ("Argotec Reserved Shares") which will be pledged in
accordance with the Pledge Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Except as disclosed in the
Disclosure Schedule, which identifies the specific sections to which each such
disclosure relates, the Purchaser hereby represents and warrants to the Company,
Argotec and the Sellers as follows:
6.1 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. The Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement, the License Agreement and the Joint Development
Agreement. All action on the part of the Purchaser, its officers, directors and
shareholders necessary for the authorization of this Agreement, the License
Agreement and the Joint Development Agreement, and the performance of all
obligations of the Purchaser hereunder and thereunder has been taken. This
Agreement has been duly executed and delivered by the Purchaser and (assuming
the due authorization, execution and delivery hereof by the Company, Argotec,
and each Seller) constitutes a valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights;
(ii) as limited by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing that restrict the
availability of equitable remedies; and (iii) as rights to indemnity and
contribution hereunder may be limited by United States state and federal
securities laws or Israeli
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laws or principles of public policy. On the Closing Date, the License Agreement
and the Joint Development Agreement shall be duly executed and delivered by
Purchaser and (assuming the due authorization, execution and delivery thereof by
the Company) shall constitute valid and binding obligations of the Purchaser
enforceable against the Purchaser in accordance with their respective terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; (ii) as limited by general principles of equity including
principles of commercial reasonableness, good faith and fair dealing that
restrict the availability of equitable remedies; and (iii) as rights to
indemnity and contribution hereunder may be limited by United States state or
federal securities laws or Israeli laws or principles of public policy.
6.2 NO CONSENTS. Except for compliance with the HSR Act, the execution,
delivery or performance of this Agreement, the License Agreement and the Joint
Development Agreement shall not require on the part of the Purchaser the
consent, approval or notification of, or registration with, any third party,
including any governmental authorities.
6.3 INVESTMENT REPRESENTATIONS. The Purchaser understands that the Shares
have not been registered under the Securities Act. The Purchaser also
understands that the Shares are being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon the
Purchaser's representations contained in this Agreement. The Purchaser hereby
represents and warrants as follows:
6.3.1 THE PURCHASER BEARS ECONOMIC RISK. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser
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must bear the economic risk of this investment indefinitely unless the Shares
are registered pursuant to the Securities Act, or an exemption from registration
is available.
6.3.2 THE PURCHASER CAN PROTECT ITS INTEREST. The Purchaser represents
that by reason of its, or of its management's, business or financial experience,
the Purchaser has the capacity to protect its own interests in connection with
the transactions contemplated in this Agreement. Further, the Purchaser is aware
of no publication of any advertisement in connection with the transactions
contemplated in this Agreement.
6.3.3 INVESTMENT. The Purchaser is acquiring the Shares for investment
for its own account and not with a view to, or for resale in connection with,
any distribution thereof, and the Purchaser has no present intention of selling
or distributing the Shares. The Purchaser understands that the Shares to be
purchased by it have not been registered under the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent as
expressed herein.
6.3.4 COMPANY INFORMATION. The Purchaser has received and read the
Annual Financials, the Interim Financials and the documents listed in the
Disclosure Schedule and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. The Purchaser has also had the opportunity to ask
questions of and receive answers from the Company and its management regarding
the terms and conditions of this investment.
6.3.5 RESTRICTED SECURITIES. The Purchaser acknowledges and agrees that
the Company Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. The Purchaser has been
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advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the availability of certain current public information about the
Company, the resale occurring after the expiration of the period of time set
forth in Rule 144 after a party has purchased and paid for the security to be
sold, the sale being through an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the number of shares being sold during any
three-month period not exceeding specified limitations.
7. COVENANTS.
7.1 USE OF PROCEEDS. The Company shall use all of the proceeds of the sale
of the Company Shares for general working capital and product development
purposes.
7.2 BOARD OF DIRECTORS. Prior to the Closing, the Board of Directors of the
Company will bring before an extraordinary General Meeting of the shareholders
of the Company, a resolution, pursuant to which, in accordance with Article 38
of the Articles of Association of the Company, for as long as the Purchaser and
its affiliates collectively own 15% or more of the Ordinary Shares outstanding
On A Fully Diluted Basis (as defined in Section 7.15 below) and until the
earlier of (i) the Option Closing or (ii) the termination or expiration of the
Option Period (as defined in Section 11.1 below), the number of directors of the
Company shall thereafter be not more than seven and shall elect as a director of
the Company the nominee proposed by the Purchaser (the "Purchaser Nominee"). The
Sellers agree to vote the Sellers' Shares in favor of such resolution and
Argotec agrees to vote its shares in favor of such resolution.
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After the Closing and until the earlier of (i) the Purchaser and its
affiliates collectively owning less than 15% of the Ordinary Shares outstanding
On A Fully Diluted Basis; (ii) the Option Closing (as defined in Section 11
below) or (iii) the expiration or termination of the Option Period (as defined
in Section 11 below), the Purchaser, the Sellers and Argotec agree to vote their
shares to insure that the Board of Directors will at all times be composed of
the Purchaser Nominee, four directors who shall be nominated by Argotec, of
which one shall be the Chief Executive Officer or the President of the Company
and two directors who shall be outside directors who are unrelated by blood or
marriage to any shareholders, who in the aggregate beneficially own 5% or more
of the outstanding shares, directors or officers of the Company.
The Board of Directors shall meet at least quarterly and at least one
such meeting shall be held in the United States. The Purchaser Nominee shall
have access to the Company's quarterly financial statements and all other
material made available to the Board of Directors of the Company.
7.3 SELLERS' SHARE COVENANTS
7.3.1 ARGOTEC RESERVED SHARES. From the Closing Date until the earlier
of (i) the expiration of the Option Period, (ii) the termination of the Option
Period, other than by the exercise of the Option or (iii) the closing of the
exercise of the call option pursuant to Section 11.2 below, Argotec shall not
sell, assign, pledge (other than to the Purchaser pursuant to this Agreement),
transfer or grant a security interest in the Argotec Reserved Shares, other than
to the Purchaser upon exercise of the Option or to an affiliate or affiliates of
Argotec that agree to acquire such shares subject to the Option and subject to
the pledge in accordance with the Pledge Agreement; provided, however, that
Argotec is prohibited from selling or transferring Argotec Reserved Shares to an
affiliate, which directly or through an affiliate, competes
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directly with the Purchaser.
7.3.2 VOTING. Each of the Sellers and Argotec undertakes during the
period from the date of this Agreement until the expiration or termination of
the Option Period and except with regard to the resolutions mentioned in Article
2.2.9 above, to vote his or its respective shares at any general meeting of the
Company against (unless consented to by Purchaser in writing) any resolution
with regard to:
(a) the increase of the authorized share capital of the Company;
(b) the approval of any agreement in which any officer (noseh misrah)
has a personal interest where such approval is required by any provision of
Chapter D'1 (Article D) of the Companies Ordinance (New Version);
(c) the amendment of the Articles of Association of the Company to
alter any of the following articles or with regard to any of the following
subjects:
1. Articles 23-34 ( or any amendment with regard to convocation
or conduct of general meetings, or of voting (including by
proxy) at general meetings);
2. Article 36 (or any amendment with regard to the exercise of
powers of directors);
3. Articles 38 and 40 (or any amendment with regard to the
number of directors or the qualifications of directors);
4. Articles 46-49 (or any amendment with regard to the
convocation or conduct of meetings of the Board of Directors
or of voting there); or
5. Article 69 (or any amendment with regard to notice of
general meetings or of meetings of the Board of Directors).
(d) the liquidation or winding-up of the Company whether by a court or
by choice and the authorization of any compromise or arrangement with
creditors;
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(e) the change of rights attached to any class or group of shares; and
(f) the issue of shares with different rights than Ordinary Shares,
including without limitation, shares with preferred or deferred right or
rights of redemption or other special rights.
7.4 BOARD OF DIRECTORS. From the date hereof until the Closing, the Company
agrees to provide written notice to Roy T. Heggland by facsimile at least (i)
five days in advance of any meeting of the Company's Board of Directors at which
the directors of the Company will be present in person and a representative of
the Purchaser may attend any such meeting and (ii) at least two days in advance
of any meeting of the Company's Board of Directors in which the directors will
participate by telephone and a representative of Purchaser may participate by
telephone in any such meeting.
7.5 SHARES. Argotec and each Seller agree from the date hereof until the
Closing not to sell, pledge, assign or transfer any Ordinary Shares or options
or warrants to purchase Ordinary Shares.
7.6 CONDUCT OF THE BUSINESS. The Company, Argotec and each Seller agree
that, except to the extent otherwise expressly permitted by this Agreement or
consented to in writing in advance by the Purchaser, from the date hereof until
the Closing, the Company will, and Argotec and each Seller agree to use his or
its respective reasonable best efforts to cause the Company to:
7.6.1 operate only in the ordinary course,
7.6.2 preserve the Company's business organization intact, retain the
services of the Company's key employees and to preserve the Company's goodwill
and relationships
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with customers, suppliers, creditors and others having business relationships
with the Company;
7.6.3 take such action as may be reasonably necessary to preserve the
Company's material properties and assets, to maintain the material Intellectual
Property necessary to sustain the Company's business activities and to maintain
the Company's material permits and licenses;
7.6.4 maintain in full force and effect the Company's insurance
policies presently in effect;
7.6.5 comply in all material respects with all laws applicable to the
Company's business, properties or operations;
7.6.6 promptly advise the Purchaser in writing of any Material Adverse
Change and of any event or circumstance which will, or with reasonable certainty
may, result in any such change or which will, or with reasonable certainty may,
constitute a material violation or breach of any representation, warranty or
covenant contained in this Agreement;
7.6.7 maintain the Company's books and records in the usual, regular
and ordinary manner and in accordance with good business practices and Israeli
GAAP;
7.6.8 not authorize, issue, sell, combine or reclassify any of the
Company's securities, or issue or grant any option, warrant or other right with
respect to any of the Company's securities, other than securities issued
pursuant to the exercise of options granted prior to the date hereof under
option plans approved by the Board of Directors of the Company;
7.6.9 not merge, combine or consolidate with any other corporation or
entity, or purchase an equity interest in or the assets of any other corporation
or entity;
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7.6.10 not dissolve, liquidate, or change the corporate structure of
the Company,
7.6.11 not pay, discharge or satisfy any obligation, liability, lien or
encumbrance other than current liabilities reflected in the balance sheet
included in the Interim Financials and current liabilities incurred since the
Interim Balance Sheet Date in the ordinary course of business;
7.6.12 not sell, transfer, lease, encumber or otherwise dispose of any
of the Company's tangible assets other than in the ordinary course of business,
or cancel any debt or claim other than in the ordinary course of business or
encumber, license or dispose of any of the Company's intangible assets or
Intellectual Property other than in the ordinary course of business;
7.6.13 not incur, prepay, endorse, guarantee or otherwise become liable
or responsible for any indebtedness, liability or obligation (whether absolute,
accrued, contingent or otherwise) in excess of $500,000 unless previously
approved by the Board of Directors of the Company;
7.6.14 not amend the Company's Articles of Association; and
7.6.15 not make any agreement or commitment to take any action referred
to in Subsections 7.6.1 through 7.6.14 above.
7.7 INVENTIONS/TECHNOLOGY AGREEMENTS. The Company shall cause each
independent contractor and consultant (collectively, the "Agents") to enter into
and maintain, proprietary information and inventions/technology agreements which
provide in part for the assignment to the Company of intellectual property
created by each Agent.
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7.8 CORPORATE EXAMINATIONS AND INVESTIGATIONS. The Company, Argotec and the
Sellers agree that from the date hereof until the Closing the Purchaser shall be
entitled, through its employees, officers, accountants, counsel, financial
advisors and other representatives and agents, to make such investigation of the
properties, businesses and operations of the Company, and such examination of
the books, records, contracts and financial condition of the Company as it shall
reasonably request (the "Due Diligence"). Any such investigation and examination
shall be conducted at reasonable times and under reasonable circumstances and
Argotec, the Sellers and the Company shall cooperate fully therewith. No
investigation by the Purchaser shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Company, Argotec or
the Sellers contained in this Agreement. In order that the Purchaser may have
full opportunity to make such physical, business, accounting and legal review,
examination or investigation as it may wish of the affairs of the Company, the
Company shall make available to the representatives and agents of the Purchaser
during such period all such information and copies of such documents concerning
the affairs of the Company as such representatives or agents may reasonably
request, shall permit the representatives and agents of the Purchaser access to
the properties of the Company during normal business hours and upon two days'
prior written notice and shall cause the officers, employees, consultants,
agents, accountants and attorneys of the Company to cooperate fully with such
representatives and agents in connection with such review and examination. The
Company shall furnish to the Purchaser (i) a copy of each report, schedule,
return and other document filed by the Company on or after the date hereof with
any governmental entity and (ii) balance sheets and related statements of
operations and cash flows of the Company which are prepared for dissemination to
the management of the Company.
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7.9 PUBLIC ANNOUNCEMENT. The Company, the Purchaser, Argotec and each
Seller agree that the Company and the Purchaser shall agree upon the form,
timing and substance of any public announcement related to this Agreement or the
transactions contemplated hereby, such agreement not to be unreasonably withheld
or delayed, and the Company and the Purchaser shall consult with each other as
to the form, timing and substance of other public disclosures related hereto;
provided, however, that nothing contained herein shall prohibit the Company or
the Purchaser without the agreement of the other from making any disclosure
required by law or as such party deems necessary under federal or state
securities laws; provided, however, that in the event that the Company or the
Purchaser is required to make any such disclosure, such party will provide
notice to the other party at least twenty-four hours in advance of making such
disclosure.
7.10 CERTAIN FILINGS, CONSENTS AND ACTION. The Company, the Sellers,
Argotec and the Purchaser shall cooperate with each other in determining whether
any filings are required to be made or consents, approvals, permits or
authorizations are required to be obtained under any federal, state or foreign
law or regulation, or whether any consents, approvals or waivers are required to
be obtained from parties to other contracts material to the business in
connection with the consummation of the transactions contemplated hereunder.
Upon Closing, and to the extent not otherwise obtained prior to the Closing
Date, each of the Company, each Seller, Argotec and the Purchaser, respectively,
will use all reasonable efforts and will immediately seek to obtain all such
additional consents, approvals, permits, authorizations or waivers required to
be obtained by the Company, each Seller, Argotec and the Purchaser,
respectively.
7.11 FINANCIAL AND BUSINESS INFORMATION. The Company shall provide the
Purchaser with copies of all statements which the Company provides to the Board
of Directors and all SEC
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filings. The foregoing shall not be interpreted as limiting in any way the
rights of the Purchaser Nominee to receive information about the Company and to
have access to the Company's books, records and accounts.
7.12 ACQUISITION PROPOSALS. Prior to the Closing or the earlier termination
of this Agreement, each Seller, Argotec and the Company will not respectively,
directly or indirectly, through any officer, employee, director, representative,
parent, affiliate, broker, advisor or agent (i) seek, solicit, initiate or
encourage the submission of inquiries, proposals or offers from any corporation,
partnership, person or other entity or group relating to any acquisition or
purchase of the Ordinary Shares or the assets, properties or business of the
Company or any tender or exchange offer, merger, reverse merger, consolidation,
business combination, recapitalization, spin-off, liquidation, dissolution or
similar transaction seeking, directly or indirectly, to acquire the Ordinary
Shares or any of the Company's assets, properties or business (each an
"Acquisition Proposal"); (ii) participate or cooperate in or consider or pursue,
any discussions or negotiations regarding an Acquisition Proposal or furnish to
any person or entity information concerning the Company for any Acquisition
Proposal; or (iii) otherwise solicit or cooperate in any way with, or assist, or
participate in, facilitate or encourage any effort or attempt by any person to
make or enter into an Acquisition Proposal; provided, however, that nothing
contained in this Section 7.12 shall prohibit the Board of Directors of the
Company from complying with its fiduciary duties under applicable law. The
Company, Argotec or a Seller, as the case may be, shall notify Purchaser in
writing within twenty-four hours of any breach of this Section 7.12. Such
written notifications shall describe in reasonable detail any such occurrence
and identify the person or persons involved. In the event that the Company,
Argotec or any Seller breaches this Section 7.12, and, as a result, the Closing
does not occur, the Company shall reimburse the Purchaser for
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all reasonable out-of-pocket expenses incurred by the Purchaser in connection
with the transaction contemplated by this Agreement. In the event that the
Company, Argotec or a Seller breaches this Section 7.12 and then enters into an
agreement with a party other than the Purchaser within six months of the
termination or expiration of this Agreement to sell the Ordinary Shares or to
sell substantially all of the Company's assets, then the Company, Argotec or any
Seller, or any of them, as applicable, shall pay the Purchaser $1,000,000 or
such percentage of $1,000,000 as is equal to the percentage of total
consideration to be received by the breaching party under the terms of this
Agreement.
