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Filed by Marvell Technology Group Ltd.
Filed pursuant to Rule 425 under the
Securities Act of 1933 and Rule
14a-12 under the Securities Exchange
Act of 1934
Subject Company: Galileo Technology Ltd.
Commission File No.: 0-30877
Attached are the following documents executed by Marvell Technology Group Ltd.,
Galileo Technology Ltd. and/or their respective shareholders in connection with
the proposed merger of Toshack Acquisitions Ltd., a wholly owned subsidiary of
Marvell Technology Group Ltd. with and into Galileo Technology Ltd.
1. Merger Agreement w/Exhibits as follows:
Exhibit A - Form of Stock Option Agreement
Exhibit B - Form of Irrevocable Proxy
Exhibit C - Form of Voting Agreement
Exhibit E-1 - Form of Company Certificate
Exhibit E-2 - Form of Parent Certificate
2. Form of Shareholder Undertaking
3. Form of Lock-Up Letter Agreement
Where You Can Find Additional Information:
Investors and security holders are advised to read the joint proxy
statement/prospectus regarding the business combination referenced in these
materials when it becomes available because it will contain important
information. The joint proxy statement/prospectus will be filed with the SEC by
Marvell and Galileo. Security holders may obtain a free copy of the joint proxy
statement/prospectus, when it becomes available, and other related documents
filed by Marvell and Galileo at the SEC's website at www.sec.gov or at the SEC's
public reference room located at 450 Fifth Street, NW, Washington D.C. 20549 or
at one of the SEC's other public reference rooms in New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. When available, the joint proxy
statement/prospectus and the other documents may also be obtained by contacting
Marvell, Attention: Denise Franklin, Director of Investor Relations, 645 Almanor
Ave., Sunnyvale, CA 94085, (408) 222-2551; and/or Galileo, Attention: Mike Tate,
Chief Financial Officer, 142 Charcot Ave., San Jose, CA, 95131, (408) 367-1400,
ext. 244.
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EXECUTION COPY
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AGREEMENT OF MERGER
DATED AS OF OCTOBER 16, 2000
AMONG
MARVELL TECHNOLOGY GROUP LTD.,
GALILEO TECHNOLOGY LTD.,
AND
TOSHACK ACQUISITIONS LTD.
--------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE 1 THE MERGER..............................................................2
SECTION 1.1. THE MERGER........................................................2
SECTION 1.2. EFFECTIVE TIME....................................................2
SECTION 1.3. CLOSING OF THE MERGER.............................................2
SECTION 1.4. CONVERSION OF SHARES..............................................2
SECTION 1.5. EXCHANGE OF CERTIFICATES..........................................3
SECTION 1.6. STOCK OPTIONS.....................................................5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................6
SECTION 2.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES; INVESTMENTS.........6
SECTION 2.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES................7
SECTION 2.3. AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION..............8
SECTION 2.4. SEC REPORTS; FINANCIAL STATEMENTS.................................9
SECTION 2.5. INFORMATION SUPPLIED.............................................10
SECTION 2.6. CONSENTS AND APPROVALS; NO VIOLATIONS............................10
SECTION 2.7. NO DEFAULT.......................................................12
SECTION 2.8. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES...................12
SECTION 2.9. LITIGATION.......................................................13
SECTION 2.10. COMPLIANCE WITH APPLICABLE LAW...................................14
SECTION 2.11. FOUNDRY RELATIONSHIPS............................................14
SECTION 2.12. ENVIRONMENTAL LAWS AND REGULATIONS...............................14
SECTION 2.13. TAXES............................................................15
SECTION 2.14. INTELLECTUAL PROPERTY............................................17
SECTION 2.15. INSURANCE........................................................20
SECTION 2.16. CERTAIN BUSINESS PRACTICES.......................................20
SECTION 2.17 TITLE TO PROPERTIES..............................................20
SECTION 2.18. PRODUCT WARRANTIES...............................................21
SECTION 2.19. SUPPLIERS AND CUSTOMERS..........................................21
SECTION 2.20. GRANTS, INCENTIVES AND SUBSIDIES.................................21
SECTION 2.21. OPINION OF FINANCIAL ADVISER.....................................22
SECTION 2.22. AFFILIATES.......................................................22
SECTION 2.23. BROKERS..........................................................22
SECTION 2.24. EMPLOYEE BENEFITS................................................22
SECTION 2.25. LABOR AND EMPLOYMENT MATTERS.....................................25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION...............26
SECTION 3.1. ORGANIZATION.....................................................26
SECTION 3.2. CAPITALIZATION OF PARENT AND ITS SUBSIDIARIES....................27
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT.............................28
SECTION 3.4. SEC REPORTS; FINANCIAL STATEMENTS................................29
SECTION 3.5. INFORMATION SUPPLIED.............................................29
SECTION 3.6. CONSENTS AND APPROVALS; NO VIOLATIONS............................29
SECTION 3.7. LITIGATION.......................................................30
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SECTION 3.8. NO DEFAULT.......................................................31
SECTION 3.9. OPINION OF FINANCIAL ADVISOR.....................................31
SECTION 3.10. BROKERS..........................................................31
SECTION 3.11. NO PRIOR ACTIVITIES..............................................31
SECTION 3.12. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES...................31
SECTION 3.13. COMPLIANCE WITH APPLICABLE LAW...................................31
SECTION 3.14. AFFILIATES.......................................................32
SECTION 3.15. INTELLECTUAL PROPERTY............................................32
SECTION 3.16 ENVIRONMENTAL LAWS AND REGULATIONS...............................34
SECTION 3.17 TAXES............................................................36
SECTION 3.18 EMPLOYEE BENEFITS................................................36
SECTION 3.19. CERTAIN BUSINESS PRACTICES.......................................38
ARTICLE 4 COVENANTS..............................................................38
SECTION 4.1. CONDUCT OF BUSINESS OF THE COMPANY...............................38
SECTION 4.2. CONDUCT OF BUSINESS OF PARENT....................................40
SECTION 4.3. MERGER PROPOSAL; SHAREHOLDERS' MEETINGS; PREPARATION OF
FORM S-4 AND THE PROXY STATEMENT..............................42
SECTION 4.4. OTHER POTENTIAL ACQUIRERS........................................44
SECTION 4.5 ISRAELI APPROVALS................................................45
SECTION 4.6 ISRAELI INCOME TAX RULING........................................46
SECTION 4.7. ISRAELI SECURITIES LAW EXEMPTION.................................47
SECTION 4.8. NASDAQ NATIONAL MARKET...........................................47
SECTION 4.9. ACCESS TO INFORMATION............................................48
SECTION 4.10. CERTAIN FILINGS; REASONABLE BEST EFFORTS.........................48
SECTION 4.11. PUBLIC ANNOUNCEMENTS.............................................49
SECTION 4.12. INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE...........49
SECTION 4.13. NOTIFICATION OF CERTAIN MATTERS..................................51
SECTION 4.14. AFFILIATES.......................................................51
SECTION 4.15. ADDITIONS TO AND MODIFICATION OF COMPANY DISCLOSURE SCHEDULE.....52
SECTION 4.16. PARENT BOARD OF DIRECTORS........................................52
SECTION 4.17. CERTAIN EMPLOYEE MATTERS.........................................52
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER...............................53
SECTION 5.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER......53
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.....................54
SECTION 5.3. CONDITIONS TO THE OBLIGATIONS OF PARENT AND ACQUISITION..........55
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER.........................................56
SECTION 6.1. TERMINATION......................................................56
SECTION 6.2. EFFECT OF TERMINATION............................................57
SECTION 6.3. FEES AND EXPENSES................................................57
SECTION 6.4. AMENDMENT........................................................59
SECTION 6.5. EXTENSION; WAIVER................................................59
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ARTICLE 7 MISCELLANEOUS..........................................................60
SECTION 7.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES....................60
SECTION 7.2. ENTIRE AGREEMENT; ASSIGNMENT.....................................60
SECTION 7.3. VALIDITY.........................................................60
SECTION 7.4. NOTICES..........................................................60
SECTION 7.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL....................62
SECTION 7.6. DESCRIPTIVE HEADINGS.............................................63
SECTION 7.7. PARTIES IN INTEREST..............................................63
SECTION 7.8. CERTAIN DEFINITIONS..............................................63
SECTION 7.9. PERSONAL LIABILITY...............................................64
SECTION 7.10. SPECIFIC PERFORMANCE.............................................64
SECTION 7.12. COUNTERPARTS.....................................................64
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TABLE OF EXHIBITS
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Exhibit A..................Form of Stock Option Agreement
Exhibit B..................Form of Irrevocable Proxy
Exhibit C..................Form of Parent Voting Agreement
Exhibit D..................[Intentionally omitted]
Exhibit E-1................Form of Representations related to Tax Matters of the
Company
Exhibit E-2................Form of Representations related to Tax Matters of
Parent and Acquisition
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TABLE OF DEFINED TERMS
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Cross Reference
Term in Agreement Page
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Acquisition Preamble, .....................................................1
Affiliate Section 7.8(a),.................................................62
Agreement Preamble, .......................................................1
Applicable Law Section 7.8(b),............................................62
Business Day Section 7.8(c), .............................................62
Capital Stock Section 7.8(d),.............................................62
Certificates Section 1.5(b),...............................................3
Claims Section 3.16, .....................................................34
Closing Date Section 1.3, .................................................2
Closing Section 1.3, ......................................................2
Companies Law Section 1.1, ................................................2
Company Affiliates Section 2.22,..........................................22
Company Approval Matters Section 4.3(b),..................................41
Company Board Section 2.3(a), .............................................8
Company Disclosure Schedule Article 2, ....................................6
Company Employee Plan Section 2.24(a)(iii), ..............................22
Company Financial Adviser Section 2.21, ..................................22
Company Permits Section 2.10, ............................................14
Company Plans Section 1.6(a), .............................................5
Company Preamble, .........................................................1
Company Property Section 2.12, ...........................................14
Company SEC Reports Section 2.4(a),........................................9
Company Securities Section 2.2(a), ........................................7
Company Shareholder Meeting Section 2.5, .................................10
Company Stock Option(s) Section 1.6(a), ...................................5
Copyrights Section 2.14(a), ..............................................17
DOL Section 2.24(b), .....................................................23
Effect of Transaction Section 3.18(e), ...................................36
Effective Time Section 1.2, ...............................................2
Employee Agreement Section 2.24(a)(vi), ..................................22
Employee Plan Compliance Section 3.18(c), ................................36
Employee Plan Section 2.24(a)(iv), .......................................22
Employee Plans Section 3.18(b), ..........................................35
Employee Section 2.24(a)(v), .............................................22
Environmental Claims Section 2.12, .......................................15
Environmental Claims Section 3.16, .......................................34
Environmental Law Section 2.12, ..........................................15
Environmental Law Section 3.16, ..........................................34
ERISA Affiliate Section 2.24(a)(ii), .....................................22
ERISA Section 2.24(a)(i), ................................................22
Excess Parachute Payment Section 2.24(f)(2), .............................24
</TABLE>
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Exchange Act Section 2.2(c), ..............................................8
Exchange Agent Section 1.5(a), ............................................3
Exchange Fund Section 1.5(a), .............................................3
Exchange Ratio Section 1.4(b), ............................................3
Final Date Section 6.1(b), ...............................................55
Foreign Plan Section 2.24(k), ............................................24
Foreign Plan Section 3.18(k), ............................................36
Foreign Plans Section 3.18(f), ...........................................36
Form S-4 Section 2.5, ....................................................10
Governmental Entity Section 2.6(a), ......................................11
Hazardous Materials Section 2.12, ........................................14
Hazardous Materials Section 3.16, ........................................34
HSR Act Section 2.6(a), ..................................................10
Inbound License Agreements Section 2.14(e), ..............................18
Incentive Stock Options (ISOs) Section 1.6(a), ............................6
Include (including) Section 7.8(f), ......................................62
Indemnified Liabilities Section 4.12(a), .................................49
Indemnified Persons Section 4.12(a), .....................................48
Insured Parties Section 4.12(c), .........................................50
Intellectual Property Section 2.14(a), ...................................17
IRS Section 2.24(a)(vii), ................................................23
Israeli Income Tax Ruling Section 4.6, ...................................46
Israeli Securities Exemption Section 4.7, ................................46
Knowledge or Known Section 7.8(e), .......................................62
License Agreements Section 2.14(e), ......................................18
Lien Section 2.2(b), ......................................................8
Material Adverse Effect Section 7.8(g), ..................................62
Merger Consideration Section 1.4(a), ......................................3
Merger Proposal Section 4.3(a), ..........................................41
Merger Section 1.1, .......................................................2
Notice of Superior Proposal Section 4.4(b), ..............................44
OCS Section 2.6(a), ......................................................10
Opinion of Parent Financial Advisor Section 3.9, .........................30
Other Interests Section 2.1(c, ............................................7
Outbound License Agreements Section 2.14(e), .............................18
Parent Affiliates Section 3.14, ..........................................31
Parent Approval Matters Section 4.3(c), ..................................42
Parent Bye-Laws Section 3.3(c), ..........................................27
Parent Common Stock Section 3.2(a), .....................................26
Parent Common Stock Section 1.4(a), .......................................3
Parent Employee Plan Section 3.18(a)(i), .................................35
Parent Financial Advisor Section 3.9, ....................................30
Parent Permits Section 3.13, .............................................31
Parent Preamble, ..........................................................1
Parent Property Section 3.16, ............................................34
Parent Requisite Vote Section 3.3(c), ....................................28
Parent SEC Reports Section 3.4(a), .......................................28
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Parent Special Meeting Section 4.3(c), ...................................42
Patents Section 2.14(a), .................................................17
Pension Plans Section 3.18(d), ...........................................36
Person Section 7.8(h), ...................................................63
Prohibited Transaction Section 2.24(c), ..................................23
Prohibited Transaction Section 3.18(c), ..................................36
Proxy Statement Section 4.3(d), ..........................................42
Release Section 2.12, ....................................................15
Release Section 3.16, ....................................................34
SEC Section 2.4(a), .......................................................9
Securities Act Section 2.4(a), ............................................9
Share(s) Section 1.4(a), ..................................................2
Shareholder Approval Notice Section 4.3(b), ..............................42
Shareholder Approval Notices Section 1.2, .................................2
Software Section 2.14(l), 20, ............................................33
Stock Option Agreement Section 2.3(a), ....................................8
Subsidiary or subsidiaries Section 7.8(i), ...............................63
Superior Proposal Section 4.4(c), ........................................44
Supply Contracts Section 2.11, ...........................................14
Surviving Corporation Section 1.1, ........................................2
Tax or Taxes Section 2.13(a)(i), .........................................15
Tax Return Section 2.13(a)(ii), ..........................................16
Third Party Acquisition Section 4.4(c), ..................................44, 57
Third Party Section 4.4(c), ..............................................44, 57
Trade Secrets Section 2.14(a), ...........................................17
Trademarks Section 2.14(a), ..............................................17
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AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") dated as of October 16,
2000, is by and among GALILEO TECHNOLOGY LTD., an Israeli corporation (the
"Company"), MARVELL TECHNOLOGY GROUP LTD., a Bermuda corporation ("Parent"), and
TOSHACK ACQUISITIONS LTD., an Israeli corporation and a direct wholly-owned
subsidiary of Parent ("Acquisition"). Capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms in Section 7.8 of this
Agreement.
WHEREAS, Parent, the Company and Acquisition intend to effect a Merger
(as defined below) of Acquisition into the Company in accordance with this
Agreement and the Israeli Companies Law-5759-1999 (the "Companies Law") pursuant
to which Acquisition will cease to exist, and the Company will become a
wholly-owned subsidiary of Parent;
WHEREAS, the Boards of Directors of the Company, Parent and Acquisition
have each (i) determined that the Merger is advisable and fair and in the best
interests of their respective companies and shareholders and (ii) approved the
Merger upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Merger is intended to constitute a reorganization for
United States federal income tax purposes within the meaning of Section 368(a)
of the Code (as defined below);
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent and the Company have entered into a Stock Option Agreement,
dated as of the date of this Agreement, in the form attached hereto as Exhibit A
(the "Stock Option Agreement"), pursuant to which the Company has granted to
Parent an option to purchase ordinary shares of the Company under certain
circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to the Parent's willingness to enter into this
Agreement, certain shareholders of the Company have entered into an Irrevocable
Proxy, dated as of the date of this Agreement, in the form attached hereto as
Exhibit B, pursuant to which such shareholders have directed the proxyholder to
vote all voting securities of the Company beneficially owned by them in favor of
approval and adoption of this Agreement and the Merger; and
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to the Company's willingness to enter into
this Agreement, certain shareholders of Parent have entered into a Voting
Agreement, dated as of the date of this Agreement, in the form attached hereto
as Exhibit C, pursuant to which such shareholders have agreed to vote all voting
securities of Parent beneficially owned by them in favor of approval and
adoption of this Agreement and the Merger.
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NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE 1
THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in accordance
with the Companies Law, Acquisition (as the target company (Chevrat Ha 'Ya'ad))
shall be merged with and into the Company (as the absorbing company (HaChevra Ha
'Koletet)) (the "Merger"). Following the Merger, the Company (a) shall continue
as the surviving corporation (the "Surviving Corporation") and the separate
corporate existence of Acquisition shall cease, (b) shall be governed by the
laws of the State of Israel, (c) shall maintain a registered office in the State
of Israel, and (d) shall succeed to and assume all of the rights, properties and
obligations of Acquisition and the Company in accordance with the Companies Law.
Parent, as the sole shareholder of Acquisition, hereby undertakes to approve the
Merger and this Agreement at the general shareholders meeting of Acquisition.
Section 1.2. Effective Time. The Merger shall become effective after
the delivery of shareholder approval notices (the "Shareholder Approval
Notices") of both the Company and Acquisition to the Companies Registrar and
upon the issuance of a certificate of merger by the Companies Registrar in
accordance with Section 323(5) of the Companies Law after the expiration of the
70 day waiting period set forth in such Section 323 (the "Effective Time"). The
parties agree to deliver the Shareholder Approval Notices to the Companies
Registrar in accordance with the Companies Law on or before the Closing Date (as
defined below) so that the certificate of merger may issue on the Closing Date.
Section 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction (or waiver) of the latest to occur of the conditions set
forth in Article 5 (other than conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions), at the offices of Gibson, Dunn & Crutcher LLP, 1530 Page Mill Road,
Palo Alto, California 94304, unless another time, date or place is agreed to in
writing by the parties hereto.
Section 1.4. Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without any
further action by Parent, the Company, Acquisition, or any shareholder of
Parent, Company and Acquisition, each ordinary share of the Company, par value
NIS 0.01 per share (individually a "Share" and collectively the "Shares"),
issued and outstanding immediately prior to the Effective Time (other than (i)
Shares held in the Company's treasury and (ii) Shares held by Parent or
Acquisition) shall, by virtue of the Merger and without any action on the part
of
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Acquisition, the Company or the holder thereof, be exchanged into and shall
become a number of fully paid and nonassessable shares of common stock, par
value $0.002 per share, of Parent ("Parent Common Stock") equal to the Exchange
Ratio (as defined below) (the "Merger Consideration"). Notwithstanding the
foregoing, if, between the date of this Agreement and the Effective Time, the
outstanding shares of Parent Common Stock or the Shares shall have been changed
into a different number of shares or a different class by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange of shares or similar event, then the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar event.
(b) The "Exchange Ratio" shall be 0.674.
(c) At the Effective Time, by virtue of the Merger and without any
further action by Parent, the Company, Acquisition, or any shareholder of
Parent, the Company and Acquisition, each outstanding ordinary share of
Acquisition shall be converted into one ordinary share of the Surviving
Corporation and shall be registered in the name of Parent in the shareholders
register of the Surviving Corporation.
(d) At the Effective Time, each Share held in the treasury of the
Company and each Share held by Parent and Acquisition immediately prior to the
Effective Time shall remain outstanding, shall not be exchanged under Section
1.4(a) and no shares of Parent Common Stock shall be delivered with respect
thereto.
Section 1.5. Exchange of Certificates.
(a) At the Effective Time, Parent shall deliver to its transfer agent,
or a depository or trust institution of recognized standing selected by Parent
and Acquisition and reasonably acceptable to the Company (the "Exchange Agent")
for the benefit of the holders of Shares for exchange in accordance with this
Article I: (i) certificates representing the appropriate number of shares of
Parent Common Stock issuable pursuant to Section 1.4; and (ii) cash to be paid
in lieu of fractional shares of Parent Common Stock (such shares of Parent
Common Stock and such cash are hereinafter referred to as the "Exchange Fund"),
in exchange for outstanding Shares.
(b) As soon as reasonably practicable after the Effective Time (but not
later than five business days thereafter), the Exchange Agent shall mail to each
holder of record of a certificate or certificates that immediately prior to the
Effective Time represented outstanding Shares (the "Certificates") and whose
Shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.4: (i) a letter of transmittal (which shall specify that
delivery shall be effected and risk of loss and title to the Certificates shall
pass only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Parent
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent together with such letter of transmittal duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
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representing that number of whole shares of Parent Common Stock and, if
applicable, a check representing the cash consideration to which such holder may
be entitled on account of a fractional share of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of this Article I,
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of Shares that is not registered in the transfer records
of the Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate representing such
Shares is presented to the Exchange Agent accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
1.5, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock and cash in lieu of any fractional
shares of Parent Common Stock as contemplated by this Section 1.5.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 1.5(f), until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of Applicable Law, following
surrender of any such Certificate there shall be paid to the record holder of
the certificates representing whole shares of Parent Common Stock issued in
exchange therefor without interest (i) the amount of any cash payable in lieu of
a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.5(f) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such number of whole shares of Parent Common Stock and (ii) at the appropriate
payment date the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender that is payable with respect to such whole shares of Parent Common
Stock.
(d) In the event that any Certificate shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange therefor upon the making
of an affidavit of that fact by the holder thereof such shares of Parent Common
Stock and cash in lieu of fractional shares, if any, as may be required pursuant
to this Agreement; provided, however, that Parent or the Exchange Agent may, in
its reasonable discretion, require the delivery of a suitable bond or indemnity
against any claim that may be made against it with respect to such Certificate.
(e) All shares of Parent Common Stock issued upon the surrender for
exchange of Shares in accordance with the terms hereof and any cash paid
pursuant to Section 1.5(c) or 1.5(f) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares; subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the date hereof that remain unpaid at
the Effective Time. From and after the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time, other than transfers by
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Parent. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
(f) No fractions of a share of Parent Common Stock shall be issued in
the Merger but in lieu thereof each holder of Shares otherwise entitled to a
fraction of a share of Parent Common Stock shall upon surrender of his or her
Certificate or Certificates be entitled to receive an amount of cash (without
interest) determined by multiplying the closing price for a share of Parent
Common Stock on the Nasdaq National Market (as reported in the New York City
edition of the Wall Street Journal or, if not reported thereby, another
nationally recognized source) on the date of the Effective Time by the
fractional share interest to which such holder would otherwise be entitled. The
parties acknowledge that payment of the cash consideration in lieu of issuing
fractional shares was not separately bargained for consideration, but merely
represents a mechanical rounding off for purposes of simplifying the corporate
and accounting complexities that would otherwise be caused by the issuance of
fractional shares.
(g) Any portion of the Exchange Fund that remains undistributed to the
former shareholders of the Company upon the expiration of three hundred and
sixty five (365) days after the Effective Time shall be delivered to Parent upon
demand and any former shareholders of the Company who have not theretofore
complied with this Article 1 shall thereafter look only to Parent as general
creditors for payment of their claim for Parent Common Stock and cash in lieu of
fractional shares, as the case may be, and any applicable dividends or
distributions with respect to Parent Common Stock.
(h) Neither Parent nor the Company shall be liable to any holder of
Shares or Parent Common Stock for such shares (or dividends or distributions
with respect thereto) or cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
Applicable Law.
Section 1.6. Stock Options.
(a) At the Effective Time, each outstanding option, warrant or other
right to purchase Shares (a "Company Stock Option" or collectively "Company
Stock Options") issued pursuant to the Galileo 1997 Employees' Stock Option
Plan, the Galileo 1997 GTI Stock Option Plan and the Galileo 1998 Non Employee
Directors' Stock Option Plan, or other agreement or arrangement, whether vested
or unvested, shall be converted as of the Effective Time into an option, warrant
or right, as applicable, to purchase shares of Parent Common Stock in accordance
with the terms of this Section 1.6. All plans or agreements described above
pursuant to which any Company Stock Option has been issued or may be issued
other than outstanding warrants or rights are referred to collectively as the
"Company Plans." Each Company Stock Option shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option, a number of shares of Parent Common Stock equal to
the number of shares of Parent Common Stock (rounded up to the nearest whole
share) that the holder of such Company Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option or warrant
in full immediately prior to the Effective Time at a price per share of Parent
Common Stock (rounded down to the nearest whole cent) equal to (x) the former
per share exercise price for
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the Shares otherwise purchasable pursuant to such Company Stock Option divided
by (y) the Exchange Ratio; provided, however, that in the case of any option to
which Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code ("incentive stock options" or "ISOs"), the option price,
the number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code.
(b) Within fifteen (15) business days after the Effective Time, Parent
shall deliver to the holders of Company Stock Options appropriate notices
setting forth such holders' rights pursuant to the relevant Company Plan and
that the agreements evidencing the grants of such Company Stock Options shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 1.6 after giving effect to the Merger). Parent shall
assume and comply with the terms of the Company Plans and ensure, to the extent
required by and subject to the provisions of such Company Plans, that Company
Stock Options that qualified as incentive stock options prior to the Effective
Time continue to qualify as incentive stock options after the Effective Time.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Company Stock Options assumed in accordance with this Section 1.6.
As soon as practicable after the Effective Time, Parent shall, if no
registration statement is in effect covering such Parent shares, file a
registration statement on Form S-8 (or any successor form) with respect to the
shares of Parent Common Stock subject to any Company Stock Options to the extent
registrable on Form S-8 (or any successor form) and shall use all reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
(d) At or before the Effective Time, the Company shall, to the extent
reasonably necessary, cause to be effected, in a manner reasonably satisfactory
to Parent, amendments to the Company Plans to give effect to the foregoing
provisions of this Section 1.6.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition, subject to the exceptions set forth in the Disclosure Schedule (the
"Company Disclosure Schedule") delivered by the Company to Parent in accordance
with Section 4.15 that:
Section 2.1. Organization and Qualification; Subsidiaries; Investments.
(a) Section 2.1(a) of the Company Disclosure Schedule sets forth a true
and complete list of all the Company's directly or indirectly owned subsidiaries
and foreign
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<PAGE> 16
branch offices, together with the jurisdiction of incorporation of each
subsidiary and the percentage of each subsidiary's outstanding capital stock or
other equity interests owned by the Company or another subsidiary of the
Company. Each of the Company and its subsidiaries is duly organized, validly
existing and (to the extent such concept exists under the laws of its
jurisdiction of incorporation) in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power
and authority to own, lease and operate its properties and to carry on its
businesses as now being conducted.
(b) Each of the Company and its subsidiaries is duly qualified or
licensed and, to the extent such concept exists under applicable law, in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(c) Except as otherwise disclosed in the Company SEC Reports (as defined
below) or Section 2.1(c) of the Company Disclosure Schedule, none of the Company
or any of its subsidiaries have any equity investment in an amount of Five
Hundred Thousand Dollars ($500,000) or more or that represents a five percent
(5%) or greater ownership interest in the subject of such investment made by the
Company or any of its subsidiaries in any person other than the Company's
subsidiaries ("Other Interests"). The Other Interests are owned by the Company,
by one or more of the Company's subsidiaries or by the Company and one or more
of its subsidiaries, in each case free and clear of all Liens (as defined
below).