7.13 SUPPLEMENTS TO SCHEDULES. From time to time prior to the Closing Date,
the Company, Argotec and each Seller will promptly supplement or amend the
Disclosure Schedule with respect to any matter arising after the date hereof
which, if existing on or occurring after the date hereof, would have been
required to be set forth thereon or which is necessary to correct any
information contained herein; provided, however, that no supplement or amendment
to the Disclosure Schedule shall be considered in determining the satisfaction
of the conditions set forth in Section 8.1 hereof unless agreed to in writing by
the Purchaser.
7.14 CERTIFICATE. Upon delivery of the certificates pursuant to Sections
2.2.1 and 2.3.1, the Purchaser will return such certificates to the Company and
the Sellers for the purpose set forth in this Section 7.14. As soon as
practicable but no later than 14 days after the Closing, the Company will
arrange to mail to the Purchaser a certificate representing the Company Shares
stamped by the Company's bank to indicate that the Shares were purchased by a
foreign resident, in foreign currency and each Seller will arrange to mail to
the Purchaser a certificate representing such Seller's Shares stamped by such
Seller's bank to indicate that such Seller's Shares were purchased by a foreign
resident, in foreign currency.
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7.15 STANDSTILL AND RELATED COVENANTS.
7.15.1 The Purchaser agrees that during the period commencing on the
date hereof and ending on the earlier of (i) the exercise of the Option or (ii)
the six month anniversary of the expiration or termination of the Option (the
"Standstill Period"), without the prior written consent of the Company,
specifically expressed in a resolution adopted by a majority of the directors of
the Company, the Purchaser will not and the Purchaser will cause each of its
affiliates not to, directly or indirectly (a) make, or in any way participate,
directly or indirectly, in any "solicitation" (as such term is used in the proxy
rules of the Securities and Exchange Commission as in effect on the date hereof)
of proxies or consents relating to the election or removal of directors, (b)
acquire, offer or propose to acquire, or agree to acquire (except, in any case,
by way of stock dividends or other distributions or offerings made available to
holders of any Voting Securities generally, provided, that any such distributed
securities shall be subject to the provisions hereof), directly or indirectly,
whether by purchase, tender or exchange offer, through the acquisition of
control of another Person (as hereinafter defined), by joining a partnership,
limited partnership, syndicate or other "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or otherwise, any Voting Securities; PROVIDED, HOWEVER, that the
Purchaser or its affiliates may (1) acquire additional Voting Securities through
open market or privately-negotiated purchases as long as the effect of such
acquisition would not cause the Purchaser or its affiliates to own in the
aggregate more than 19% of the Voting Securities On A Fully Diluted Basis and
(2) notwithstanding (1) above, may exercise the Option, the call option pursuant
to Section 11.2 below and the Right of First Refusal pursuant to Section 10.3
below.
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(a) Nothing contained in Section 7.15.1 shall be deemed in any way to
prohibit or limit the lawful activities of the Purchaser Director acting in his
capacity as a director of the Company (regardless of whether such actions are
taken at a Board meeting or otherwise).
(b) The Purchaser will not be in breach of or in default under the
provisions of Section 7.15.1 hereof, and will not be required to dispose of any
Voting Securities, if the aggregate Voting Securities owned by the Purchaser and
its affiliates is increased solely as a result of a recapitalization of the
Company or a repurchase of securities by the Company or any other action taken
by the Company or its affiliates.
(c) If during the Standstill Period, any Takeover Proposal (as
hereinafter defined), is made to the Company or the Board of Directors, then,
notwithstanding the provisions of Section 7.15.1, the Purchaser and its
affiliates shall be permitted to make a competing Takeover Proposal, and this
Standstill covenant shall automatically terminate as of the date of the Board of
Directors' approval or recommendation of such proposal.
7.15.2 PERSON. "Person" shall mean any individual, group, corporation,
limited liability company, partnership, firm, government or agency or political
subdivision thereof, or other entity of whatever nature.
7.15.3 TAKEOVER PROPOSAL. "Takeover Proposal" shall mean any solicited
or unsolicited tender or exchange offer, binding proposal for a merger, share
exchange or other business combination involving the Company or any of its
material subsidiaries or any proposal or offer to acquire in any manner 20% or
more of the Company's Voting Securities On A Fully Diluted Basis or a
substantial portion of the assets of the Company.
7.15.4 VOTING SECURITIES. "Voting Securities" shall mean Ordinary
Shares and
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any other securities of the Company entitled to vote generally in the election
of directors.
7.15.5 ON A FULLY DILUTED BASIS. "On A Fully Diluted Basis" shall refer
to the number of Voting Securities of the Company which would be outstanding and
issued assuming that all Voting Securities which are issuable (i) upon the
conversion or exchange of any of the Company's outstanding convertible or
exchangeable securities, including notes and debentures, have been issued and
(ii) upon the exercise of the Company's outstanding options or authorized but
unissued options and warrants for the purchase of Voting Securities and rights
to subscribe for or purchase Voting Securities, have been issued.
7.16 CHIEF SCIENTIST. Until the earlier of the exercise of the Option or
the termination or expiration of the Option Period, the Company does not intend
to, and undertakes not to, without the prior written consent of the Purchaser,
request or obtain further funding for research and development from the Chief
Scientist.
7.17 MANAGEMENT FEES TO ARGOTEC. Until the earlier of the exercise of the
Option or the termination or expiration of the Option Period, the Company shall
not pay Argotec in excess of $180,000 per year for management fees pursuant to
the letter agreement dated December 31, 1995 (the "Letter Agreement"). Upon the
Purchaser's exercise of the Option, the Company and Argotec agree that the
Letter Agreement may be terminated at the Purchaser's option.
7.18 ARGOTEC'S OWNERSHIP IN CRYSTAL SYSTEMS SOLUTIONS LTD. Unless agreed to
in advance by the Purchaser, from the date of the execution of this Agreement
until the Put Effective Date (as defined in Section 13.1 below), Argotec
covenants and agrees not to sell, transfer or assign any Ordinary Shares, or any
rights therein, of Crystal Systems Solutions Ltd. to any party for less than
fair market value.
7.19 . FURTHER ASSURANCES. After the Closing, any party hereto will, at the
reasonable
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request of any other party hereto from time to time and without further
consideration, execute and deliver or cause to be executed and delivered to the
requesting party such other instruments, documents of sale, transfer,
conveyance, assignment and confirmation and take such other actions as the
requesting party may reasonably request to carry out and effectuate the
provisions hereof and the transactions contemplated hereby.
8. CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of the Purchaser to
consummate the transactions contemplated hereby shall be subject to the
fulfillment, on or before the Closing Date, of the following conditions, any of
which may be waived in whole or in part by the Purchaser in a writing delivered
to the Company, Argotec and the Sellers prior to or at the Closing:
8.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE. The
representations and warranties of the Company, Argotec and of each Seller
contained in this Agreement shall be deemed to have been made again on and as of
the Closing Date and shall be true and correct in all material respects as of
the Closing Date.
8.2 PERFORMANCE BY THE COMPANY, BY THE SELLERS AND ARGOTEC. Each of the
terms, covenants, agreements and obligations to be performed, complied with or
satisfied by the Company, each Seller and Argotec on or before the Closing Date
pursuant to the terms hereof shall have been duly performed, complied with or
satisfied in all material respects on or before the Closing Date.
8.3 AUTHORITY. All actions required to be taken by the Company, each Seller
and Argotec, as applicable, to authorize the execution, delivery and performance
of this Agreement, the Joint Development Agreement, the Pledge Agreement and the
Registration Rights
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Agreement, as Amended, and the consummation of the transactions contemplated
hereby and thereby shall have been duly and validly taken.
8.4 CONSENTS. All notices to, and permits, authorizations, approvals,
consents and waivers from, any governmental agencies and all third party
consents required in order to consummate the transactions contemplated hereby,
in the License Agreement, the Joint Development Agreement, the Pledge Agreement
and the Registration Rights Agreement, as Amended, shall have been made or
obtained in form and substance reasonably acceptable to Purchaser.
8.5 PROPRIETARY INFORMATION AND INVENTIONS/TECHNOLOGY AGREEMENTS. The
Purchaser shall have received copies of executed proprietary information and
inventions/technology agreements from each independent contractor and consultant
listed in Schedule II.
8.6 JOINT VENTURE WITH PELEPHONE COMMUNICATIONS LTD. The Company shall have
taken all necessary actions to ensure that the Company's interest (the "Joint
Venture Interest") in the Joint Venture with Pelephone Communications Ltd.
("Pelephone"), pursuant to the Joint Venture Agreement by and between the
Company and Pelephone, dated May 21, 1997 (the "Joint Venture"), shall be
subject to a put option, exercisable by the Company within thirty (30) days of
the exercise of the Option, permitting the Company to require Argotec to
purchase the Joint Venture Interest for the sum of money representing the
Company's total investment expressed in United States dollars in the Joint
Venture. Notwithstanding the foregoing, said put option shall be terminated and
of no force and effect if the Company, instead of selling the Joint Venture
Interest to Argotec, shall have caused the Joint Venture to cease operations
prior to the Purchaser's exercise of the put option.
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8.7 OPINIONS OF COUNSEL. Purchaser shall have received the opinion of
Goldfarb, Levy, Eran and Co., counsel to the Company, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit C, and the opinion of
Goldfarb, Levy, Eran and Co., counsel to Argotec, dated as of the Closing Date,
that Argotec's signatures on this Agreement, the Pledge Agreement and the
Registration Rights Agreement, as Amended, were duly authorized by Argotec's
Board of Directors and legally bind Argotec in accordance with their terms.
8.8 ABSENCE OF LITIGATION. No action, suit or proceeding relating to the
consummation of the transactions contemplated under this Agreement, the License
Agreement, the Joint Development Agreement, the Pledge Agreement or the
Registration Rights Agreement, as Amended, shall be pending or threatened. No
preliminary or permanent injunction or other order shall have been issued by any
court of competent jurisdiction or governmental agency or commission which
prevents the consummation of the transactions contemplated hereby and no such
injunction or order shall remain in effect, and no action shall have been taken
nor shall any statute, rule or regulation have been enacted by any governmental,
regulatory or administrative body or that makes consummation of the transactions
contemplated hereby illegal.
8.9 NO MATERIAL ADVERSE CHANGE. Since March 31, 1997, there shall not have
been any Material Adverse Change in the condition (financial or otherwise),
assets, properties, business, prospects or operations of the Company or any
event or circumstance which will likely result in any such change.
8.10 PLEDGE AGREEMENT AND REGISTRATION RIGHTS AGREEMENT, AS AMENDED.
Argotec shall have executed the Pledge Agreement. Argotec and each Seller, if
applicable, shall have executed the Registration Rights Agreement, as Amended.
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8.11 THE BSI AGREEMENT AND THE DIGITAL AGREEMENT. The Company shall have
evidenced to the reasonable satisfaction of the Purchaser that (i) BSI's rights
under the BSI Agreement were assigned first to Cablevision Industries Corp. and
thence to Cableair Inc., (ii) the payment owing by the Company to Cableair Inc.
under the agreement of March 12, 1996 between the Company and Cableair Inc was
paid in timely fashion, (iii) the payment mentioned in Clause 1 of Addendum No.
1 to the agreement of January 29, 1995 between Digital Equipment Corporation,
Digital Equipment (DEC) Ltd., Argotec and Formula was paid in timely fashion and
(iv) all the obligations of Argotec and Formula and the Company under Clauses 2,
3 and 4 of that Addendum have been fulfilled in a timely fashion.
8.12 LICENSE AGREEMENT, THE JOINT DEVELOPMENT AGREEMENT AND THE
REGISTRATION RIGHTS AGREEMENT, AS AMENDED. The Company shall have executed the
License Agreement, the Joint Development Agreement and the Registration Rights
Agreement, as Amended.
8.13 OTHER AGREEMENTS. Any of the agreements, documents or instruments to
be delivered as contemplated herein not otherwise listed in this Article 8 shall
have been executed and delivered as contemplated by this Agreement.
9. CONDITIONS TO OBLIGATIONS OF THE COMPANY, ARGOTEC AND THE SELLERS.
The obligations of the Company, the Sellers and Argotec to consummate
the transactions contemplated hereby shall be subject to the fulfillment, on or
before the Closing Date, of the following conditions, any of which may be waived
in whole or in part by the Company, any Seller or Argotec in writing delivered
to the Purchaser prior to or at the Closing:
9.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE. The
representations and warranties of the Purchaser contained in this Agreement
shall be deemed to
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have been made again on and as of the Closing Date and shall be true and correct
in all material respects as of the Closing Date.
9.2 PERFORMANCE BY PURCHASER. Each of the terms, covenants, agreements and
obligations to be performed, complied with or satisfied by the Purchaser on or
before the Closing Date pursuant to the terms hereof shall have been duly
performed, complied with or satisfied in all material respects on or before the
Closing Date.
9.3 AUTHORITY. All actions required to be taken by the Purchaser to
authorize the execution, delivery and performance of this Agreement, the License
Agreement and the Joint Development Agreement, and the consummation of the
transactions contemplated hereby and thereby shall have been duly and validly
taken.
9.4 CONSENTS. All notices to, permits, authorizations, approvals, consents
and waivers from any governmental agencies and all third party consents required
in order to consummate the transactions contemplated hereby and in the License
Agreement and the Joint Development Agreement shall have been made or obtained.
9.5 ABSENCE OF LITIGATION. No action, suit or proceeding relating to the
consummation of the transactions contemplated under this Agreement shall be
pending or threatened. No preliminary or permanent injunction or other order
shall have been issued by any court of competent jurisdiction or governmental
agency or commission which prevents the consummation of the transactions
contemplated hereby and no such injunction or order shall remain in effect, and
no action shall have been taken nor shall any statute, rule or regulation have
been enacted by any governmental regulatory or administrative body or that makes
consummation of the transactions contemplated hereby illegal.
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9.6 OPINION OF COUNSEL. The Company and the Sellers shall have received the
opinion of Roy T. Heggland, counsel for the Purchaser, dated as of the Closing
Date in substantially the form attached hereto as Exhibit F.
9.7 SHAREHOLDER APPROVAL. The Company's shareholders shall have authorized
the execution, delivery and performance of this Agreement, the License Agreement
and the Joint Development Agreement.
9.8 LICENSE AGREEMENT AND THE JOINT DEVELOPMENT AGREEMENT. The Purchaser
shall have executed the License Agreement and the Joint Development Agreement.
9.9 OTHER AGREEMENTS. Any of the agreements, documents or instruments to be
delivered as contemplated herein not otherwise listed in this Article 9 have
been executed and delivered as contemplated by this Agreement.
10. DISPOSITION OF THE SHARES; DISPOSITION OF THE COMPANY'S ASSETS.
10.1 RESTRICTION PERIOD. The Purchaser shall not, for a period of twelve
months from the Closing Date (the "Restriction Period"), sell, assign, pledge or
otherwise dispose of the Shares or the Option Shares (as defined in Section 11.1
below) that it may acquire during such period, other than to any affiliate of
the Purchaser, without the prior written consent of the Board of Directors of
the Company.
10.2 ARGOTEC RIGHT OF FIRST REFUSAL. The Purchaser shall give written
notice to Argotec (the "Purchaser's Notice of Sale") if at any time it desires
to sell the Shares or any equity securities of the Company in a private
transaction (the "Purchaser's Shares"). The Purchaser's Notice of Sale shall set
forth a description of the proposed sale, including the name of the proposed
purchaser(s), a description of the Purchaser's Shares affected, the number of
the
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Purchaser's Shares affected, the purchase price or consideration (all of which
shall be cash), the date on or about which the proposed sale is to be made and
any other conditions of the sale or transfer.
For a period of thirty (30) days following such Purchaser's Notice of
Sale, Argotec shall have the right to purchase the Purchaser's Shares designated
in the Purchaser's Notice of Sale on the same terms and conditions and for the
price or consideration designated therein (the "Argotec Right of First
Refusal"). Notice of Argotec's intention to purchase the Purchaser's Shares
shall be evidenced by a writing signed by the President of Argotec and delivered
to the Purchaser prior to the end of the thirty (30) day period following
Argotec's receipt of the Purchaser's Notice of Sale. The closing of Argotec's
purchase of the Purchaser's Shares shall occur no later than sixty (60) days
following Argotec's receipt of the Notice of Sale.
If Argotec does not exercise Argotec's Right of First Refusal, the
Purchaser shall have the right to sell the Purchaser's Shares designated in the
Purchaser's Notice of Sale on the same terms and conditions, to the same
purchaser(s) and for the price or consideration designated therein within sixty
(60) days from the expiration of the period during which Argotec had the option
to purchase the Purchaser's Shares.
10.3 RIGHT OF FIRST REFUSAL AND PREEMPTIVE RIGHTS. Except for Excluded
Securities (as defined below), the Company shall give written notice to the
Purchaser (the "Notice of Issuance") if at any time during the Option Period or
during the twelve month period following the expiration or termination of the
Option Period it desires to issue and sell or transfer, any of its shares or any
notes, debentures, bonds or other securities convertible into or carrying
options or warrants to purchase shares (the "Issued Shares"). The Notice of
Issuance shall set forth a description of the proposed issuance and sale or
transfer, including the name of the proposed
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purchaser(s) or transferee(s), a description of the Issued Shares, the number of
Issued Shares to be sold or transferred, the purchase price or consideration and
any other conditions of the issuance and sale or transfer. For a period of sixty
days following receipt of such Notice of Issuance, the Purchaser shall have the
right to purchase (i) all of the Issued Shares designated in the Notice of
Issuance on the same terms and conditions and for the price or consideration
designated in the Notice of Issuance (the "Right of First Refusal") or (ii) such
number of Issued Shares from the Company on the same terms and conditions and
for the price or consideration designated in the Notice of Issuance such that
the Purchaser may maintain its ownership position, On A Fully Diluted basis (as
defined in Section 11.1 below), in the Company (the "Preemptive Right"). Notice
of the Purchaser's intention to exercise the Right of First Refusal or the
Preemptive Right shall be evidenced by a writing signed by the Purchaser and
delivered to the Company prior to the end of the thirty (30) day period
following receipt of the Notice of Issuance.
If the Purchaser does not exercise the Right of First Refusal or the
Preemptive Right, then the Company shall have the right to issue and sell or
transfer the Issued Shares designated in the Notice of Issuance to the proposed
purchaser(s) or transferee(s) on the same terms and conditions and for the price
or consideration designated therein within ninety (90) days from the expiration
of the period during which the Purchaser had the option to exercise the
Preemptive Right or the Right of First Refusal.
For the purposes of this Agreement, "Excluded Securities" shall mean
(i) Ordinary Shares (and/or options, warrants or other Ordinary Shares purchase
rights issued pursuant to such options, warrants or other rights) issued or to
be issued to employees, officers or directors of the Company pursuant to a stock
purchase plan or stock option plans or other arrangements
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that are approved by the Board of Directors of the Company, (ii) Ordinary Shares
sold pursuant to an acquisition of shares or assets prior to the expiration of
the Option Period provided that such acquisition is approved by the Board of
Directors of the Company and that the Purchaser's Nominee on the Board of
Directors votes in favor of such acquisition; (iii) shares issued pursuant to
any rights agreements, options or warrants outstanding as of the date of this
Agreement, (iv) any equity securities that are issued by the Company as part of
an underwritten public offering referred to in Section 12 hereof or in the
Registration Rights Agreement, as Amended, or (v) Ordinary Shares issued in
connection with any stock split, stock dividend or recapitalization by the
Company.
10.4 RIGHT OF FIRST REFUSAL FOR THE COMPANY'S ASSETS. The Company shall
give written notice to the Purchaser (the "Notice of Sale") if at any time
during the Option Period or during the twelve month period following the
expiration or termination of the Option Period it desires to sell, transfer or
otherwise dispose of (i) all or substantially all of the Company's assets owned
as of the Closing Date or (ii) other than Intellectual Property (as defined in
Section 3.10 hereof) licensed to its customers in the ordinary course of
business, any of the Company's Intellectual Property and any asset acquired
after the Closing Date that would be Intellectual Property if owned as of the
Closing Date (the "Assets"). The Notice of Issuance shall set forth a
description of the proposed sale or transfer, including the name of the proposed
purchaser(s) or transferee(s), a description of the Assets, the purchase price
or consideration and any other conditions of the issuance and sale or transfer.
For a period of 60 days following receipt of such Notice of Sale, the Purchaser
shall have the right to purchase all of the Assets designated in the Notice of
Sale on the same terms and conditions and for the price or consideration
designated in the Notice of Sale (the "Asset Right of First Refusal"). Notice of
the Purchaser's intention to
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exercise the Asset Right of First Refusal shall be evidenced by a writing signed
by the Purchaser and delivered to the Company prior to the end of the thirty
(30) day period following receipt of the Notice of Sale.
If the Purchaser does not exercise the Asset Right of First Refusal,
then the Company shall have the right to sell or transfer the Assets designated
in the Notice of Sale to the proposed purchaser(s) or transferee(s) on the same
terms and conditions and for the price or consideration designated therein
within ninety (90) days from the expiration of the period during which the
Purchaser had the option to exercise the Asset Right of First Refusal.
11. OPTION TO PURCHASE CERTAIN SHARES HELD BY ARGOTEC.
11.1 OPTION. Argotec hereby grants to the Purchaser effective on the
Closing Date, and the Purchaser hereby accepts effective on the Closing Date, an
option (the "Option") to purchase on a one time basis up to that number of
Ordinary Shares, (calculated On A Fully Diluted Basis, as defined below) owned
by Argotec (the "Option Shares") as shall equal N in the following equation:
((X)(51%)) - E = N
Where,
X = the number of Voting Securities On A Fully Diluted Basis
immediately prior to the closing of the sale of the Option Shares pursuant to
the exercise of the Option.
N = the number of Option Shares to be purchased pursuant to the exercise of
the Option.
E = that number of Ordinary Shares owned by the Purchaser immediately prior
to the closing of the sale of the Option Shares pursuant to the exercise of the
Option.
Example: ((6,600,000)(51%)) - 1,300,000 = N; N = 2,066,000
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The purchase price per Option Share (the "Exercise Price") shall be equal
to EP in the following equation:
((15 C/D)+Z)/2= EP, where Z = the average closing price of the Voting
Securities for the thirty days immediately prior to the closing of the Option
Shares pursuant to the exercise of the Option and where C = the number of Voting
Securities On A Fully Diluted Basis immediately upon the Closing and where D=
the number of Voting Securities On A Fully Diluted Basis immediately prior to
the closing of the sale of the Option Shares pursuant to the exercise of the
Option; provided, however, that D shall exclude Voting Securities On A Fully
Diluted Basis pursuant to a Board of Directors approved employee stock option
plan to employees and directors (except Dan Goldstein, Gad Goldstein, Shai
Beilis and any current or future directors of Formula or any affiliate thereof)
and shares issued and sold in exchange for assets; provided, however, that C/D
shall not be greater than 1.
The Option shall begin on the Closing Date hereof and shall terminate
(unless earlier exercised) upon the earlier of (i) the Purchaser's sale of any
Voting Securities other than to any affiliate of Purchaser and (ii) the last day
of the twenty-fourth (24th) month following the Closing Date (the "Option
Period"); provided, however, that the Option Period shall be automatically
extended as follows: Release of 5.0 Wizard shall meet the following requirements
by January 1, 1998: (i) substantially equivalent functionality to Wizard 3.3;
(ii) in beta test with a customer; (iii) operating with an average response time
of no more than 3 seconds; and (iv) able to accommodate at least 100
simultaneous users; provided, however, if all requirements are not met by such
date, Wiztec shall have the opportunity to meet such requirements within 90 days
of such date. The Option Period shall be extended in increments of one day for
each day of delay after the expiration of the ninety (90) day period. To
exercise the Option, the Purchaser shall provide
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90 days advance written notice of such exercise to Argotec at its address as set
forth on Schedule I attached hereto. The closing of the sale of the Option
Shares (the "Option Closing") pursuant to the exercise of the Option shall take
place on or before the ninety-fifth (95th) day after exercise of the Option or
such earlier date as the parties may agree. At the Option Closing, Argotec will
deliver to the Purchaser:
(a) certificates representing N, the number of shares to be
purchased pursuant to the exercise of the Option, duly endorsed, or
accompanied by stock powers duly executed in blank, and otherwise in
form acceptable for transfer on the books of the Company and any
documents which are necessary for the transfer to the Purchaser of
good title to such shares; and
(b) the opinion of Goldfarb, Levy, Eran & Co., counsel to
Argotec, in form reasonably satisfactory to Purchaser, that Argotec's
signatures on the certificates were duly authorized by Argotec's Board
of Directors and legally bind Argotec; and
(c) a certificate signed by the Company and Argotec certifying
that the representations and warranties of the Company and Argotec
shall be deemed to have been made again on and as of the Option
Closing and shall be true and correct in all material respects as of
the Option Closing except for that which is described in a disclosure
schedule updated as of the Option Closing, which updated disclosure
schedule is satisfactory to the Purchser.
At the Option Closing, the Purchaser will deliver to Argotec the
Exercise Price multiplied by N, representing the number of shares to be
purchased pursuant to the exercise of the Option, by international wire transfer
(SWIFT) of immediately available funds to an account as designated in writing by
Argotec 48 hours prior to the Option Closing.
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11.2 CALL OPTION AND PUT OPTION AS TO REMAINING ORDINARY SHARES OWNED BY
ARGOTEC AND CERTAIN SELLERS.
11.2.1 CALL OPTION. Upon the Option Closing and until thirty (30) days
thereafter, the remaining Ordinary Shares held (the "Remaining Shares") on the
date of the Option Closing by Argotec, Shai Beilis, Dan Goldstein, Gad Goldstein
and Yaron Polak (the "Remaining Shareholders") shall be subject to a call option
exercisable by the Purchaser and pursuant to which the Purchaser may purchase
the Remaining Shares for the Exercise Price.
11.2.2 PUT OPTION. Upon the Option Closing and until thirty (30) days
thereafter, the Remaining Shares held on the date of the Option Closing by the
Remaining Shareholders shall be subject to a put option exercisable by the
Remaining Shareholders (the "Put"). The Put shall permit each Remaining
Shareholder to require the Purchaser to purchase such Remaining Shareholder's
Remaining Shares for the Exercise Price.
12. REGISTRATION RIGHTS.
12.1 DEMAND REGISTRATION. Upon the written request of the Purchaser made at
any time after the expiration of the Restriction Period, requesting that the
Company effect the registration under the Securities Act of any of the Shares
and/or Option Shares for which the option has been exercised (the "Issued Option
Shares"), specifying the number of Shares and/or Issued Option Shares desired to
be so registered and the intended method or methods of disposition of such
Shares and/or Issued Option Shares (including, if the proposed offering is to be
an underwritten offering, the managing underwriter or underwriters thereof which
underwriter shall be acceptable to the Purchaser and the Company, the Company
shall expeditiously prepare and file a registration statement with respect to,
and use its best efforts to effect the registration under the Securities Act,
the Shares and/or the Issued Option Shares which the Company has
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been so requested to register by the Purchaser for disposition in accordance
with the intended method of disposition stated in such request; provided,
however, (i) that, in the case of any registration pursuant to this Section 12.1
which is an underwritten offering, the Company shall have the right to postpone
such registration for up to one hundred twenty (120) days on the advice of the
managing underwriter thereof, (ii) that the Company may delay the filing of any
registration statement requested pursuant to this Section 12.1 for a reasonable
period of time (not to exceed 120 days) if within five days of the decision of
the board of directors of the Company to delay such filing, the Company provides
the Purchaser with a certificate signed by the Chairman of the Board of
Directors of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, the filing of the registration statement would
require disclosure of information not otherwise then required to be disclosed
and that such disclosure would adversely affect any material business
opportunity, transaction or negotiation than contemplated by the Company and
(iii) that the Purchaser may only request the Company to register up to three
times on Form F-1, Form F-2 or Form F-3 or similar form of registration.
Any registration of the Shares and/or Issued Option Shares requested by
the Purchaser pursuant to the provisions of this Section 12.1 which shall not
have become effective and remained effective in accordance with the provisions
of Section 12.4, below, shall not be deemed to be a registration for any purpose
hereunder; provided, however, that if the reason such registration did not
become effective is due to the Purchaser's failure to comply with any term of
this Agreement, such registration shall be deemed a registration hereunder.
In connection with the registration of the Shares and/or Issued Option
Shares pursuant to this Section 12.1 pursuant to the first registration, the
Company shall pay all expenses of such registration and the related offering,
including, without limitation, any and all special audits,
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legal and accounting fees and disbursements (including fees and disbursements of
one legal counsel designated to represent the Purchaser and selected by the
Purchaser and reasonably acceptable to the Company), blue sky fees and expenses,
road show expenses, printing costs and related disbursements arising out of the
preparation, filing, amending and supplementing of the registration statement,
except for (i) broker's and underwriter's discounts and commissions and (ii)
transfer taxes on any Shares and/or Issued Option Shares sold by the Purchaser.
In connection with the registration of the Shares and/or Issued Option Shares
pursuant to this Section 12.1 pursuant to any registrations after the first
registration, the Purchaser shall pay all expenses of such registrations and the
related offerings, including, without limitation, any and all special audits,
legal and accounting fees and disbursements (including fees and disbursements of
one legal counsel designated to represent the Purchaser and selected by the
Purchaser), blue sky fees and expenses, printing costs and related disbursements
arising out of the preparation, filing, amending and supplementing of the
registration statements.
12.2 REGISTRATION BY THE COMPANY. If at any time or from time to time the
Company shall propose to file on its behalf or on behalf of any Shareholder or
Shareholders (as such terms are defined in the Registration Rights Agreement, As
Amended) pursuant to the Registration Rights Agreement, As Amended, a
registration statement under the Securities Act on Form F-1, F-2 or F-3 or
similar form of registration with respect to its Ordinary Shares, the Company
shall in each case give written notice to the Purchaser at least forty-five (45)
days before the anticipated filing date. Such notice shall offer to include in
such filing, as the Purchaser may request, the Shares and/or the Issued Option
Shares. If the Purchaser desires to have any of its Shares and/or Issued Option
Shares registered under this Section 12.2, it shall be required so to advise the
Company in writing within ten (10) days after the date of its receipt of the
Company's
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notice, setting forth the number of Shares and/or Issued Option Shares
for which registration is so requested. In connection with any registration of
any of the Purchaser's Shares and/or Issued Option Shares pursuant to this
Section 12.2, the Company shall pay all expenses of such registration and the
related offering, including, without limitation, any and all special audits,
legal and accounting fees and disbursements, blue sky fees and expenses, road
show expenses, printing costs and related disbursements arising out of the
preparation, filing, amending and supplementing of the registration statement,
except for brokers' and underwriters' discounts and commissions, transfer taxes
and counsel for the Purchaser. Neither the delivery of the notice by the Company
nor the delivery of the request by the Purchaser shall in any way obligate the
Company to file a registration statement and, notwithstanding such filing, the
Company may, at any time prior to the effective date thereof, determine not to
offer the securities to which the registration statement relates without
liability to the Purchaser. No registration of any of the Shares and/or Issued
Option Shares effected under this Section 12.2 shall relieve the Company of its
obligation to effect registration of any of the Shares and/or Issued Option
Shares upon the request of the Purchaser pursuant to the provisions of Section
12.1 above.