Section 2.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized share capital of the Company consists of 1,000,000
NIS, divided into 100,000,000 Shares, of which, as of October 6, 2000,
42,973,767 Shares were issued and outstanding. Between October 6, 2000 and the
date hereof, no Shares have been issued other than pursuant to Company Stock
Options already in existence on such first date, and between October 6, 2000 and
the date hereof, except as disclosed in Section 2.2(a) of the Company Disclosure
Schedule, no stock options have been granted. All of the outstanding Shares have
been validly issued and are fully paid, nonassessable and free of preemptive
rights. As of October 3, 2000, approximately 9,254,772 Shares were reserved for
issuance and 8,999,472 Shares were issuable upon or otherwise deliverable in
connection with the exercise of outstanding Company Stock Options. Except as set
forth above, there are outstanding (i) no shares or other voting securities of
the Company, (ii) no securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for shares or other securities
of the Company, (iii) no options, preemptive or other rights to acquire from the
Company or any of its subsidiaries, and, except as described in the Company SEC
Reports, no obligations of the Company or any of its subsidiaries to issue, any
shares, voting securities or securities convertible into or exchangeable or
exercisable for shares or other securities of the Company and (iv) no equity
equivalent interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (collectively "Company Securities"). As of
the date hereof, there are no outstanding rights or obligations of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities. Except as set forth in Section 2.2(a) of the Company
Disclosure Schedule, there are no voting
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<PAGE> 17
agreements, voting trusts or other agreements or understandings to which the
Company is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of the Company.
(b) All of the outstanding capital stock of the Company's subsidiaries
is owned by the Company, directly or indirectly, free and clear of any Lien or
any other limitation or restriction (including any restriction on the right to
vote or sell the same except as may be provided as a matter of Applicable Law).
There are no (i) securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for, (ii) options or (iii) other
rights to acquire from the Company or any of its subsidiaries any capital stock
or other ownership interests in or any other securities of any subsidiary of the
Company, and there exists no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of any such capital stock. There are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including any security), any mortgage,
lien, pledge, charge, claim, security interest or encumbrance of any kind in
respect of such asset; provided, however, that the term "Lien" shall not include
(i) statutory liens for Taxes (as defined below) that are not yet due and
payable, (ii) statutory liens for Taxes that are being contested in good faith
by appropriate proceedings and are disclosed in Section 2.13 of the Company
Disclosure Schedule or Section 3.2 of Parent Disclosure Schedule, as applicable,
or that are otherwise not material, (iii) statutory or common law liens to
secure obligations to landlords, lessors or renters under leases or rental
agreements confined to the premises rented, (iv) deposits or pledges made in
connection with, or to secure payment of, workers' compensation, unemployment
insurance, old age pension or other social security programs mandated under
Applicable Laws, (v) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen, to secure claims for labor, materials
or supplies and other like liens, and (vi) restrictions on transfer of
securities imposed by applicable state and federal (United States or foreign)
securities laws or the governing documents of the Company or Parent, as
applicable. The record list of shareholders of the Company contains less than 35
shareholders whose addresses are in Israel and the Company does not have records
of beneficial ownership of shares that would show that, in the aggregate, there
are more than 35 holders of Shares resident in Israel.
(c) The Shares constitute the only class of equity securities of the
Company or its subsidiaries registered or required to be registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Section 2.3. Authority Relative to this Agreement; Recommendation.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and the Stock Option Agreement, to perform
its obligations under this Agreement and the Stock Option Agreement, and,
subject to receipt of the required shareholder vote (as described below), to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement, and the consummation
of the transactions contemplated hereby and
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<PAGE> 18
thereby, have been duly and validly authorized by the Board of Directors of the
Company (the "Company Board"), and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or the Stock Option
Agreement, or to consummate the transactions contemplated hereby or thereby,
except the receipt of the required shareholder vote. This Agreement and the
Stock Option Agreement have been duly and validly executed and delivered by the
Company and constitute the valid, legal and binding agreements of the Company,
enforceable against the Company in accordance with their terms, except that (i)
such enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other Applicable Laws, now or hereafter in
effect, relating to or limiting creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceedings therefor may be brought.
(b) Without limiting the generality of the foregoing, the Board of
Directors of the Company has unanimously (i) approved this Agreement, the Stock
Option Agreement, and the transactions contemplated thereby and hereby, (ii)
resolved to recommend approval and adoption of this Agreement and the
transactions contemplated hereby to the Company's shareholders, and (iii) as of
the date hereof has not withdrawn or modified such approval or resolution to
recommend.
(c) Assuming neither Parent nor Acquisition, nor any of their affiliates
(as such term is described in Section 320(c) of the Companies Law), (i) own or
hold any Shares, or (ii) vote any Shares they own, the affirmative vote of 75%
of the voting power of the Shares present and voting at the Company Shareholder
Meeting is the only vote of the holders of any securities of the Company
necessary to approve the Merger (the "Company Requisite Vote"). The quorum
required for the Company Shareholder Meeting is two shareholders who hold at
least 60% of the voting rights of the issued share capital of the Company. No
vote or approval of (i) any creditor of the Company or its subsidiaries (subject
to the rights of creditors under Section 319 of the Companies Law), (ii) any
holder of any option or warrant granted by the Company or its subsidiaries, or
(iii) any shareholder of the Company's subsidiaries is necessary in order to
approve or permit the consummation of the Merger.
Section 2.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents
("Company SEC Reports") with the Securities and Exchange Commission (the "SEC")
since July 28, 1997, each of which complied at the time of filing in all
material respects with all applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, as in effect on
the dates such forms, reports and documents were filed. None of such Company SEC
Reports, including any financial statements or schedules included or
incorporated by reference therein, contained when filed any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading,
except to the extent superseded by a Company SEC Report filed subsequently and
prior to the date hereof. The audited consolidated financial statements of the
Company included in the Company SEC Reports fairly present in all material
respects, in conformity with United States generally accepted
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<PAGE> 19
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended. Notwithstanding the foregoing, the Company shall not be deemed to be in
breach of any of the representations or warranties in this Section 2.4(a) as a
result of any changes to the Company SEC Reports that the Company may make in
response to comments received from the SEC on the Form S-4. The Company is a
"foreign private issuer" as such term is defined under Rule 3b-4(c) promulgated
by the SEC under the Exchange Act.
(b) The Company has heretofore made, and hereafter will make, available
to Acquisition or Parent a complete and correct copy of any amendments or
modifications that are required to be filed with the SEC but have not yet been
filed with the SEC to agreements, documents or other instruments that previously
had been filed by the Company with the SEC pursuant to the Exchange Act.
Section 2.5. Information Supplied. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with the SEC
by Parent in connection with the issuance of shares of Parent Common Stock in
the Merger, and any amendment or supplement thereto (the "Form S-4") will, at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they are made or (ii) the Proxy Statement
relating to the general meeting of the Company's shareholders to be held in
connection with the Merger (the "Company Shareholder Meeting") will, at the date
mailed to shareholders of the Company and at the time of the Company Shareholder
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein in light of the circumstances under which they are made not
misleading. The Proxy Statement insofar as it relates to the Company Shareholder
Meeting to vote on the Merger will comply as to form in all material respects
with the provisions of applicable Israeli law. Notwithstanding the foregoing,
the Company makes no representation, warranty or covenant with respect to any
information supplied or required to be supplied by Parent or Acquisition that is
contained in or omitted from any of the foregoing documents.
Section 2.6. Consents and Approvals; No Violations.
(a) Except as set forth in Section 2.6(a) of the Company Disclosure
Schedule, and except for filings, permits, authorizations, consents and
approvals as may be required under applicable requirements of the Securities
Act, the Exchange Act, state securities or blue sky laws, and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), any filings under similar merger notification laws or regulations of
non-Israeli or U.S. Governmental Entities (as defined below), to the extent
required by Applicable Law, the consent of the Israeli Controller of Restrictive
Trade Practices, to the extent required pursuant to the Restrictive Trade
Practices Law (1968), the filing and recordation of the Merger Proposal and the
Shareholders Approval Notice and other filings as
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<PAGE> 20
required by the Companies Law, and the approval of the Office of the Chief
Scientist in the Israeli Ministry of Industry and Commerce (the "OCS") and the
approval of the Israeli Investment Center in the Israeli Ministry of Industry
and Commerce (the "Investment Center"), no filing with or notice to and no
permit, authorization, consent or approval of any Israeli, United States
(federal, state or local) or foreign court or tribunal, or administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
is necessary for the execution and delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby except
for such filings, notices, permits, authorizations, consents or approvals the
failure of which to make or obtain would not, individually or in the aggregate,
prevent or delay the transactions contemplated hereby or have a Material Adverse
Effect on the Company.
(b) Except as set forth in Section 2.6(b) of the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement or
the Stock Option Agreement by the Company nor the consummation by the Company of
the transactions contemplated hereby or thereby will (i) conflict with or result
in any breach of any provision of the respective memorandum of association and
articles of association and other charter documents (or similar governing
documents) of the Company or any of its subsidiaries, (ii) result in a violation
or breach of or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, license, contract (including
any material Supply Contract (as defined below)), agreement or other instrument
or obligation to which the Company or any of its subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound,
(iii) violate any material order, writ, injunction, decree, law, statute, rule
or regulation applicable to the Company or any of its subsidiaries or any of
their respective properties or assets, (iv) contravene, conflict with or result
in a violation of, or give any Governmental Entity or other person the right to
exercise any remedy or obtain any relief under, any legal requirement or any
order, writ, injunction, judgment or decree to which the Company or its
subsidiaries, or any of the assets owned or used by the Company or its
subsidiaries, is subject, (v) contravene, conflict with or result in a violation
of any of the terms or requirements of, or give any Governmental Entity the
right to revoke, withdraw, suspend, cancel, terminate, modify or exercise any
right or remedy or require any refund or recapture with respect to, any Grant
(as hereinafter defined) given by any Governmental Entity (or any benefit
provided or available thereunder) or other permit, license, consent,
authorization, grant, benefit, right that is held by the Company or that
otherwise relates to the business or assets of the Company, or (vi) with the
passage of time, the giving of notice, or the taking of any action by a third
person, have any of the effects set forth in clauses (i) through (v) of this
Section; in each case (other than clause (i) hereof) other than such violations,
breaches or defaults as could not reasonably be expected to have a Material
Adverse Effect on the Company. Section 2.6 of the Company Disclosure Schedule
lists all holders of any material indebtedness of the Company or its
subsidiaries, the lessors of any material property leased by the Company or its
subsidiaries and the other parties to any material agreements to which the
Company or its subsidiaries is a party in each case whose consent to the Merger
is required.
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Section 2.7. No Default. Except as set forth in Section 2.7 of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
in breach, default or violation (and no event has occurred that with notice or
the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (a) its memorandum of association and
articles of association and other charter documents (or similar governing
documents), (b) any material note, bond, mortgage, indenture, lease, license,
contract (including any material Supply Contract), agreement or other instrument
or obligation to which the Company or any of its subsidiaries is now a party or
by which it or any of its properties or assets may be bound or (c) any material
Applicable Law, the consequence of which breach, default or violation does or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. The
Company has provided Parent true and accurate copies of its material agreements
as described in Item 601(b)(10) of Regulation S-K promulgated under the
Securities Act. Except as and to the extent publicly disclosed by the Company in
the Company SEC Reports or as set forth in Section 2.8 of the Company Disclosure
Schedule, or as incurred by the Company in the ordinary and usual course of
business consistent with past practice, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by United States
generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company (including the notes thereto), except for such
liabilities or obligations which do or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Except as publicly disclosed by the Company in the Company SEC Reports or as set
forth in Section 2.8 of the Company Disclosure Schedule, since December 31,
1999, there have been no events, changes or effects with respect to the Company
or its subsidiaries that, individually or in the aggregate, have had or
reasonably would be expected to have a Material Adverse Effect on the Company.
Without limiting the generality of the foregoing, except as and to the extent
publicly disclosed by the Company in the Company SEC Reports or as set forth in
Section 2.8 of the Company Disclosure Schedule or as otherwise permitted
pursuant to this Agreement, since December 31, 1999, the Company and its
subsidiaries have conducted their respective businesses in all material respects
in the ordinary and usual course of such businesses consistent with past
practices, and there has not been (other than under this Agreement) any:
(i) material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by the
Company or any of its subsidiaries, not covered by insurance;
(ii) declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of the Company or any of its
subsidiaries (other than wholly-owned subsidiaries) or any repurchase,
redemption or other acquisition by the Company or any of its subsidiaries of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or any of its subsidiaries;
(iii) amendment of any material term of any outstanding security
of the Company or any of its subsidiaries;
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<PAGE> 22
(iv) incurrence, assumption or guarantee by the Company or any of
its subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices;
(v) creation or assumption by the Company or any of its
subsidiaries of any Lien on any material asset other than in the ordinary course
of business consistent with past practices;
(vi) loan, advance or capital contributions made by the Company
or any of its subsidiaries to, or investment in, any person other than (x) loans
or advances to employees in connection with business-related travel, (y) loans
made to employees consistent with past practices that are not in the aggregate
in excess of Fifty Thousand Dollars ($50,000), and (z) loans, advances or
capital contributions to or investments in wholly-owned subsidiaries, and in
each case made in the ordinary course of business consistent with past
practices;
(vii) transaction or commitment made, or any contract or
agreement entered into, by the Company or any of its subsidiaries relating to
its assets or business (including the acquisition (by sale, license or
otherwise) or disposition (by sale, license or otherwise) of any assets) or any
relinquishment by the Company or any of its subsidiaries of any contract,
agreement or other right, in any such case, material to the Company and its
subsidiaries, taken as a whole, other than transactions and commitments in the
ordinary course of business consistent with past practices and those
contemplated by this Agreement;
(viii) labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company or any of its subsidiaries, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees; or
(ix) change by the Company or any of its subsidiaries in its
accounting principles, practices or methods.
Since December 31, 1999, except as disclosed in the Company SEC Reports
filed prior to the date hereof or increases in the ordinary course of business
consistent with past practices, there has not been any increase in the
compensation or other consideration payable or that could become payable by the
Company or any of its subsidiaries to (a) executive officers of the Company or
any of its subsidiaries or (b) any employee of the Company or any of its
subsidiaries whose annual compensation is One Hundred Thousand Dollars
($100,000) or more.
Section 2.9. Litigation. Except as publicly disclosed by the Company in
the Company SEC Reports or as set forth in Section 2.9 of the Company Disclosure
Schedule, to the knowledge of the Company there is no suit, claim, action,
arbitration, proceeding or investigation pending or threatened against the
Company or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity or brought by any person that could, if
adversely determined, have a Material Adverse Effect on the Company or would
reasonably be expected to prevent or delay the consummation of the transactions
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contemplated by this Agreement beyond the Final Date. Except as publicly
disclosed by the Company in the Company SEC Reports, neither the Company nor any
of its subsidiaries is subject to any outstanding order, writ, injunction or
decree that would reasonably be expected to prevent or delay the consummation of
the transactions contemplated hereby or have a Material Adverse Effect on the
Company.
Section 2.10. Compliance with Applicable Law. Except as publicly
disclosed by the Company in the Company SEC Reports, the Company and its
subsidiaries hold all material permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits") except where the failure to
hold any Permit could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company. Except as publicly
disclosed by the Company in the Company SEC Reports, (a) the Company and its
subsidiaries are in compliance with the terms of the Company Permits, (b) the
businesses of the Company and its subsidiaries have been and are being conducted
in compliance with all Applicable Laws and (c) no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the knowledge of the Company, threatened, nor, to the knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same, except to the extent that any noncompliance could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company.
Section 2.11. Foundry Relationships. Section 2.11 of the Company
Disclosure Schedule sets forth a complete and correct description of each and
every (a) foundry relationship, wafer manufacturing and fabricating agreement,
understanding or commitment, and (b) integrated circuit die or device purchase,
supply or service agreement, understanding or commitment, used by or in
connection with the Company's business, in whole or in part, whether written or
oral ("Supply Contracts").
Section 2.12. Environmental Laws and Regulations.
Except as could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company, (a) Hazardous
Materials have not been generated, used, treated or stored on, transported to or
from or released or disposed of on, any Company Property, except in compliance
with applicable Environmental Laws; (b) each of the Company and each of its
subsidiaries is in compliance with all applicable Environmental Laws and the
requirements of any Permits issued under such Environmental Laws with respect to
any Company Property; (c) there are no past, pending or, to the Company's
knowledge, threatened Environmental Claims against the Company or any of its
subsidiaries or any Company Property; and (d) to the Company's knowledge there
are no facts or circumstances, conditions or occurrences regarding the business,
assets or operations of the Company or any Company Property that could
reasonably be anticipated to form the basis of an Environmental Claim against
the Company or any of its subsidiaries or any Company Property.
For purposes of this Agreement, (a) "Company Property" means any real
property and improvements owned, leased or operated by the Company or any of its
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Subsidiaries; (b) "Hazardous Materials" means (i) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; (ii) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "extremely hazardous substances," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law; and (iii) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by any
Governmental Entity; (c) "Environmental Law" means any federal, state, foreign
or local statute, law, rule, regulation, ordinance, code or rule of common law
and any judicial or administrative interpretation thereof binding on the Company
or its operations or property as of the date hereof and the Closing Date,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health or Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Sections 6901 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Sections 1251 et
seq.; the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the
Clean Air Act, 42 U.S.C. Sections 7401 et seq.; the Oil Pollution Act of 1990,
33 U.S.C. Sections 2701 et seq.; the Safe Drinking Water Act, 42 U.S.C. Sections
300(f) et seq.; and their state and local counterparts and equivalents; (d)
"Environmental Claims" means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigations or proceedings under any Environmental Law or any
permit issued under any such Environmental Law (for purposes of this subclause
(e), "Claims"), including, without limitation, (i) any and all Claims by
Governmental Entities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law and (ii)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment; and (f) "Release" means disposing,
discharging, injecting, spilling, leaking, leaching, dumping, emitting,
escaping, emptying or seeping into or upon any land or water or air, or
otherwise entering into the environment.
Section 2.13. Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Tax" (including "Taxes") means (A) all federal,
state, local, foreign and other net income, gross income, gross receipts, sales,
use, value added, purchase, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind whatsoever,
whether disputed or not, together with any interest and any penalties, additions
to tax or additional amounts with respect thereto, (B) any liability for payment
of amounts described in clause (A) whether as a result of transferee liability,
of being a member of an affiliated, consolidated, combined or unitary group for
any period, or otherwise through operation of law, and (C) any liability for the
payment of amounts described in clauses (A) or
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(B) as a result of any tax sharing, tax indemnity or tax allocation agreement or
any other express or implied agreement to indemnify any other person; and
(ii) the term "Tax Return" means any return, declaration, report,
statement, information statement and other document required to be filed with
respect to Taxes.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, the Company and its subsidiaries have duly and timely filed all
material Tax Returns required to be filed (after taking into account all
available extensions) and have timely paid or adequately provided for in
accordance with United States generally accepted accounting principles all Taxes
due in respect of the periods covered by such Tax Returns, except, in each case,
where the failure so to file, pay or provide would not have a Material Adverse
Effect on the Company.
(c) No material penalty, interest or other charge is due or has been
asserted in writing as of the date of this Agreement, with respect to the late
filing of any Tax Return or late payment of any Tax, except where such penalty,
interest or other charges will not have a Material Adverse Effect on the
Company. Except as set forth in Section 2.13(c) of the Company Disclosure
Schedule, as of the date of this Agreement no material claim for assessment or
collection of Taxes is presently being asserted against the Company or its
subsidiaries and neither the Company nor any of its subsidiaries is a party to
any pending action, proceeding, or investigation by any governmental taxing
authority relating to a material Tax nor does the Company have knowledge of any
such threatened action, proceeding or investigation.
(d) Except as set forth in Section 2.13(d) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to or bound
by any obligation under any written Tax sharing, Tax allocation, Tax indemnity
or similar agreement or arrangement.
(e) Section 2.13(e) of the Company Disclosure Schedule, together with
the Company's annual report on Form 20-F for the year ended December 31, 1999,
lists each material tax incentive granted to the Company and its subsidiaries
under the laws of the State of Israel, the period for which such tax incentive
applies, and the nature of such tax incentive. The Company and its subsidiaries
have complied with all material requirements of Israeli law to be entitled to
claim all such incentives. Subject to the receipt of the approvals set forth in
Section 2.6 of the Company's Disclosure Schedule and compliance by the Surviving
Corporation with the applicable requirements and conditions, to the Company's
knowledge, the consummation of the Merger will not adversely affect the
remaining duration of the incentive or require any recapture of any previously
claimed incentive, and no consent or approval of any Governmental Entity is
required, other than as contemplated by Section 2.6, prior to the consummation
of the Merger in order to preserve the entitlement of the Surviving Corporation
or its subsidiaries to any such incentive.
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Section 2.14. Intellectual Property.
(a) Section 2.14(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all of the Company's and each of its subsidiary's
United States and foreign (i) patents and patent applications; (ii) Trademark
registrations and applications and material unregistered Trademarks; and (iii)
copyright registrations and applications, indicating for each, the applicable
jurisdiction, registration number (or application number) and date issued (or
date filed) owned, in whole or in part, including jointly with others, by the
Company or any of its subsidiaries. For purposes of this Agreement,
"Intellectual Property" means: (A) trademarks and service marks (whether
registered or unregistered), trade names, designs and general intangibles of
like nature, together with all goodwill related to the foregoing (collectively,
"Trademarks"); (B) patents (including any continuations, continuations in part,
renewals and applications for any of the foregoing) (collectively "Patents");
(C) copyrights (including any registrations and applications therefor and
whether registered or unregistered) (collectively "Copyrights"); (D) computer
software; databases; works of authorship; mask works; technology; trade secrets
and other confidential information, know-how, proprietary processes, formulae,
algorithms, models, user interfaces, customer lists, inventions, discoveries,
concepts, ideas, techniques, methods, source codes, object codes, methodologies
and (E) with respect to all of the foregoing, related confidential data or
information (collectively, "Trade Secrets"). The Company's and each of its
subsidiary's Trademarks, Patents, Copyrights and Trade Secrets are sometimes
referred to hereinafter as the "Company Trademarks," "Company Patents," "Company
Copyrights" and "Company Trade Secrets," respectively.
(b) Trademarks.
(i) All Company Trademark registrations are currently in
compliance in all material respects with all legal requirements (including,
where applicable, the timely post-registration filing of affidavits of use and
incontestability and renewal applications) other than any requirement that, if
not satisfied, would not result in a cancellation of any such registration or
otherwise materially affect the priority and enforceability of the Company
Trademark in question.
(ii) No material registered Company Trademark has been within the
last three (3) years or is now involved in any opposition or cancellation
proceeding in the United States Patent and Trademark Office or other applicable
Governmental Entity. To the Company's knowledge, no such action has been
threatened in writing within the one (1)-year period prior to the date of this
Agreement.
(iii) To the knowledge of the Company, there has been no prior
use of any material Company Trademark by any third party that confers upon such
third party superior rights in any such Company Trademark.
(c) Patents.
(i) All Company Patents are currently in compliance with legal
requirements (including payment of filing, examination, and maintenance fees and
proofs of
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<PAGE> 27
working or use) other than any requirement that, if not satisfied, would not
result in a revocation or otherwise materially affect the enforceability of the
Company Patent in question.
(ii) No Company Patent has been or is now involved in any
interference, reissue, reexamination or opposition proceeding in the United
States Patent and Trademark Office or other applicable Governmental Entity. To
the Company's knowledge, no such action has been threatened in writing within
the one (1)-year period prior to the date of this Agreement.
(iii) To the knowledge of the Company, there is no patent or
patent application of any person that conflicts in any material respect with any
Company Patent or invalidates any claim the Company has in any Company Patent.
(d) Trade Secrets.
(i) The Company has taken reasonable steps in accordance with
normal industry practice to protect the Company's rights in confidential
information and Company Trade Secrets.
(ii) Without limiting the generality of Section 2.14(d)(i) and
except as would not be materially adverse to the Company or its business, the
Company enforces and has enforced a policy of requiring each relevant employee,
consultant and contractor to execute "work for hire" (or similar arrangements
under Applicable Law), proprietary information, confidentiality and assignment
agreements substantially in the Company's standard forms that effectively and
exclusively assign to the Company or one of its subsidiaries rights to any
Intellectual Property relating to the business of the Company or its
subsidiaries created in the course of performance of work for the Company or one
of its subsidiaries. Except under confidentiality obligations, to the knowledge
of the Company there has been no disclosure by the Company or any subsidiary of
material confidential information or Company Trade Secrets. The Company has
provided Parent a copy of its trade secret protection policy.
(e) License Agreements. Section 2.14(e)(1) of the Company Disclosure
Schedule sets forth a complete and accurate list of all license agreements
granting to the Company or any of its subsidiaries any material right to use or
practice any rights under any Intellectual Property, other than software
commercially available on reasonable terms to any person for a license fee of no
more than One Hundred Thousand Dollars ($100,000) in the aggregate
(collectively, the "Company Inbound License Agreements"), indicating for each
the title and the parties thereto. Section 2.14(e)(2) of the Company Disclosure
Schedule sets forth a complete and accurate list of all license agreements under
which the Company or any of its subsidiaries licenses software or grants other
rights in or rights to use or practice under any Intellectual Property,
excluding licenses with customers that in the twelve-month period prior to the
date hereof have purchased or licensed products for which the total payments to
the Company and its subsidiaries did not exceed One Hundred Thousand Dollars
($100,000) in the aggregate (collectively, the "Company Outbound License
Agreements," and with the Company Inbound License Agreements, the "Company
License Agreements"), indicating for
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<PAGE> 28
each the title and the parties thereto. There is no material outstanding or, to
the Company's knowledge, threatened dispute or disagreement with respect to any
Company Inbound License Agreement or any Company Outbound License Agreement.
(f) Ownership; Sufficiency of IP Assets. The Company or one of its
subsidiaries owns or possesses adequate licenses or other rights to use, free
and clear of Liens, orders and arbitration awards, all of its Intellectual
Property used in their respective businesses as currently conducted. The
Intellectual Property identified in Section 2.14(a) of the Company Disclosure
Schedule, together with the Company's and its subsidiaries' rights under the
licenses granted to the Company or any of its subsidiaries under the Company
Inbound License Agreements, constitute all the material Intellectual Property
rights used or necessary in the operation of the Company's and its subsidiaries'
businesses as they are currently conducted.
(g) Protection of IP. The Company has taken reasonable and customary
steps to protect the Intellectual Property of the Company and its subsidiaries.
(h) No Infringement by the Company. The products used, manufactured,
marketed, sold or licensed by the Company, and all Intellectual Property used in
the conduct of the Company's and its subsidiaries' businesses as currently
conducted, do not infringe upon, violate or constitute the unauthorized use of
any rights owned or controlled by any third party, including any Intellectual
Property of any third party.
(i) No Pending or Threatened Infringement Claims. Except and to the
extent publicly disclosed in the Company SEC Reports, no litigation is now or,
within the three (3) years prior to the date of this Agreement, was pending and,
to the Company's knowledge, no notice or other claim has been received by the
Company within the one (1) year prior to the date of this Agreement, nor is the
Company aware of any facts or circumstances that in the Company's reasonable
judgment could be expected to give rise to any material claim, (i) alleging that
the Company or any of its subsidiaries has engaged in any activity or conduct
that infringes upon, violates or constitutes the unauthorized use of the
Intellectual Property rights of any third party or (ii) challenging the
ownership, use, validity or enforceability of any Intellectual Property owned or
exclusively licensed by or to the Company. Except as specifically disclosed in
one or more Sections of the Company Disclosure Schedules pursuant to this
Section 2.14, no Intellectual Property owned or licensed by the Company or any
of its subsidiaries is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting the use thereof by the Company or any such
subsidiary or, in the case of any Intellectual Property licensed to others,
restricting the sale, transfer, assignment or licensing thereof by the Company
or any of its subsidiaries to any person.