12.3 PRIORITY ON REGISTRATION; LIMITATION ON REGISTRATION RIGHTS OF OTHERS.
12.3.1 If the managing underwriters give the Company and the Purchaser
their written opinion that the total number or dollar amount of Shares and/or
Issued Option Shares requested to be included in a registration filed pursuant
to Section 12.1 or 12.2 above, exceeds the number or dollar amount of Ordinary
Shares that can be sold, the Company shall include Ordinary Shares in the
registration in the following order of priority:
12.3.1.1 if the registration is filed pursuant to Section 12.1 above,
first, all Shares and/or Issued Option Shares requested to be included in the
registration, second, up to
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the full number or dollar amount of Ordinary Shares on behalf of any Shareholder
or Shareholders (as such terms are defined in the Registration Rights Agreement,
As Amended) apportioned prorata among such Shareholder or Shareholders and,
third, up to the full number or dollar amount of Ordinary Shares that the
Company proposes to sell; and
12.3.1.2 if the registration is filed pursuant to Section 12.2 above on
behalf of any Shareholder or Shareholders (as such terms are defined in the
Registration Rights Agreement, As Amended), first, up to the full number or
dollar amount of (i) Ordinary Shares that the Company proposes to sell on behalf
of any Shareholder or Shareholders (as such terms are defined in the
Registration Rights Agreement, As Amended) and (ii) Shares and/or Issued Option
Shares requested to be registered, apportioned prorata among the Purchaser and
such Shareholder or Shareholders, and, second, up to the full number or dollar
amount of Ordinary Shares that the Company proposes to sell; and
12.3.1.3 if the registration is filed pursuant to Section 12.2 above on
behalf of the Company, first, all Ordinary Shares that the Company proposes to
sell and, second, up to the full number or dollar amount of (i) Ordinary Shares
that the Company proposes to sell on behalf of any Shareholder or Shareholders
(as such terms are defined in the Registration Rights Agreement) and (ii) Shares
and/or Issued Option Shares requested to be registered by the Purchaser,
apportioned prorata among the Purchaser and such Shareholder or Shareholders.
12.3.2 The Company covenants and agrees that until such time as the
Purchaser no longer holds any of the Shares and/or any of the Issued Option
Shares with respect to which any of its rights of registration provided for in
this Section 12 shall continue, the Company shall not, directly or indirectly,
without the prior written consent of the Purchaser, such
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consent not to be unreasonably withheld, grant, at any time after the date
hereof, to any party or agree to or otherwise become obligated with respect to
any rights of registration of securities of the Company in the nature or
substantially in the nature of the rights of registration of the Purchaser
pursuant to Section 12.1 or 12.2 above.
12.4 REGISTRATION GENERALLY.
If and when the Company shall be required by the provisions of this Section
12 to effect the registration of the Shares and/or Issued Option Shares under
the Securities Act, the Company shall, as expeditiously as possible:
12.4.1 prepare and file a registration statement under the Securities
Act on Form F-1, Form F-2 or Form F-3 with respect to the Shares and/or Issued
Option Shares required to be registered, and use its best efforts to cause such
registration statement to become effective; provided, however, that before
filing such registration statement and any amendment or supplement thereto, the
Company shall furnish to the Purchaser or, if requested by the Purchaser, to
counsel selected by the Purchaser, copies of all documents proposed to be filed,
which documents in case of registration pursuant to Section 12.1 shall be
subject to the review and reasonable approval of the Purchaser and/or such
counsel;
12.4.2 prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period of
ninety (90) days from the effective date of the applicable registration
statement or such shorter period agreed upon by the parties hereto, and to
comply with the provisions of the Securities Act and the Exchange Act, with
respect to the offer of the Shares and/or Issued Option Shares covered by such
registration statement during the period required for distribution of the Shares
and/or Issued Option Shares;
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12.4.3 furnish to the Purchaser such number of printed copies of such
registration statement and of each such amendment and supplement thereto, such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), such
documents incorporated by reference in such registration statement or prospectus
and such other documents as the Purchaser may reasonably request in order to
facilitate the disposition of the Shares and/or Issued Option Shares covered by
such registration statement in conformity with the requirements of the
Securities Act;
12.4.4 use its best efforts to register or qualify the Shares and/or
Issued Option Shares covered by any such registration statement under such
securities or blue sky laws in such jurisdictions within the United States as
the Purchaser may reasonably request; provided, however, that the Company shall
not be obligated to qualify its business in any jurisdiction where it is not
then so qualified or otherwise required to be so qualified or to take any action
which would subject it to service of process in suits other than those arising
out of such registrations;
12.4.5 furnish to the Purchaser and, in the case of any registration
pursuant to Subsection 12.1 above, which is an underwritten offering, to the
managing underwriters thereof, a signed counterpart of customary closing
documents, including (A) an opinion of counsel for the Company, dated the
effective date of such registration statement (or, in the case of any
underwritten offering, the date of closing with the underwriters) and (B) a
so-called "cold comfort" letter signed by the independent public accountants who
have certified the Company's financial statements included in such registration
statement, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the
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date of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters in
connection with underwritten public offerings of securities;
12.4.6 immediately notify the Purchaser at any time when, upon the
actual knowledge of the Company, a prospectus relating to the registration of
the Shares and/or Issued Option Shares is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact required to be stated therein or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and at the request of the Purchaser, prepare and furnish to the Purchaser a
reasonable number of copies of a supplement to or an amendment of such a
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of the Shares and/or Issued Option Shares, such prospectus shall not
include an untrue statement of a material fact required to be stated therein or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing;
12.4.7 otherwise use its best efforts to comply with the Securities
Act, Exchange Act and all applicable rules and regulations of the Commission,
and make available to its securities holders, as soon as reasonably practicable,
an earnings statement covering a period of at least twelve (12) months, but not
more than eighteen (18) months, beginning with the first month of the first
fiscal quarter after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
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12.4.8 use its best efforts to list the registered Shares and/or Issued
Option Shares on each securities exchange or Over the Counter Market on which
securities of the same class are then listed, if the Ordinary Shares are not
already so listed and if such listing is then permitted under the rules of such
exchange, and to provide, if appropriate, a transfer agent and registrar for the
Shares and/or Issued Option Shares not later than the effective date of such
registration statement.
If requested by the underwriters for any underwritten offering of the
Shares and/or Issued Option Shares pursuant to a registration under the
provisions of Section 12.1, above, the Company shall enter into an underwriting
agreement with such underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, customary
indemnities. If the Company at any time proposes to register any of its
securities under the Securities Act, other than pursuant to a request made under
Section 12.1 above, whether or not for sale for its own account, and such
securities are to be distributed by or through one or more underwriters, the
Company shall make reasonable efforts to arrange for such underwriters to
include the Shares and/or Issued Option Shares among those securities to be
distributed by or through such underwriters. The Purchaser shall be a party to
any such underwriting agreement and the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Purchaser.
In connection with the preparation and filing of each registration
statement registering the Shares and/or Issued Option Shares under the
Securities Act pursuant to Section 12.1, the
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Company shall give the Purchaser and the underwriters, if any, and each of their
respective counsel and accountants the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
shall give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers, its
counsel and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of the Purchaser and such
underwriters or their respective counsel, to conduct, prior to the effectiveness
of such registration statement, a reasonable investigation within the meaning of
the Securities Act.
12.5 CONDITIONS TO REGISTRATION.
The Purchaser's right to have the Shares and/or Issued Option Shares
included in any registration statement filed by the Company in accordance with
the provisions of this Section 12 shall be subject to the following conditions:
12.5.1 the Purchaser shall be required to furnish the Company, in
writing, in a timely manner with all information required by the applicable
rules and regulations of the Commission concerning the proposed method of sale
or other disposition of the Shares and/or Issued Option Shares, the identity of
and compensation to be paid to any proposed underwriters to be employed in
connection therewith, and such other information as may be reasonably requested
by the Company to prepare and file properly such registration statement in
accordance with applicable provisions of the Securities Act;
12.5.2 if the Purchaser desires to sell and distribute the Shares
and/or Issued Option Shares over a period of time, or from time to time, at then
prevailing market prices, then the Purchaser shall execute and deliver to the
Company such written undertakings as the
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Company and its counsel may reasonably require in order to assure full
compliance with relevant provisions of the Securities Act and the Exchange Act;
12.5.3 in the case of any underwritten offering on behalf of the
Purchaser pursuant to the provisions of Section 12.1, above, the managing
underwriters thereof shall be subject to the approval of the Company, such
approval not to be delayed or unreasonably withheld; and
12.5.4 in the case of any underwritten offering, the Purchaser shall
provide representations and warranties which are normal and customary.
12.6 INDEMNIFICATION. In the event of the registration of any of the Shares
and/or Issued Option Shares under the Securities Act pursuant to the provisions
hereof, the Company shall, to the extent permitted by law, indemnify and hold
harmless the Purchaser, its directors, officers, agents, underwriter, and each
other person, if any, who controls or is controlled by the Purchaser or any such
underwriter within the meaning of the Securities Act (each such person being
hereinafter sometimes referred to as an "indemnified person"), against any
losses, claims, damages or liabilities, joint or several, to which such
indemnified person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions with respect
thereto) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in any
registration statement under which such Shares and/or Issued Option Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein (as such may be amended or supplemented), or any
document incorporated by reference therein, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were
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made, not misleading, and shall reimburse each such indemnified person for any
legal or any other expenses reasonably incurred by such indemnified person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made or incorporated by reference in
such registration statement, such preliminary prospectus or such final
prospectus (as such may be amended or supplemented), or any document
incorporated by reference therein, in reliance upon and in conformity with
written information furnished to the Company by such indemnified person
specifically stating that it is for use in preparation thereof, or (ii) the
indemnified person's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto to any purchaser. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such indemnified person and shall survive the transfer
of Shares and/or Issued Option Shares by the Purchaser.
In the event of the registration of any of the Shares and/or Issued
Option Shares under the Securities Act pursuant to the provisions hereof, the
Purchaser shall, to the extent permitted by law, indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who signs the
registration statement, each underwriter, broker and dealer, if any, who
participates in the offering and sale of such Shares and/or Issued Option Shares
and any person, firm or corporation, if any, who controls or is controlled by
the Company or any such underwriter, broker or dealer within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Company, such director, officer, underwriter, broker,
dealer or controlling or controlled person may become subject under the
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Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions with respect thereto) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained or
incorporated by reference in any registration statement under which the Shares
and/or Issued Option Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein (as such may be
amended or supplemented), or any document incorporated by reference therein, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, which untrue statement or alleged untrue
statement or omission or alleged omission has been made or incorporated by
reference therein in reliance upon and in conformity with written information
furnished to the Company by the Purchaser specifically stating that it is for
use in the preparation thereof, and shall reimburse the Company, each such
director, officer, underwriter, broker, dealer and controlling or controlled
person for any legal or any other expenses reasonably incurred by the Company,
such director, officer, underwriter, broker, dealer or controlling or controlled
person in connection with investigating or defending any such loss, claim,
damage, liability or action.
Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 12.6, except and to the
extent the Indemnifying Party has been materially prejudiced as a consequence
thereof. The Indemnifying Party shall be entitled to participate in, and to the
extent that it may elect by written notice delivered to the Indemnified Party
promptly after receiving the aforesaid notice from such
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Indemnified Party, at its expense to assume, the defense of any such claim or
any litigation resulting therefrom, with counsel reasonably satisfactory to such
Indemnified Party; provided, however, that the Indemnified Party may participate
in such defense at its expense, notwithstanding the assumption of such defense
by the Indemnifying Party, and provided, further, that if the defendants in any
such action shall include both the Indemnified Party and the Indemnifying Party
and the Indemnified Party shall have reasonably concluded that there may be a
conflict of interest in counsel representing both the Indemnifying Party and
such Indemnified Party, the Indemnified Party or Parties shall have the right to
select one separate counsel on behalf of such Indemnified Party or Parties and
the fees and expenses of such counsel shall be paid by the Indemnifying Party.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party (which shall not be
unreasonably withheld), consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as the
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities (or actions with respect thereto)
referred to above in this Section 12.6 or in Section 12.7, below, shall include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim (which shall
be limited as provided in this Section 12.6 if the Company has assumed the
defense of any such action in accordance with the provisions hereof). No person
guilty of fraudulent
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misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Indemnification similar to that specified in the preceding provisions
of this Section 12.6 (with appropriate modifications) shall be given by the
Company to the Purchaser and by the Purchaser to the Company with respect to any
required registration or other qualification of such Shares and/or Issued Option
Shares under any federal or state law or regulation of governmental authority
other than the Securities Act.
In the event of any underwritten offering of Shares and/or Issued
Option Shares under the Securities Act pursuant to the provisions of this
Section 12, the Company and the Purchaser agree to enter into an underwriting
agreement, in standard form, with the underwriters.
12.7 EXCHANGE ACT REGISTRATION. The Company covenants and agrees that until
such time as the Purchaser no longer holds any of the Shares and/or any of the
Issued Option Shares with respect to which any of its rights of registration
provided for in this Section 12 shall continue, the Company shall:
12.7.1 if required by law, subsequent to any registration of Ordinary
Shares, including the Shares and/or the Issued Option Shares, under the
Securities Act, maintain an effective registration statement (containing such
information and documents as the Commission shall specify) under Section 12(g)
of the Exchange Act with respect to the Ordinary Shares, and file on time such
information, documents and reports as the Commission may require or prescribe
for companies whose shares have been registered pursuant to said Section 12(g);
12.7.2 if a registration statement with respect to the Ordinary Shares
is, or is required to be maintained, effective under Section 12(b) or Section
12(g) of the Exchange Act, make, upon the request of the Purchaser, whatever
other filings with the Commission or
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otherwise make generally available to the public such financial and other
information as may be reasonably necessary in order to enable the Purchaser to
be permitted to sell the registered Shares and/or Issued Option Shares pursuant
to the provisions of Rule 144 or Rule 144A promulgated under the Securities Act
(or any successor rule or regulation thereto or any statute hereafter adopted to
replace or to establish the exemption that is now covered by said Rule 144 or
Rule 144A); and
12.7.3 upon the reasonable request of the Purchaser, deliver to the
Purchaser a written statement as to whether it has complied with the
requirements of this Section 12.7.
12.8 Notwithstanding the foregoing, the Company shall not be required to
effect registration under this Article 12 if counsel for the Company, reasonably
acceptable to the Purchaser, shall deliver an opinion reasonably acceptable to
the Purchaser that, pursuant to Rule 144 under the Securities Act or otherwise,
Purchaser can publicly sell the Shares and/or the Issued Option Shares as to
which registration has been requested without registration under the Securities
Act and without any limitation with respect to offerees, manner of offering,
timing of the offering, selling price or the size of the transaction.
13. SURVIVAL AND INDEMNIFICATION.
13.1 NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
of the statements made by the Company and/or each of the Sellers and/or the
Purchaser and/or Argotec herein or in any Schedule or Exhibit hereto shall be
deemed representations and warranties hereunder and shall be true and correct as
of the date hereof and in the case of representations and warranties being
certified by the Company and Argotec, as of the Option Closing under Section
11.1. Except for the representations and warranties contained in Sections 3.2,
3.3, 4.1, 4.2, 5.1 and 5.2 which shall survive indefinitely, the
representations, warranties,
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covenants and agreements of each of the Company, each Seller, Argotec, and the
Purchaser set forth in or made pursuant to this Agreement shall terminate on the
Closing Date; provided, however, if the Option shall have been exercised, the
representations and warranties of the Company and Argotec recertified pursuant
to Section 11.1 shall terminate twelve months after the Option Closing.