(j) No Infringement by Third Parties. Except as and to the extent
publicly disclosed in the Company SEC Reports or as set forth in Section 2.14(j)
of the Company Disclosure Schedule, to the knowledge of the Company, no third
party is misappropriating, infringing, diluting or violating any Intellectual
Property owned or exclusively licensed by the Company or any of its
subsidiaries, and no such claims have been brought against any third party by
the Company or any of its subsidiaries.
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(k) Assignment; Change of Control. The execution, delivery and
performance by the Company of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the loss or impairment of,
or give rise to any right of any third party to terminate, any of the Company's
or any of its subsidiaries' rights to own any of its Intellectual Property or
their respective rights under the Company License Agreements, nor require the
consent of any Governmental Authority or third party in respect of any such
Intellectual Property.
(l) Software. The Software owned or purported to be owned by the Company
or any of its subsidiaries, was either (i) developed by employees of the Company
or any of its subsidiaries within the scope of their employment; (ii) developed
by independent contractors who have assigned their rights to the Company or any
of its subsidiaries pursuant to written agreements; or (iii) otherwise acquired
by the Company or a subsidiary from a third party. Except as set forth in
Section 2.14(l) of the Company Disclosure Schedule, to the Company's knowledge,
the Software does not contain any programming code, documentation or other
materials or development environments that embody Intellectual Property rights
of any person other than the Company or any of its subsidiaries, except for such
materials or development environments obtained by the Company or any of its
subsidiaries from other persons who make such materials or development
environments commercially available to purchasers or end-users. For purposes of
this Section 2.14(l), "Software" means any and all (i) computer programs,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (ii) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, and
(iv) all documentation, including user manuals and training materials, relating
to any of the foregoing.
Section 2.15. Insurance. The insurance policies maintained by the
Company and its subsidiaries have been issued by insurers which, to the
Company's knowledge, are reputable and financially sound. Such policies provide
coverage for the operations conducted by the Company and its subsidiaries of a
scope and coverage consistent with customary industry practice of similarly
situated companies in the same or similar businesses.
Section 2.16. Certain Business Practices. None of the Company, any of
its subsidiaries or any directors, officers, agents or employees of the Company
or any of its subsidiaries has (a) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(b) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (c)
made any other unlawful payment.
Section 2.17. Title to Properties. Except as set forth in Section 2.17
of the Company Disclosure Schedule, and except for merchandise and other
property sold, used or otherwise disposed of in the ordinary course of business,
the Company and each of its subsidiaries has good and marketable title to, or,
in the case of leased properties and assets a valid leasehold interest in, the
real and personal property reflected in the Company's most recent balance sheet
included in the Company SEC Reports, except where the failure to have
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<PAGE> 30
such good, valid and marketable title or leasehold interest could not reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on the Company, in each case, subject to no Liens, except for (a) Liens
reflected in the Company SEC Reports, (b) Liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of, such property by the Company or
any of its subsidiaries in the operation of their respective businesses, (c)
Liens for current Taxes, assessments or governmental charges or levies on
property not yet due or which are being contested in good faith and (d) Liens
which could not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company. Except as could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company, each of the Company and its subsidiaries is in compliance with the
terms of all leases of real or personal properties to which it is a party or
under which it is in occupancy, and all such leases are in full force and
effect.
Section 2.18. Product Warranties. Except as set forth in Section 2.18 of
the Company Disclosure Schedule, there have not been any material deviations
from any warranties and guaranties of the Company or any of its subsidiaries
currently in effect with respect to its products, and neither the Company, any
of its subsidiaries nor any of their respective salesmen, employees,
distributors and agents is authorized to undertake obligations to any customer
or to other third parties materially in excess of such warranties or guaranties.
To the Company's knowledge, neither the Company nor any of its subsidiaries has
made any material oral warranty or guaranty with respect to its products.
Section 2.19. Suppliers and Customers. The documents and information
supplied by the Company to Parent or any of its representatives in connection
with this Agreement with respect to relationships and volumes of business done
with its significant suppliers and customers are accurate in all material
respects.
Section 2.20. Grants, Incentives and Subsidies. Section 2.20 of the
Company Disclosure Schedule provides a complete list of all pending and
outstanding grants, incentives and subsidies (collectively, "Grants") from the
Government of the State of Israel or any agency thereof, or from any foreign
governmental or administrative agency, granted to the Company, including,
without limitation, (i) Approved Enterprise Status from the Investment Center
and (ii) grants from the Office of the Chief Scientist (the "OCS"). The Company
has made available to Parent, prior to the date hereof, correct copies of all
documents evidencing Grants submitted by the Company and of all letters of
approval, and supplements thereto, granted to the Company (except for OCS
grants, with respect to which such documents will be provided within five (5)
days after the date hereof). Without limiting the generality of the above,
Section 2.20 of the Company Disclosure Schedule includes the aggregate amounts
of each Grant, and the aggregate outstanding obligations thereunder of the
Company with respect to royalties, or the outstanding amounts to be paid by the
OCS to the Company. The Company is in compliance, in all material respects, with
the terms and conditions of their respective Grants and, except as disclosed in
Section 2.20 of the Company Disclosure Schedule hereto, have duly fulfilled, in
all material respects, all the undertakings relating thereto. Other than the
transactions contemplated by this Agreement, the Company is not
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aware of any event or other set of circumstances which might lead to the
revocation or material modification of any of the Grants.
Section 2.21. Opinion of Financial Adviser. Salomon Smith Barney (the
"Company Financial Adviser") has delivered to the Company Board its opinion to
the effect that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of Shares, a written copy of which will
be received prior to the Closing, and a true and accurate copy of which will be
delivered to Parent as soon as available but no later than the Closing. Such
opinion has not been withdrawn, revoked or modified.
Section 2.22. Affiliates. Except for the directors and executive
officers of the Company, each of whom is listed in Section 2.22 of the Company
Disclosure Schedule, there are no persons who, to the knowledge of the Company,
may be deemed to be affiliates of the Company under Rule 145 of the Securities
Act ("Company Affiliates").
Section 2.23. Brokers. No broker, finder or investment banker (other
than the Company Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to Parent) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
Section 2.24. Employee Benefits.
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(ii) "ERISA Affiliate" shall mean, with respect to any person,
any other person under common control with the first person within the meaning
of Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(iii) "Company Employee Plan" shall mean any Employee Plan for
the benefit of any Employee with respect to the Company and pursuant to which
the Company or any of its ERISA Affiliates has any liability contingent or
otherwise;
(iv) "Employee Plan" shall refer to each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA and each stock option, stock
purchase, stock bonus, retirement, health, disability insurance, or dependent
care plan, policy or agreement;
(v) "Employee" shall mean, with respect to any person, any
current, former, or retired employee, director, or officer of the person or any
of its ERISA Affiliates;
(vi) "Employee Agreement" shall, with respect to any person,
refer to each management, employment and consulting agreement as to which
unsatisfied obligations (contingent or otherwise) of the person or any of its
ERISA Affiliates are greater than Fifty Thousand Dollars ($50,000) and each
signing bonus, relocation, repatriation,
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expatriation, or similar agreement between the person or any of its ERISA
Affiliates and any Employee or consultant, as to which unsatisfied obligations
(contingent or otherwise) of the person or any of its ERISA Affiliates are
greater than Fifty Thousand Dollars ($50,000); and
(vii) "IRS" shall mean the Internal Revenue Service.
(b) Employee Plans. Section 2.24(b) of the Company Disclosure Schedule
contains an accurate and complete list of each Company Employee Plan and each
Employee Agreement. Except as and to the extent publicly disclosed in the
Company SEC Reports or as set forth in Section 2.24(b) of the Company Disclosure
Schedule, the Company has also made available to Parent or its counsel, where
applicable, true, complete and correct copies of (i) the most recent plan
documents, related trust documents, adoption agreements, summary plan
descriptions, and all amendments thereto for each Company Employee Plan, (ii)
the most recent actuarial and audit reports for each Pension Plan, and (iii) the
most recent IRS determination letters and rulings received by the Company and
copies of all applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any Company Employee Plan.
(c) Employee Plan Compliance. Except in each case for which
non-compliance would not have a Material Adverse Effect (i) each Company
Employee Plan has been established and maintained in accordance with its terms
and all Applicable Laws, including ERISA and the Code; (ii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company Employee Plan; (iii) no Employee
of the Company has committed a material breach of any responsibility imposed
upon fiduciaries by Title I of ERISA with respect to any Company Employee Plan;
(iv) there are no judicial, regulatory, arbitration or similar proceedings
pending, or, to the Company's knowledge, threatened or anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan; (v) there are no inquiries, investigations,
audits or proceedings pending or, to the Company's knowledge, threatened by the
IRS or DOL with respect to any Company Employee Plan or any related trust; (vi)
neither the Company nor any ERISA Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Sections 4975 through 4980 of
the Code; (vii) each Pension Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and has received a favorable determination
opinion, notification or advisory letter with respect to such status from the
IRS or has time remaining to apply under applicable Treasury Regulation or IRS
pronouncement for a determination or opinion letter and to make any necessary
amendments, and no event has occurred and no condition or circumstance has
existed or exists which may reasonably be expected to result in the
disqualification of such Pension Plan.
(d) Pension Plans. None of the Company Employee Plans is or was subject
to Code Section 412 or ERISA Section 302, or is a plan described in Sections
3(37), 4063 or 4064 of ERISA.
(e) Post-Employment Obligations. Except as set forth in Section 2.24(e)
of the Company Disclosure Schedule, no Company Employee Plan provides, or has
any liability to provide, life insurance, medical or other employee welfare
benefits coverage to any
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Employee upon his or her retirement or termination of employment for any reason,
except as (i) may be required by statute, (ii) to benefits the full cost of
which are borne by Employees of the Company (or such Employees' beneficiaries or
dependents), (iii) death or disability benefits under any of the Company
Employee Plans, (iv) life insurance benefits for any Employee who dies while in
service with the Company, or (v) continuing coverage until the end of the month
in which retirement or termination of employment occurs.
(f) Effect of Transaction.
(i) Except as set forth in Section 2.24(f)(1) of the Company
Disclosure Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise and including forgiveness of
indebtedness), acceleration, vesting, distribution, increase in benefits under
any Company Employee Plan or Employee Arrangement or compensation to any
Employee, or obligation to fund compensation benefits with respect to any
Employee.
(ii) Except as set forth in Section 2.24(f)(2) of the Company
Disclosure Schedule, no payment or benefit which will or may be made under any
Company Employee Plan or Company Employee Agreement in connection with the
consummation of the transactions contemplated hereby by the Company or Parent or
any of their respective affiliates with respect to any Employee will be
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code.
(g) Stock Options. Section 2.24(g) of the Company Disclosure Schedule
lists all outstanding Stock Options as of October 1, 2000, identifying for each
such option: (i) the number of shares issuable, (ii) the number of vested
shares, (iii) the date of expiration and (iv) the exercise price. Other than the
automatic vesting of Stock Options that may occur without any action on the part
of the Company or its officers or directors, the Company has not taken any
action that would result in any Stock Options that are unvested becoming vested
or their terms being extended in connection with or as a result of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(h) Foreign Plans. Except as set forth in Section 2.24(h) of the Company
Disclosure Schedule, with respect to any Company Employee Plan maintained for
Employees outside of the United States (each a "Foreign Plan"): (i) each Foreign
Plan and the manner in which it has been administered satisfies all Applicable
Laws, (ii) all contributions to each Foreign Plan required through the Closing
have been and will be made by the Company, (iii) each Foreign Plan is either
fully funded (or fully insured) based upon generally accepted local actuarial
and accounting practices and procedures or adequate accruals for each Foreign
Plan have been made in the Company's financial statements in accordance with
United States generally accepted accounting principles, (iv) there are no
pending investigations by any Governmental Entity involving any Foreign Plan nor
any pending claims (except for claims for benefits payable in the normal
operation of the Foreign Plans), suits or proceedings against any Foreign Plan
or asserting any rights or claims to benefits under any Foreign Plan; and (v)
the consummation of the transactions contemplated by this Agreement will not by
itself create
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or otherwise result in any material liability with respect to any Foreign Plan.
Without derogating from the above, the Company's obligations to provide
severance pay to its employees are fully funded or have been properly provided
for in the Company's financial statements attached to the Company SEC Reports in
accordance with United States generally accepted accounting principles. All
other liabilities of the Company relating to its employees (excluding
liabilities for illness pay) were properly accrued in the Company's financial
statements in accordance with United States generally accepted accounting
principles.
Section 2.25. Labor and Employment Matters. Except as set forth in
Section 2.25 of the Company Disclosure Schedule:
(a) Neither the Company nor any of its subsidiaries are a party to or
bound by any collective bargaining contract, collective labor agreement or other
contract or arrangement with a labor union, trade union or other organization
involving any of its employees, or, except for Company Benefit Plans and
Employee Agreements listed in Section 2.24 of the Company's Disclosure Schedule
is otherwise required (under any legal requirement, under any contract or
otherwise) to provide benefits or working conditions beyond the minimum benefits
and working conditions required by law to be provided pursuant to rules and
regulations of any jurisdiction in which the Company and its subsidiaries have
employees, including without limitation the Histadrut (General Federation of
Labor), the Coordinating Bureau of Economic Organization and the Industrialists'
Association, and the Company has not been officially apprised that any petition
has been filed or proceeding instituted by an employee or group of employees of
the Company, or any of its subsidiaries, with any Governmental Entity seeking
recognition of a bargaining representative. Except as set forth in Section 2.24
or 2.25 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries have or are subject to, and no employee of the Company or any of
its subsidiaries benefits from, any extension order (tzavei harchava) or any
contract or arrangement with respect to termination of employment. All of the
employees of the Company and its subsidiaries are "at will" employees subject to
the termination notice provisions included in employment agreements or
Applicable Law.
(b) (i) To the Company's knowledge, there is no labor strike,
dispute, slow down or stoppage pending or threatened against the Company or any
of its subsidiaries;
(ii) Neither the Company nor any of its subsidiaries has received
in the last twenty-four (24) months any demand letters, civil rights charges,
suits or drafts of suits with respect to claims made by or on behalf of any of
their respective employees which would have a Material Adverse Effect on
Company; and
(iii) Neither the Company nor any of its subsidiaries is aware of
any pending claims, civil rights charges, suits or drafts of suits with respect
to claims made by or on behalf of their respective employees.
(c) All amounts that the Company or any subsidiary is legally or
contractually required either (i) to deduct from its employees' salaries or to
transfer to such employees' pension or provident, life insurance, incapacity
insurance, continuing education fund or other similar fund or (ii) to withhold
from their employees' salaries and pay to any
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Governmental Entity as required by the Israeli Income Tax Ordinance [New
Version] and other applicable laws have, in each case, been duly deducted,
transferred, withheld and paid, and the Company does not have any outstanding
obligation to make any such deduction, transfer, withholding or payment.
(d) The Company is not liable for any material payment to any trust or
other fund or to any Governmental Entity, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(e) The Company and its subsidiaries are in compliance with all material
laws and regulations pertaining to the payment of wages and overtime.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company,
subject to the exceptions set forth in the Disclosure Schedule delivered by
Parent to the Company (the "Parent Disclosure Schedule") as follows:
Section 3.1. Organization.
(a) Parent is duly organized, validly existing and in good
standing under the laws of Bermuda. Acquisition is duly organized and validly
existing under the laws of the State of Israel. Each of Parent and Acquisition
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Parent has heretofore made
available to the Company accurate and complete copies of the organizational
documents and bye-laws (or similar governing documents) as currently in full
force and effect, of Parent and Acquisition.
(b) Each of Parent and Acquisition is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect on Parent.
(c) Acquisition is a newly incorporated Israeli corporation.
Except in connection with this Agreement, Acquisition has not and will not prior
to the Effective Time conducted any operations, entered into any agreements and
has no and will not have prior to the Effective Time or the earlier termination
of this Agreement any obligations or liabilities, either accrued, absolute,
contingent or otherwise.
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Section 3.2. Capitalization of Parent and its Subsidiaries.
(a) The authorized share capital of Parent consists of $500,000, divided
into 242,000,000 shares of Parent common stock, $0.002 par value per share
("Parent Common Stock"), and 8,000,000 shares of preferred stock, $0.002 per
share, of which, as of October 16, 2000, 85,468,166 shares of Parent Common
Stock were issued and outstanding. All of the outstanding shares of Parent
Common Stock have been validly issued and are fully paid, nonassessable and free
of preemptive rights. The shares of Parent Common Stock to be issued in the
Merger or upon exercise of any Assumed Option will be validly issued, fully paid
and nonassessable and free of preemptive rights. As of October 16, 2000,
30,640,000 shares of Parent Common Stock were reserved for issuance and
12,943,958 were issuable upon or otherwise deliverable in connection with the
exercise of outstanding options and warrants. Except as set forth above or in
Parent SEC Reports, there are outstanding (i) no shares or other voting
securities of Parent, (ii) no securities of Parent or any of its subsidiaries
convertible into or exchangeable or exercisable for shares or other securities
of Parent, (iii) no options, preemptive or other rights to acquire from Parent
or any of its subsidiaries, and no obligations of Parent or any of its
subsidiaries to issue, any shares, voting securities or securities convertible
into or exchangeable or exercisable for shares or other securities of Parent and
(iv) no equity equivalent interests in the ownership or earnings of Parent or
its subsidiaries or other similar rights (collectively "Parent Securities"). As
of the date hereof, there are no outstanding rights or obligations of Parent or
any of its subsidiaries to repurchase, redeem or otherwise acquire any Parent
Securities. Except as set forth in Section 3.1(a) of Parent Disclosure Schedule
or in Parent SEC Reports, there are no voting agreements, voting trusts or other
agreements or understandings to which Parent is a party or by which it is bound
relating to the voting or registration of any shares of capital stock of Parent.
(b) All of the outstanding capital stock of Parent's subsidiaries is
owned by Parent, directly or indirectly, free and clear of any Lien or any other
limitation or restriction (including any restriction on the right to vote or
sell the same except as may be provided as a matter of Applicable Law). There
are no (i) securities of Parent or any of its subsidiaries convertible into or
exchangeable or exercisable for, (ii) options or (iii) other rights to acquire
from Parent or any of its subsidiaries any capital stock or other ownership
interests in or any other securities of any subsidiary of Parent, and there
exists no other contract, understanding, arrangement or obligation (whether or
not contingent) providing for the issuance or sale, directly or indirectly, of
any such capital stock. There are no outstanding contractual obligations of
Parent or its subsidiaries to repurchase, redeem or otherwise acquire any
outstanding Parent Common Stock of capital stock or other ownership interests in
any subsidiary of Parent.
(c) The Parent Common Stock constitutes the only class of equity
securities of Parent or its subsidiaries registered or required to be registered
under the Exchange Act.
(d) The authorized share capital of Acquisition consists of 39,100 NIS,
divided into 39,100 ordinary shares, of which 100 shares were issued and
outstanding as of the date hereof. All of the issued and outstanding ordinary
shares of Acquisition are owned
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by Parent and there are no other outstanding shares or other voting securities
of Acquisition or rights to acquire the same.
Section 3.3. Authority Relative to this Agreement.
(a) Each of Parent and Acquisition has all necessary corporate power and
authority to execute and deliver this Agreement and the Stock Option Agreement,
to perform its obligations under this Agreement and the Stock Option Agreement
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the boards of directors of Parent and Acquisition and
by Parent as the sole shareholder of Acquisition, and, subject to receipt of the
required shareholder vote (as described below), no other corporate proceedings
on the part of Parent or Acquisition are necessary to authorize this Agreement
or the Stock Option Agreement or to consummate the transactions contemplated
hereby or thereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Acquisition and constitutes, assuming the due
authorization, execution and delivery hereof by the Company, a valid, legal and
binding agreement of each of Parent and Acquisition enforceable against each of
Parent and Acquisition in accordance with its terms, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity.
(b) Without limiting the generality of the foregoing, each of the Board
of Directors of Parent and Acquisition has (i) determined that the Merger is
fair to, and in the best interests of Parent and Parent's shareholders, (ii)
approved this Agreement, the Stock Option Agreement, the Merger and the other
transactions contemplated hereby, and (iii) has not withdrawn or modified such
approval.
(c) The affirmative votes of both (i) 66-2/3% of votes cast by such
Members of Parent (as such term is defined in the Amended and Restated Bye-Laws
of Parent (the "Parent Bye-Laws")) as, being entitled to do so, vote in person
or by proxy or by duly authorized corporate representative and (ii) 66-2/3% in
number of the Members present in person or by proxy or by duly authorized
corporate representative at the Parent Special Meeting (as hereinafter defined)
of which not less than twenty-one (21) Clear Days' notice (as such term is
defined in the Parent Bye-Laws) has been duly given in accordance with the
Parent Bye-Laws (the "Parent Requisite Vote"), are the only votes of the holders
of any securities of Parent necessary to approve (A) the Merger and (B) the
issuance of Parent Common Stock pursuant to the rules of Nasdaq National Market.
The quorum required for the Parent Special Meeting is two persons present in
person and representing in excess of 50% of the total issued voting shares in
Parent throughout the meeting. No vote or approval of (x) any creditor of Parent
or its subsidiaries, (y) any holder of any option or warrant granted by Parent
or its subsidiaries, or (z) any shareholder of Parent's subsidiaries is
necessary in order to approve or permit the consummation of the Merger or the
issuance of Parent Shares pursuant to the rules of Nasdaq National Market.
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Section 3.4. SEC Reports; Financial Statements.
(a) Parent has filed all required forms, reports and documents ("Parent
SEC Reports") with the SEC since June 26, 2000, each of which, complied at the
time of filing in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, each law as in effect on the dates such
forms, reports and documents were filed. None of such Parent SEC Reports,
including any financial statements or schedules included or incorporated by
reference therein, contained when filed any untrue statement of a material fact
or omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein in light
of the circumstances under which they were made not misleading, except to the
extent superseded by a Parent SEC Report filed subsequently and prior to the
date hereof. The audited consolidated financial statements of Parent included in
the Parent SEC Reports fairly present in all material respects in conformity
with United States generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto) the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended. Notwithstanding the foregoing,
Parent shall not be deemed to be in breach of any of the representations or
warranties in this Section 3.4 as a result of any changes to the Parent SEC
Reports that Parent may make in response to comments received from the SEC on
the Form S-4.
(b) Parent has heretofore made available, and hereafter will promptly
make, available to the Company a complete and correct copy of any amendments or
modifications that are required to be filed with the SEC but have not yet been
filed with the SEC to agreements documents or other instruments that previously
had been filed by Parent with the SEC pursuant to the Exchange Act.
Section 3.5. Information Supplied. None of the information supplied or
to be supplied by Parent or Acquisition for inclusion or incorporation by
reference to (i) the Form S-4 will at the time the Form S-4 is filed with the
SEC and at the time it becomes effective under the Securities Act contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
or (ii) the Proxy Statement will at the date mailed to shareholders and at the
times of the meeting or meetings of shareholders of the Parent to be held in
connection with the Merger contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they are made not misleading. The Form S-4 will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations thereunder. Notwithstanding the foregoing, Parent makes no
representation, warranty or covenant with respect to any information supplied or
required to be supplied by the Company that is contained in or omitted from any
of the foregoing documents.
Section 3.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under and
other applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, and any filings under similar merger
notification laws or regulations of foreign
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Governmental Entities and the filing and recordation of the Merger Proposal, the
Shareholder Approval Notices and the other filings listed in Section 4.5(d) as
required by the Companies Law, the exemption from the Israeli Securities
Authority from the requirement to publish a prospectus in respect of the
issuance of options to acquire Parent Common Stock to Israeli resident holders
of Company Stock Options, to the extent required by Applicable Law, the consent
of the Israeli Controller of Restrictive Trade Practices pursuant to the
Restrictive Trade Practices Law (1968), no material filing with or notice to,
and no material permit, authorization, consent or approval of any Governmental
Entity is necessary for the execution and delivery by Parent or Acquisition of
this Agreement or the consummation by Parent or Acquisition of the transactions
contemplated hereby. Neither the execution, delivery and performance of this
Agreement by Parent or Acquisition nor the consummation by Parent or Acquisition
of the transactions contemplated hereby will (a) conflict with or result in any
breach of any provision of the respective Certificates of Incorporation or
bylaws (or similar governing documents) of Parent or Acquisition, (b) result in
a violation or breach of or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent or
Acquisition or any of Parent's other subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound or (c) violate
any material order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or Acquisition or any of Parent's other subsidiaries or any
of their respective properties or assets.
Section 3.7. Litigation. Except as publicly disclosed by Parent in the
Parent SEC Reports or as set forth in Section 3.7 of the Parent Disclosure
Schedule, there is no suit, claim, action, arbitration, proceeding pending or,
to the knowledge of Parent, investigation pending or threatened, against Parent
or any of its subsidiaries or any of their respective properties or assets
before any Governmental Entity that could, if adversely determined, have a
Material Adverse Effect on Parent or would reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement beyond
the Final Date. Except as publicly disclosed by Parent in the Parent SEC
Reports, Parent nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree that could reasonably be expected to prevent or delay
the consummation of the transactions contemplated hereby.
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Section 3.8. No Default. Except as set forth in Section 3.8 of the
Parent Disclosure Schedule, neither Parent nor any of its subsidiaries is in
material breach, default or violation (and no event has occurred that with
notice or the lapse of time or both would constitute a breach, default or
violation) of any term, condition or provision of (a) its Certificate of
Incorporation or bylaws (or similar governing documents), (b) any material note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or any of its subsidiaries is now a
party or by which it or any of its properties or assets are bound or (c) any
material order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or any of its subsidiaries or any of its properties or
assets.
Section 3.9. Opinion of Financial Advisor. Goldman Sachs & Co. (the
"Parent Financial Advisor") has delivered to the Board of Directors of Parent
its opinion to the effect that, as of the date hereof, the Exchange Ratio is
fair, from a financial point of view, to Parent ("Opinion of Parent Financial
Advisor"), a written copy of which will be received prior to the Closing, and a
true and correct copy of which will be delivered to the Company as soon as
available but no later than the Closing.
Section 3.10. Brokers. No broker finder or investment banker (other than
the Parent Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Acquisition.
Section 3.11. No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Acquisition has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind or entered into any agreement or
arrangement with any person.
Section 3.12. No Undisclosed Liabilities; Absence of Changes. Except as
and to the extent publicly disclosed by Parent in the Parent SEC Reports,
neither Parent nor any of its subsidiaries has any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by United States generally accepted accounting principles to
be reflected on a consolidated balance sheet of Parent (including the notes
thereto) other than (a) liabilities specifically described in this Agreement or
in the Parent Disclosure Schedule, and (b) normal or recurring liabilities
incurred since June 26, 2000 in the ordinary course of business consistent with
past practices. Except as publicly disclosed by Parent in the Parent SEC Reports
or as set forth in Section 3.12 of the Parent Disclosure Schedule, since June
26, 2000, there have been no events, changes or effects with respect to Parent
or its subsidiaries that, individually or in the aggregate, have had or
reasonably would be expected to have a Material Adverse Effect on Parent.
Section 3.13. Compliance with Applicable Law. Except as publicly
disclosed by Parent in the Parent SEC Reports, (a) Parent and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Parent Permits"), (b) Parent and its subsidiaries are in
material compliance with the terms of the Parent Permits, and (c) to the
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knowledge of Parent, the businesses of Parent and its subsidiaries have been and
are being conducted in compliance with all Applicable Laws except to the extent
that the failure to hold any such permit or such noncompliance could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on Parent.
Section 3.14. Affiliates. Except for the directors and executive
officers of Parent, each of whom is listed in Section 3.14 of the Parent
Disclosure Schedule, there are no persons who, to the knowledge of Parent, may
be deemed to be affiliates of Parent within the meaning of Rule 145 of the
Securities Act ("Parent Affiliates").
Section 3.15. Intellectual Property. The Parent's and each of its
subsidiary's Trademarks, Patents, Copyrights and Trade Secrets are sometimes
referred to hereinafter as the "Parent Trademarks," "Parent Patents," "Parent
Copyrights" and "Parent Trade Secrets," respectively.
(a) Trademarks.
(i) All Parent Trademark registrations are currently in
compliance in all material respects with all legal requirements (including,
where applicable, the timely post-registration filing of affidavits of use and
incontestability and renewal applications) other than any requirement that, if
not satisfied, would not result in a cancellation of any such registration or
otherwise materially affect the priority and enforceability of the Parent
Trademark in question.
(ii) No material registered Parent Trademark has been within the
last three (3) years or is now involved in any opposition or cancellation
proceeding in the United States Patent and Trademark Office or other applicable
Governmental Entity. To the Parent's knowledge, no such action has been
threatened in writing within the one (1)-year period prior to the date of this
Agreement.
(iii) To Parent's knowledge, there has been no prior use of any
material Parent Trademark by any third party that confers upon such third party
superior rights in any such Parent Trademark.
(b) Patents.
(i) All Parent Patents are currently in compliance with legal
requirements (including payment of filing, examination, and maintenance fees and
proofs of working or use) other than any requirement that, if not satisfied,
would not result in a revocation or otherwise materially affect the
enforceability of the Parent Patent in question.
(ii) No Parent Patent has been or is now involved in any
interference, reissue, reexamination or opposition proceeding in the United
States Patent and Trademark Office or other applicable Governmental Entity. To
Parent's knowledge, no such action has been threatened in writing within the one
(1)-year period prior to the date of this Agreement.
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(iii) To Parent's knowledge, there is no patent or patent
application of any person that conflicts in any material respect with any Parent
Patent or invalidates any claim Parent has in any Parent Patent.
(c) Trade Secrets.
(i) Parent has taken reasonable steps in accordance with normal
industry practice to protect Parent's rights in confidential information and
Parent Trade Secrets.
(ii) Without limiting the generality of Section 3.15(c)(i) and
except as would not be materially adverse to Parent or its business, Parent
enforces and has enforced a policy of requiring each relevant employee,
consultant and contractor to execute "work for hire" (or similar arrangements
under Applicable Law), proprietary information, confidentiality and assignment
agreements substantially in Parent's standard forms that effectively and
exclusively assign to Parent or one of its subsidiaries rights to any
Intellectual Property relating to the business of Parent or its subsidiaries
created in the course of performance of work for Parent or one of its
subsidiaries. Except under confidentiality obligations, there has been no
disclosure by Parent or any subsidiary of material confidential information or
Parent Trade Secrets. Parent has provided the Company a copy of its trade secret
protection policy.
(d) License Agreements. There is no material outstanding or, to Parent's
knowledge, threatened dispute or disagreement with respect to (i) any license
agreements granting to the Parent or any of its subsidiaries any material right
to use or practice any rights under any Intellectual Property, other than
software commercially available on reasonable terms to any person for a license
fee of no more than One Hundred Thousand Dollars ($100,000) in the aggregate or
(ii) any license agreements under which the Parent or any of its subsidiaries
licenses software or grants other rights in or rights to use or practice under
any Intellectual Property, excluding licenses with customers that in the
twelve-month period prior to the date hereof have purchased or licensed products
for which the total payments to Parent and its subsidiaries did not exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
(e) Ownership; Sufficiency of IP Assets. Parent or one of its
subsidiaries owns or possesses adequate licenses or other rights to use, free
and clear of Liens, orders and arbitration awards, all of its Intellectual
Property used in their respective businesses as currently conducted.
(f) Protection of IP. Parent has taken reasonable and customary steps to
protect the Intellectual Property of Parent and its subsidiaries.
(g) No Infringement by Parent. The products used, manufactured,
marketed, sold or licensed by Parent, and all Intellectual Property used in the
conduct of Parent's and its subsidiaries' businesses as currently conducted, do
not infringe upon, violate or constitute the unauthorized use of any rights
owned or controlled by any third party, including any Intellectual Property of
any third party.
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(h) No Pending or Threatened Infringement Claims. Except and to the
extent publicly disclosed in the Parent SEC Reports, no litigation is now or,
within the three (3) years prior to the date of this Agreement, was pending and,
to Parent's knowledge, no notice or other claim has been received by Parent
within the one (1) year prior to the date of this Agreement, nor is Parent aware
of any facts or circumstances that in Parent's reasonable judgment could be
expected to give rise to any material claim, (i) alleging that Parent or any of
its subsidiaries has engaged in any activity or conduct that infringes upon,
violates or constitutes the unauthorized use of the Intellectual Property rights
of any third party or (ii) challenging the ownership, use, validity or
enforceability of any Intellectual Property owned or exclusively licensed by or
to Parent.
(i) No Infringement by Third Parties. Except and to the extent publicly
disclosed in the Parent SEC Reports, to the Parent's knowledge, no third party
is misappropriating, infringing, diluting or violating any Intellectual Property
owned or exclusively licensed by Parent or any of its subsidiaries, and no such
claims have been brought against any third party by Parent or any of its
subsidiaries.
(j) Assignment; Change of Control. The execution, delivery and
performance by Parent of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the loss or impairment of,
or give rise to any right of any third party to terminate, any of Parent's or
any of its subsidiaries' rights to own any of its Intellectual Property or their
respective rights under the License Agreements, nor require the consent of any
Governmental Authority or third party in respect of any such Intellectual
Property.
(k) Software. The Software owned or purported to be owned by Parent or
any of its subsidiaries was either (i) developed by employees of Parent or any
of its subsidiaries within the scope of their employment; (ii) developed by
independent contractors who have assigned their rights to Parent or any of its
subsidiaries pursuant to written agreements; or (iii) otherwise acquired by
Parent or a subsidiary from a third party. To the Parent's knowledge, the
Software does not contain any programming code, documentation or other materials
or development environments that embody Intellectual Property rights of any
person other than Parent or any of its subsidiaries, except for such materials
or development environments obtained by Parent or any of its subsidiaries from
other persons who make such materials or development environments commercially
available to purchasers or end-users. For purposes of this Section 3.15(k),
"Software" means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise, (iii)
descriptions, flow-charts and other work product used to design, plan, organize
and develop any of the foregoing, and (iv) all documentation, including user
manuals and training materials, relating to any of the foregoing.
Section 3.16. Environmental Laws and Regulations. Except as could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on Parent, (a) Hazardous Materials have not been generated, used,
treated or stored on, transported to or from or released or disposed of on, any
Parent Property, except in
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compliance with applicable; (b) each of Parent and each of its subsidiaries is
in compliance with all applicable and the requirements of any Permits issued
under such Environmental Laws with respect to any Parent Property; (c) there are
no past, pending or, to Parent's knowledge, threatened Environmental Claims
against Parent or any of its subsidiaries or any Parent Property; and (d) to
Parent's knowledge there are no facts or circumstances, conditions or
occurrences regarding the business, assets or operations of Parent or any Parent
Property that could reasonably be anticipated to form the basis of an
Environmental Claim against Parent or any of its Subsidiaries or any Parent
Property.
For purposes of this Agreement, (i) "Parent Property" means any real
property and improvements owned, leased or operated by the Parent or any of its
Subsidiaries; (ii) "Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; (B) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "extremely hazardous substances," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law; and (C) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
Governmental Entity; (iii) "Environmental Law" means any federal, state, foreign
or local statute, law, rule, regulation, ordinance, code or rule of common law
and any judicial or administrative interpretation thereof binding on Parent or
its operations or property as of the date hereof and the Closing Date, including
any judicial or administrative order, consent decree or judgment, relating to
the environment, health or Hazardous Materials, including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Sections 9601 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Sections 6901 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Sections 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Air Act, 42
U.S.C. Sections 7401 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Sections
2701 et seq.; the Safe Drinking Water Act, 42 U.S.C. Sections 300(f) et seq.;
and their state and local counterparts and equivalents; (iv) "Environmental
Claims" means any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings under any Environmental Law or any permit issued
under any such Environmental Law (for purposes of this subclause (iv),
"Claims"), including, without limitation, (A) any and all Claims by Governmental
Entities for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any applicable Environmental Law and (B) any and all
Claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
environment; and (v) "Release" means disposing, discharging, injecting,
spilling, leaking, leaching, dumping, emitting, escaping, emptying or seeping
into or upon any land or water or air, or otherwise entering into the
environment.
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Section 3.17. Taxes.
(a) Except as set forth in Section 3.17(a) of Parent Disclosure
Schedule, Parent and its subsidiaries have duly and timely filed all material
Tax Returns required to be filed (after taking into account all available
extensions) and have timely paid or adequately provided for in accordance with
United States generally accepted accounting principles all Taxes due in respect
of the periods covered by such Tax Returns, except, in each case, where the
failure so to file, pay or provide would not have a Material Adverse Effect on
Parent or Acquisition.
(b) No material penalty, interest or other charge is due or has been
asserted in writing as of the date of this Agreement with respect to the late
filing of any Tax Return or late payment of any Tax, except where such penalty,
interest or other charge will not have a Material Adverse Effect on Parent or
Acquisition. Except as set forth in Section 3.17(b) of the Parent Disclosure
Schedule, as of the date of this Agreement no material claim for assessment or
collection of Taxes is presently being asserted against Parent or its
subsidiaries and neither Parent nor any of its subsidiaries is a party to any
pending action, proceeding, or investigation by any governmental taxing
authority relating to a material Tax nor does Parent have knowledge of any such
threatened action, proceeding or investigation.
(c) Except as set forth in Section 3.17(c) of the Parent Disclosure
Schedule, neither Parent nor any of its subsidiaries is a party to or bound by
any obligation under any written Tax sharing, Tax allocation, Tax indemnity or
similar agreement or arrangement.
Section 3.18. Employee Benefits.
(a) Definitions. For purposes of this Section, the following terms shall
have the meanings set forth below:
(i) "Parent Employee Plan" shall mean any Employee Plan for the
benefit of any Employee with respect to Parent and pursuant to which Parent or
any of its ERISA Affiliates has any liability contingent or otherwise; and
(b) Employee Plans. Section 3.18(b) of the Parent Disclosure Schedule
contains an accurate and complete list of each Parent Employee Plan and each
Parent Employee Agreement. Except as and to the extent publicly disclosed in the
Parent SEC Reports or as set forth in Section 3.18(b) of the Parent Disclosure
Schedule, the Parent has also made available to the Company or its counsel,
where applicable, true, complete and correct copies of (i) the most recent plan
documents, related trust documents, adoption agreements, summary plan
descriptions, and all amendments thereto for each Parent Employee Plan, (ii) the
most recent actuarial and audit reports for each Pension Plan, and (iii) the
most recent IRS determination letters and rulings received by the Parent and
copies of all applications and correspondence to or from the IRS or the DOL with
respect to any Parent Employee Plan.
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(c) Employee Plan Compliance. Except in each case for which
non-compliance would not have a Material Adverse Effect (i) each Parent Employee
Plan has been established and maintained in accordance with its terms and all
Applicable Laws, including ERISA and the Code; (ii) no "prohibited transaction,"
within the meaning of Section 4975 of the Code or Section 406 of ERISA, has
occurred with respect to any Parent Employee Plan; (iii) no Employee of the
Parent has committed a material breach of any responsibility imposed upon
fiduciaries by Title I of ERISA with respect to any Parent Employee Plan; (iv)
there are no judicial, regulatory, arbitration or similar proceedings pending,
or, to the Parent's knowledge, threatened or anticipated (other than routine
claims for benefits) against any Parent Employee Plan or against the assets of
any Parent Employee Plan; (v) there are no inquiries, investigations, audits or
proceedings pending or, to the Parent's knowledge, threatened by the IRS or DOL
with respect to any Parent Employee Plan or any related trust; (vi) neither the
Parent nor any ERISA Affiliate is subject to any penalty or tax with respect to
any Parent Employee Plan under Sections 4975 through 4980 of the Code; (vii)
each Pension Plan that is intended to be qualified under Section 401(a) of the
Code is so qualified and has received a favorable determination opinion,
notification or advisory letter with respect to such status from the IRS or has
time remaining to apply under applicable Treasury Regulation or IRS
pronouncement for a determination or opinion letter and to make any necessary
amendments, and no event has occurred and no condition or circumstance has
existed or exists which may reasonably be expected to result in the
disqualification of such Pension Plan.
(d) Pension Plans. None of the Parent Employee Plans is or was subject
to Code Section 412 or ERISA Section 302, or is a plan described in Sections
3(37), 4063 or 4064 of ERISA.
(e) Effect of Transaction. Except as set forth in Section 3.18(e) of the
Parent Disclosure Schedule, the execution of this Agreement and the consummation
of the transactions contemplated hereby will not constitute an event under any
Parent Employee Plan, Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise and including forgiveness
of indebtedness), acceleration, vesting, distribution, increase in benefits
under any Parent Employee Plan or Employee Arrangement or compensation to any
Employee, or obligation to fund compensation benefits with respect to any
Employee.
(f) Foreign Plans. Except as set forth in Section 3.18(f) of the Parent
Disclosure Schedule, with respect to any Parent Employee Plan maintained for
Employees outside of the United States (each a "Foreign Plan"): (i) each Foreign
Plan and the manner in which it has been administered satisfies all Applicable
Laws, (ii) there are no pending investigations by any Governmental Entity
involving any Foreign Plan nor any pending claims (except for claims for
benefits payable in the normal operation of the Foreign Plans), suits or
proceedings against any Foreign Plan or asserting any rights to benefits under
any Foreign Plan; (iii) the consummation of the transactions contemplated by
this Agreement will not by itself create or otherwise result in any material
liability with respect to any Foreign Plan; (iv) the Parent's obligations to
provide severance pay to its employees are fully funded or have been properly
provided for in the Parent's financial statements attached to the Parent SEC
Reports in accordance with United States except for noncompliance which would
not
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have a Material Adverse Effect on Parent; and (v) all other liabilities of the
Parent relating to its employees (excluding liabilities for illness pay) were
properly accrued in the Parent's financial statements in accordance with United
States generally accepted accounting principles.
Section 3.19. Certain Business Practices. None of Parent, any of its
subsidiaries or any directors, officers, agents or employees of Parent or any of
its subsidiaries has (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity or (b)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended or (c)
made any other unlawful payment.
ARTICLE 4
COVENANTS
Section 4.1. Conduct of Business of the Company. Except as contemplated
by this Agreement or as described in Section 4.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time or the
earlier termination of this Agreement, the Company will and will cause each of
its subsidiaries to conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers, distributors, lessors, creditors,
employees, contractors and others having business dealings with it with the
intention that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement, prior to the Effective Time or
the earlier termination of this Agreement, neither the Company nor any of its
subsidiaries will, without the prior written consent of Parent and Acquisition:
(a) amend its Memorandum of Association, Articles of Association,
Certificate of Incorporation or bylaws (or other similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other debt or equity securities or equity equivalents
(including any stock options or stock appreciation rights) except for the
issuance and sale of Shares pursuant to options granted under the Company Plans
prior to the date hereof and issuance of Company Stock Options to new employees
in the ordinary course of business consistent with the applicable Company Plan
and past practice;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any
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combination thereof) in respect of its capital stock (except dividends declared
or paid by a wholly-owned subsidiary of the Company to the Company or another
wholly-owned subsidiary of the Company), make any other actual, constructive or
deemed distribution in respect of its capital stock or otherwise make any
payments to shareholders in their capacity as such, or redeem or otherwise
acquire any of its securities or any securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring or
any other fashion the corporate structure of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business, or modify or agree to any amendment of the terms of
any of the foregoing; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other person except for obligations of subsidiaries of the Company
incurred in the ordinary course of business; (iii) make any loans, advances or
capital contributions to or investments in any other person (other than to
subsidiaries of the Company or customary loans or advances to employees in each
case in the ordinary course of business consistent with past practice); (iv)
pledge or otherwise encumber shares of capital stock of the Company or any of
its subsidiaries; or (v) mortgage or pledge any of its material assets, tangible
or intangible, or create or suffer to exist any material Lien thereupon other
than in the ordinary course of business;
(g) except as may be required by Applicable Law or as required by any
existing agreement listed on Section 4.1 of the Company Disclosure Schedule,
enter into, adopt or amend or terminate any Employee Plan or Employee Agreement,
or any trust or other fund for the benefit or welfare of any director, officer
or employee.
(h) (i) acquire, sell, lease, license, transfer or otherwise dispose of
any material assets in any single transaction or series of related transactions
(including in any transaction or series of related transactions having a fair
market value in excess of One Hundred Thousand Dollars ($100,000) in the
aggregate), other than sales of its products in the ordinary course of business
consistent with past practices, or (ii) enter into any exclusive license,
distribution, marketing, sales or other agreement;
(i) except as may be required as a result of a change in law or in
United States generally accepted accounting principles, change any of the
accounting principles, practices or methods used by it;
(j) revalue in any material respect any of its assets, including writing
down the value of inventory or writing-off notes or accounts receivable, other
than in the ordinary course of business;
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(k) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other entity or division thereof or any
equity interest therein; (ii) enter into any contract or agreement that would be
material to the Company and its subsidiaries, taken as a whole, other than in
the ordinary course and consistent with past practice; (iii) amend, modify or
waive any material right under any material contract of the Company or any of
its subsidiaries; (iv) modify its standard warranty terms for its products or
amend or modify any product warranties in effect as of the date hereof in any
material manner that is adverse to the Company or any of its subsidiaries; or
(v) authorize any new capital expenditure or expenditures not included in the
current annual budget of the Company or any of its subsidiaries, true and
accurate copies of which have been provided to Parent, that individually is in
excess of Five Hundred Thousand Dollars ($500,000) or in the aggregate are in
excess of One Million Dollars ($1,000,000); provided that nothing in the
foregoing clause (v) shall limit any capital expenditure required pursuant to
existing customer contracts;
(l) make any material Tax election or settle or compromise any material
income Tax liability or permit any material insurance policy naming it as a
beneficiary or loss-payable to expire, or to be cancelled or terminated, unless
a comparable insurance policy reasonably acceptable to Parent is obtained and in
effect;
(m) settle or compromise any pending or threatened suit, action or claim
that (i) relates to the transactions contemplated hereby or (ii) the settlement
or compromise of which would involve more that One Hundred Thousand Dollars
($100,000) or that would otherwise be material to the Company or any of its
subsidiaries;
(n) except as permitted pursuant to Section 4.4, take any action that
would or would reasonably be expected to prevent, impair or materially delay the
ability of the Company, Acquisition or Parent to consummate the transactions
contemplated by this Agreement;
(o) take any action or fail to take any action that would cause the
Merger to fail to qualify as a reorganization within the meaning of Section
368(a) of the Code; or
(p) take or agree in writing or otherwise to take any of the actions
described in Sections 4.1(a) through 4.1(o) (and it shall use all reasonable
best efforts not to take any action that would make any of the representations
or warranties of the Company contained in this Agreement untrue or incorrect).
Section 4.2. Conduct of Business of Parent. Except as contemplated by
this Agreement or as described in Section 4.2 of the Parent Disclosure Schedule,
during the period from the date hereof to the Effective Time or the earlier
termination of this Agreement, Parent will and will cause each of its
subsidiaries to conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers, distributors, lessors, creditors,
employees, contractors and others having business dealings with it with the
intention that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time.
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Without limiting the generality of the foregoing, except as otherwise expressly
provided in this Agreement, prior to the Effective Time or the earlier
termination of this Agreement, neither Parent nor any of its subsidiaries will,
without the prior written consent of the Company:
(a) amend its Memorandum of Association, Bye-Laws, certificate of
incorporation or bylaws (or other similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other debt or equity securities or equity equivalents
(including any stock options or stock appreciation rights) except for the
issuance and sale of Shares pursuant to options granted prior to the date
hereof, and issuance of Parent Stock Options to new employees in the ordinary
course of business consistent with the applicable Parent Plan and past practice;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to shareholders in their capacity
as such, or redeem or otherwise acquire any of its securities or any securities
of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of Parent or any of its subsidiaries (other than the Merger);
(e) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings under existing lines of credit in the ordinary
course of business, or modify or agree to any amendment of the terms of any of
the foregoing;
(f) except as may be required as a result of a change in law or in
United States generally accepted accounting principles, change any of the
accounting principles, practices or methods used by it;
(g) take any action that would or would reasonably be expected to
prevent, impair or materially delay the ability of the Company, Acquisition or
Parent to consummate the transactions contemplated by this Agreement;
(h) enter into or acquire any new line of business that (i) is material
to the Parent and its Subsidiaries taken as a whole and (ii) is not
strategically related to the current business or operations of Parent and its
subsidiaries;
(i) engage in any (i) merger, consolidation, share exchange, business
combination, reorganization, recapitalization or other similar transaction, (ii)
transaction as a result of which any third party acquires, directly or
indirectly, an equity interest representing greater than 10% of the voting
securities of Parent or any Parent subsidiary, (iii) disposition,
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directly or indirectly, of material assets, securities or ownership interests or
(iv) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or entity or division thereof or equity interest
therein for aggregate consideration in excess of $1,000,000,000;
(j) take or agree in writing or otherwise to take any of the actions
described in Sections 4.2(a) through 4.2(i) (and it shall use all reasonable
best efforts not to take any action that would make any of the representations
or warranties of Parent contained in this Agreement untrue or incorrect); or
(k) take any action or fail to take any action that would cause the
Merger to fail to qualify as a reorganization within the meaning of Section
368(a) of the Code.
Section 4.3. Merger Proposal; Shareholders' Meetings; Preparation of
Form S-4 and the Proxy Statement.
(a) Promptly after the execution and delivery of this Agreement, (i)
each of the Company and Acquisition shall cause a merger proposal (in the Hebrew
language) in form reasonably agreed upon by the parties (the "Merger Proposal")
to be executed in accordance with Section 316 of the Israeli Companies Law, (ii)
the Company shall call the Company Shareholder Meeting, and (iii) each of the
Company and Acquisition shall deliver the Merger Proposal to the Companies
Registrar. Each of the Company and Acquisition shall cause a copy of the Merger
Proposal to be delivered to each of their secured creditors, if any, no later
than three days after the date on which the Merger Proposal is delivered to the
Companies Registrar, and shall promptly inform their non-secured creditors of
the Merger Proposal and its contents in accordance with Section 318 of the
Companies Law and the regulations promulgated thereunder. Promptly after the
Company and Acquisition shall have complied with the preceding sentence, the
Company and Acquisition shall inform the Companies Registrar, in accordance with
Section 317(b) of the Companies Law, that notice was given to their creditors
under Section 318 of the Israeli Companies Law and the regulations promulgated
thereunder.
(b) The Company shall take all action necessary under all applicable
legal requirements to call (promptly after the execution and delivery of this
Agreement), give notice of and hold the Company Shareholder Meeting to vote on
the proposal to approve the Merger (the "Company Approval Matters"). Subject to
the notice requirements of the Companies Law and the Articles of Association of
the Company and effectiveness of the Form S-4, the Company Shareholder Meeting
shall be held (on a date selected by the Company in consultation with Parent) as
promptly as practicable after the date hereof. The Company shall ensure that all
proxies solicited in connection with the Company Shareholder Meeting are
solicited in compliance with all applicable legal requirements. In the event
that Parent shall cast any votes in respect of the Merger, Parent shall disclose
to the Company its interest in such shares so voted. Unless this Agreement is
terminated, the Company's obligation to call, give notice of and hold the
Company Shareholder Meeting in accordance with this Agreement shall not be
limited or otherwise affected by the commencement, disclosure, announcement or
submission of any Superior Proposal (as hereinafter defined). Within three days
after the approval of the Merger by the shareholders of Company, Company
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shall deliver to the Companies Registrar a notice in accordance with Section
317(b) of the Companies Law (the "Shareholder Approval Notice") informing the
Companies Registrar that the Merger was approved by the general shareholders
meeting of Company.
(c) Parent shall, in accordance with applicable law and the Memorandum
of Association and the Bye-laws of Parent duly call, give notice of, convene and
hold a special general meeting of its shareholders (the "Parent Special
Meeting") as promptly as practicable after the date hereof for the purpose of
considering and taking action upon this Agreement, the Merger and the issuance
of Parent Common Stock in connection with the transactions contemplated hereby
(the "Parent Approval Matters"). The Board of Directors of Parent shall
recommend approval and adoption of the Parent Approval Matters by Parent's
shareholders. Promptly after the approval of the Merger by the Company
Shareholder Meeting and by no later than the Closing Date, Parent (as the sole
shareholder of Acquisition) shall approve the Merger by written resolution or by
such general meeting. No later than three days after the approval of the Merger
by Acquisition, Acquisition shall deliver to the Companies Registrar a
Shareholder Approval Notice in accordance with Section 317(b) of the Companies
Law informing the Companies Registrar that the Merger was approved by the
shareholders of Acquisition.
(d) Promptly following the date of this Agreement, the Company and
Parent shall prepare a joint proxy statement relating to the Company Approval
Matters and the Parent Approval Matters (the "Proxy Statement"), and Parent
shall prepare and file with the SEC the Form S-4, in which the Proxy Statement
will be included as a prospectus. Parent and the Company shall cooperate with
each other in connection with the preparation of the foregoing documents. Parent
and the Company shall each use reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use reasonable best efforts to cause the Proxy
Statement to be mailed to the Company's shareholders, and Parent will use
reasonable best efforts to cause the Proxy Statement to be mailed to Parent's
shareholders, in each case as promptly as practicable after the Form S-4
declared effective under the Securities Act. The Proxy Statement will comply in
all material respects with Israeli and Bermudian law. Parent and the Company
will provide reasonable representations to the tax counsel who prepares the tax
disclosure to be made in connection with the filing of the Proxy Statement.
(e) Each of the Company and Parent shall as promptly as practicable
notify the other of the receipt of any comments from the SEC relating to the
Proxy Statement. Each of Parent and the Company shall as promptly as practicable
notify the other of (i) the effectiveness of the Form S-4, (ii) the receipt of
any comments from the SEC relating to the Form S-4 and (iii) any request by the
SEC for any amendment to the Form S-4 or for additional information. All filing
by Parent and the Company with the SEC in connection with the transactions
contemplated hereby, including the Proxy Statement, the Form S-4 and any
amendment or supplement thereto, shall be subject to the prior review of the
other, and all mailings to the Company's and Parent's shareholders in connection
with the transactions contemplated by this Agreement shall be subject to the
prior review of the other party.
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Section 4.4. Other Potential Acquirers.