13.2 INDEMNIFICATION. Each Seller, severally in respect of representations
and warranties in Section 4.1 and 4.2 hereof, the Company with respect to the
representations and warranties in Sections 3.2 and 3.3 hereof, Argotec with
respect to the representations and warranties in Sections 3.2, 3.3, 5.1 and 5.2,
agree to indemnify, defend and hold harmless the Purchaser and its directors,
officers, agents and representatives from, against and with respect to any and
all claims, demands, actions or causes of action, damages, losses, liabilities,
obligations, assessments, costs, fees, penalties, interest, fines and expenses
(including reasonable attorneys' fees) which the Purchaser may suffer or incur
as a result of an inaccuracy in, or a breach of, any of the representations,
warranties, covenants or agreements of the Company or any of the Sellers set
forth in or made pursuant to this Agreement.
13.3 SECTION ( ) 96 OF THE ISRAELI COMPANIES ORDINANCE. In the event that
this Agreement, the License Agreement, the Joint Development Agreement and the
Registration Rights Agreement, as Amended, (hereinafter collectively referred to
in this Section 13.3 as the "Other Agreements") and the transactions
contemplated hereby and thereby are approved by a majority of the votes of the
Company's shareholders present at the vote, but (i) such majority does not
include at least one-third of the votes of the "disinterested shareholders"
present at the vote (as defined in Section ( ) 96 of the Companies Ordinance),
(ii) an action is filed (other than by or on behalf of the Purchaser, Argotec or
any Seller), inter alia, for an injunction or other
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similar relief with a court of competent jurisdiction in Israel or the United
States during the period commencing on the Closing Date and ending on the 180th
day following the Closing Date and such court or another court of competent
jurisdiction in Israel or in the United States shall have issued an injunction
or other relief, whether temporary or permanent, precluding the execution of any
of the transactions contemplated hereby, or part of them, on the basis, inter
alia, that this Agreement and the Other Agreements or any of them were not
approved in accordance with Section ( ) 96 of the Companies Ordinance (where no
basis is stated in the decision granting or sustaining the injunction or other
relief but the claims made in the application to grant it included a claim that
this Agreement and the Other Agreements or any of them were not approved in
accordance with Section ( ) 96 of the Companies Ordinance, the relief shall be
regarded as having been issued on such basis) and (iii) said injunction or other
relief shall not have been removed within 60 days of the issuance thereof (such
60th day being referred to as the "Put Effective Date"), then the Purchaser
shall have the option, for a period of thirty days from the Put Effective Date,
to sell to Argotec and to require Argotec to purchase on a one-time basis all of
the Ordinary Shares acquired by Purchaser hereunder (the "Purchaser's Shares")
for the Purchase Price. Such put option shall be exercised by delivering written
notice to Argotec during such 30-day period informing Argotec of Purchaser's
intention to exercise such put option. Argotec shall complete the purchase of
the Purchaser's Shares within thirty days of receipt of such written notice.
Upon the exercise and full execution of the put option, this Agreement, except
for Section 14 and the representations and warranties specified therein as
surviving indefinitely, shall be regarded as having been rescinded, as shall the
Pledge Agreement. Similarly, during the thirty (30) day period from the closing
of the put option, the Purchaser and the Company shall have the option to
rescind the License Agreement and the Joint Development
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Agreement. The rescission shall be accomplished by delivering written notice to
the Purchaser or Company, as the case may be, during such 30-day period
informing the Company or the Purchaser, as the case may be, of the Company's or
the Purchaser's, as the case may be, intention to rescind. Within thirty (30)
days after such rescission, the Company will be obligated to restore any sums
received by it from the Purchaser in accordance with the License Agreement and
the Joint Development Agreement and to pay such damages as may be necessary to
restore the Purchaser to its position had it not negotiated, concluded and
partially executed such Agreements.
14. MISCELLANEOUS.
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Israel.
14.2 LANGUAGE. The parties hereto agree that all transactions pursuant to
this agreement shall be conducted in the English language. All oral and written
correspondence between the parties hereto shall be presented in the English
language.
14.3 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or the breach, termination or invalidity thereof
shall be settled by arbitration in accordance with the International Arbitration
Association as at present in force. The appointing authority shall be the
President of the London Court of International Arbitration ("LCIA") and LCIA
shall appoint three lawyers as arbitrators. The arbitration shall take place in
London, England. The language of the arbitration shall be in English.
14.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and legal assigns.
This Agreement is not
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assignable except by operation of law, except that Purchaser may assign its
rights hereunder to any affiliate of the Purchaser.
14.5 ENTIRE AGREEMENT. The Confidentiality Agreement between the Company
and the Purchaser executed in the second quarter of 1997, this Agreement, the
Pledge Agreement, the Exhibits and Schedules hereto, the License Agreement, the
Joint Development Agreement and the Registration Rights Agreement, as Amended,
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
14.6 SEPARABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
14.7 AMENDMENT AND WAIVER. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof waived, only by a written
instrument signed by the Purchaser, the Company, Argotec and the Sellers or, in
the case of a waiver, by the party waiving compliance. No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies that any party
may otherwise have at law or in equity.
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<PAGE> 80
14.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) ten days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) two days after deposit with a
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at the
address as set forth on the signature page hereof, to the Purchaser at the
address set forth on the signature page hereof, to each Seller or Argotec at the
address set forth on Schedule I or at such other address as the Company, the
Purchaser, Argotec or any Seller may designate by ten days advance written
notice to the other parties hereto.
14.9 EXPENSES. Each party hereto shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement.
14.10 CURRENCY. Any and all payments made hereunder shall be in United
States Dollars.
14.11 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
14.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
14.13 BROKER'S FEES. Except for Broadview Associates on behalf of the
Purchaser, each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
such party hereto is or will be entitled to any
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<PAGE> 81
broker's or finder's fee or any other commission directly or indirectly in
connection with the transactions contemplated herein.
14.14 DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
"Knowledge" shall mean, with respect to a Person, actual knowledge
after reasonable investigation, including the knowledge of such Person's
officers and employees with responsibility for the particular matters to
which referred.
"Material Adverse Change" shall mean an occurrence, event or
development which has had or is reasonably likely to have a Material
Adverse Effect.
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<PAGE> 82
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
CINCINNATI BELL INFORMATION CINCINNATI BELL INFORMATION SYSTEMS INC.
SYSTEMS INC.
600 Vine Street, P. O. Box 1638 By:
Cincinnati, Ohio 45201 -----------------------------------
Name:
Attn: Tom Smaldone ----------------------------------
President, Cable and Broadband Title:
Solutions Group ---------------------------------
Copy To: Roy T. Heggland
Sr. Vice President & General
Counsel
WIZTEC SOLUTIONS LTD. WIZTEC SOLUTIONS LTD.
8 Maskit Street
Herzlia, 46766 ISRAEL
Attn: Yaron Polak By:
President & CEO -----------------------------------
Name:
----------------------------------
Title:
---------------------------------
------------------------------------
Shai Beilis
------------------------------------
Dan Goldstein
------------------------------------
Gad Goldstein
------------------------------------
Yaron Polak
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
CINCINNATI BELL INFORMATION SYSTEMS INC.
CINCINNATI BELL INFORMATION
SYSTEMS INC.
600 Vine Street, P. O. Box 1638 By: __________________________________
Cincinnati, Ohio 45201 Name: ________________________________
Title: _______________________________
Attn: Tom Smaldone
President, Cable and Broadband
Solutions Group
Copy To: Roy T. Heggland
Sr. Vice President & General Counsel
WIZTEC SOLUTIONS LTD. WIZTEC SOLUTIONS LTD.
8 Maskit Street
Herzlia, 46766 ISRAEL
Attn: Yaron Polak By: __________________________________
President & CEO Name:_________________________________
Title:________________________________
ARGOTEC LTD.
By: __________________________________
Name:_________________________________
Title:________________________________
Sellers - see attached signature page
<PAGE> 84
SELLERS
-------
- ---------------------------- ----------------------------
Dan Goldstein Gilad Cohen
- ---------------------------- ----------------------------
Gad Goldstein Haim Morad
- ---------------------------- ----------------------------
Riki Allon Gur Shomron
- ---------------------------- ----------------------------
Yaron Polak Shai Beilis
<PAGE> 85
SCHEDULE I
Sellers Number of Ordinary Shares Sold
- ------- ------------------------------
Haim Morad 8,000
Gur Shomron 15,000
Rivka Allon 19,000
Gilad Cohen 19,000
Yaron Polak 70,000
Shai Beilis 119,000
Gad Goldstein 160,000
DAN GOLDSTEIN 360,000
- ------------- -------
Total 770,000
<PAGE> 86
SCHEDULE II
The Company is presently hiring and plans to continue to hire in the future
three long-term full time independent contractors:
1. Yossi Sharfi
2. Galit Lior
3. Amihai Weisman
<PAGE> 87
INDEX OF OMITTED EXHIBITS AND SCHEDULES
Schedule 3.1 Schedule Regarding Organization and Qualification
Schedule 3.6.1 Schedule Regarding Agreements; Action
Schedule 3.6.2 Schedule Regarding Agreements; Action
Schedule 3.7 Schedule Regarding Obligations to Related Parties
Schedule 3.8.2 Schedule Regarding Resignation or Termination of
Officers/Employees
Schedule 3.10 Schedule Regarding Patents and Trademarks
Schedule 3.22 Schedule Regarding Insurance
Schedule 3.26 Schedule Regarding Directors and Officers
Schedule 4.1 Schedule Regarding Title to Sellers' Shares
Exhibit A Marketing and License Agreement
Exhibit B Joint Development Agreement
Exhibit C Opinion of Goldfarb, Levy, Eran & Co.
Exhibit D Amended and Restated Registration Rights Agreement
Exhibit E Pledge Agreement
Exhibit F Opinion of General Counsel of Cincinnati Bell Information
Systems Inc.
<PAGE> 1
EXHIBIT 3
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of February 16,
1999, by and between Convergys Information Management Group Inc. ("Purchaser"),
an Ohio corporation, the beneficial owners of ordinary shares set forth on
Schedule 1 attached hereto (the "Shareholders") of Wiztec Solutions Ltd., a
company limited by shares duly registered under the laws of the State of Israel
(the "Company"), and Formula Systems (1985) Ltd. ("Formula"), which is the
parent corporation of Argotec Ltd., one of the Shareholders.
WHEREAS, in a Stock Purchase Agreement dated as of August 19, 1997
among the Company, the Shareholders, and the Purchaser (the "Stock Purchase
Agreement"), the Shareholders have previously granted to the Purchaser an option
(the "Option") to purchase such number of their shares as equals 51% of the
outstanding Ordinary Shares, each with New Israeli Shekel ("NIS") 1 Par Value
(the "Shares"), of the Company and also have granted a call option to the
Purchaser (and Purchaser has granted a put option to the Shareholders) allowing
it to purchase all of the remaining Shares that the Shareholders own within 30
days after the consummation of the Option exercise;
WHEREAS, the Shareholders wish to cause the Shareholder Entities (as
hereinafter defined) to sell all of the Shares that they own and the Purchaser
wishes to purchase all such Shares on terms and conditions different from those
set forth in the Stock Purchase Agreement, and this Agreement reflects such
modified terms and conditions; and
WHEREAS, Formula benefits from Argotec's sale of its Shares pursuant to
this Agreement and is entering into this Agreement in order to receive that
benefit.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
<PAGE> 2
1. PURCHASE AND SALE. Subject to the terms and conditions hereof, each
Shareholder hereby agrees to cause his or its Shareholder Entity to sell to
Purchaser, and Purchaser hereby agrees to purchase from each Shareholder Entity,
the number of Ordinary Shares set forth opposite each Shareholder's name on
Schedule 1 attached hereto in consideration of the payment of the amounts set
forth on Schedule 1 (individually, the "Shareholder Consideration" and
collectively, the "Shareholders' Consideration"). Payment of each Shareholder's
Consideration will be made at the Closing by wire transfer in immediately
available funds to such Shareholder Entity's account as indicated on Schedule 1.
2. CLOSING. Subject to the satisfaction of the conditions precedent set
forth below and the delivery of the agreements and documents to be delivered at
the Closing, as set forth in Section 3 below, the closing of the sale and
purchase of the Shares (the "Closing") shall occur on March 2, 1999 or such
other date mutually agreeable to the parties. In addition, the satisfaction of
the following items are conditions precedent to the Closing:
(i) the receipt by Purchaser of Employment Agreements, in form
satisfactory to the Purchaser, executed by the Company and each of Yaron
Polak, Rivka Allon, and Gilad Cohen;
(ii) the satisfaction of the conditions set forth in Annex A attached
hereto;
(iii) the delivery by Dan Goldstein, Gad Goldstein and Shai Beilis of
their resignations as Company directors, such resignations to be
conditioned upon the Closing and to be effective upon the election or
appointment of their successors as directors of such persons as are
proposed by Purchaser, which resignations and appointments shall be
authorized or accepted by validly adopted Board of Directors resolutions.
(iv) the representations and warranties of Formula contained in this
Agreement and Annex B shall be true and correct in all material respects on
the date of Closing.
2
<PAGE> 3
3. DELIVERIES AT CLOSING.
3.1 DELIVERY BY SHAREHOLDERS. At Closing, each Shareholder shall
deliver or cause to be delivered to Purchaser certificates representing the
Shareholder's Shares, duly endorsed, or accompanied by stock powers duly
executed in blank, and otherwise in form acceptable for transfer on the books of
the Company and any documents which are necessary for the transfer to the
Purchaser of good title to Shareholder's Shares, including, but not limited to,
duly-signed report forms, ready for submission to the Registrar of Companies,
reporting the transfer of the Shareholders' Shares to the Purchaser.
3.2 DELIVERY BY FORMULA. At Closing, Formula shall deliver or cause to
be delivered:
(i) the opinion of Goldfarb, Levy, Eran & Co., Counsel to Formula, in
form reasonably satisfactory to Purchaser, that Formula's signatures on
this Agreement and the certificates referred to herein were duly authorized
by Formula's Board of Directors and legally bind Formula and regarding such
other matters as were addressed at the consummation of the Stock Purchase
Agreement;
(ii) the Sub-Contractor Agreement, in the form of attached Exhibit A,
executed by Forsoft Ltd., a subsidiary of Formula;
(iii) the Services Agreement, in the form of attached Exhibit B,
executed by Formula and the Company;
(iv) a certificate signed by a Formula executive officer certifying
that the representations and warranties made herein shall be deemed to have
been made again on and as of the date of Closing and shall be true and
correct in all material respects as of the Closing; and
(v) Schedule 1.2 to Annex B, updated through the Closing, which update
shall not be deemed to be a breach of the representations contained in
Annex B.
3
<PAGE> 4
3.3 DELIVERY BY PURCHASER. At Closing, Purchaser shall deliver or cause
to be delivered to Shareholders or the Shareholder Entities, as Shareholders may
designate:
(i) the Shareholders' Consideration;
(ii) the Sub-Contractor Agreement executed by the Purchaser; and
(iii) a certificate signed by a Purchaser executive officer certifying
that the representations and warranties of Purchaser shall be deemed to
have been made again on and as of the date of Closing and shall be true and
correct in all material respects as of the Closing.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to the Shareholders as follows:
4.1 Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio.
4.2 Purchaser has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement. All action
on the part of Purchaser, its officers, directors and shareholders necessary for
the authorization of this Agreement and the performance of all obligations of
Purchaser hereunder has been taken. This Agreement has been duly executed and
delivered by Purchaser and (assuming the due authorization, execution and
delivery hereof by the Shareholders) constitutes a valid and binding obligation
of Purchaser enforceable against Purchaser in accordance with its terms, except
(i) as limited by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing that restrict the
availability of equitable remedies and (ii) as rights to indemnity and
contribution hereunder may be limited by United States state and federal
securities laws or Israeli securities laws or principles of public policy.
4.3 Neither the execution and delivery of this Agreement nor the
performance by Purchaser of its obligations hereunder will conflict with, result
in a violation or breach of, or constitute a default (or an event that, with
notice or lapse of time or both, would result in a
4
<PAGE> 5
default) or give rise to any right of termination, amendment, cancellation, or
acceleration under, (i) any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which Purchaser is a party or by which
it is bound or (ii) any injunction, judgment, writ, decree, order or ruling
applicable to Purchaser.