(a) The Company, its affiliates (as reasonably determined by the
Company) and their respective officers and other employees with managerial
responsibilities, directors, representatives (including the Company Financial
Advisor or any other investment banker and any attorneys and accountants) and
agents shall immediately cease any discussions or negotiations with any parties
with respect to any Third Party Acquisition (as defined below). The Company also
agrees promptly to request each person, if any, that has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring
(whether by merger, acquisition of stock or assets or otherwise) the Company or
any of its subsidiaries, if any, to return all confidential information
heretofore furnished to such person by or on behalf of the Company or any of its
subsidiaries. Neither the Company nor any of its affiliates shall, nor shall the
Company authorize or permit any of its or their respective officers, directors,
employees, representatives or agents to, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with or provide
any non-public information to any person or group (other than Parent and
Acquisition or any designees of Parent and Acquisition) concerning any Third
Party Acquisition; provided, however, that if the Board of Directors of the
Company determines in good faith, after consultation with legal counsel, that it
is necessary to do so in order to comply with its fiduciary duties, the Company
may, in response to a proposal or offer for a Third Party Acquisition which was
not solicited and which the Board of Directors of the Company determines, based
on consultation with the Financial Advisor, is from a Third Party that is
capable of consummating a Superior Proposal and only for so long as the Board of
Directors so determines that its actions are reasonably likely to lead to a
Superior Proposal, (i) furnish information only of the type and scope with
respect to the Company that the Company provided to Parent prior to the date
hereof to any such person pursuant to a customary confidentiality agreement as
was executed by Parent prior to the execution of this Agreement and (ii)
participate in the discussions and negotiations regarding such proposal or
offer; provided further, that nothing herein shall prevent the Company Board
from taking and disclosing to the Company's shareholders a position contemplated
by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender or exchange offer. The Company shall promptly (and in any event within
one business day after becoming aware thereof) (1) notify Parent in the event it
receives any proposal or inquiry concerning a Third Party Acquisition, including
the terms and conditions thereof and the identity of the party submitting such
proposal, and any request for confidential information is requested in
connection with a potential Third Party Acquisition, (2) provide Parent with a
copy of any written agreements, proposals or other materials the Company
receives from any such person or group (or its representatives), and (3)
promptly advise Parent from time to time of the status and any developments
concerning the same.
(b) Except as set forth in this Section 4.4(b), the Company Board shall
not withdraw or modify its recommendation of the transactions contemplated
hereby or approve or recommend, or cause or permit the Company to enter into any
agreement or obligation with respect to, any Third Party Acquisition.
Notwithstanding the foregoing, if the Company Board by a majority vote
determines in its good faith judgment, after consultation with and based upon
the advice of legal counsel, that it is required to do so in order to comply
with its
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fiduciary duties, the Company Board may (i) withdraw its recommendation of the
transactions contemplated hereby and (ii) approve or recommend a Superior
Proposal (as defined in subsection (c) below), but in the case of clause (ii)
only (A) after providing written notice to Parent (a "Notice of Superior
Proposal") advising Parent that the Company Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal and (B) if Parent does
not, within three (3) business days of Parent's receipt of the Notice of
Superior Proposal, make an offer that the Company Board by a majority vote
determines in its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) to be at least as favorable to the
Company's shareholders as such Superior Proposal; provided, however, that the
Company shall not be entitled to enter into any agreement with respect to a
Superior Proposal unless and until this Agreement is terminated by its terms
pursuant to Section 6.1 and upon such termination the Company pays or has paid
all amounts due to Parent pursuant to Section 6.3. Any disclosure that the
Company Board may be compelled to make with respect to the receipt of a proposal
for a Third Party Acquisition or otherwise in order to comply with Rule 14d-9 or
14e-2 will not constitute a violation of this Agreement.
(c) For the purposes of this Agreement, "Third Party Acquisition" means
the occurrence of any of the following events: (i) the acquisition of the
Company by merger or otherwise by any person (which includes a "person" as such
term is defined in Section 13(d)(3) of the Exchange Act) other than Parent,
Acquisition or any affiliate thereof (a "Third Party"); (ii) the acquisition by
a Third Party of any material portion (which shall include thirty percent (30%)
or more) of the assets of the Company and its subsidiaries taken as a whole,
other than the sale of its products in the ordinary course of business
consistent with past practices; (iii) the acquisition by a Third Party of thirty
percent (30%) or more of the outstanding Shares; (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend or (v) the repurchase by the Company or any of its
subsidiaries of more than thirty percent (30%) of the outstanding Shares. For
purposes of this Agreement, a "Superior Proposal" means any bona fide proposal
(1) to acquire, directly or indirectly, for consideration consisting solely of
cash and/or freely tradeable securities (subject only to securities laws
restricting sales by affiliates of the Company), all of the Shares then
outstanding, or all or substantially all the assets, of the Company, (2) that is
fully financed or is financeable and contains terms that the Company Board by a
majority vote determines in its good faith judgment (based on the advice of the
Company Financial Advisor or another financial advisor of nationally recognized
reputation) to be more favorable to the Company's shareholders than the Merger,
(3) that the Company Board by a majority vote determines in its good faith
judgment (following and based on consultation with the Company Financial Adviser
or another financial advisor of nationally recognized reputation and its legal
and other advisors) to be reasonably capable of being completed (taking into
account all legal, financial, regulatory and other aspects of the proposal and
the person making the proposal) and (4) that does not contain a "right of first
refusal" or "right of first offer."
Section 4.5. Israeli Approvals. Each party to this Agreement shall use
reasonable best efforts to deliver and file, as promptly as practicable after
the date of this Agreement, each notice, report or other document required to be
delivered by such party to or
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filed by such party with any Israeli Governmental Entity with respect to the
Merger. Without limiting the generality of the foregoing:
(a) as promptly as practicable after the date of this Agreement, Parent
and the Company shall prepare and file the notifications required, if any, under
the Israeli Restrictive Trade Practices Law in connection with the Merger;
(b) Parent and the Company shall respond as promptly as practicable to
any inquiries or requests received from the Israeli Restrictive Trade Practices
Commissioner for additional information or documentation;
(c) The Company shall use reasonable best efforts to obtain, as promptly
as practicable after the date of this Agreement, the following consents, and any
other consents that may be required in connection with the Merger: (i) approval
of the OCS; and (ii) approval of the Investment Center; and
(d) Parent shall provide to the OCS, the Investment Center, the Israeli
Restrictive Trade Practices Commissioner and the Israel Securities Authority any
information reasonably requested by such authorities and shall, without
limitation of the foregoing, execute an undertaking in customary form in which
Parent undertakes to comply with the OCS laws and regulations and confirm to the
OCS and the Investment Center that Company shall continue after the Effective
Time to operate in a manner consistent with its previous undertakings to the OCS
and the Investment Center.
Each party to this Agreement shall (i) give the other parties prompt
notice of the commencement of any legal proceeding by or before any Israeli
Governmental Entity with respect to the Merger, (ii) keep the other parties
informed as to the status of any such legal proceeding and (iii) promptly inform
the other parties of any communication to the Israeli Restrictive Trade
Practices Commissioner, the OCS, the Investment Center, the Israeli Securities
Authority, the Companies Registrar or any other Israeli Governmental Entity
regarding the Merger or any of the other transactions contemplated by this
Agreement. The parties to this Agreement will consult and cooperate with one
another, and will consider in good faith the views of one another, in connection
with any analysis, appearance, presentation, memorandum, brief, argument,
opinion or proposal made or submitted in connection with any Israeli legal
proceeding relating to the Merger. In addition, except as may be prohibited by
any Israeli Governmental Entity or by any Israeli legal requirement, in
connection with any such legal proceeding under or relating to the Israeli
Restrictive Trade Practices Law or any other Israeli antitrust or fair trade
law, each party hereto will permit authorized representatives of the other party
to be present at each meeting or conference relating to any such legal
proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any Israeli Governmental
Entity in connection with any such legal proceeding.
Section 4.6. Israeli Income Tax Ruling. As soon as reasonably
practicable after the execution of this Agreement, the Company shall cause the
Company's Israeli counsel and accountants to prepare and file with the Israeli
Income Tax Commissioner an application for a ruling (a) deferring any obligation
to pay capital gains tax on the exchange of the Shares
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in the Merger until the earlier of two (2) years after the Closing or the date
on which a shareholder sells the shares of Parent Common Stock received as of
the Closing, and (b) confirming that the exchange of the Company Options for
options to purchase shares of Parent Common Stock (the "Assumed Options") will
not result in a requirement for an immediate Israeli tax payment and that the
Israeli taxation will be deferred until the exercise of the Assumed Options, or
in the event of Assumed Options which are part of a "Section 102 Plan", until
the actual sale of the shares of Parent Common Stock by the option holders,
provided that any ruling that is substantially similar to the foregoing will be
sufficient to comply with the conditions set forth in this clause (b) and
provided further that Parent is reasonably satisfied that, in light of such
ruling, Parent is not required to withhold any Taxes in respect of the issuance
of Parent Common Stock to any holder of Shares in connection with the Merger
(the "Israeli Income Tax Ruling"). Each of the Company and Parent shall cause
their respective Israeli counsel to coordinate all activities, and to cooperate
with each other, with respect to the preparation and filing of such application
and in the preparation of any written or oral submissions that may be necessary,
proper or advisable to obtain the Israeli Income Tax Ruling. Subject to the
terms and conditions hereof, the Company shall use reasonable best efforts to
promptly take, or cause to be taken, all action and to do, or cause to be done,
all things necessary, proper or advisable under applicable Law to obtain the
Israeli Income Tax Ruling, or as appropriate the confirmation referred to in
Section 5.3(f)(ii), as promptly as practicable. Notwithstanding any provisions
contained in Section 4.1 hereof to the contrary, the Company shall be allowed to
comply with any conditions contained in the ruling described in this Section 4.6
or reasonable requests made by the Israeli Tax Commissioner in connection with
its delivery of such ruling.
Section 4.7. Israeli Securities Law Exemption. As soon as reasonably
practicable after the execution of this Agreement, Parent shall cause its
Israeli counsel to prepare and file with the Israeli securities authority an
application for an exemption from the requirements of the Israeli Securities Law
1968 concerning the publication of a prospectus in respect of the exchange of
the Company Options for the Assumed Options, pursuant to Section 15D of the
Securities Law of Israel (the "Israeli Securities Exemption"). Each of Parent
and the Company shall cause their respective Israeli counsel to coordinate all
activities, and to cooperate with each other, with respect to the preparation
and filing of such application and in the preparation of any written or oral
submissions that may be necessary, proper or advisable to obtain the Israeli
Securities Exemption. Subject to the terms and conditions hereof, Parent shall
use its reasonable best efforts to promptly take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable Law to obtain the Israeli Securities Exemption as promptly as
practicable.
Section 4.8. Nasdaq National Market. Parent shall use reasonable best
efforts to cause the shares of Parent Common Stock to be issued in the Merger
and the shares of Parent Common Stock to be reserved for issuance upon exercise
of Company Stock Options to be approved for listing on the Nasdaq National
Market, subject to official notice of issuance, prior to the Effective Time.
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Section 4.9. Access to Information.
(a) Between the date hereof and the Effective Time, the Company will
give Parent and its authorized representatives reasonable access to all
employees, plants, offices, warehouses and other facilities and to all books and
records of the Company and its subsidiaries as Parent may reasonably require,
and will cause its officers and those of its subsidiaries to furnish Parent with
such financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as Parent may from
time to time reasonably request. Between the date hereof and the Effective Time,
Parent shall make available to the Company, as reasonably requested by the
Company, a designated officer of Parent to answer questions and make available
such information regarding Parent and its subsidiaries as is reasonably
requested by the Company taking into account the nature of the transactions
contemplated by this Agreement.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent (i) within two (2) business days following preparation thereof
(and in any event within twenty (20) business days after the end of each
calendar month, commencing with October 2000), an unaudited balance sheet as of
the end of such month and the related statements of earnings, shareholders'
equity (deficit) and cash flows, (ii) within two (2) business days following
preparation thereof (and in any event within twenty (20) business days after the
end of each fiscal quarter) an unaudited balance sheet as of the end of such
quarter and the related statements of earnings, shareholders' equity (deficit)
and cash flows for the quarter then ended, and (iii) within two (2) business
days following preparation thereof (and in any event within ninety (90) calendar
days after the end of each fiscal year) an audited balance sheet as of the end
of such year and the related statements of earnings, shareholders' equity
(deficit) and cash flows, all of such financial statements referred to in
clauses (i), (ii) and (iii) to be prepared in accordance with United States
generally accepted accounting principles in conformity with the practices
consistently applied by the Company with respect to such financial statements.
All the foregoing shall be in accordance with the books and records of the
Company and shall fairly present its financial position (taking into account the
differences between the monthly, quarterly and annual financial statements
prepared by the Company in conformity with its past practices) as of the last
day of the period then ended.
(c) Each of the parties hereto will hold, and will cause its consultants
and advisers to hold, in confidence all documents and information furnished to
it by or on behalf of another party to this Agreement in connection with the
transactions contemplated by this Agreement pursuant to the terms of that
certain Confidentiality Agreement entered into between the Company and Parent
dated October 5, 2000.
Section 4.10. Certain Filings; Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided, including
Section 4.4(b), each of the parties hereto agrees to use reasonable best efforts
to take or cause to be taken all action and to do or cause to be done all things
reasonably necessary, proper or advisable under Applicable Law to consummate and
make effective the transactions contemplated by this Agreement, including using
reasonable best efforts to do the following, (i) cooperate in the preparation
and filing of the Proxy Statement and the Form S-4 and any
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amendments thereto, any filings that may be required under the HSR Act and any
filings under similar merger notification laws or regulations of Governmental
Entities; (ii) obtain consents of all third parties and Governmental Entities
necessary, proper, advisable or reasonably requested by Parent or the Company,
for the consummation of the transactions contemplated by this Agreement; (iii)
contest any legal proceeding opposing or otherwise adversely affecting to the
Merger; and (iv) execute any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Acquisition agree to use reasonable best efforts to cause
the Effective Time to occur as soon as practicable after the Company shareholder
vote and the Parent Shareholder vote with respect to the Merger. If at any time
after the Effective Time any further action is necessary to carry out the
purposes of this Agreement the proper officers and directors of each party
hereto shall take all such necessary action.
(b) Parent and the Company will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, letters, white papers, memoranda, briefs,
arguments, opinions or proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or any
other foreign, federal, or state antitrust, competition, or fair trade law. In
this regard but without limitation, each party hereto shall promptly inform the
other of any material communication between such party and the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice,
or any other federal, foreign or state antitrust or competition Governmental
Entity regarding the transactions contemplated herein.
Section 4.11. Public Announcements. None of Parent, Acquisition or the
Company shall issue any press release or otherwise make any public statements
with respect to the transactions contemplated by this Agreement, including the
Merger, or any Third Party Acquisition, without the prior consent of Parent and
Acquisition (in the case of the Company) or the Company (in the case of Parent
or Acquisition), which consent may not be unreasonably withheld, except (i) as
may be required by Applicable Law, or by the rules and regulations of, or
pursuant to any agreement with, the Nasdaq National Market, or (ii) following a
change, if any, of the Company Board's recommendation of the Merger (in
accordance with Section 4.4(b)). The first public announcement of this Agreement
and the Merger shall be a joint press agreed upon by Parent, Acquisition and the
Company.
Section 4.12 Indemnification and Directors' and Officers' Insurance.
(a) After the Effective Time, Parent and the Surviving Corporation shall
jointly and severally indemnify and hold harmless (and shall also advance
expenses as incurred to the fullest extent permitted under Applicable Law to),
to the extent not covered by insurance maintained by the Company, the Surviving
Corporation or Parent, each person who is now or has been prior to the date
hereof or who becomes prior to the Effective Time an officer or director of the
Company or any of the Company's subsidiaries (the "Indemnified Persons") against
(i) all losses, claims, damages, costs, expenses (including counsel fees and
expenses), settlement, payments or liabilities arising out of or in connection
with any claim, demand, action, suit, proceeding or investigation based in whole
or in part on or arising in whole or in part out of the fact that such person is
or was an officer or director of the
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Company or any of its subsidiaries, whether or not pertaining to any matter
existing or occurring at or prior to the Effective Time and whether or not
asserted or claimed prior to or at or after the Effective Time ("Indemnified
Liabilities"); and (ii) all Indemnified Liabilities based in whole or in part on
or arising in whole or in part out of or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the fullest extent required or
permitted under Applicable Law. Nothing contained herein shall make Parent,
Acquisition, the Company or the Surviving Corporation, an insurer, a co-insurer
or an excess insurer in respect of any insurance policies which may provide
coverage for Indemnified Liabilities, nor shall this Section 4.12 relieve the
obligations of any insurer in respect thereto. The parties hereto intend, to the
extent not prohibited by Applicable Law, that the indemnification provided for
in this Section 4.12 shall apply without limitation to negligent acts or
omissions by an Indemnified Person. Each Indemnified Person is intended to be a
third party beneficiary of this Section 4.12 and may specifically enforce its
terms. This Section 4.12 shall not limit or otherwise adversely affect any
rights any Indemnified Person may have under any agreement with the Company or
under the Company's Articles of Association as presently in effect.
(b) From and after the Effective Time, the Parent shall cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of or prior to the date hereof (or indemnification
agreements in the Company's customary form for directors joining the Company's
Board of Directors prior to the Effective Time) and any indemnification
provisions under the Company's Articles of Association as in effect immediately
prior to the Effective Time. If Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then in such case, Parent shall cause proper provision to be made so
that the successors and assigns of Parent assume the obligations set forth in
this Section 4.12.
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(c) For a period of six years after the Effective Time, Parent will
maintain or cause the Surviving Corporation to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who, as of
immediately prior to the Effective Time, are covered by the Company's directors'
and officers' liability insurance policy (the "Insured Parties") on terms no
less favorable to the Insured Parties than those of the Company's present
directors' and officers' liability insurance policy; provided, however, that in
no event will Parent or the Surviving Corporation be required to expend in
excess of 200% of the annual premium currently paid by the Company for such
coverage (and if such premium is in excess of 200% of the annual premium, the
Surviving Corporation shall only be required to maintain such coverage as is
available for 200% of such annual premium); provided further, that, in lieu of
maintaining such existing insurance as provided above, Parent, at its election,
may cause coverage to be provided under any policy maintained for the benefit of
Parent or any of its subsidiaries, so long as the terms are not materially less
advantageous to the intended beneficiaries thereof than such existing insurance.
(d) The provisions of this Section 4.12 are intended for the benefit of,
and will be enforceable by, each person entitled to indemnification hereunder
and the heirs and representatives of such person.
Section 4.13. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which has caused or would be likely to cause any representation or warranty
contained in this Agreement by such first party to be untrue or inaccurate in
any material respect at or prior to the Effective Time and (ii) any material
failure by such first party to comply with or satisfy in any material respect
any covenant condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 4.13 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Section 4.14. Affiliates; Tax Representations.
(a) Parent shall not be required to maintain the effectiveness of the
S-4 for the purpose of resale of shares of Parent Common Stock by shareholders
of the Company who may be affiliates of the Company or Parent pursuant to Rule
145 under the Securities Act.
(b) The Company, on the one hand, and Parent and Acquisition, on the
other hand, shall execute and deliver to legal counsel to the Company and Parent
certificates substantially in the form of Exhibits E-1 and E-2, respectively at
such time or times as reasonably requested by such legal counsel in connection
with the delivery of opinions in accordance with Sections 5.2(d) and 5.3(e)
hereof, or as required in connection with any filings with the SEC, and the
Company and Parent shall each provide a copy thereof to the other parties
hereto. The parties agree to make such changes to the certificates as they
reasonably agree are necessary in connection with the delivery of such opinions.
Prior to the Effective Time, none of the Company, Parent or Acquisition shall
take or cause to be taken any action that would cause to be untrue (or fail to
take or cause not to be taken any action that would cause to be untrue) any of
the representations in Exhibits E-1 or E-2. Unless the
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Company elects to waive the condition contained in Section 5.2(d), the Company
agrees that it shall cause the exercise of all outstanding stock options of the
Company necessary to allow such opinion to be rendered.
Section 4.15. Additions to and Modification of Disclosure Schedules.
Concurrently with the execution and delivery of this Agreement, the Company has
delivered a Company Disclosure Schedule and Parent has delivered a Parent
Disclosure Schedule that includes all of the information required by the
relevant provisions of this Agreement. In addition, the Company shall deliver to
Parent and Acquisition on the one hand, and Parent shall deliver to the Company
on the other, such additions to or modifications of any Sections of the
respective disclosure schedule necessary to make the information set forth
therein true, accurate and complete in all material respects as soon as
practicable after such information is available to such party after the date of
execution and delivery of this Agreement; provided, however, that such
disclosure shall not be deemed to constitute an exception to its representations
and warranties under Article 2 or 3, respectively, nor limit the rights and
remedies of Parent and Acquisition, on the one hand, or the Company on the
other, under this Agreement for any breach by the Company of such representation
and warranties.
Section 4.16. Parent Board of Directors. Immediately prior to the
Effective Time, the Board of Directors of Parent will take all necessary action
to expand the size of its Board of Directors by two members and appoint to the
Board of Directors of Parent, as of Effective Time, two current members of the
Board of Directors of the Company selected by the Company who agree to serve in
that capacity (the "New Directors"). Each New Director shall be assigned to the
class whose term expires in 2001. Parent agrees to nominate each New Director
for re-election at Parent's 2001 Annual General Meeting. The provisions of this
Section 4.16 shall survive the consummation of the Merger and are intended to
benefit, and shall be enforceable by, the New Directors.
Section 4.17. Certain Employee Matters.
(a) For at least one year immediately following the Effective Time while
employed by the Surviving Corporation or its subsidiaries, employees of the
Surviving Corporation and its subsidiaries shall receive compensation in the
aggregate at rates no less favorable to such employees than the rates of
compensation paid by the Company or its subsidiaries to such employees on the
date of this Agreement. Notwithstanding the foregoing, employees of the
Surviving Corporation shall be subject to other personnel and compensation
policies and practices of Parent in the same manner as the Parent's similarly
situated employees. Further, Parent shall or shall cause the Surviving
Corporation to provide benefits to employees of the Surviving Corporation that
are no less favorable in the aggregate to benefits provided to similarly
situated employees of Parent.
(b) Parent shall or shall cause the Surviving Corporation to (i)
recognize each employee's service with the Company or its subsidiaries for all
purposes under such benefit plans and arrangements (other than for benefit
accruals in any defined benefit plan) to the same extent that such service had
been recognized by the Company or its subsidiaries for such purposes immediately
prior to the Effective Time, (ii) waive any preexisting condition limitations
(other than those limitations existing under the Company's welfare benefit plans
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prior to the date of this Agreement) under the employee welfare benefit plans of
the Parent or the Surviving Corporation that would otherwise apply to employees
of the Company or its subsidiaries and their respective dependents after the
Effective Time, (iii) recognize the dollar amount of all expenses incurred by
the employees of the Company or its subsidiaries and tier respective dependents
in respect of the Company payment limitations for the applicable plan year under
the corresponding employee welfare benefit plan of the Parent or the Surviving
Corporation, and (iv) in furtherance of Section 14(b) of the Company's currently
existing Code Section 423 plan, maintain the Company's currently existing Code
Section 423 plan until employees of the Surviving Corporation become eligible to
participate in a Parent or Surviving Corporation Code Section 423 plan, at which
time (1) all accumulated payroll deductions shall be applied toward the purchase
of stock under the Company's existing Code Section 423 plan, and (2) thereafter
all outstanding offering and purchase periods under the Company's currently
existing Code Section 423 plan shall terminate and no new payroll deductions
shall be withheld and no new offering or purchase periods shall begin.
(c) Except as provided in this Section 4.17, nothing in this Agreement
shall be construed to require Parent or Surviving Corporation to continue any
Company Employee Plan or Employee Arrangement or to prevent amendment,
modification or termination of any such plan (in whole or in part) thereof after
the Effective Time.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the Company
Requisite Vote and the Parent Requisite Vote;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state or foreign court or United States federal or
state or foreign Governmental Entity that prohibits, restrains, enjoins or
restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act and
the Companies Law shall have terminated or expired;
(d) any governmental or regulatory notices, consents, approvals or other
requirements necessary to consummate the transactions contemplated hereby and to
operate the business of the Company and its subsidiaries after the Effective
Time in all material respects as it was operated prior thereto (other than under
the HSR Act) shall have been given, obtained or complied with, as applicable;
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(e) the parties shall have obtained approval of the Merger from the OCS,
the Investment Center and the Israeli Commissioner of Restrictive Trade
Practices if required by applicable law;
(f) the Form S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a stop
order, and Parent shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue shares of Parent Common Stock in
exchange for Shares in the Merger; and
(g) Parent shall have received the Israel Securities Exemption.
Section 5.2. Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition
contained in this Agreement shall be true and correct (except to the extent that
the aggregate of all breaches or inaccuracies thereof would not have a Material
Adverse Effect on Parent) at and as of the Effective Time with the same effect
as if made at and as of the Effective Time (except to the extent such
representations specifically relate to an earlier date, in which case such
representations shall be true and correct as of such earlier date, and in any
event, subject to the foregoing Material Adverse Effect qualification) and, at
the Closing, Parent and Acquisition shall have delivered to the Company a
certificate to that effect, executed by two (2) executive officers of Parent and
Acquisition;
(b) each of the covenants and obligations of Parent and Acquisition to
be performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, Parent and Acquisition shall have
delivered to the Company a certificate to that effect, executed by two (2)
executive officers of Parent and Acquisition;
(c) the shares of Parent Common Stock issuable to the Company's
shareholders pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been approved for
quotation on the Nasdaq National Market, upon official notice of issuance;
(d) the Company shall have received the opinion of Weil, Gotshal &
Manges LLP, counsel to the Company, based on the representations of the Company,
Parent and Acquisition in substantially the form attached hereto as Exhibits E-1
and E-2 respectively, to the effect that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and such opinion
shall not have been withdrawn or modified in any material respect; and
(e) the Company shall have obtained the Israeli Income Tax Ruling.
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Section 5.3. Conditions to the Obligations of Parent and Acquisition.
The respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company contained in this
Agreement and in the Stock Option Agreement shall be true and correct (except to
the extent that the aggregate of all breaches or inaccuracies thereof would not
have a Material Adverse Effect on the Company) at and as of the Effective Time
with the same effect as if made at and as of the Effective Time (except to the
extent such representations specifically relate to an earlier date, in which
case such representations shall be true and correct as of such earlier date, and
in any event, subject to the foregoing Material Adverse Effect qualification),
and, at the Closing, the Company shall have delivered to Parent and Acquisition
a certificate to that effect, executed by two (2) executive officers of the
Company;
(b) each of the covenants and obligations of the Company to be performed
at or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time and, at the Closing, the Company shall have delivered to Parent and
Acquisition a certificate to that effect, executed by two (2) executive officers
of the Company;
(c) Parent shall have received from each affiliate of the Company
referred to in Sections 2.21 and 4.14(a) an executed copy of the letter attached
hereto as Exhibit E;
(d) Herzog, Fox & Neeman or counsel to the Company shall have delivered
to Parent its written opinion (which may be based on such representations,
warranties and certificates it deems reasonable and appropriate under the
circumstances) as of the date that the Proxy Statement is first mailed to the
Company's shareholders that the Merger will not constitute a taxable event to
the Company, and such opinion shall not have been withdrawn or modified in any
material respect;
(e) Parent shall have received the opinion, based on the representations
of the Company, Parent and Acquisition in substantially the form attached hereto
as Exhibits E-1 and E-2 respectively, of Gibson, Dunn & Crutcher LLP, counsel to
Parent and Acquisition to the effect that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and such opinion
shall not have been withdrawn or modified in any material respect; and
(f) the Company shall have received from the Israeli Income Tax
Commissioner either (i) the Israeli Income Tax Ruling satisfactory to Parent in
accordance with Section 4.6 or (ii) confirmation of the mechanism for
withholding taxes in connection with the Merger, which mechanism shall be
reasonably acceptable to Parent.