4.4 Neither the execution and delivery of this Agreement nor the
performance by Purchaser of its obligations hereunder will violate any law,
decree, statute, rule or regulation applicable to it or require any order,
consent, authorization or approval of, filing or registration with, or
declaration or notice to, any court, administrative agency or other governmental
body or authority, except such notifications or registrations as may be required
with any United States federal and state securities commissions or any Israeli
securities and antitrust authorities.
5. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. Each Shareholder
represents and warrants, as to himself or itself only, that:
5.1 He or it directly or indirectly beneficially owns the Shares set
forth opposite his or its name in Schedule 1 hereto and such Shares are held of
record by the company (the "Shareholder Entity") set forth in Schedule 1 hereto.
His or its Shareholder Entity is limited by shares duly registered under the
laws of the State of Israel. Except for Argotec's pledge of its shares pursuant
to the Stock Purchase Agreement, Shareholder possesses the sole voting power and
sole investment power with respect to the Shares. Shareholder beneficially owns
the Shares and the Shareholder Entity holds the Shares of record, free and clear
of all liens, claims, charges and encumbrances of any nature whatsoever, and,
upon the Closing, the Shares will be transferred to Purchaser, free and clear of
all liens, claims, charges and encumbrances of any nature whatsoever.
5.2 His or its Shareholder Entity has all necessary power and authority
under all applicable provisions of law to transfer the Shares to Purchaser. All
action on the part of the Shareholder Entity and its officers, directors and
shareholders necessary for the authorization of the transfer of the Shares to
Purchaser and the performance of all related obligations has been taken.
5
<PAGE> 6
5.3 Shareholder has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement and to cause
its respective Shareholder Entity to perform its obligations under this
Agreement. All actions on the part of Shareholder, and, if applicable, its
officers, directors and shareholders, necessary for the authorization of this
Agreement and the performance of all obligations of Shareholder and his or its
Shareholder Entity hereunder has been taken. This Agreement has been duly
executed and delivered by Shareholder and (assuming the due authorization,
execution and delivery hereof by the Purchaser) constitutes a valid and binding
obligation of Shareholder enforceable against Shareholder in accordance with its
terms, except (i) as limited by general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing that
restrict the availability of equitable remedies and (ii) as rights to indemnity
and contribution hereunder may be limited by United States state and federal
securities laws or Israeli securities laws or principles of public policy.
5.4 Except for the Shares and options granted pursuant to the Company's
option plans to acquire the Shares as indicated on Schedule 1.2 to Annex B, he
or it does not, directly or indirectly, beneficially own or have any option,
warrant or other right to acquire any securities of the Company that are or may
by their terms become entitled to vote or any securities that are convertible or
exchangeable into or exercisable for any securities of the Company that are or
may by their terms become entitled to vote, nor is he or it subject to any
contract, commitment, arrangement, understanding, restriction or relationship
(whether or not legally enforceable), other than this Agreement, that provides
for Shareholder to vote or acquire any securities of the Company. Except as set
forth on Schedule 1.2 to Annex B, Shareholder holds exclusive power to vote the
Shares and has not granted a proxy to any other person to vote the Shares,
subject to the limitations set forth in this Agreement.
5.5 Neither the execution and delivery of this Agreement nor the
performance by Shareholder of his or its obligations hereunder will conflict
with, result in a violation or breach of, or constitute a default (or an event
that, with notice or lapse of time or both, would result in a default) or give
rise to any right of termination, amendment, cancellation, or acceleration or
result in the creation of any lien on any Shares under (i) any material
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which Shareholder or his or its
6
<PAGE> 7
Shareholder Entity is a party or by which he or it or his or its Shareholder
Entity is bound or (ii) any injunction, judgment, writ, decree, order or ruling
applicable to Shareholder or his or its Shareholder Entity.
5.6 Neither the execution and delivery of this Agreement nor the
performance by Shareholder or his or its Shareholder Entity of his or its
obligations hereunder will violate any law, decree, statute, rule or regulation
applicable to him or it or his or its Shareholder Entity or require any order,
consent, authorization or approval of, filing or registration with, or
declaration or notice to, any court, administrative agency or other governmental
body or authority, except such notifications or registrations as may be required
with any United States federal and state securities commissions or any Israeli
securities and antitrust authorities.
6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF FORMULA.
6.1 Formula hereby represents and warrants that the representations and
warranties set forth in Annex B are true and correct in all material respects on
the date hereof and that its representations set forth in this Annex B shall
survive for twelve months from the date hereof.
6.2 Formula agrees to indemnify, defend and hold harmless Purchaser and
its directors, officers, agents and representatives from, against and with
respect to any and all claims, demands, actions or causes of action, damages,
losses, liabilities, obligations, assessments, costs, fees, penalties, interest,
fines and expenses (including reasonable attorneys' fees) which Purchaser may
suffer or incur as a result of an inaccuracy in, or a breach of, any of the
representations and warranties made in this Agreement and Annex B attached
hereto. No amount shall be payable by Formula under the indemnification
contained in this Section 6 for any individual claim of Purchaser unless the
aggregate amount of all such individual claims is or becomes an amount in excess
of $575,000 and then Formula shall be liable only for amounts in excess of
$575,000. Formula's aggregate liability under this Section 6 shall not exceed
$43,493,000.
6.3 Formula agrees that, for a period of three years from the date of
the Closing, neither it nor any of its wholly owned subsidiaries will, directly
or indirectly, in any
7
<PAGE> 8
capacity including, without limitation, as a partner, shareholder, officer,
director, principal, agent or consultant, in the United States or any other
country, (i) start up, invest in or continue an investment in, provide customer
care and billing programming services to, or otherwise be involved in the
operation or management of, a business entity whose primary business is customer
care or billing in the cable or satellite industries or the creation or
marketing of software, the main application of which is customer care or billing
in cable or satellite industries and which conducts business in the United
States or any other country or (ii) compete against Purchaser or any of its
subsidiaries in the acquisition of companies in such businesses in the United
States or any other country or in the bid or request for proposal process or for
business for customer care and billing systems from Purchaser's customers who
operate in the cable or satellite industries in the United States or any other
country. In addition, in the event that an Affiliate acts in a manner which
would, if the Affiliate were subject to the preceding restrictive covenants,
breach or violate the immediately preceding restrictive covenants, Formula
agrees that it will sell all of its interests in such Affiliate as promptly as
commercially reasonable, but, in any event, within six months of the covenant
violation. The parties agree that: (y) the above restrictive covenants are not
intended to and shall not apply to customer care or billing software sales for
end-use in the Israeli market; and (z) nothing contained in such restrictive
covenants will prevent Formula, its wholly owned subsidiaries and its Affiliates
from owning, collectively, solely as a passive investment, up to 5% of any class
of securities of any company traded on any United States or other securities
exchange or quoted on any automated quotation system. An "Affiliate" is any
entity controlled by, controlling or under common control with Formula, directly
or indirectly.
In addition, Formula agrees that, for a period of two years after the
date of the Closing, (i) neither it nor any of its wholly owned subsidiaries
will solicit any current employees of the Company to work for Formula or its
wholly owned subsidiaries and (ii) neither it nor any of its wholly owned
subsidiaries or Affiliates will solicit any of the "selected employees", set
forth on Schedule II attached hereto, to work for Formula or its wholly owned
subsidiaries or Affiliates. For purposes of the immediately preceding subclause
(ii), if any selected employee is hired by, employed by or retained by Formula
or a wholly owned subsidiary or an Affiliate in any capacity during the
applicable two-year period, then Formula, such wholly owned subsidiary or such
8
<PAGE> 9
Affiliate shall be deemed to have solicited such selected employee in violation
of subclause (ii), above.
If Formula or any of its subsidiaries or Affiliates breaches, or
threatens to commit a breach of, any of the restrictive covenants set forth in
the two paragraphs immediately above (the "Restrictive Covenants"), Purchaser
shall have the following rights and remedies, each of which rights and remedies
shall be independent of the others and severally enforceable, and each of which
is in addition to, and not in lieu of, any of the rights and remedies available
to the Purchaser under law or in equity:
(i) The right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction, it being
agreed that any breach or threatened breach of the Restrictive Covenants
would cause irreparable injury to the Purchaser and that money damages
would not provide an adequate relief to Purchaser; provided that, if an
Affiliate acts in a manner which would, if the Affiliate were subject to
the restrictive covenants contained in the first paragraph of this Section
6.3, breach the restrictive covenants contained in the first paragraph of
this Section 6.3, Purchaser's right to specific performance is limited to a
court enforcing Formula's obligation to sell all of its interests in such
Affiliate.
(ii) The right and remedy to require Formula and its wholly owned
subsidiaries to account for and pay over to Purchaser all compensation,
profits, monies, accruals, increments or other benefits derived or received
by Formula or its subsidiaries or Affiliates as the result of any
transactions constituting a breach of the Restrictive Covenants.
Formula acknowledges and agrees that the Restrictive Covenants are
reasonable and valid in geographical and temporal scope and all other respects.
If any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants
shall not thereby be affected and shall be given full effect without regard to
the invalid portions.
9
<PAGE> 10
If any court determines that any of the Restrictive Covenants, or any
part thereof, is unenforceable because of the duration or geographic scope of
such provision, such court shall have the power to reduce the duration or scope
of such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
Formula and its subsidiaries and Purchaser intend to and hereby confer
jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Restrictive Covenants. If the
courts of one or more of such jurisdictions hold the Restrictive Covenants
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of Formula and its subsidiaries and Purchaser that such determination
not bar or in any way affect Purchaser's rights to the relief provided above in
the courts of any other jurisdiction within the geographical scope of the
Restrictive Covenants, and as to breaches of the Restrictive Covenants in such
other respective jurisdictions, the Restrictive Covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants. Formula and its subsidiaries hereby waive trial by jury in any
judicial proceeding to which Formula and its subsidiaries are a party involving,
directly or indirectly, any matter in any way arising out of, related to or
connected with any of the Restrictive Covenants.
7. EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, except that corporate governance
matters regarding the Company shall be governed by the laws of the State of
Israel.
9. SECURITIES ACT OF 1933. Purchaser represents that it is an
Accredited Investor as defined in Regulation D as promulgated under the
Securities Act of 1933 and is purchasing such shares for investment only and not
with a view to any public distribution under the Securities Act of 1933.
10
<PAGE> 11
10. PUBLICITY. Purchaser and the Shareholders shall consult with each
other as to the form, timing and substance of any public announcements related
to this Agreement or the transactions contemplated hereby.
11. WAIVER. Shareholders waive any and all rights, claims, demands,
actions or causes of actions, damages, losses, liabilities, costs, fees and
expenses which Shareholders have or may have or may suffer or incur arising out
of, in connection with or as a result of Purchaser or any of its subsidiaries or
affiliates purchasing or offering to purchase any Ordinary Shares of the Company
at any time at a purchase price in excess of the price paid to the Shareholders
under this Agreement.
12. NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified; (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day; or (iii) two days after deposit with a recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the parties at the addresses shown
below or to such other address as any party may designate by ten days advance
written notice to the other parties hereto;
If to Purchaser, to:
Convergys Information Management Group Inc.
600 Vine Street
Cincinnati, Ohio 45202
Attention: Roy T. Heggland
Sr. Vice President & General Counsel
with a copy to:
Frost & Jacobs LLP
2500 PNC Center
Cincinnati, Ohio 45202
Attention: Neil Ganulin
If to the Shareholders, to:
Formula Systems (1985) Ltd.
39 Hagalim Boulevard
11
<PAGE> 12
Herzlia 46725, Israel
Attention: Dan Goldstein, Gad Goldstein, Shai Beilis
Yaron Polak and Argotec, Ltd.
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103-3198
Attention: Richard H. Gilden
13. ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in accordance with
the rules of the International Arbitration Association as at present in force.
The appointing authority shall be the President of the London Court of
International Arbitration ("LCIA") and LCIA shall appoint three lawyers as
arbitrators. The arbitration shall take place in London, England. The language
of the arbitration shall be in English.
14. RELATIONSHIP TO THE STOCK PURCHASE AGREEMENT. This Agreement
supercedes all provisions of Sections 7.15 and 11 of the Stock Purchase
Agreement entitled the "Standstill and Related Covenants" and "Option to
Purchase Certain Shares Held by Argotec," respectively, all of which provisions
are null and void.
15. SPECIFIC PERFORMANCE. The parties recognize that if any party
hereto refuses to perform under the provisions of this Agreement or otherwise
breaches this Agreement such that the Closing does not occur, monetary damages
alone will not be adequate to compensate the parties for their injury. The
parties shall therefore be entitled to obtain specific performance of the terms
of this Agreement (including, but not limited to, the transfer of the Shares and
the payment therefor) in addition to any other remedies, including but not
limited to monetary damages that may be available to them. If any action is
brought by any party to enforce this Agreement, the other parties waive and
shall not assert any defense that there is an adequate remedy at law, that there
is no irreparable injury or that any other factor exists that would preclude
specific enforcement of this Agreement.
12
<PAGE> 13
16. MANAGEMENT FEE. Upon Closing, the management fee being paid by the
Company to Formula, and all agreements and arrangements with respect to such
fees, will terminate and, after the Closing, the Company will have no
obligations to pay such fee.
17. BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and assigns. At any time prior to the
Closing, Purchaser may assign this Agreement and all of its obligations
hereunder to Convergys Corporation (its parent) or any of its subsidiaries,
provided, that should such assignee fail to perform its obligations under this
Agreement, Purchaser shall continue to be obligated to perform such obligations.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one agreement.
SIGNATURES ON NEXT PAGE
-12A-
<PAGE> 14
IN WITNESS WHEREOF, Purchaser and each Shareholder have caused this
Agreement to be executed as of the day and the year first above written.
Convergys Information Management
Group Inc.
By:
--------------------------------
Robert J. Marino
President and CEO
-----------------------------------
Dan Goldstein, Shareholder
-----------------------------------
Gad Goldstein, Shareholder
-----------------------------------
Shai Beilis, Shareholder
-----------------------------------
Yaron Polak, Shareholder
Formula Systems (1985) Ltd.
By:
--------------------------------
Argotec Ltd.
By:
--------------------------------
13
<PAGE> 15
SCHEDULE 1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------- ---------------------
SHAREHOLDER SHAREHOLDER ENTITY RECORD OWNERSHIP OF NUMBER OF ORDINARY SHAREHOLDER SHAREHOLDER ENTITY
SHAREHOLDER ENTITY SHARES CONSIDERATION @ $15.25 ACCOUNT WIRE TRANSFER
PER SHARE INSTRUCTIONS
- ------------------------------------------------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Argotec Ltd. Shandol Ltd. 99.99% Argotec 2,852,000 $43,493,000
0.01% G.L.E. Trust
Asset Ltd.
- ------------------------------------------------------------------------------------------------------------- ---------------------
Dan Goldstein Staticall Ltd. 99.99% Dan Goldstein 320,000 $4,880,000
0.01% Gad Goldstein
- ------------------------------------------------------------------------------------------------------------- ---------------------
Gad Goldstein Droogies Ltd. 99.99% Gad Goldstein 120,000 $1,830,000
0.01% Dan Goldstein
- ------------------------------------------------------------------------------------------------------------- ---------------------
Shai Beilis Shem Basum Ltd. 99.99% Shai Beilis 100,200 $1,528,050
0.01% Mina Beilis
- ------------------------------------------------------------------------------------------------------------- ---------------------
Yaron Polak Y.S. Polak 99.99% Yaron Polak 58,000 $884,500
Investments Ltd. 0.01% Silviya Polak
- ------------------------------------------------------------------------------------------------------------- ---------------------
</TABLE>
<PAGE> 16
SCHEDULE 2
Selected Employees
As of the date of the Agreement, "selected employees" are those
employees who have service with Wiztec of at least one year and an annual base
salary in excess of $57,000 per year.
<PAGE> 17
ANNEX A
-------
CONDITIONS TO THE CLOSING
-------------------------
The capitalized terms used in this Annex have the meanings set forth in
the attached Agreement.
Notwithstanding any other provision of the Agreement, unless the
Purchaser shall have otherwise waived the satisfaction of any of the following
events, the Purchaser shall not be required to accept for payment and pay for
any Shares under the Agreement, and may terminate or amend the Agreement and may
postpone the Closing until no later than March 31, 1999, if at any time prior to
the Closing, any of the following events shall occur:
(a) except for proceedings pursuant to ss.236 of the Companies
Ordinance relating to a plan or contract offered by the Purchaser, there shall
be instituted or pending any action or proceeding before any court, regulatory
or administrative agency or commission, domestic or foreign, initiated by a
governmental, regulatory or administrative body or authority, (i) challenging
the acquisition by the Purchaser of the Shares, seeking to restrain or prohibit
the consummation of the transactions contemplated by the Agreement, seeking to
obtain any material damages or otherwise directly or indirectly relating to the
consummation of the transactions contemplated by the Agreement, (ii) seeking to
prohibit or impose any material limitation on the ownership or operation by the
Purchaser or any of its subsidiaries of all or any portion of the business or
assets or properties of the Purchaser or any of its subsidiaries or the Company
or any of its subsidiaries or to compel the Purchaser or any of their
subsidiaries to dispose of or hold separate all of any portion of the business
or assets of the Purchaser or any of its subsidiaries or the Company or any of
its subsidiaries, (iii) imposing any material limitation upon the ability of the
Purchaser or any of its subsidiaries effectively to acquire or hold or to
exercise full rights of ownership of Shares, including without limitation the
right to vote Shares purchased by it on all matters properly presented to the
stockholders of the Company, (iv) making the acceptance for payment, or payment
for, some or all of the Shares illegal or (v) which otherwise, in the reasonable
judgment of the Purchaser, is reasonably likely to have a materially adverse
effect on the financial condition, results of the operations, business,
operations, properties, assets or prospects of the Company and its subsidiaries
taken as a whole or on the value of the Shares to the Purchaser; or
(b) there shall be in force an injunction or other order issued by any
court, regulatory or administrative agency or commission, domestic or foreign,
(i) restraining or prohibiting the consummation of the transactions contemplated
by the Agreement or awarding any material damages relating to the consummation
of the transactions contemplated by the Agreement, (ii) prohibiting or imposing
any material limitation on the ownership or operation by the Purchaser or any of
its subsidiaries of all or any portion of the business or assets or properties
of the Purchaser or any of its subsidiaries or the Company or any of its
subsidiaries or compelling the Purchaser or any of its subsidiaries to dispose
of or hold separate all or any portion of the business or assets of the
Purchaser or any of its subsidiaries or the Company or any of its subsidiaries,
(iii) imposing any material limitation upon the ability of the Purchaser
<PAGE> 18
or any of its subsidiaries effectively to acquire or hold or to exercise full
rights of ownership of Shares including without limitation the right to vote
Shares purchased by it on all matters properly presented to the stockholders of
the Company, (iv) making the acceptance for payment, or payment for, some or all
of the Shares illegal or (v) which is otherwise, in the reasonable judgment of
the Purchaser, is reasonably likely to have a materially adverse effect on the
financial condition, results of operations, business, operations, properties,
assets or prospects of the Company and its subsidiaries taken as a whole or on
the value of the Shares to the Purchaser; or
(c) any statute, rule, regulation or order shall be enacted,
promulgated, entered, enforced or deemed applicable to the purchase of the
Shares or any other action shall have been taken by any government, governmental
authority or court, domestic or foreign, that, in the reasonable judgment of the
Purchaser is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (iii) through (v) of paragraph (a) above; or
(d) any material adverse change shall have occurred in the financial
condition, results of operations or business of the Company or the Purchaser
shall have become aware of liabilities, contingent or otherwise, or any facts or
circumstances that reasonably could be expected to result in a claim for damages
which have not been disclosed to the Purchaser and which could materially and
adversely affect the business, assets, conditions (financial or otherwise) or
operations of the Company and its subsidiary taken as a whole; or
(e) there shall have occurred (i) any general suspension of, or
limitation on price for or trading in securities in the over-the-counter market,
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or Israel, (iii) a commencement of a war,
armed hostilities or other national or international calamity involving the
United States or Israel, (iv) any limitation by any governmental authority on
the extension of credit by banks or other lending institutions, (v) civil riots,
acts of insurgence and related actions that threaten the normal conduct of
business and commerce in Israel, or (vi) in the case of any of the foregoing
existing at the time of the signature of this Agreement, in the reasonable
judgment of the Purchaser, a material acceleration or worsening thereof; or
(f) other than the Shareholders' present share ownership, it shall have
been publicly disclosed or the Purchaser shall have learned that (i) any person
(other than the Purchaser or any of its subsidiaries or third party transferee
thereof) or group (as defined in Section 13(d)(3) of the Exchange Act) not
including among its members the Purchaser or any of its subsidiaries or third
party transferee thereof ("Group") shall have acquired, or made an offer to
acquire or shall have been granted any option or right, conditional or otherwise
to acquire, Shares constituting, when aggregated with all Shares beneficially
owned by such person or Group and its affiliates and any other person or Group
which beneficially owns 10% or more of the outstanding Shares, at least a
majority of the outstanding Shares, or (ii) any new Group is formed which
beneficially owns at least a majority of the outstanding Shares; or
(g) Any of the representations and warranties in Annex B are inaccurate
in any material respect;
2
<PAGE> 19
(h) Shareholders and the Purchaser shall have agreed to terminate the
Agreement or postpone the purchase of and payment for Shares thereunder or
(i) Conduct of Business prior to the Closing:
(i) the Company shall have conducted its business other than
in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted;
(ii) the Company shall have (i) amended its Articles of
Association or Memorandum of Association; (ii) split, combined or
reclassified the outstanding Shares or declared, set aside or paid any
dividend payable in cash, stock or property or made any other
distribution with respect to the Shares; or (iii) redeemed, purchased
or otherwise acquired, directly or indirectly, any Shares;
(iii) the Company shall have (i) issued or sold or agreed to
issue or sell any additional shares of, or options, warrants or rights
of any kind to acquire any shares of its capital stock or any class
(including grants of options to its employees or to the employees of
Wiztec Solutions, Inc. under existing authorized employee option plans)
other than Shares issuable pursuant to presently outstanding stock
options and warrants, (ii) entered into any agreement, contract or
commitment out of the ordinary course of its business, to dispose of or
acquire, or relating to the disposition or acquisition of, any material
assets of the Company; (iii) incurred any material amount of
indebtedness for borrowed money, or materially reduced the availability
of funds under any of their existing credit facilities, or entered into
any other material transaction other than in the ordinary course of
business; (iv) amended or modified any outstanding option to acquire
Shares or granted any stock appreciation rights or bonuses; or (v)
entered into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(iv) the Company shall have failed to use its best efforts to
preserve intact the business organization of the Company, and shall
have failed to assist Purchaser in its efforts to keep available the
services of present officers and key employees of the Company, or to
preserve the good will of those having business relationships with it;
(v) the Company shall have entered into any new employment or
consulting agreement or amended or modified any employment or other
compensation contract or arrangement, or any bonus, deferred
compensation contract, retirement or profit-sharing plan or other
employee benefit plan to which the Company or its subsidiary is a
party, except to grant any increase in compensation in the ordinary
course of business and consistent with past practice;
(vi) the Company shall have failed to cooperate with Purchaser
in determining whether any other filings are required to be made or
consents, approvals, permits or authorizations are required to be
obtained under any other federal, state or foreign law or regulation or
whether any consents, approvals or waivers are required to be obtained
from other parties to loan agreements or other contracts material to
the business of the
3
<PAGE> 20
Company in connection with the purchase of the Shares, to actively assist
Purchaser in obtaining any consents, permits, authorizations, approvals or
waivers which are required, and use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly
as practicable the transactions contemplated by this Agreement and to
cooperate with Purchaser in connection therewith;
which, in the reasonable judgment of the Purchaser, in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with the Agreement and the purchase of the Shares
thereunder.
4
<PAGE> 21
ANNEX B
-------
1. ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized and validly existing and has paid in full its annual
fees to the Registrar of Companies in Israel. The Company has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the financial condition,
business, operations or prospects of the Company and its subsidiaries as a whole
("Material Adverse Effect"). Except as set forth in Schedule 1.1, the Company
owns no equity securities of any other corporation, limited partnership or
similar entity. Except as set forth in Schedule 1.1, the Company is not a
participant in any joint venture, partnership or similar arrangement. Except as
set forth in Schedule 1.1, the Company has no right to become the owner of
equity securities in any other corporation nor is it the beneficial owner,
directly or indirectly, of any other corporation.
2. CAPITALIZATION. The authorized capital of the Company as of the date
of this Agreement consists of 10,000,000 Ordinary Shares each with NIS 1 Par
Value, 6,787,083 shares of which are issued and outstanding, 140,000
underwriters warrants, all of which are issued and outstanding, 400,000 options
authorized pursuant to Company's Incentive Plan, 207,000 of which are issued and
outstanding, 500,000 options authorized pursuant to Company's Subsidiary
Incentive Plan, 11,375 of which are issued and outstanding, 331,200 Series A
Warrants, 319,575 of which are issued and outstanding, and 690,000 options
authorized pursuant to Company's 1997 Option Plans, 332,300 of which are issued
and outstanding. All issued and outstanding Ordinary Shares (i) have been duly
authorized and validly issued, (ii) are fully paid and nonassessable, and (iii)
(a) to the extent issued and sold to United States residents, were issued in
compliance with all applicable United States state and federal securities laws
and (b) were issued in compliance with the laws of the State of Israel
concerning the issuance of securities. Other than as set forth in this Section 2
and Schedule 1.2 attached hereto, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or shareholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its equity securities.
3. AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. The execution of the
Agreement and the consummation of the transactions contemplated thereby will not
(i) require the Company to obtain the consent, approval, notification, or
registration with any third party, including governmental authorities; (ii)
conflict with or result in any breach or violation of any of the terms and
conditions of, or constitute (or with notice or lapse of time or both would
constitute) a default, under any applicable law, statute, code, ordinance,
regulation, or other requirement or order of any governmental body applicable to
the Company, or any contract to which the Company is a party or by which or to
which the Company's assets are bound or subject, except
1
<PAGE> 22
for such breaches, violations and defaults which will not have a Material
Adverse Effect; or (iii) result in the creation of any lien on any of the
Company's assets.
4. FINANCIAL STATEMENTS. The balance sheets of the Company as of
December 31, 1998 and the related statements of income, shareholders' equity and
cash flows for the year then ended, including the notes thereto, which have been
audited by Kesselman & Kesselman, independent certified public accountants, and
delivered to Purchaser, present fairly in all material respects the financial
position of the Company at such dates and the results of operations and cash
flows of the Company for the years then ended, in each case in accordance with
Israeli generally accepted accounting principles ("Israeli GAAP") consistently
applied for the periods covered thereby. (The foregoing financial statements of
the Company as of December 31, 1998 and for the year then ended are sometimes
herein called the "Annual Financials," the balance sheet included in the Annual
Financials is sometimes herein called the "Balance Sheet," and December 31, 1998
is sometimes herein called the "Balance Sheet Date").
5. ABSENCE OF CERTAIN LIABILITIES. As of the Balance Sheet Date, the
Company did not have any direct or indirect indebtedness, liability, claim,
loss, damage, deficiency, obligation or responsibility, known or unknown, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise, of a kind required by
Israeli GAAP to be set forth on a financial statement or in the notes thereto
including without limitation any tax liabilities, which were not accurately and
fully reflected or reserved against in the Balance Sheet.
6. AGREEMENTS; ACTION.
(a) Except for the agreements between the Company and its
employees with respect to the sale of Company's Ordinary Shares under Company's
stock option plans and standard non-compete and proprietary information
agreements, and except for those agreements or understandings described in the
Company's Form 20-F for the fiscal year ended December 31, 1997, filed with the
SEC, there are no written, or to Formula's Knowledge, oral agreements or
understandings between the Company and any of its officers, directors,
affiliates or any affiliate thereof of the kind required to be disclosed in
Company's annual filings made with the SEC;
(b) There are no written, or to Formula's Knowledge, oral
agreements, understandings, instruments, contracts, judgments, orders, writs or
decrees to which the Company is a party or to which it is bound which could
reasonably be expected to involve (i) obligations (contingent or otherwise) of,
or payments to, the Company (other than payments of or to the Company arising
from purchase, sale or license agreements entered into in the ordinary course of
business), or (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company other than in connection with licenses
of Company products granted by the Company in the ordinary course of business,
or (iii) provisions materially restricting or affecting the development,
manufacture or distribution of the Company's products or services, or (iv)
indemnification by the Company with respect to infringements of proprietary
rights other than in connection with licenses of Company products granted by the
Company in the ordinary course of business; and
2
<PAGE> 23
(c) Other than with Purchaser, the Company has not engaged in
the past three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the consolidation or merger of the Company
with or into any such corporation or corporations, (ii) with any corporation,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of the assets of
the Company, or a transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of, or
(iii) regarding any other form of acquisition, liquidation, dissolution or
winding up of the Company.
7. OBLIGATIONS TO RELATED PARTIES. Except as set forth in Schedule 1.7,
there are no obligations of the Company to any Company officer (noseh misrah),
director, beneficial holder of 5% or more of Shares or with respect to any
Company employee other than (i) for payment of salary (including bonus) and
commissions for services rendered and (ii) for other standard employee benefits
made generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company) except as set forth in the Company's Annual Report on Form 20-F for
the fiscal year ended December 31, 1997.
8. CHANGES. Since the Balance Sheet Date, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect;
(b) Any material increase, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(c) Any damage, destruction or loss, whether or not covered
by insurance, which has had or which could reasonably be expected to have a
Material Adverse Effect;
(d) Any waiver by the Company of a right or of a debt owed
to it, other than write-offs of bad debts in the ordinary course of business and
for which reserves exist;
(e) Any direct loans made by the Company or any direct or
indirect subsidiary of the Company in excess of $10,000 to any shareholder,
employee, officer or director of the Company;
(f) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(g) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
3
<PAGE> 24
(h) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(i) Any change in any material agreement to which the
Company is a party or by which it is bound which could reasonably be expected to
have a Material Adverse Effect;
(j) To Formula's Knowledge, any change in Israeli law or any
rules promulgated thereunder that has had a Material Adverse Effect;
(k) Any other event or condition of any character that, either
individually or cumulatively, has had a Material Adverse Effect; or
(l) Any agreements or commitments by the Company to do any of
the foregoing.
9. TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its properties and assets (other than properties and assets
leased from third parties), both real and personal, including the properties and
assets reflected in the Balance Sheet, and good title to its leasehold estates,
in each case, other than as set forth in Schedule 1.9, subject to no mortgage,
pledge, lien, lease, encumbrance or charge, except for liens on taxes not due
and payable.
10. PATENTS AND TRADEMARKS. As to each domestic and foreign patent,
patent application, trade name, trademark, unpatented invention, service mark,
trademark registration, trademark application, service mark registration,
service mark application, registered copyright, copyright registration applied
for and copyright in software (whether registered or not), owned by the Company
(collectively, the "Intellectual Property"), Schedule 1.10 contains a complete
list thereof specifying (i) the title of the work, if any; (ii) the application
or registration numbers, if any; and (iii) a brief description thereof. If any
domestic or foreign patent, patent application, trade name, trademark,
unpatented invention, service mark, trademark registration, trademark
application, service mark registration, service mark application, registered
copyright, copyright registration applied for and copyright in software (whether
registered or not) was acquired by licenses, including but not limited to patent
licenses, know-how licenses, and software licenses (other than licenses for
off-the-shelf software used in the office environment), such licenses are
likewise identified in the Schedule 1.10 (collectively, "Licensed Intellectual
Property"). Complete and correct copies of each application for or registration
of each such Intellectual Property and each such license have been made
available for inspection to Purchaser prior to execution of this Agreement. To
Formula's Knowledge, there is no claim of infringement or threat of claim of
infringement which in any material way affects Company's rights in or to any
Intellectual Property or Licensed Intellectual Property.