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ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
Section 6.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time whether before
or after approval and adoption of this Agreement by the shareholders of the
Company and Parent:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent and Acquisition or the Company if (i) any court of
competent jurisdiction or other federal or state or foreign Governmental Entity
shall have issued a final order, decree or ruling, or taken any other final
action, restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable or
(ii) the Merger has not been consummated by March 31, 2001 (the "Final Date");
provided that no party may terminate this Agreement pursuant to this clause (ii)
if such party's failure to fulfill any of its obligations under this Agreement
shall have been a principal reason that the Effective Time shall not have
occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representations or warranties on the part of Parent or Acquisition set forth in
this Agreement or if any representations or warranties of Parent or Acquisition
shall have become untrue such that the conditions set forth in Section 5.2(a)
would be incapable of being satisfied by the Final Date, provided that the
Company has not breached any of its obligations hereunder in any material
respect; (ii) there shall have been a breach by Parent or Acquisition of any of
their respective covenants or agreements hereunder having a Material Adverse
Effect on Parent or materially adversely affecting (or materially delaying) the
ability of Parent, Acquisition or the Company to consummate the Merger, and
Parent or Acquisition, as the case may be, has not cured such breach within five
(5) business days after notice by the Company thereof, provided that the Company
has not breached any of its obligations hereunder in any material respect; (iii)
the Company shall have convened a meeting of its shareholders to vote upon the
Merger in accordance with this Agreement and shall have failed to obtain the
Company Requisite Vote at such meeting (including any adjournments thereof);
(iv) Parent shall have ceased using reasonable best efforts to call, give notice
of, or convene or hold a shareholders' meeting to vote on the Merger as promptly
as practicable after the date hereof or shall have adopted a resolution not to
effect the Merger; (v) Parent shall have convened a meeting of its shareholders
to vote upon the Merger and shall have failed to obtain the Parent Requisite
Vote at such meeting (including any adjournments thereof) or (vi) the Company
Board has received a Superior Proposal, has complied with the provisions of
Section 4.4(b), and has made the payment called for by Section 6.3(a)(1); or
(d) by Parent and Acquisition if (i) there shall have been a breach of
any representations or warranties on the part of the Company set forth in this
Agreement or if any representations or warranties of the Company shall have
become untrue such that the conditions set forth in Section 5.3(a) would be
incapable of being satisfied by the Final Date, provided that neither Parent nor
Acquisition has breached any of their respective obligations hereunder in any
material respect; (ii) there shall have been a breach by the Company of one
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or more of its covenants or agreements hereunder having a Material Adverse
Effect on the Company (or, in the case of Section 4.4, any material breach
thereof) or materially adversely affecting (or materially delaying) the ability
of Parent, Acquisition or the Company to consummate the Merger, and the Company
has not cured such breach within five (5) business days after notice by Parent
or Acquisition thereof, provided that neither Parent nor Acquisition has
breached any of their respective obligations hereunder in any material respect;
(iii) the Company Board shall have recommended to the Company's shareholders a
Superior Proposal; (iv) the Company Board shall have withdrawn or adversely
modified its approval or recommendation of this Agreement or the Merger; (v) the
Company shall have ceased using reasonable best efforts to call, give notice of,
or convene or hold a shareholders' meeting to vote on the Merger as promptly as
practicable after the date hereof or shall have adopted a resolution not to
effect any of the foregoing; (vi) the Company shall have convened a meeting of
its shareholders to vote upon the Merger and shall have failed to obtain the
Company Requisite Vote at such meeting (including any adjournments thereof) or
(vii) Parent shall have convened a meeting of its shareholders to vote upon the
Merger in accordance with this Agreement and shall have failed to obtain the
Parent Requisite Vote at such meeting (including any adjournments thereof).
Section 6.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders other
than the provisions of this Section 6.2 and Sections 4.9(c) and 6.3 hereof.
Nothing contained in this Section 6.2 shall relieve any party from liability for
any breach of this Agreement prior to such termination.
Section 6.3. Fees and Expenses.
(a)(1) In the event that this Agreement shall be terminated pursuant to:
(i) Section 6.1(c)(vi) or 6.1(d)(iii);
(ii) Section 6.1(c)(iii) or 6.1(d)(vi) and within six (6) months
thereafter the Company enters into an agreement with respect to or consummates a
Third Party Acquisition or a Third Party Acquisition occurs involving any Third
Party who, at the time of such failure to obtain the Company Requisite Vote,
shall have outstanding an offer of a plan or proposal with respect to any Third
Party Acquisition by such Third Party (or any affiliate thereof);
(iii) Section 6.1(d)(i) or (ii) arising out of a willful breach
of a representation or warranty of the Company or an action by the Company or
failure to take an action by the Company which results in a breach of a covenant
by the Company and within six (6) months thereafter the Company enters into an
agreement or consummates a Third Party Acquisition or a Third Party Acquisition
occurs involving a Third Party who at the time of such breach shall have
outstanding an offer of a plan or proposal with respect to such Third Party
Acquisition by such Third Party (or an affiliate thereof:); or
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(iv) Section 6.1(d)(iv) or (v) and within six (6) months
thereafter the Company enters into an agreement with respect to a Third Party
Acquisition or a Third Party Acquisition occurs involving any Third Party (or
any affiliate thereof);
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent and
Acquisition for such damages the Company shall pay to Parent the amount of
Seventy-Five Million Dollars ($75,000,000), less any amounts previously paid
pursuant to Section 6.3(b), as liquidated damages immediately upon the
occurrence of the event described in this Section 6.3(a)(1) giving rise to such
damages. It is specifically agreed that the amount to be paid pursuant to this
Section 6.3(a)(1) represents liquidated damages and not a penalty. The Company
hereby waives any right to set-off or counterclaim against such amount.
(2) In the event that this Agreement shall be terminated
pursuant to:
(i) Section 6.1(c)(iv) or (v) or Section 6.1(d)(vii) and within
six (6) months thereafter Parent enters into an agreement with respect to a
Parent Acquisition or a Parent Acquisition occurs involving any Parent Third
Party (or any affiliate thereof); or
(ii) Section 6.1(c)(i) or (ii) arising out of a willful breach
of a representation or warranty of Parent or an action by Parent or failure to
take an action by Parent which results in a breach of a covenant by Parent and
within six (6) months thereafter Parent enters into an agreement or consummates
a Parent Acquisition or a Third Party Acquisition occurs involving a Third Party
who at the time of such breach shall have outstanding an offer of a plan or
proposal with respect to such Parent Acquisition by such Parent Third Party (or
an affiliate thereof:); the Company would suffer direct and substantial damages,
which damages cannot be determined with reasonable certainty. To compensate the
Company for such damages Parent shall pay to the Company the amount of Eighty
Million Dollars ($80,000,000), less any amounts previously paid pursuant to
Section 6.3(c), as liquidated damages immediately upon the occurrence of the
event described in this Section 6.3(a)(2) giving rise to such damages. It is
specifically agreed that the amount to be paid pursuant to this Section
6.3(a)(2) represents liquidated damages and not a penalty. Parent waives any
right to set-off or counterclaim against such amount.
(iii) For the purposes of this Agreement, "Parent Acquisition"
means the occurrence of any of the following events: (i) the acquisition of
Parent by merger or otherwise by any person (which includes a "person" as such
term is defined in Section 13(d)(3) of the Exchange Act) other than the Company
or any affiliate thereof (a "Parent Third Party"); (ii) the acquisition by a
Parent Third Party of any material portion (which shall include thirty percent
(30%) or more) of the assets of Parent and its subsidiaries taken as a whole,
other than the sale of its products in the ordinary course of business
consistent with past practices; (iii) the acquisition by a Parent Third Party of
thirty percent (30%) or more of the outstanding Parent Common Stock; (iv) the
adoption by Parent of a plan of liquidation or the declaration or payment of an
extraordinary dividend or (v) the repurchase by Parent or any of its
subsidiaries of more than thirty percent (30%) of the outstanding Parent Common
Stock.
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(b) Upon the termination of this Agreement pursuant to Section
6.1(d)(i), (ii), (iii), (iv) or (v), in addition to any other remedies that
Parent, Acquisition or their affiliates may have as a result of such termination
(including pursuant to Section 6.3(a)(1)), the Company shall pay to Parent the
amount of Five Million Dollars ($5,000,000) as reimbursement for the costs, fees
and expenses incurred by any of them or on their behalf in connection with this
Agreement, the Merger and the consummation of all transactions contemplated by
this Agreement (including fees payable to investment bankers, counsel to any of
the foregoing and accountants).
(c) Upon the termination of this Agreement pursuant to Section
6.1(c)(i), (ii), (iv) or (v) in addition to any other remedies that the Company
or its affiliates may have as a result of such termination (including pursuant
to Section 6.3(a)(2)), Parent shall pay to the Company the amount of Five
Million Dollars ($5,000,000) as reimbursement for the costs, fees and expenses
incurred by any of them or on their behalf in connection with this Agreement,
the Merger and the consummation of all transactions contemplated by this
Agreement (including fees payable to investment bankers, counsel to any of the
foregoing and accountants).
(d) Except as specifically provided in this Section 6.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
(e) The Company acknowledges that the agreements contained in this
Article 6 (including this Section 6.3) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, Parent and
Acquisition would not enter into this Agreement. Accordingly, if the Company
fails promptly to pay the amounts required pursuant to Section 6.3 when due
(including circumstances where, in order to obtain such payment Parent or
Acquisition commences a suit that results in a final nonappealable judgment
against the Company for such amounts), the Company shall pay to Parent or
Acquisition (i) their costs and expenses (including attorneys' fees) in
connection with such suit and (ii) interest on the amount that was determined to
be due and payable hereunder at the rate announced by Chase Manhattan Bank as
its "reference rate" in effect on the date such payment was required to be made.
Section 6.4. Amendment. This Agreement may be amended by action taken by
the Company, Parent and Acquisition at any time before or after approval of the
Merger by the shareholders of the Company but after any such approval no
amendment shall be made that requires the approval of such shareholders under
Applicable Law without such approval. This Agreement (including, subject to
Section 4.15, the Company Disclosure Schedule and the Parent Disclosure
Schedule) may be amended only by an instrument in writing signed on behalf of
the parties hereto.
Section 6.5. Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or
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conditions contained herein. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid only if set forth in an instrument,
in writing, signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights
except that (i) without the Company's consent, Parent and Acquisition may not
waive compliance with Section 5.3(e) hereof and (ii) without Parent's consent,
the Company may not waive compliance with Section 5.2(d) hereof.
ARTICLE 7
MISCELLANEOUS
Section 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto that by its terms requires
performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule and the Parent Disclosure Schedule) and the Stock
Option Agreement (a) constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all other prior and
contemporaneous agreements and understandings both written and oral between the
parties with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise; provided, however, that Acquisition may assign
any or all of its rights and obligations under this Agreement to any direct
wholly owned subsidiary of Parent incorporated under the Companies Law, but no
such assignment shall relieve Acquisition of its obligations hereunder if such
assignee does not perform such obligations.
Section 7.3. Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
Section 7.4. Notices. All notices and other communications pursuant to
this Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied, sent by nationally-recognized overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the addresses set forth below or to such other
address as the party to whom notice is to be given may have furnished to the
other parties hereto in writing in accordance herewith. Any such notice or
communication shall be deemed to have been delivered and received (A) in the
case of personal delivery, on the date of such delivery, (B) in the case of
telecopier, on the date sent if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified mail (return receipt
requested), (C) in the case of a nationally-recognized overnight courier in
circumstances under which such courier guarantees next business day delivery, on
the next business day after the date when sent and (D) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted:
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if to Parent or Acquisition: Marvell Technology Group Ltd.
645 Almanor Avenue
Sunnyvale, CA 94086
Telecopier: (408) 328-0918
Attention: Corporate Counsel
and
Marvell Technology Group Ltd.
645 Almanor Avenue
Sunnyvale, CA 94086
Telecopier: (408) 328-0918
Attention: Chief Financial
Officer
with a copy to: Gibson, Dunn & Crutcher LLP
One Montgomery Street
Telesis Tower
San Francisco, California 94104
Telecopier: (415) 986-5309
Attention: Kenneth R. Lamb
if to the Company to: Galileo Technology Ltd.
c/o Galileo Technology, Inc.
142 Charcot Avenue
San Jose, CA 95131
Telecopier: (408) 367-1404
Attention: Manuel Alba,
President
with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telecopier: (212) 310-8007
Attention: Stephen M. Besen
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
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Section 7.5. Governing Law and Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF PROVIDED, HOWEVER, THAT (i) ANY MATTER INVOLVING THE INTERNAL CORPORATE
AFFAIRS OF COMPANY OR PARENT SHALL BE GOVERNED BY THE PROVISIONS OF THE
JURISDICTIONS OF ITS INCORPORATION AND (ii) THE FORM AND CONTENT OF THE MERGER
AND THE CONSEQUENCES THEREOF SHALL BE GOVERNED BY THE COMPANIES LAW. The parties
hereby irrevocably submit to the jurisdiction of the courts of the State of New
York and the Federal courts of the United States of America located in the State
of New York solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and in respect of the transactions contemplated hereby, and hereby waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a New York State
or Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 7.4 or in such other
manner as may be permitted by Applicable Law, shall be valid and sufficient
service thereof.
(b) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of New York or in New York
state court, this being in addition to any other remedy to which they are
entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH
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<PAGE> 72
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.5.
Section 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 7.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as expressly provided herein, including in
Sections 1.6, 4.12, 4,16, 4.17 and 7.2, nothing in this Agreement is intended to
or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
Section 7.8. Certain Definitions. For the purposes of this Agreement the
term:
(a) "affiliate" means (except as otherwise provided in Sections 2.22,
3.14 and 4.14) a person that, directly or indirectly, through one or more
intermediaries controls, is controlled by or is under common control with the
first-mentioned person;
(b) "Applicable Law" means, with respect to any person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, regulation,
order, writ, injunction, judgment, decree or other requirement of any
Governmental Entity existing as of the date hereof or as of the Effective Time
applicable to such Person or any of its respective properties, assets, officers,
directors, employees, consultants or agents.
(c) "business day" means any day other than a day on which the Nasdaq
National Market is closed;
(d) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(e) "knowledge" or "known" means, with respect to any matter in
question, the actual knowledge of such matter of any executive officer, of the
Company or Parent, as the case may be, and each of such person's shall be deemed
to have actual knowledge of all books and records of the Company or Parent, as
the case may be, to which they have reasonable access;
(f) "include" or "including" means "include, without limitation" or
"including, without limitation," as the case may be, and the language following
"include" or "including" shall not be deemed to set forth an exhaustive list;
(g) "Material Adverse Effect" means on or with respect to the Company or
Parent, as the case may be, any circumstance, change in, or effect on (or
circumstance, change
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in, or effect involving a prospective change on) the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as the case may be, that is, or is reasonably likely in the future to be,
materially adverse to the operations, assets or liabilities (including
contingent liabilities), earnings, prospects or results of operations, or the
business (financial or otherwise), of the Company and its subsidiaries, taken as
a whole, or Parent and its subsidiaries, taken as a whole, as the case may be,
excluding any such effect resulting from or arising in connection with (i) this
Agreement, the transactions contemplated hereby or the announcement or pendency
hereof or thereof, (ii) changes or conditions generally affecting the industries
in which the Company and its subsidiaries, or the Parent and its subsidiaries,
as the case may be, operate, (iii) changes in general economic, capital markets,
regulatory or political conditions and (iv) shareholder class action litigation
arising from allegations of a breach of fiduciary duty relating to this
Agreement;
(h) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity including any Governmental Entity; and
(i) "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other legal
entity of which the Company, Parent, the Surviving Corporation or any such other
person, as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the capital stock the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
Section 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of the Company or Parent or Acquisition or
any officer, director, employee, agent, representative or investor of any party
hereto.
Section 7.10. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
Section 7.11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
MARVELL TECHNOLOGY GROUP LTD.
By: /s/ Sehat Sutardja
-------------------------------------
Name: Sehat Sutardja
Title:
Date:
GALILEO TECHNOLOGY LTD.
By: /s/ Avigdor Willenz
-------------------------------------
Name: Avigdor Willenz
Title:
Date:
TOSHACK ACQUISITIONS LTD.
By: /s/ Sehat Sutardja
-------------------------------------
Name: Sehat Sutardja
Title:
Date:
{SIGNATURE PAGE TO AGREEMENT OF MERGER BY AND AMONG MARVELL TECHNOLOGY GROUP
LTD., GALILEO TECHNOLOGY LTD. AND TOSHACK ACQUISITIONS LTD.}
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This Stock Option Agreement was executed by Sehat Sutardja on behalf of Marvell
Technology Group Ltd., and Avigdor Willenz, on behalf of Galileo Technology
Ltd., on October 16, 2000.
Exhibit A
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of October 16, 2000, is by and
between MARVELL TECHNOLOGY GROUP LTD., a Bermuda corporation ("Grantee"), and
GALILEO TECHNOLOGY LTD., an Israeli corporation ("Issuer").
RECITALS
A. Grantee, Toshack Acquisitions Ltd., an Israeli corporation
("Acquisition") and Issuer are simultaneously entering into an Agreement and
Plan of Merger (the "Merger Agreement") which provides, among other things, that
upon the terms and subject to the conditions thereof, Acquisition (as the target
company (Chevrat Ha 'Ya'ad)) will be merged with and into Issuer (as the
absorbing company (HaChevra Ha 'Koletet)) (the "Merger").
B. As a condition to its willingness to enter into the Merger Agreement,
Grantee has required that Issuer agree, and Issuer has agreed, to enter into
this Stock Option Agreement, which provides, among other things, that Issuer
grant to Grantee an option to purchase ordinary shares of Issuer, NIS 0.01 per
share ("Issuer Shares"), upon the terms and subject to the conditions provided
for herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this Stock Option Agreement and the Merger
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Grant of Option. Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase 5,371,720 shares of Issuer Shares (or such
other number of Issuer Shares as equals 12.5% of the outstanding Issuer Shares
immediately prior to the time of exercise) (the "Option Shares"), in the manner
set forth below, at an exercise price of $55.10 per share of Issuer Shares,
subject to adjustment as provided below (the "Option Price"). Capitalized terms
used herein but not defined herein shall have the meanings set forth in the
Merger Agreement.
2. Exercise of Option.
(a) Subject to the satisfaction or waiver of the conditions set
forth in Section 9 of this Stock Option Agreement, prior to the termination of
this Stock Option Agreement in accordance with its terms, Grantee may exercise
the Option, in whole or in part, at any time or from time to time on or after
the occurrence of a Triggering Event (as defined below). The Option shall
terminate and not be exercisable at any time following the Expiration Date (as
defined in Section 11). The term "Triggering Event" means the time immediately
prior to the termination of the Merger Agreement pursuant to Section 6.3(a)(1)
thereof as a result of which the Issuer could become obligated to pay the fee
specified in Section 6.3(a).
(b) In the event Grantee wishes to exercise the Option at such
time as the Option is exercisable and has not terminated, Grantee shall deliver
written notice (the "Exercise
<PAGE> 76
Notice") to Issuer specifying its intention to exercise the Option, the total
number of Option Shares it wishes to purchase and a date and time for the
closing of such purchase (a "Closing") not less than one (1) nor more than
thirty (30) business days after the later of (i) the date such Exercise Notice
is given and (ii) the expiration or termination of any waiting period pursuant
to applicable law; provided that if the applicable waiting period has not
expired or terminated by the Expiration Date, the Expiration Date shall be
extended until two (2) business days after the applicable waiting period has
expired or terminated (but in no event longer than three (3) months beyond the
original Expiration Date). If after the occurrence of a Triggering Event and
prior to the Expiration Date (x) any person or group (other than Grantee and its
affiliates) shall have acquired thirty percent (30%) or more of the then
outstanding shares of Issuer Shares (a "Share Acquisition"), or (y) Issuer shall
have entered into a written definitive agreement with any person or group (other
than Grantee and its affiliates) providing for a Company Acquisition (as defined
below), then Grantee, in lieu of exercising the Option, shall have the right at
any time thereafter (for so long as the Option is exercisable under Section 2(a)
hereof) to request in writing that Issuer pay, and promptly (but in any event
not more than five (5) business days) after the giving by Grantee of such
request, Issuer shall pay to Grantee, in cancellation of the Option (which shall
upon such payment be deemed surrendered by Grantee and extinguished), an amount
in cash (the "Cancellation Amount") equal to the lesser of:
(i)(A) the excess over the Option Price of the greater
of (x) the last sale price of a share of Issuer Shares as reported on the Nasdaq
National Market on the last trading day prior to the date of the Exercise
Notice, and (y)(1) the highest price per share of Issuer Shares offered to be
paid or paid by any such person or group pursuant to or in connection with such
Share Acquisition or Company Acquisition or (2) if such Company Acquisition
consists of a purchase and sale of assets, the aggregate consideration offered
to be paid or paid in any transaction or proposed transaction in connection with
a Company Acquisition, divided by the number of shares of Issuer Shares then
outstanding, multiplied by (B) the number of Option Shares then covered by the
Option; and
(ii) Five Million Dollars ($5,000,000).
If all or a portion of the price per share of Issuer Shares
offered, paid or payable or the aggregate consideration offered, paid or payable
for the stock or assets of Issuer, each as contemplated by the preceding
sentence, consists of noncash consideration, such price or aggregate
consideration shall be the cash consideration, if any, plus the fair market
value of the non-cash consideration as determined jointly by the investment
bankers of Issuer and the investment bankers of Grantee.
(c) Notwithstanding any other provision of this Stock Option
Agreement, in no event shall Grantee's Total Profit (as hereinafter defined)
exceed $80 million and, if it otherwise would exceed such amount, Grantee, at
its sole election, shall either (i) deliver to the Issuer for cancellation
shares of Issuer Shares previously purchased by Grantee, (ii) pay cash or other
consideration to the Issuer or (iii) undertake any combination thereof, so that
Grantee's Total Profit shall not exceed $80 million after taking into account
the foregoing actions. As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes ) of the following: (A) the amount paid by the
Issuer pursuant to Section 2(b) of this Stock Option Agreement, (B) the amounts
received by Grantee pursuant to the sale of Registrable Securities (as
hereinafter
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<PAGE> 77
defined) (or any other securities into which such securities are converted or
exchanged) to any unaffiliated party, less Grantee's purchase price for such
shares, and (C) the aggregate amount received by Grantee from the Issuer
pursuant to Section 6.3 of the Merger Agreement.
(d) Notwithstanding any other provision of this Stock Option
Agreement, the Option may not be exercised for a number of Option Shares as
would, as of the date of the related Exercise Notice, result in a Notional Total
Profit (as defined below) of more than $80 million, and, if exercise of the
Option otherwise would exceed such amount, Issuer, at its discretion, may
increase the Exercise Price for that number of Option Shares set forth in the
Exercise Notice so that the Notional Total Profit shall not exceed $80 million.
As used herein, the term "Notional Total Profit" with respect to any number of
Option shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of the related Exercise Notice
assuming that the Option were exercised on such date for such number of Option
Shares and assuming that such Option Shares, together with all other Option
Shares held by Grantee and its affiliates as of such date, were sold for cash at
the closing market price for Issuer Shares of the close of business on the
immediately preceding trading day (less customary brokerage commissions).
(e) Notwithstanding anything in this Stock Option Agreement, the
Option may not be exercised if Grantee or Acquisition has willfully breached any
of its representations and warranties or has taken an action or failed to take
an action which results in a breach of a covenant by Grantee or Acquisition
contained in the Merger Agreement.
(f) As used herein, "Company Acquisition" means the occurrence
of any of the following events: (i) the acquisition of Issuer by merger or
otherwise by any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Grantee, Acquisition or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
any material portion (which shall include thirty percent (30%) or more) of the
assets of Issuer and its subsidiaries taken as a whole, other than the sale of
its products in the ordinary course of business consistent with past practices;
(iii) the acquisition by a Third Party of thirty percent (30%) or more of the
outstanding Issuer Shares; (iv) the adoption by the Issuer of a plan of
liquidation or the declaration or payment of an extraordinary dividend or (v)
the repurchase by the Issuer or any of its subsidiaries of more than thirty
percent (30%) of the outstanding Shares.
3. Payment of Option Price and Delivery of Certificate. Any
Closings under Section 2 of this Stock Option Agreement shall be held at the
principal executive offices of the Issuer, or at such other place as Issuer and
Grantee may agree. At any Closing hereunder, (a) Grantee or its designee will
make payment to Issuer of the aggregate price for the Option Shares being so
purchased by delivery of a certified check, official bank check or wire transfer
of funds pursuant to Issuer's instructions payable to Issuer in an amount equal
to the product obtained by multiplying the Option Price by the number of Option
Shares to be purchased, and (b) upon receipt of such payment Issuer will deliver
to Grantee or its designee a certificate or certificates representing the number
of validly issued, fully paid and non-assessable Option Shares so purchased, in
the denominations and registered in such names designated to Issuer in writing
by Grantee.
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<PAGE> 78
4. Registration and Listing of Option Shares.
(a) Issuer will, if requested by Grantee at any time or from
time to time within one (1) year following the Exercise Date (as defined in
Section 12 below) (the "Registration Period"), in order to permit the sale or
other disposition of the Option Shares that have been acquired by Grantee upon
exercise of the Option ("Registrable Securities"), register under the Securities
Act of 1933, as amended (the "Act"), the offering, sale and delivery, or other
disposition, of the Registrable Securities. Any such Registration Notice must
relate to a number of Registrable Securities equal to at least forty percent
(40%) of the Option Shares, unless the remaining number of Registrable
Securities is less than such amount, in which case Grantee shall be entitled to
exercise its rights hereunder but only for all of the remaining Registrable
Securities (a "Permitted Offering"). Grantee's rights hereunder shall terminate
at such time as Grantee shall be entitled to sell all of the remaining
Registrable Securities pursuant to Rule 144(k) under the Act. Issuer will use
all reasonable efforts to qualify any Registrable Securities Grantee desires to
sell or otherwise dispose of under applicable state securities or "blue sky"
laws; provided, however, that Issuer shall not be required to qualify to do
business or consent to general service of process in any jurisdiction by reason
of this provision. Without Grantee's prior written consent, no other securities
may be included in any such registration. Issuer will use all reasonable efforts
to cause each such registration statement to become effective, to obtain all
consents or waivers of other parties that are required therefor and to keep such
registration statement effective for a period of ninety (90) days from the day
such registration statement first becomes effective. The obligations of Issuer
hereunder to file a registration statement and to maintain its effectiveness may
be suspended for one or more periods not exceeding ninety (90) days during any
one-year period in the aggregate if the Board of Directors of Issuer shall have
determined in good faith that the filing of such registration statement or the
maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect Issuer, or Issuer is
required under the Act to include audited financial statements for any period in
such registration statement and such financial statements are not yet available
for inclusion in such registration statement. Grantee shall be entitled to make
up to two (2) requests under this Section 4(a). For purposes of determining
whether the two (2) requests have been made under this Section 4(a), only
requests relating to a registration statement that has become effective under
the Act will be counted.
(b) If, during the Registration Period, Issuer shall propose to
register under the Act the offering, sale and delivery of Issuer Shares for cash
for its own account or for any other shareholder of Issuer pursuant to a firm
underwriting, it will, in addition to Issuer's other obligations under this
Section 4, allow Grantee the right to participate in such registration so long
as Grantee participates in such underwriting; provided, however, that, if the
managing underwriter of such offering advises Issuer in writing that in its
opinion the number of shares of Issuer Shares requested to be included in such
registration exceeds the number that it would be in the best interests of Issuer
to sell in such offering, Issuer will, after fully including therein all shares
of Issuer Shares to be sold by Issuer, include the shares of Issuer Shares
requested to be included therein by Grantee pro rata (based on the number of
shares of Issuer Shares requested to be included therein) with the shares of
Issuer Shares requested to be included therein by persons other than Issuer and
persons to whom Issuer owes a contractual obligation (other than any director,
officer or employee of Issuer to the extent any such person is not currently
owed such contractual obligation).