With respect to the Intellectual Property:
(a) the Company is the sole and exclusive owner of the entire
right, title and interest in and to the Intellectual Property used in the
operation of its business (including, but not
4
<PAGE> 25
limited to, the exclusive right to use, enhance, modify and license the same)
except for such Intellectual Property as to which Purchaser has certain
ownership rights pursuant to the Joint Development Agreement dated October 6,
1997 between the Company and Cincinnati Bell Information Systems Inc.;
(b) the Intellectual Property and all rights appurtenant
thereto are free of any and all liens, claims, security interests and other
encumbrances of any nature or kind;
(c) no interests or rights in or to the source code of any
software have been pledged or hypothecated by the Company to any third party;
(d) all material registrations, filings and issuances relating
to the Intellectual Property remain in full force and effect;
(e) to Formula's Knowledge, the Company has not disclosed
trade secrets used in the operation of its business to any third party on a
non-confidential basis; and
(f) the Intellectual Property and trade secrets, together with
the Licensed Intellectual Property, constitute all intellectual property
necessary for the Company to carry on its business as presently conducted.
With respect to the Licensed Intellectual Property:
(g) to Formula's Knowledge, the parties granting licenses to
the Company under Licensed Intellectual Property had full authority to do so;
(h) to Formula's Knowledge, the Company has the right under
the licenses to practice the Licensed Intellectual Property;
(i) to Formula's Knowledge, the Licensed Intellectual Property
and all rights appurtenant thereto are free of any and all liens, claims,
security interests and other encumbrances of any nature or kind; and
(j) to Formula's Knowledge, all registrations, filings and
issuances relating to the Licensed Intellectual Property remain in full force
and effect.
There are no pending or, to the Knowledge of Formula,
threatened proceedings or litigation or other adverse claims against
the Company with respect to the Intellectual Property or trade secrets
of the Company, and, to Formula's Knowledge, there are no threatened
proceedings or litigation or other adverse claims with respect to the
Licensed Intellectual Property. During the past two years the Company
has not received any notices or claims which claim infringement by the
Company of any domestic or foreign patents, patent applications, patent
licenses, know-how licenses, trade marks, copyrights, copyright
registrations or applications, trade secrets or other confidential
proprietary information. Except as described in the Schedule 1.10,
Formula does not believe that there are any claims which may be
asserted against the Company for infringement of any
5
<PAGE> 26
such third party intellectual property, trade secrets or other
proprietary information. To Formula's Knowledge, no person or entity
is infringing the Intellectual Property or trade secrets of the
Company.
To Formula's Knowledge, no person has claimed that any key
employee employed by the Company has, in respect of his or her
activities to date, violated any of the terms or conditions of his or
her prior employment contract with such third party, or disclosed or
utilized any trade secrets or proprietary information or documentation
of such third party, or interfered in the employment relationship
between such third party and any of its employees, except for such
violations, disclosures or interferences which would not have a
Material Adverse Effect.
To Formula's Knowledge, none of Company's key employees is
obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that
would interfere with his duties to the Company or that would conflict
with Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement nor the carrying on of
Company's business by the employees of the Company, will, to Formula's
Knowledge, conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant
or instrument under which any employee is now obligated. Formula does
not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior
to their employment by the Company, except for inventions, trade
secrets or proprietary information that have been assigned to the
Company.
Except in his or her capacity as shareholder of the Company,
no present officer or former officer, partner or affiliate of the
Company has or, to Formula's Knowledge, claims to have (i) any interest
in Company's assets, including without limitation, the Intellectual
Property and trade secrets used in the operation of its business, or
(ii) any contract, commitment, arrangement or understanding with the
Company with respect to the Intellectual Property. To Formula's
Knowledge, no present officer of the Company has any ownership or stock
interest, directly or indirectly, in any other enterprise, firm,
corporation, trust or any other entity which is engaged in any line or
lines of business which are the same as, or similar to, or competitive
with, Company's business. For purposes of this representation,
ownership of not more than five percent of the voting stock of any
publicly-held company whose stock is listed on any recognized
securities exchange or traded over the counter shall be disregarded.
11. COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Articles of Association. In addition, the Company
is not in violation or default of any term of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is party or
by which it is bound or of any judgment, decree, order, writ or any statute,
rule or regulation applicable to the Company except for violations and defaults
which would not have a Material Adverse Effect. The execution, delivery, and
performance of and compliance with this Agreement will not result in a violation
or default of any term of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is a
6
<PAGE> 27
party or by which it is bound or of any judgment, decree, order, writ or any
statute, rule or regulation applicable to the Company except for violations and
defaults which would not have a Material Adverse Effect or result in the
creation of any material Lien upon any of the properties or assets of the
Company or the suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties which suspension,
revocation, impairment, forfeiture or nonrenewal would have a Material Adverse
Effect.
12. LITIGATION. There is no action, suit, proceeding or, to Formula's
Knowledge, investigation pending against the Company. In addition, to Formula's
Knowledge, there is no action, suit, proceeding or investigation currently
threatened against the Company that questions the validity of this Agreement, or
the consummation of the transactions contemplated hereby, or which could
reasonably be expected to result, either individually or in the aggregate, in
any Material Adverse Change, or any change in the current equity ownership of
the Company. The foregoing includes, without limitation, actions pending or
threatened involving the prior employment of any of Company's employees, their
use in connection with Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality which has had or is reasonably
expected to have a Material Adverse Effect. There is no material action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
13. TAX MATTERS. "Tax" or "Taxes" shall mean any federal, state, local,
national, municipal or other tax (whether income, value added, sales, use,
franchise, transfer, withholding, excise, real or personal property, employment
or any other kind of tax), assessment, levy, fee, impost, withholding or other
governmental charge and shall include all interest and penalties thereon. "Tax
Return(s)" shall mean all returns, declarations, reports, statements and other
documents, including supporting documents, required to be filed with respect to
Taxes. The Company has timely filed in the appropriate place all material Tax
Returns that are required to be filed on or before the date of the Closing, and
all such Tax Returns are true, correct and complete in all material aspects. The
Company has made timely payment of all material Taxes required to be paid,
including all deficiencies and assessments, if any, heretofore levied or
assessed. The Company has duly withheld, collected and timely deposited, paid
over or held for payment to the proper governmental authorities all Taxes
required to be withheld or collected by the Company. The Company has not
received any claim, proposal or assessment in writing from any taxing authority
for any deficiencies for any Tax or governmental charge that could result in, or
that have resulted in, the imposition of a lien by any taxing authority on
property or rights to property owned by the Company except where such a claim,
proposal or assessment would not have a Material Adverse Effect. To Formula's
Knowledge, there are no examinations by any taxing authority of or relating to
the Company, except where such examination would not have a Material Adverse
Effect, and no material basis for any such examination exists. The Company has
received final tax assessments in Israel for the years ended 1993, 1994 and
1995.
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14. EMPLOYEES. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
Formula's Knowledge, threatened with respect to the Company. The Company has
supplied a sample of all its contracts with its current employees to Purchaser
prior to the date hereof. There is no current employee of the Company who has
not signed a contract with the Company. To Formula's Knowledge, no employee of
the Company, nor any consultant with whom the Company has contracted, is in
material violation of any term of any employment contract, proprietary
information and inventions/technology agreement, or any other agreement relating
to the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to Formula's Knowledge the continued employment by the Company of its
present employees, and the performance of Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee has a right to any compensation following termination of employment
with the Company, except to severance pay (pitzuei piturin) which may be owed to
such employee under Israeli law. Formula has no Knowledge that any officer or
key employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any officer, key employee or group of key employees
in the three-month period following the Closing.
15. ASSIGNMENT AND AGREEMENT CONCERNING NONDISCLOSURE OF PROPRIETARY
INFORMATION. Each independent contractor and consultant of the Company has
executed a proprietary information and inventions/technology agreement and the
Company has previously provided copies of such agreements to Purchaser.
16. OBLIGATIONS OF MANAGEMENT. To Formula's Knowledge, each officer,
except the Chairman of the Board, of the Company is currently devoting one
hundred percent (100%) of his or her business time to the conduct of the
business of the Company. Formula has no Knowledge of any officer or key employee
of the Company planning to work less than full time at the Company in the
three-month period following the Closing.
17. REGISTRATION RIGHTS. Other than pursuant to the Registration Rights
Agreement with Convergys Information Management Group Inc. (formerly known as
Cincinnati Bell Information Systems Inc.), and except as set forth in Schedule
1.17, the Company is presently not under any obligation, and has not granted any
rights, to effect a registration statement by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Securities Act"), for any of Company's presently
outstanding securities or any of its securities that may hereafter be issued.
18. COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of
any applicable statute, rule, regulation, order or restriction of any domestic
or foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
have a Material Adverse Effect. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
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<PAGE> 29
now being conducted by it, the lack of which could reasonably be expected to
have a Material Adverse Effect.
19. EMPLOYEE BENEFIT PLANS. Neither the Company nor any of the
"employee pension benefit plans" (the "Plans"), as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder (collectively, and as from time to time in
effect, "ERISA"), established or maintained or to which contributions have been
made by the Company, nor any trust created thereunder, nor, to the knowledge of
Formula, any other trustee or administrator thereof, has engaged in a
"prohibited transaction," as such term is defined in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder (the "Code"), which could subject the Plans or any of
them, any such trust, or any trustee or administrator thereof, or any party
dealing with the Plans or any such trust, to a material tax or penalty on
prohibited transactions imposed by said Section 4975 or to any similar provision
under ERISA. Each Plan maintained by the Company intended to comply with
Sections 401 and 501 of the Code complies in form and operation with all
applicable requirements of the Code. Each Plan has been administered and
operated, at all times during its existence, in accordance with its terms and in
compliance with ERISA and the Age Discrimination in Employment Act and the
regulations promulgated thereunder. Neither the Company nor any of its
directors, officers, employees or any other fiduciary has committed any breach
of fiduciary responsibility imposed by ERISA or any other applicable law that
would subject the Company or any of its directors, officers or employees to
liability under ERISA or any other applicable law. There is no litigation,
arbitration, claim (other than routine benefit claims) or other proceeding or
investigation pending or, to the knowledge of the Company, threatened (or any
basis therefor) with respect to any Plan. None of the Plans or trusts has been
terminated in a manner with respect to which the Company has or may incur
liability, nor have there been any "reportable events," as that term is defined
in Section 4043 of ERISA, since the effective date of ERISA. No Plan which is
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code
had an accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the most
recent fiscal year of such Plan to which Part 3 of Subtitle B of Title I of
ERISA or Section 412 of the Code applied, nor would have had an accumulated
funding deficiency on such date if such year were the first year of such Plan to
which Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code
applied. No liability to the Pension Benefit Guaranty Corporation has been or is
expected by the Company to be incurred by the Company with respect to any Plan,
and there has been no event or condition which presents a risk of termination of
any Plan by the Pension Benefit Guaranty Corporation. The present value of all
benefits under each Plan subject to Title IV of ERISA, as determined in
accordance with Statement 87 of the Financial Accounting Standards Board, does
not exceed the current value of the assets of such Plan by an amount greater
than $25,000. The Company is not and has never been a party to any
multi-employer plan, as such term is defined in Section 4001(a)(3) of ERISA. The
execution, delivery and performance of the Agreement and the purchase by the
Purchaser of the Shares shall not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code with respect to such
plans.
20. APPROVED ENTERPRISE STATUS. On November 19, 1995 and December 9,
1996, the Company received certification of expansions of its existing
enterprise as "Approved
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<PAGE> 30
Enterprises." The Company is in conformance in all material respects with the
conditions of the certifications (kitvei ishur) issued on such dates, including
reporting obligations and with the law governing Approved Enterprises, such
certifications remain in full force and effect and the Company remains fully
entitled to the benefits to which it is entitled as an Approved Enterprise under
such certifications. The Israeli taxing authorities have not challenged
Company's status as an approved enterprise.
21. OFFICE OF THE CHIEF SCIENTIST. On May 20, 1992, prior to Company's
incorporation, Company's predecessor, a division of Digital Equipment (DEC)
Ltd., received authorization to receive funding from the Office of the Chief
Scientist of the Ministry of Trade and Industry (the "Chief Scientist") with
regard to research and development of earlier versions of certain components of
its program and in fact received such funding. The Company assumed the
liabilities of Company's predecessor towards the office of the Chief Scientist
with regard to such funding. The Company is in conformance in all material
respects with the condition of its certifications from the Chief Scientist and
of the law governing companies which have received funding from the Chief
Scientist, including reporting obligations, and does not owe any royalties.
22. DIGITAL AGREEMENT. The Company has performed fully all of its
obligations, acquired by assignment from Digital Equipment (DEC) Ltd.
("Digital"), to the assignees of Business Systems, Inc. ("BSI") under the
agreement between Digital and "BSI", dated June 28, 1991 (the "BSI Agreement").
23. DIGITAL ROYALTY. The Company, Argotec and Formula have performed
fully in all material respects all their obligations under the Agreement of
January 29, 1997 between Digital Equipment Corporation, Digital Equipment (DEC)
Ltd., Argotec and Formula and have performed fully all their obligations under
Addendum No. 1 of the same date to that agreement (the agreement and the
addendum will be collectively referred to as "the Digital Agreement").
24. CONSULTANTS AND INDEPENDENT CONTRACTORS. Schedule 1.24 attached
hereto lists each full-time consultant and independent contractor that has been
retained by the Company since 1995 to aid in the development of Intellectual
Property.
25. INFORMATION. This Annex B and the Schedules attached hereto, and
all other documents delivered by Formula to Purchaser or their attorneys or
agents in connection herewith or with the transactions contemplated hereby, do
not contain any untrue statements of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein not
misleading.
26. ASSETS; SALES. The Company holds assets located in the United
States having an aggregate book value of less than $15 million. In 1998, the
Company made aggregate sales in the United States of less than $25 million.
For purposes of this Annex B and the Agreement, the following terms
shall have the following meanings:
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"Knowledge" shall mean, with respect to Formula, actual knowledge after
reasonable investigation, including the knowledge of such Formula officers and
employees with responsibility for the management and supervision of Wiztec and
the particular matters to which referred.
"Material Adverse Change" shall mean an occurrence, event or
development which has had or is reasonably likely to have a Material Adverse
Effect.
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INDEX OF OMITTED EXHIBITS AND SCHEDULES
Schedule 1.1 Schedule Regarding Organization, Good Standing and
Qualification
Schedule 1.2 Schedule Regarding Capitalization
Schedule 1.7 Schedule Regarding Obligations to Related Parties
Schedule 1.10 Schedule Regarding Patents and Trademarks
Schedule 1.17 Schedule Regarding Compliance with Laws; Permits
Schedule 1.24 Schedule Regarding Consultants and Independent
Contractors
Exhibit A Sub-Contractor Agreement
Exhibit B Services Agreement
<PAGE> 1
EXHIBIT 4
Commitment to File Schedules and Exhibits
The Stock Purchase Agreement, dated as of August 19, 1997, among Convergys
Information Management Group Inc. (formerly known as Cincinnati Bell Information
Systems Inc., "Convergys IMG"), Wiztec Solutions Ltd. ("Wiztec") and certain
shareholders of Wiztec and the Agreement, dated as of February 16, 1999, among
Convergys IMG, certain shareholders of Wiztec and Formula Systems (1985) Ltd.,
which are being filed as exhibits to the Schedule 13D of Convergys Corporation
and Convergys IMG, date of report February 16, 1999, are being filed without
schedules and exhibits. Attached to each Agreement is an index briefly
identifying the contents of all omitted schedules and exhibits. Convergys
Corporation and Convergys IMG hereby agree to furnish supplementally a copy of
any omitted schedule or exhibit to the Securities and Exchange Commission upon
request.
Convergys Corporation
By: /s/ William D. Baskett III
--------------------------
Name: William D. Baskett III
Title: General Counsel and Secretary
Convergys Information Management Group Inc.
By: /s/ Roy T. Heggland
-------------------
Name: Roy T. Heggland
Title: Senior Vice President and General Counsel