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<PAGE> 79
(c) The expenses associated with the preparation and filing of
any registration statement pursuant to this Section 4 and any sale covered
thereby (including any fees related to blue sky qualifications and filing fees
in respect of SEC or the National Association of Securities Dealers, Inc.)
("Registration Expenses") will be paid by Issuer, except for underwriting
discounts or commissions or brokers' fees in respect of shares of Issuer Shares
to be sold by Grantee and the fees and disbursements of Grantee's counsel;
provided, however, that Issuer will not be required to pay for any Registration
Expenses with respect to such registration if the registration request is
subsequently withdrawn at the request of Grantee unless Grantee agrees to
forfeit its right to request one registration; provided further, however, that,
if at the time of such withdrawal Grantee has learned of a material adverse
change in the results of operations, condition, business or prospects of Issuer
not known to Grantee at the time of the request and has withdrawn the request
within a reasonable period of time following disclosure by Issuer to Grantee of
such material adverse change, then Grantee shall not be required to pay any of
such expenses and shall not forfeit such right to request one registration.
Grantee will provide all information reasonably requested by Issuer for
inclusion in any registration statement to filed hereunder.
(d) In connection with each registration under this Section 4,
Issuer shall indemnify and hold each holder of Option or Option Shares
participating in such offering (a "Holder"), its underwriters and each of their
respective affiliates harmless against any and all losses, claims, damage,
liabilities and expenses (including, without limitation, investigation expenses
and fees and disbursements of counsel and accountants), joint or several, to
which such Holder, its underwriters and each of their respective affiliates may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any registration statement (including any prospectus therein),
or any amendment or supplement thereto, 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, other
than such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) that arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in written information
furnished by a Holder to Issuer expressly for use in such registration
statement.
(e) In connection with any registration statement pursuant to
this Section 4, each Holder agrees to furnish Issuer with such information
concerning itself and the proposed sale or distribution as shall reasonably be
required in order to ensure compliance with the requirements of the Act and
shall provide representations and warranties customary for selling shareholders
who are unaffiliated with the Issuer. In addition, Grantee and each Holder shall
indemnify and hold Issuer, its underwriters and each of their respective
affiliates harmless against any and all losses, claims, damages, liabilities and
expenses (including, without limitation, investigation expenses and fees and
disbursement of counsel and accountants), joint or several, to which Issuer, its
underwriters and each of their respective affiliates may become subject under
the Act or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
written information furnished by any Holder to Issuer expressly for use in such
registration statement; provided, however, that in no
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<PAGE> 80
event shall any indemnification amount contributed by a Holder hereunder exceed
the net proceeds of the offering received by such Holder.
(f) Upon the exercise of the Option, Issuer will promptly list
the Option Shares for which the Option was exercised with the Nasdaq National
Market System or on such national or other exchange on which the shares of
Issuer Shares are at the time listed.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Israel and has requisite power
and authority to enter into and perform its obligations under this Stock Option
Agreement.
(b) The execution and delivery of this Stock Option Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorized this Stock Option
Agreement or to consummate the transactions contemplated hereby. The Board of
Directors of Issuer has duly approved the issuance and sale of the Option
Shares, upon the terms and subject to the conditions contained in this Stock
Option Agreement, and the consummation of the transactions contemplated hereby.
This Stock Option Agreement has been duly and validly executed and delivered by
Issuer and constitutes a legal, valid and binding obligation of Issuer
enforceable against Issuer in accordance with its terms.
(c) Issuer has taken all necessary action to authorize and
reserve for issuance and to permit it to issue, and at all times from the date
of this Stock Option Agreement through the date of expiration of the Option will
have reserved for issuance upon exercise of the Option, a sufficient number of
authorized shares of Issuer Shares for issuance upon exercise of the Option,
each of which, upon issuance pursuant to this Stock Option Agreement and when
paid for as provided herein, will be validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all claims, liens,
charges, encumbrances and security interests (other than those imposed by
Grantee or applicable law).
(d) The execution, delivery and performance of this Stock Option
Agreement by Issuer and the consummation by it of the transactions contemplated
hereby except as required by the HSR Act and any material foreign competition
authorities (if applicable), and, with respect to Section 4 hereof, compliance
with the provisions of the Act and any applicable state or securities laws, and
the approvals of the Office of the Chief Scientist and the Investment Center of
the Ministry of Industry and Commerce of the State of Israel, do not require the
consent, waiver, approval, license or authorization of or result in the
acceleration of any obligation under, or constitute a default under, any term,
condition or provision of the memorandum of association and articles of
association (and other governing documents), or any indenture, mortgage, lien,
lease, agreement, contract, instrument, order, judgment, ordinance, regulation
or decree or any restriction to which Issuer or any property of Issuer or its
subsidiaries is bound, except where failure to obtain such consents, waivers,
approvals, licenses or authorizations or where such acceleration or defaults
could not, individually or in the aggregate, reasonably be expected to adversely
affect Grantee's rights hereunder or to have a Material Adverse Effect on
Issuer.
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<PAGE> 81
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Grantee is a corporation duly organized, validly existing
and in good standing under the laws of Bermuda, and has the requisite power and
authority to enter into and perform its obligations under this Stock Option
Agreement.
(b) The execution and delivery of this Stock Option Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Grantee and no other corporate
proceedings on the part of Grantee are necessary to authorize this Stock Option
Agreement or to consummate the transactions contemplated hereby. This Stock
Option Agreement has been duly and validly executed and delivered by Grantee
and, assuming this Stock Option Agreement has been duly executed and delivered
by Issuer, constitutes a valid and binding obligation of Grantee enforceable
against Grantee in accordance with its terms.
(c) Grantee is acquiring the Option and it will acquire the
Option Shares issuable upon the exercise thereof for its own account and not
with a view to the distribution or resale thereof in any manner not in
accordance with applicable law.
7. Covenants of Grantee. Grantee agrees not to transfer or
otherwise dispose of the Option or the Option Shares, or any interest therein,
except that Grantee may transfer or dispose of the Option Shares so long as such
transaction is in compliance with the Act and any applicable state securities
law. Grantee further agrees to the placement of the following legend on the
certificates) representing the Option Shares (in addition to any legend required
under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED
UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE FOREIGN OR STATE LAW GOVERNING THE OFFER AND SALE OF
SECURITIES. NO TRANSFER OR OTHER DISPOSITION OF THESE SHARES, OR OF ANY
INTEREST THEREIN, MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH OTHER FOREIGN OR STATE
LAWS OR PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER THE ACT, SUCH
OTHER FOREIGN OR STATE LAWS, AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER AND (B) ARE SUBJECT TO ISSUER'S RIGHTS TO REPURCHASE THE
SHARES IN ACCORDANCE WITH THE TERMS OF SECTION 12 OF THAT CERTAIN STOCK
OPTION AGREEMENT, DATED AS OF OCTOBER 16, 2000, BETWEEN ISSUER AND
MARVELL TECHNOLOGY GROUP LTD."
8. HSR Compliance Efforts. Grantee and Issuer shall take, or
cause to be taken, all reasonable action to consummate and make effective the
transactions contemplated by this Stock Option Agreement, including, without
limitation, reasonable efforts to obtain any necessary consents of third parties
and governmental agencies and the filing by Grantee and
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<PAGE> 82
Issuer promptly of any required HSR Act notification forms and the documents
required to comply with the HSR Act.
9. Certain Conditions. The obligation of Issuer to issue Option
Shares under this Stock Option Agreement upon exercise of the Option shall be
subject to the satisfaction or waiver of the following conditions:
(a) any waiting periods applicable to the acquisition of the
Option Shares by Grantee pursuant to this Stock Option Agreement under the HSR
Act and any material foreign laws shall have expired or been terminated and all
regulatory approvals for the issuance of the Option Shares shall have been
obtained and be in full force and effect; and
(b) no statute, rule or regulation shall be in effect, and no
order, decree or injunction entered by any court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall be in
effect that prohibits the exercise of the Option or acquisition or issuance of
Option Shares pursuant to this Stock Option Agreement.
10. Adjustments Upon Changes in Capitalization. In the event of
any change in the number of issued and outstanding shares of Issuer Shares by
reason of any stock dividend, stock split, recapitalization, merger, rights
offering, share exchange or other change in the corporate or capital structure
of Issuer, Grantee shall receive, upon exercise of the Option, the stock or
other securities, cash or property to which Grantee would have been entitled if
Grantee had exercised the Option and had been a holder of record of shares of
Issuer Shares on the record date fixed for determination of holders of shares of
Issuer Shares entitled to receive such stock or other securities, cash or
property and the Option Price shall be adjusted appropriately.
11. Expiration. The Option shall expire at the earlier of (x)
the Effective Time (as defined in the Merger Agreement), (y) the termination of
the Merger Agreement in accordance with its terms, other than as a result of the
occurrence of a Triggering Event and (z) 5:00 p.m., California time, on the day
that is the six (6) month anniversary of the date on which the Merger Agreement
has been terminated in accordance with the terms thereof as a result of the
occurrence of a Triggering Event (such expiration date is referred to as the
"Expiration Date").
12. Issuer Call. If Grantee has acquired Option Shares pursuant
to exercise of the Option (the date of any closing relating to such exercise
herein referred to as an "Exercise Date") and there shall not be pending any
Company Acquisition that is subject to the affirmative vote of the shareholders
of the Issuer (that has not been voted upon) involving a Third Party who, at any
time during the period ending six (6) months following the date hereof, had
outstanding an offer or proposal with respect to a Company Acquisition, then, at
any time after the six (6) months following the date of grant hereof and prior
to six (6) months following such Exercise Date, Issuer, subject to applicable
law, may require Grantee, upon delivery to Grantee of written notice, to sell to
Issuer all (but not less than all) Option Shares held by Grantee as of the date
of such notice. Subject to Section 2(c) hereof, the per share purchase price for
such purchase (the "Issuer Call Price") shall be equal to (A) the Option Price,
plus (B) interest on the Option Price at a rate of 10% per annum (computed on
the basis of a 360-day year of twelve 30-day months) for the period from the
Exercise Date to the closing of such sale of Option Shares, less (C) any
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<PAGE> 83
dividends paid on the Option Shares to be purchased by Issuer pursuant to this
Section 12. The closing of any sale of Option Shares pursuant to this Section 12
shall take place at the principal offices of Grantee at a time and on a date
designated by Issuer in the aforementioned notice to Grantee, which date shall
be no more than thirty (30) days and no less than one (1) business day from the
date of such notice. The Issuer Call Price shall be paid in immediately
available funds.
13. General Provisions.
(a) Survival. All of the representations, warranties and
covenants contained herein shall survive a Closing and shall be deemed to have
been made as of the date hereof and as of the date of each Closing.
(b) Further Assurances. If Grantee exercises the Option, or any
portion thereof, in accordance with the terms of this Stock Option Agreement,
Issuer and Grantee will execute and deliver all such further documents and
instruments and use all reasonable efforts to take all such further action as
may be necessary in order to consummate the transactions contemplated thereby.
(c) Severability. It is the desire and intent of the parties
that the provisions of this Stock Option Agreement be enforced to the fullest
extent permissible under the law and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, in the event that any
provision of this Stock Option Agreement would be held in any jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Stock Option Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Stock Option Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
(d) Assignment; Transfer of Stock Option. This Stock Option
Agreement shall be binding on and inure to the benefit of the parties hereto and
their respective successors and permitted assigns; provided, however, that
Issuer and Grantee, without the prior written consent of the other party, shall
not be entitled to assign or otherwise transfer any of its rights or obligations
hereunder and any such attempted assignment or transfer shall be void; provided,
further, that Grantee shall be entitled to assign or transfer this Stock Option
Agreement or any rights hereunder to any wholly-owned subsidiary of Grantee so
long as such wholly-owned subsidiary agrees in writing to be bound by the terms
and provisions hereof.
(e) Specific Performance. The parties agree and acknowledge that
in the event of a breach of any provision of this Stock Option Agreement, the
aggrieved party would be without an adequate remedy at law. The parties
therefore agree that in the event of a breach of any provision of this Stock
Option Agreement, the aggrieved party shall be entitled to institute and
prosecute proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provisions. By seeking or
obtaining any such relief, the aggrieved party will not be precluded from
seeking or obtaining any other relief to which it may be entitled.
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(f) Amendments. This Stock Option Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by Grantee and Issuer.
(g) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to be
sufficient if contained in a written instrument and shall be deemed given if
delivered personally, telecopied, sent by nationally-recognized, overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the other party at the following addresses (or such other
address for a party as shall be specified by like notice):
If to Grantee:
Marvell Technology Group Ltd.
645 Almanor Avenue
Sunnyvale, CA 94086
Telecopier: (408) 328-0918
Attention: Corporate Counsel
with a copy to:
Gibson, Dunn & Crutcher LLP
One Montgomery Street
Telesis Tower
San Francisco, California 94104
Telecopier: (415) 374-8427
Attention: Kenneth R. Lamb
If to Issuer:
Galileo Technology Ltd.
c/o Galileo Technology, Inc.
142 Charcot Avenue
San Jose, CA 95131
Telecopier: (408) 367-1404
Attention: Manuel Alba,
President
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<PAGE> 85
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telecopier: (212) 310-8007
Attention: Stephen M. Besen
(h) Headings. The headings contained in this Stock Option
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Stock Option Agreement.
(i) Counterparts. This Stock Option Agreement may be executed in
one or more counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(j) Governing Law/Jurisdiction/Venue. Governing Law and Venue;
Waiver of Jury Trial.
(1) THIS STOCK OPTION AGREEMENT SHALL BE DEEMED TO BE MADE IN
AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES THEREOF, EXCEPT FOR MATTERS OF CORPORATE LAW CONCERNING THE
RESPECTIVE PARTIES, WHICH SHALL BE GOVERNED BY THE RESPECTIVE CORPORATE LAWS OF
THEIR JURISDICTION OF INCORPORATION. The parties hereby irrevocably submit to
the jurisdiction of the courts of the State of New York and the Federal courts
of the United States of America located in the State of New York solely in
respect of the interpretation and enforcement of the provisions of this Stock
Option Agreement and of the documents referred to in this Stock Option
Agreement, and in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Stock Option Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a New York State or Federal court. The parties hereby consent to and
grant any such court jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 13(g) or in such other manner as may be permitted by Applicable Law,
shall be valid and sufficient service thereof.
(2) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS STOCK OPTION AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES
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<PAGE> 86
ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS STOCK OPTION AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS IN THIS SECTION 13(i).
(k) Entire Agreement. This Stock Option Agreement and the Merger
Agreement, and any documents and instruments referred to herein and therein,
constitute the entire agreement between the parties hereto and thereto with
respect to the subject matter hereof and thereof and supersede all other prior
agreements and understandings, both written and oral, and all contemporaneous
oral agreements and understandings, between the parties with respect to the
subject matter hereof and thereof. Nothing in this Stock Option Agreement shall
be construed to give any person other than the parties to this Stock Option
Agreement or their respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of this Stock Option
Agreement or any provision contained herein.
(l) Expenses. Except as otherwise provided in this Stock Option
Agreement, each party shall pay its own expenses incurred in connection with
this Stock Option Agreement and the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
MARVELL TECHNOLOGY GROUP LTD.
By
--------------------------------------
Name:
-------------------------------
Title:
------------------------------
GALILEO TECHNOLOGY LTD.
By
--------------------------------------
Name:
-------------------------------
Title:
------------------------------
{SIGNATURE PAGE TO MARVELL/GALILEO STOCK OPTION AGREEMENT}
<PAGE> 88
The following proxy was executed by the following Galileo stockholders:
Manuel Alba-Marquez 1,385,500 shares
Avigdor Willenz 8,806,478 shares
Exhibit B
FORM OF IRREVOCABLE PROXY
The undersigned Shareholder of Galileo Technology Ltd., a corporation
formed under the laws of the State of Israel (the "Company"), hereby irrevocably
appoints and constitutes _______________ the attorney and proxy of the
undersigned with full power of substitution and resubstitution to the full
extent of the undersigned's rights with respect to (i) the issued and
outstanding ordinary shares, par value NIS 0.01 per share, of the Company
("Company Ordinary Shares"), owned of record by the undersigned as of the date
of this proxy, which shares are specified on the final page of this proxy and
(ii) any and all other Company Ordinary Shares, which the undersigned
(individually or jointly) may acquire beneficially or of record after the date
hereof (collectively, the "Subject Securities"). Upon the execution hereof, all
prior proxies given by the undersigned with respect to any of the Subject
Securities, are hereby revoked, and no subsequent proxies will be given with
respect to any of the Subject Securities. This proxy is irrevocable and is
coupled with an interest.
The attorneys and proxies named above are hereby instructed and
authorized to exercise this proxy during the period from the date hereof through
the earlier of (i) the date upon which the Agreement of Merger dated October 16,
2000 (the "Merger Agreement") by and among the Company, Marvell Technology Group
Ltd., a Bermuda corporation, and Toshack Acquisitions Ltd., an Israeli
corporation, is validly terminated and (ii) the date upon which the Merger
becomes effective (the "Expiration Date"), at the Company Shareholder Meeting
(as defined in the Merger Agreement), however called, and at every adjournment
or postponement thereof, or in any written action by consent of shareholders of
the Company, to (a) appear, or cause the holder of record as of the record date
for the Company Shareholder Meeting to appear at the Company Shareholder
Meeting, or any adjournments or postponements thereof, for the purpose of
establishing a quorum, (b) vote or cause to be voted all the Subject Securities
in favor of the Merger (as defined in the Merger Agreement) and the other
related transactions, the adoption and approval of the terms of the Merger
Agreement and in favor of the transactions and each of the other actions
contemplated by the Merger Agreement and the Merger, and (c) vote all the
Subject Securities against any Acquisition Proposal and any related transaction
or agreement. The term "Acquisition Proposal" shall mean, other than the Merger,
any proposal or inquiry that constitutes, or may reasonably be expected to lead
to an Acquisition Transaction. The term "Acquisition Transaction" shall mean any
acquisition or purchase of a substantial amount of assets of, or any equity
interest in, the Company, or any merger, consolidation, business combination,
amalgamation, arrangement, recapitalization, liquidation, dissolution, or
similar transaction involving the Company or any of its subsidiaries or any
other material corporate transactions the consummation of which would, or could
reasonably be expected to, impede, interfere with, prevent or materially delay
the Merger.
This Proxy does not relate to, and the undersigned Shareholder remains
entitled to vote the Subject Securities on, all other matters. This proxy shall
be binding upon the heirs, successors and assigns of the undersigned (including
any transferee of any of the Subject Securities).
<PAGE> 89
This proxy shall terminate upon the Expiration Date.
Dated:
------------------------ SHAREHOLDER
-----------------------------------------
Name:
-----------------------------------
Number of Company Ordinary Shares
owned beneficially or of record as
of the date of this proxy:
-----------------------------------------
2
<PAGE> 90
This following voting agreement was executed by the following Marvell
stockholders:
Diosdado P. Banatao 6,879,208 shares
Kuo Wei Chang 8,739,140 shares
Weili Dai 24,092,312 shares
Pantas Sutardja 11,776,000 shares
Sehat Sutardja 24,092,312 shares
Exhibit C
FORM OF VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 16, 2000 (this "AGREEMENT"), by
and between Galileo Technology Ltd., an Israeli corporation ("THE COMPANY"), and
___________________ (the "STOCKHOLDER").
W I T N E S S E T H:
WHEREAS, concurrently herewith, the Company, Marvell Technology Group
Ltd., a Bermuda corporation ("PARENT"), and Toshack Acquisitions Ltd., an
Israeli corporation and wholly-owned subsidiary of Parent ("MERGER SUB"), are
entering into an Agreement of Merger (as such agreement may hereafter be amended
from time to time, the "MERGER AGREEMENT"; capitalized terms used and not
defined herein have the respective meanings ascribed to them in the Merger
Agreement) pursuant to which Merger Sub will be merged with and into the
Company, with the Company as the Surviving Corporation (the "MERGER");
WHEREAS, the Stockholder beneficially owns __________ shares (the
"STOCKHOLDER SHARES") of Parent Common Stock; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, the Company has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement; and further the
Stockholder has agreed to enter into this Agreement strictly in his capacity as
a beneficial owner of the Stockholder Shares and not in his capacity as a
director or officer of the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
1. Provisions Concerning the Shares. (a) The Stockholder hereby agrees
that during the period commencing on the date hereof and continuing until this
provision terminates pursuant to Section 5 hereof, at any meeting of the holders
of shares of Parent Common Stock, however called, or in connection with any
written consent of the holders of shares of Parent Common Stock, the Stockholder
shall vote, (or cause to be voted) any shares of Parent Common Stock held of
record or Beneficially Owned (as defined below) by the Stockholder, including
the Stockholder Shares, whether heretofore owned or hereafter acquired, in favor
of the Merger and the adoption of the Merger Agreement and any actions required
in furtherance thereof and hereof.
(b) The Stockholder shall not enter into any agreement or
understanding with any Person (as defined below) the effect of which would be
inconsistent or violative of the provisions of this Agreement.
(c) For purposes of this Agreement:
<PAGE> 91
"BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing; without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" within the meaning of Section 13(d)(3) of the
Exchange Act; and
"PERSON" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(d) In the event of a stock dividend or distribution, or any
change in the Parent Common Stock by reason of any stock dividend, stock split,
recapitalization, reclassification, combination, exchange of shares, merger or
the like, the term "STOCKHOLDER SHARES" as used in this Agreement shall be
deemed to refer to and include the Stockholder Shares as well as all such stock
dividends and distributions and any shares or other securities into which or for
which any or all of the Stockholder Shares may be converted, changed or
exchanged.
2. Representations and Warranties. As of the date hereof, the
Stockholder hereby represents and warrants to the Company as follows:
(a) Ownership of Shares. The Stockholder is the Beneficial Owner
of all of the Stockholder Shares. On the date hereof, the Stockholder Shares
constitute all of the shares of Parent Common Stock owned of record or
Beneficially Owned by the Stockholder. The Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Section 1 hereof, sole power of disposition and sole power to agree to all of
the matters set forth in this Agreement, in each case with respect to all of the
Stockholder Shares, with no limitations, qualifications or restrictions on such
rights (subject to applicable securities laws).
(b) Power; Binding Agreement. The Stockholder has the legal
capacity, power and authority to enter into and perform all of its obligations
under this Agreement. This Agreement has been duly and validly authorized,
executed and delivered by the Stockholder and constitutes a valid and binding
agreement of the Stockholder, enforceable against the Stockholder in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity). There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the Stockholder is
settlor or trustee or any other person whose consent is required for the
execution and delivery of this Agreement or the consummation by the Stockholder
of the transactions contemplated hereby.
(c) No Conflicts. (i) Except for filings under the HSR Act, if
any, and filings under the Exchange Act, no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by the
2
<PAGE> 92
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by the Stockholder, the consummation by the Stockholder of the
transactions contemplated hereby or compliance by the Stockholder with any of
the provisions hereof will (A) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any
declaration of trust, note, bond, mortgage, indenture, security or pledge
agreement, voting agreement, stockholders' agreement or voting trust, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of the Stockholder's properties or assets may be bound, or
(B) violate any order, writ, injunction, decree, judgment, order, statute, rule
or regulation applicable to the Stockholder or any of the Stockholder's
properties or assets.
(d) Reliance by the Company. The Stockholder understands and
acknowledges that the Company is entering into the Merger Agreement in reliance
upon execution and delivery of this Agreement by the Stockholder.
(e) Sophistication. The Stockholder acknowledges being an
informed and sophisticated investor and, together with the Stockholder's
advisors, has undertaken such investigation as they have deemed necessary,
including the review of the Merger Agreement and this Agreement, to enable the
Stockholder to make an informed and intelligent decision with respect to the
Merger Agreement and this Agreement and the transactions contemplated thereby
and hereby.
(f) No Broker. No broker, investment banker, financial adviser
or other Person is entitled to any commission, broker's fee, finder's fee,
adviser's fee or similar fee arising solely in connection with the execution of
this Agreement by Stockholder.
3. Acknowledgment. The Company acknowledges that this Agreement is
entered into by the Stockholder in such Stockholder's capacity as a beneficial
owner of the Stockholder Shares, and that nothing in this Agreement shall in any
way restrict or limit the Stockholder from taking any action in his capacity as
a director or officer of Parent or otherwise fulfilling his fiduciary
obligations as a director or officer of Parent, notwithstanding that any such
action would be inconsistent with or violative of the Stockholder's obligations
under this Agreement if taken in his capacity as a beneficial owner of the
Stockholder Shares.
4. Restriction on Transfer; Proxies; Non-Interference; Stop Transfers;
etc.
(a) The Stockholder shall not, directly or indirectly, during
the period commencing on the date hereof and continuing until this provision
terminates pursuant to Section 5 hereof: (i) except as contemplated by the
Merger Agreement offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or grant or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Stockholder Shares or any interest therein;
(ii) except as contemplated by this Agreement, grant any proxies or powers of
attorney, deposit any Stockholder Shares into a voting trust or
3
<PAGE> 93
enter into a voting agreement with respect to any Stockholder Shares; or (iii)
take any action that would make any of the Stockholder's representations or
warranties contained herein untrue or incorrect or have the effect of preventing
or disabling the Stockholder from performing his/her respective obligations
under this Agreement.
(b) Without limiting the generality of Section 4(a) above, the
Stockholder agrees with, and covenants to, the Company that the Stockholder
shall not, during the period set forth in Section 4(a), request that Parent
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing the Stockholder Shares, unless such
transfer is made in compliance with this Agreement.
5. Termination. Except as otherwise provided herein, the covenants and
agreements contained in Sections 1 and 4 hereof shall terminate (i) in the event
the Merger Agreement is terminated in accordance with the terms thereof, upon
such termination, and (ii) in the event the Merger is consummated, upon the
Effective Time. Notwithstanding anything to the contrary herein no termination
of this Agreement shall relieve any party of liability for a breach hereof prior
to termination.
6. Further Assurances. From time to time, at the other party's request
and without further consideration, the Stockholder shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
7. Entire Agreement. This Agreement and the Merger Agreement constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all other prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.
8. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder Shares and shall be
binding upon any Person or entity to which legal or beneficial ownership of such
Stockholder Shares shall pass, whether by operation of law or otherwise,
including, without limitation, the Stockholder's heirs, executors, guardians,
administrators, trustees or successors. Notwithstanding any transfer of
Stockholder Shares, the transferor shall remain liable for the performance of
all obligations of the transferor under this Agreement.
9. Assignment. This Agreement shall not be assigned by any party hereto,
by operation of law or otherwise, without the prior written consent of the other
party, and any purported assignment without such consent shall be null and void.
All covenants and agreements contained in this Agreement by or on behalf of the
parties hereto shall be binding on and inure to the benefit of the respective
successors, heirs and permitted assigns of the parties hereto.
10. Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated except upon
the execution and delivery of a written agreement executed by each of the
parties hereto.
4
<PAGE> 94
11. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses: (i) if to the Company, to its
address set forth in the Merger Agreement; and (ii) if to the Stockholder, to
the address set forth under the Stockholder's signature on the signature page
hereto; or, in each case, to such other address as the Person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above.
12. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
13. Specific Performance. The Stockholder recognizes and acknowledges
that a breach by it of any covenants or agreements contained in this Agreement
will cause the Company to sustain damages for which it would not have an
adequate remedy at law for money damages, and therefore the Stockholder agrees
that in the event of any such breach the Company shall be entitled to the remedy
of specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which the Company may
be entitled, at law or in equity.
14. Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
15. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
16. No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any Person who or which is
not a party hereto .
17. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
5
<PAGE> 95
18. WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT AND ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH.
19. Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
20. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
[signature page follows]
6
<PAGE> 96
IN WITNESS WHEREOF, the Company and the Stockholder have executed and
delivered this Agreement as of the day and year first above written.
GALILEO TECHNOLOGY LTD.
By:
--------------------------------------
Name:
Title:
STOCKHOLDER
By:
--------------------------------------
--------------------------------------
Address for Notices to Stockholder:
-----------------------------------------
-----------------------------------------
-----------------------------------------
7
<PAGE> 97
Exhibit E-1
FORM OF
COMPANY
CERTIFICATE
In connection with the merger (the "Merger") of Toshack
Acquisitions Ltd., an Israeli corporation ("Acquisition") and a direct
wholly-owned subsidiary of Marvell Technology Group Ltd., a Bermuda corporation
("Parent"), with and into Galileo Technology Ltd., an Israeli corporation (the
"Company"), pursuant to the Agreement of Merger dated as of October 16, 2000
(the "Merger Agreement"), among Parent, Acquisition and the Company, the Company
hereby certifies the following (any capitalized term used but not defined herein
having the meaning given to such term in the Merger Agreement):
1. The fair market value of the shares of common stock, par value
$0.002 per share, of Parent ("Parent Shares") to be received in
the Merger by each holder of ordinary shares, par value NIS 0.01
per share, of the Company ("Company Shares") will be
approximately equal to the fair market value of the Company
Shares surrendered in the exchange.
2. The payment of cash in lieu of a fraction of a Parent Share is
solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing a fraction of a Parent Share, and does not
represent separately bargained for consideration. The total cash
consideration that will be paid in the Merger to holders of
Company Shares instead of issuing fractions of Parent Shares will
not exceed one percent (1%) of the total consideration that will
be issued in the Merger to holders of Company Shares in exchange
for their Company Shares.
3. Prior to and in connection with the Merger, no outstanding stock
of the Company has been or will be (i) redeemed by the Company or
(ii) the subject of any distribution by the Company.
4. There is no plan or intention on the part of any holder of
Company Shares who owns 5% or more of the Company Shares and, to
the best of the knowledge of the management of the Company, there
is no plan or intention on the part of the remaining holders of
Company Shares, to sell, exchange or otherwise dispose of any
Parent Shares to be received in the Merger by such holder
directly or indirectly to Parent or to a person related to Parent
(within the meaning of Treasury Regulation Section 1.368-1(e)(3))
for consideration other than Parent Shares.
<PAGE> 98
5. The Company has no outstanding equity interests other than as
described in Section 2.2 of the Merger Agreement. At the
Effective Time and following the Merger, the Company will not
have outstanding any warrants, options, convertible securities,
or any other type of right pursuant to which any person or entity
could acquire stock in the Company that, if exercised or
converted, would affect Parent's acquisition or retention of
control of the Company within the meaning of Section 368(c) of
the Internal Revenue Code of 1986, as amended (the "Code").
6. The Company has no plan or intention to alter the terms of the
Company Shares or to issue additional shares of its stock that,
in either case, would result in Parent losing control of the
Company within the meaning of Section 368(c) of the Code.
7. Either (a) there will be no dissenters to the Merger, (b) solely
Parent Shares will be issued to any dissenters to the Merger in
satisfaction of their dissenters' rights, or (c) any
consideration other than Parent Shares paid to dissenters to the
Merger will be paid solely from the funds or assets of the
Company and shall not be reimbursed by or otherwise originate
from Parent or a person related to Parent.
8. The Company and its shareholders will pay their respective
expenses, if any, incurred in connection with the Merger;
provided, however, that the Company will pay the expenses of
obtaining any rulings required to be obtained in order to effect
the Merger and related transactions on a tax-deferred basis to
its shareholders. No expenses of the transaction incurred by or
on behalf of the Company will be paid with funds originating with
Parent or a person related to Parent.
9. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
10. The Company is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
11. There is no intercorporate indebtedness existing between Parent
and the Company or between Acquisition and the Company that was
issued, acquired or will be settled at a discount.
12. In the Merger, Company Shares representing control of the Company
within the meaning of Section 368(c) of the Code will be
exchanged solely for Parent Shares. In connection with the
Merger, no Company Shares will be exchanged for cash or other
property originating with Parent or any person related to Parent
(within the meaning of Treasury Regulation Section
1.368-1(e)(3)). Further, no liabilities of the Company or of the
shareholders of the Company will be assumed by Parent, nor to the
best of
2
<PAGE> 99
the knowledge of the management of the Company will any Company
Shares be subject to any liabilities.
13. In connection with the Merger, the Company has not sold,
transferred or otherwise disposed of any of its assets to the
extent that would prevent Parent or members of its qualified
group (within the meaning of Treasury Regulation Section
1.368-1(d)(4)(ii)) from causing the Company after the Merger to
continue the historic business of the Company or to use a
significant portion of the Company's historic business assets in
a business.
14. On the date of the Merger, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which the assets are subject.
15. None of the compensation to be received by any
shareholder-employee of the Company in the Merger will be
separate consideration for, or allocable to, any of their Company
Shares; none of the Parent Shares to be received by any
shareholder-employee of the Company will be separate
consideration for, or allocable to, any employment or consulting
agreement; and the compensation to be paid to any
shareholder-employee after the Merger pursuant to arrangements
entered into in connection with the Merger will be for services
actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
16. All options, warrants or rights to acquire Company Shares that
are outstanding and exercisable immediately prior to or at the
Effective Time were issued with an exercise price that was not
less than the fair market value of a Company Share at the date of
grant, except for certain options granted by the Company after
the initial public offering of the Company that were issued with
an exercise price that was not less than 85% of the fair market
value of a Company Share at the date of grant.
17. The Merger is being effected for bona fide business reasons.
18. The Merger Agreement (including all Exhibits thereto and all
ancillary agreements referred to therein) represents the full and
complete agreement between Parent, Acquisition and the Company
regarding the Merger, and there are no other written or oral
agreements regarding the Merger.
19. No U.S. person (as defined in Treasury Regulation Section
1.367(a)-3(c)(5)(iv)) who exchanges Company Shares for Parent
Shares in the Merger will own 5% or more (applying the
attribution rules of Section 318 of the Code as modified by
Section 958(b) of the Code) of the total voting power or the
total value of the stock of Parent immediately after the Merger.
3
<PAGE> 100
20. The information relating to the Merger and all related
transactions (including, but not limited to, all representations,
warranties, covenants, and undertakings) set forth in the Merger
Agreement and in the Joint Proxy Statement/Prospectus of Parent
and the Company to be filed in connection with the Merger,
insofar as such information relates to the Company, or the plans
and intentions thereof, are true, correct and complete in all
respects. The Merger will be consummated pursuant to the terms of
the Merger Agreement.
IN WITNESS WHEREOF, the Company has executed this Certificate on
this ___ day of ____________ , 2000.
GALILEO TECHNOLOGY LTD.
By:
Name:
Title:
4
<PAGE> 101
Exhibit E-2
FORM OF
PARENT
CERTIFICATE
In connection with the merger (the "Merger") of Toshack Acquisitions
Ltd., an Israeli corporation ("Acquisition") and a direct wholly-owned
subsidiary of Marvell Technology Group Ltd., a Bermuda corporation ("Parent"),
with and into Galileo Technology Ltd., an Israeli corporation (the "Company"),
pursuant to the Agreement of Merger dated as of October 16, 2000 (the "Merger
Agreement"), among Parent, Acquisition and the Company, Parent hereby certifies,
on behalf of Parent and Acquisition, the following (any capitalized term used
but not defined herein having the meaning given to such term in the Merger
Agreement):
1. The fair market value of the shares of common stock, par value
$0.002 per share, of Parent ("Parent Shares") to be received in
the Merger by each holder of ordinary shares, par value NIS 0.01
per share, of the Company ("Company Shares") will be
approximately equal to the fair market value of the Company
Shares surrendered in the exchange.
2. The payment of cash in lieu of a fraction of a Parent Share is
solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing a fraction of a Parent Share, and does not
represent separately bargained for consideration. The total cash
consideration that will be paid in the Merger to holders of
Company Shares instead of issuing fractions of Parent Shares will
not exceed one percent (1%) of the total consideration that will
be issued in the Merger to holders of Company Shares in exchange
for their Company Shares.
3. In connection with the Merger, no Company Shares will be acquired
by Parent or any person related to Parent (within the meaning of
Treasury Regulation Section 1.368-1(e)(3)) for consideration
other than Parent Shares.
4. In connection with the Merger, neither Parent nor any person
related to Parent (within the meaning of Treasury Regulation
Section 1.368-1(e)(3)) will purchase, exchange, redeem or
otherwise acquire (directly or indirectly) any Parent Shares
issued to holders of Company Shares in the Merger.
<PAGE> 102
5. In the Merger, Company Shares representing control of the
Company, within the meaning of Section 368(c) of the Internal
Revenue Code of 1986, as amended (the "Code"), will be exchanged
solely for Parent Shares. In connection with the Merger, no
Company Shares will be exchanged for cash or other property
originating with Parent or any person related to Parent (within
the meaning of Treasury Regulation Section 1.368-1(e)(3)).
Further, no liabilities of the Company (except for the
substitution of Parent stock options for Company Stock Options)
or of the shareholders of the Company will be assumed by Parent,
nor to the best knowledge of the management of Parent will any
Company Shares be subject to any liabilities.
6. Following the Merger, the historic business of the Company will
be continued by, or a significant portion of the Company's
historic business assets will be used in a business of, Parent or
a corporation within Parent's qualified group (within the meaning
of Treasury Regulation Section 1.368-1(d)(4)(ii)).
7. Parent has no present plan or intention to liquidate the Company
(including, without limitation, by means of making a
check-the-box election for federal income tax purposes); to merge
the Company with or into another corporation; to sell, distribute
or otherwise dispose of the Company Shares acquired in the Merger
except for transfers or successive transfers of Company Shares to
one or more corporations controlled (within the meaning of
Section 368(c) of the Code) in each case by the transferor; or to
cause the Company to sell or otherwise dispose of any of its
assets or of any of the assets acquired from Acquisition, except
for dispositions made in the ordinary course of business or
transfers or successive transfers of assets to one or more
corporations controlled (within the meaning of Section 368(c) of
the Code) in each case by the transferor.
8. Either (a) there will be no dissenters to the Merger, (b) solely
Parent Shares will be issued to any dissenters to the Merger in
satisfaction of their dissenters' rights, or (c) any
consideration other than Parent Shares paid to dissenters to the
Merger will be paid solely from the funds or assets of the
Company and shall not be reimbursed by or otherwise originate
from Parent or a person related to Parent.
9. Parent and Acquisition will pay their respective expenses, if
any, incurred in connection with the Merger, and will not pay any
of the expenses of the Company or the shareholders of the Company
incurred in connection with the Merger.
10. Neither Parent nor any person related to Parent (within the
meaning of Treasury Regulation Section 1.368-1(e)(3)) has owned
during the past five (5) years any Company Shares.
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<PAGE> 103
11. Neither Parent nor Acquisition is an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
12. Prior to the Merger, Parent will be in control of Acquisition
within the meaning of Section 368(c) of the Code.
13. Parent has no plan or intention to cause the Company to alter the
terms of the Company Shares or to issue additional shares of
stock of the Company that, in either case, would result in Parent
losing control of the Company within the meaning of Section
368(c) of the Code.
14. There is no intercorporate indebtedness existing between Parent
and the Company or between Acquisition and the Company that was
issued, acquired or will be settled at a discount.
15. Acquisition will have no liabilities assumed by the Company, and
will not transfer to the Company any assets subject to
liabilities, in the Merger.
16. None of the compensation to be received by any
shareholder-employee of the Company in the Merger will be
separate consideration for, or allocable to, any of their Company
Shares; none of the Parent Shares to be received by any
shareholder-employee of the Company will be separate
consideration for, or allocable to, any employment, management or
consulting agreement; and the compensation to be paid to any
shareholder-employee after the Merger pursuant to arrangements
entered into in connection with the Merger will be for services
actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
17. The Merger is being effected for bona fide business reasons.
18. The Merger Agreement (including all Exhibits thereto and all
ancillary agreements referred to therein) represents the full and
complete agreement between Parent, Acquisition and the Company
regarding the Merger, and there are no other written or oral
agreements regarding the Merger.
19. A Parent Share entitles the holder thereof to vote for the
election of the members of the board of directors of Parent.
20. No holder of Company Shares is acting as agent for Parent in
connection with the Merger or approval thereof, and neither
Parent nor Acquisition will reimburse any holder of Company
Shares for the Company Shares such holder may have purchased, or
for other obligations such holder may have incurred, as agent for
Parent or Acquisition.
21. The information relating to the Merger and all related
transactions (including, but not limited to, all representations,
warranties, covenants, and undertakings) set forth in the Merger
Agreement and in the Joint
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Proxy Statement/Prospectus of Parent and the Company to be filed
in connection with the Merger, insofar as such information
relates to Parent or Acquisition, or the plans and intentions of
either entity, are true, correct and complete in all respects.
The Merger will be consummated pursuant to the terms of the
Merger Agreement.
IN WITNESS WHEREOF, Parent, on behalf of Parent and Acquisition,
has executed this Certificate on this _____ day of __________, 2000.
MARVELL TECHNOLOGY
GROUP LTD.
By:
Name:
Title:
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<PAGE> 105
The following shareholder undertaking was executed by the following Galileo
stockholders:
Manuel Alba-Marquez 1,385,500 shares
344,872 options and other rights
Avigdor Willenz 8,806,478 shares
411,898 options and other rights
FORM OF
SHAREHOLDER UNDERTAKING
Shareholder Undertaking (the "Undertaking") dated as of October 16, 2000
by __________________ ("Shareholder") in favor of and for the benefit of Marvell
Technology Group Ltd., a Bermuda corporation ("Marvell").
RECITALS
Whereas, Marvell, Toshack Acquisitions Ltd., an Israeli corporation and
a wholly-owned subsidiary of Marvell ("Merger Sub"), and Galileo Technology Ltd.
an Israeli corporation ("Galileo"), are entering into an Agreement of Merger of
even date herewith (the "Merger Agreement") that provides (subject to the
conditions set forth therein) for the merger of Merger Sub with and into Galileo
(the "Merger"). Capitalized terms used but not otherwise defined in this
Undertaking have the meanings ascribed to such terms in the Merger Agreement.
Whereas, Marvell has set, as an inducement for entering into the Merger
Agreement, a requirement that it receive the undertakings set forth herein from
certain shareholders of Galileo, including Shareholder, and Shareholder has
agreed to deliver this Undertaking.
Whereas, in order to induce Marvell to enter into the Merger Agreement,
Shareholder is making the undertakings set forth herein.
UNDERTAKINGS
Shareholder, intending to be legally bound, agrees as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Undertaking:
1.1 Shareholder shall be deemed to "Own" or to have acquired "Ownership"
of a security if Shareholder: (i) is the record owner of such security; or (ii)
is the "beneficial owner" (within the meaning of Rule 13d-3 under the Exchange
Act) of such security.
1.2 "Subject Securities" shall mean: (i) all securities of Galileo
(including all Shares and all options, warrants and other rights to acquire
Shares) Owned by Shareholder as of the date of this Undertaking; and (ii) all
additional securities of Galileo (including all additional Shares and all
additional options, warrants and other rights to acquire Shares) of which
Shareholder acquires Ownership during the period from the date of this
Undertaking through the Expiration Date.
1.3 "Person" shall mean and include natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, business
trusts or other organizations.
<PAGE> 106
1.4 A Person shall be deemed to have effected a "Transfer" of a security
if such Person directly or indirectly: (i) sells, pledges, encumbers, grants an
option with respect to, transfers or disposes of such security or any interest
in such security; or (ii) enters into an agreement or commitment contemplating
the possible sale of, pledge of, encumbrance of, grant of an option with respect
to, transfer of or disposition of such security or any interest therein.
2. TRANSFER OF SUBJECT SECURITIES.
2.1 No Transfer of Subject Securities. Shareholder agrees that, during
the period from the date of this Undertaking through the Expiration Date,
Shareholder shall not cause or permit any Transfer of any of the Subject
Securities to be effected, other than the Transfer of the Subject Securities to
Shareholders' heirs, estate or executors upon death of the Shareholder.
2.2 No Transfer of Voting Rights. Shareholder agrees that, during the
period from the date of this Undertaking through the Expiration Date,
Shareholder shall ensure that: (i) none of the Subject Securities is deposited
into a voting trust; and (ii) other than the Irrevocable Proxy dated of even
date herewith, no proxy or power-of-attorney is granted, and no voting agreement
or similar agreement is entered into, with respect to any of the Subject
Securities.
3. WAIVER OF APPRAISAL RIGHTS.
Shareholder hereby irrevocably and unconditionally waives, and agrees to
cause to be waived and to prevent the exercise of, any rights of appraisal, and
dissenters' rights and any similar rights relating to the Merger or any related
transaction that Shareholder or any other Person may have by virtue of the
ownership of any outstanding Shares.
4. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.
Shareholder hereby represents and warrants to Marvell as follows:
4.1 Authorization. Shareholder has all requisite authority and capacity
to execute and deliver this Undertaking and to perform his obligations
hereunder. This Undertaking has been duly executed and delivered by Shareholder
and constitutes a legal, valid and binding obligation of Shareholder,
enforceable against Shareholder in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
4.2 No Conflicts or Consents.
4.2.1 The execution and delivery of this Undertaking by
Shareholder does not, and the performance of this Undertaking by
Shareholder will not: (i) conflict with or violate any law applicable to
Shareholder or by which he or any of his properties is or may be bound
or affected; or (ii) result in or constitute (with or without notice or
lapse of time) any breach of or default under, or give to any other
Person (with or without notice or lapse of time) any right of
termination, amendment, acceleration or cancellation of, or result (with
or without notice or lapse of time) in the creation of any encumbrance
on any of the Subject Securities pursuant to, any agreement to which
Shareholder is a party or by which Shareholder or any of his affiliates
or properties is or may be bound or affected.
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<PAGE> 107
4.2.2 The execution and delivery of this Undertaking by
Shareholder does not, and the performance of this Undertaking by
Shareholder will not, require any consent of any Person.
4.3 Title to Securities. As of the date of this Undertaking: (i)
Shareholder holds of record (free and clear of any encumbrances) the number of
outstanding Shares set forth under the heading "Shares Held of Record" on the
signature page hereof; (ii) Shareholder holds (free and clear of any
encumbrances) the options, warrants and other rights to acquire Shares set forth
under the heading "Options and Other Rights" on the signature page hereof; (iii)
Shareholder Owns the additional securities of Galileo set forth under the
heading "Additional Securities Beneficially Owned" on the signature page hereof;
and (iv) Shareholder does not directly or indirectly Own any shares or other
securities of Galileo, or any option, warrant or other right to acquire (by
purchase, conversion or otherwise) any shares or other securities of Galileo,
other than the shares and options, warrants and other rights set forth on the
signature page hereof.
5. ADDITIONAL COVENANTS OF SHAREHOLDER.
5.1 Further Assurances. From time to time and without additional
consideration, Shareholder shall execute and deliver, or cause to be executed
and delivered, such additional documents and shall take such further actions, as
Marvell may reasonably request for the purpose of carrying out and furthering
the intent of this Undertaking.
5.2 Proxy. Shareholder on the date hereof has validly executed and
delivered a proxy attached hereto as Exhibit A (the "Proxy").
6. MISCELLANEOUS.
6.1 Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements made by Shareholder in
this Undertaking shall survive (i) the consummation of the Merger, (ii) any
termination of the Merger Agreement, and (iii) the Expiration Date.
6.2 Expenses. Except as otherwise provided in the Merger Agreement or in
this Undertaking, all costs and expenses incurred in connection with the
transactions contemplated by this Undertaking shall be paid by the party
incurring such costs and expenses.
6.3 Notices. Any notice or other communication required or permitted to
be delivered to Marvell or Shareholder under this Undertaking shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery service
or by facsimile) to the address or facsimile telephone number set forth beneath
the respective names of Marvell or Shareholder below (or to such other address
or facsimile telephone number as Marvell or Shareholder shall have specified in
a written notice given to the other):
If to Shareholder to:
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with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile No.: (212) 310-8007
Attn: Stephen M. Besen
if to Marvell to: Marvell Technology Group Ltd.
645 Almanor Avenue
Sunnyvale, CA 94086
Facsimile No.: (408) 328-0918
Attn: Corporate Counsel
with a copy to: Gibson, Dunn & Crutcher LLP
One Montgomery Street
Telesis Tower
San Francisco, CA 94104
Facsimile No.: (415) 374-8427
Attn: Kenneth R. Lamb
6.4 Severability. In the event that any provision of this Undertaking,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, invalid or unenforceable, the reminder of this
Undertaking will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as reasonably
to effect the intent of Shareholder and Marvell. Shareholder further agrees to
replace such void or unenforceable provision without additional consideration.
6.5 Entire Agreement; No Third Party Beneficiary. This Undertaking
(including the Merger Agreement and the other documents and instruments referred
to herein and therein) (i) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, and all
contemporaneous oral agreements and understandings between the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
6.6 Assignability. Except as provided herein, neither this Undertaking
nor any of the interests or obligations hereunder may be assigned or delegated
by Shareholder, and any attempted or purported assignment or delegation of any
of such interests or obligations shall be void. Subject to the preceding
sentence, this Undertaking shall be binding upon Shareholder and his heirs,
estate, executors, personal representatives, successors and assigns, and shall
inure to the benefit of Marvell and its successors and assigns. Without limiting
any of the restrictions set forth in Section 2 or elsewhere in this Undertaking,
this Undertaking shall be binding upon any Person to whom any Subject Securities
are transferred. Nothing in this Undertaking, express or implied, is intended to
or shall confer upon any Person other than Marvell any right, benefit or remedy
of any nature whatsoever under this Undertaking.
6.7 Specific Performance. The parties hereto hereby acknowledge and
agree that the failure of any party to this Undertaking to perform its
agreements and covenants hereunder will cause irreparable injury to the other
party to this Undertaking for which damages, even if
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<PAGE> 109
available, will not be an adequate remedy. Accordingly, each of the parties
hereto hereby consents to the granting of equitable relief (including specific
performance and injunctive relief) by any court of competent jurisdiction to
enforce any party's obligations hereunder. The parties further agree to waive
any requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
6.8 Non-Exclusivity. The rights and remedies of Marvell under this
Undertaking are not exclusive of or limited by any other rights or remedies that
it may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative). Without limiting the generality of
the foregoing, the rights and remedies of Marvell under this Undertaking, and
the obligations and liabilities of Shareholder under this Undertaking, are in
addition to their respective rights, remedies, obligations and liabilities under
common law requirements and under all applicable statutes, rules and
regulations.
6.09 Governing Law; Venue.
6.09.1 This Undertaking shall be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of law; provided, however, that any matter involving the
internal corporate affairs of Galileo or any party hereto shall be
governed by the provisions of the jurisdiction of its incorporation.
6.09.2 In any action between Shareholder and Marvell arising out
of or relating to any provision of this Undertaking: (i) Shareholder
irrevocably and unconditionally consents and submits to the jurisdiction
and venue of the state and federal courts located in the State of
California; (ii) if any such action is commenced in a state court, then,
subject to applicable law, Shareholder shall not object to the removal
of such action to any federal court located in the State of California;
(iii) Shareholder irrevocably waives the right to trial by jury; and
(iv) Shareholder irrevocably consents to service of process by first
class certified mail, return receipt requested, postage prepaid, to the
address at which such party is to receive notice in accordance with
Section 6.4.
6.10 Captions. The captions contained in this Undertaking are for
convenience of reference only, shall not be deemed to be a part of this
Undertaking and shall not be referred to in connection with the construction or
interpretation of this Undertaking.
6.11 Attorneys' Fees. If any legal action or other legal proceeding
relating to this Undertaking or the enforcement of any provision of this
Undertaking is brought by either party Shareholder, the prevailing party shall
be entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).
6.12 Waiver and Amendment. No failure on the part of Marvell to exercise
any power, right, privilege or remedy under this Undertaking, and no delay on
the part of Marvell in exercising any power, right, privilege or remedy under
his Undertaking, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right privilege or
remedy shall preclude any other or further exercise thereof or of any other
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<PAGE> 110
power, right, privilege or remedy. Marvell shall not be deemed to have waived
any claim available to Marvell arising out of this Undertaking, or any power,
right, privilege or remedy of Marvell under the Undertaking, unless the waiver
of such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of Marvell, and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given. This Undertaking may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
6.13 Counterparts. This Undertaking and any amendments hereto may be
executed in counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not execute the same counterpart.
IN WITNESS WHEREOF, Shareholder has caused this Undertaking to be
executed as of the date first written above.
SHAREHOLDER
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The following Lock Up Letter Agreement was executed by the following Marvell
and Galileo stockholders:
Galileo Stockholders
Manuel Alba-Marquez 1,385,500 shares
Avigdor Willenz 8,806,478 shares
Marvell Stockholders
Diosdado P. Banatao 6,879,208 shares
Kuo Wei Chang 8,739,140 shares
Weili Dai 24,092,312 shares
Pantas Sutardja 11,776,000 shares
Sehat Sutardja 24,092,312 shares
FORM OF
LOCK-UP LETTER AGREEMENT
Marvell Technology Group Ltd.
C/o Marvell Semiconductor, Inc.
645 Almanor Avenue
Sunnyvale, California 94086
Dear Sirs:
Reference is made to the Agreement of Merger, dated as of October 16,
2000 (the "Merger Agreement"), among Galileo Technology Ltd., Marvell Technology
Group Ltd. ("Parent") and Toshack Acquisitions Ltd. Capitalized terms used and
not otherwise defined herein shall have the respective meanings ascribed to them
in the Merger Agreement.
In consideration of the execution of the Merger Agreement, and for other
good and valuable consideration, the undersigned hereby irrevocably agrees that,
without the prior written consent of Parent, the undersigned will not, directly
or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or
enter into any transaction or device that is designed to, or could be expected
to, result in the disposition by any person at any time in the future of) any
shares of Parent Common Stock (including, without limitation, shares of Parent
Common Stock that may be deemed to be beneficially owned by the undersigned in
accordance with the rules and regulations of the Securities and Exchange
Commission and shares of Parent Common Stock that may be issued upon exercise of
any Company Option) or securities convertible into or exchangeable for shares of
Parent Common Stock owned by the undersigned on the date of execution of this
Lock-Up Letter Agreement or on the date on which the Effective Time occurs (the
"Effective Date"), or (2) enter into any swap or other derivatives transaction
that transfers to another, in whole or in part, any of the economic benefits or
risks of ownership of such shares of Parent Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
the shares of Parent Common Stock or other securities, in cash or otherwise, for
a period of 45 days after the Effective Date.
In furtherance of the foregoing, Parent and its transfer agent are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this Lock-Up Letter Agreement.
It is understood that if the Merger Agreement does not become effective,
or if the Merger Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for and delivery
of the shares of Parent Common Stock, the undersigned will be released from its
obligations under this Lock-Up Letter Agreement.
The undersigned understands that Parent will proceed with the Merger in
reliance on this Lock-Up Letter Agreement.
<PAGE> 112
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Letter Agreement and that,
upon request, the undersigned will execute any additional documents necessary in
connection with the enforcement hereof. Any obligations of the undersigned shall
be binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
Very truly yours,
By:
-------------------------------------
Name:
-------------------------------
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Number of shares:
-------------------
Dated: October 16, 2000
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