<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 5, 1998
ADC TELECOMMUNICATIONS, INC.
-----------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-1424 41-0743912
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification No.)
12501 Whitewater Drive, Minnetonka, Minnesota 55343
---------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 938-8080
------------------
Not Applicable
---------------------------------------------------------
(Former name or former address, if changed since last report)
Page 1 of 4 Pages
Exhibit Index Appears on Page 3
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On November 5, 1998, ADC Telecommunications, Inc. ("ADC")
acquired all of the issued and outstanding Ordinary Shares, NIS
0.10 per share ("Ordinary Shares"), of Teledata Communications,
Ltd. ("Teledata") for U.S. $15.75 cash per share, or an aggregate
cash purchase price of approximately $200 million (the
"Acquisition Consideration"). In addition, ADC assumed all
outstanding options to acquire Teledata shares and converted them
into options to acquire, in the aggregate, 966,111 shares of ADC
common stock, par value $0.20 per share. The terms and
conditions of the acquisition are set forth in an Agreement (the
"Acquisition Agreement"), dated September 16, 1998, between ADC
and Teledata, and the description herein is qualified in its
entirety by reference to the Acquisition Agreement, which is
attached hereto as Exhibit 2.1 and is incorporated herein by
reference.
The Acquisition Consideration was negotiated at arms' length by
the parties. Prior the to closing of the acquisition, the
holders of Ordinary Shares of Teledata were not affiliated with
ADC. The acquisition will be accounted for as a purchase. ADC
funded the cash portion of the consideration through a new
financing facility, dated October 27, 1998, among ADC, ABN AMRO
Bank, NV, and Windmill Funding Corporation.
(b) The assets of Teledata consist primarily of cash, short-term
investments, other current assets and, property and equipment.
Teledata utilizes its assets to design, develop, manufacture,
market and support advanced wireline and wireless customer access
network equipment for telephone operating companies worldwide and
to enable telephone operating companies to enhance the capacity,
reach and functionality of the network of transmission lines that
connect subscribers to the local exchange, generally known as the
"local loop" or "customer access network." ADC intends to use
the assets of Teledata's business substantially as previously
used.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The required financial statements of Teledata are not
included in this Current Report on Form 8-K. These
financial statements will be provided in an amendment to
this Current Report on Form 8-K as soon as practicable, but
not later than January 19, 1999.
Page 2 of 4 Pages
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
The required pro forma financial information relative to the
acquisition of Teledata is not included in this Report on
Form 8-K. The pro forma financial information will be
provided in an amendment to this Current Report on Form 8-K
as soon as practicable, but not later than January 19, 1999.
(c) EXHIBITS
Exhibit No. Description
----------- -----------
2.1 Agreement, dated September 16, 1998 between
ADC Telecommunications, Inc. and Teledata
Communications, Ltd.
Page 3 of 4 Pages
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 20, 1998
ADC TELECOMMUNICATIONS, INC.
By: /s/ Robert E. Switz
---------------------------------------
Robert E. Switz
Senior Vice President
and Chief Financial Officer
Page 4 of 4 Pages
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
- -------
Number Item
- ------ ----
<C> <S>
2.1 Agreement, dated September 16, 1998 between ADC
Telecommunications, Inc. and Teledata Communications, Ltd.
</TABLE>
<PAGE>
Exhibit 2.1
EXECUTION COPY
AGREEMENT
BY AND BETWEEN
ADC TELECOMMUNICATIONS, INC.
AND
TELEDATA COMMUNICATIONS LTD.
________________
SEPTEMBER 16, 1998
________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
ARRANGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1. THE ARRANGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2. FILING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3. EFFECTIVE TIME OF THE ARRANGEMENT. . . . . . . . . . . . . . . . . . . .2
1.4. STOCK SPLIT, RECLASSIFICATION, ETC.. . . . . . . . . . . . . . . . . . .2
1.5. RESERVATION OF RIGHT TO REVISE STRUCTURE . . . . . . . . . . . . . . . .2
ARTICLE II
CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.1. DELIVERY OF CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . .2
2.2 SURRENDER AND EXCHANGE PROCEDURE . . . . . . . . . . . . . . . . . . . .3
2.3 SHARE OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . .6
3.1. ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . .6
3.2. CAPITAL STOCK OF SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . .7
3.3. CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.4. AUTHORITY RELATIVE TO THIS AGREEMENT . . . . . . . . . . . . . . . . . .8
3.5. NO VIOLATIONS, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.6. COMMISSION FILINGS; FINANCIAL STATEMENTS; BOOKS AND RECORDS. . . . . . 10
3.7. ABSENCE OF CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . 11
3.8. ABSENCE OF CERTAIN DEVELOPMENTS. . . . . . . . . . . . . . . . . . . . 11
3.9. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10. TITLE TO AND CONDITION OF PROPERTIES . . . . . . . . . . . . . . . . . 11
3.11. CERTAIN CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12. LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13. COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.14. GRANTS, INCENTIVES AND SUBSIDIES . . . . . . . . . . . . . . . . . . . 14
3.15. INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . . . . . . . 14
3.16. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17. EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 18
3.18. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.20. EMPLOYMENT AND LABOR CONTRACTS . . . . . . . . . . . . . . . . . . . . 20
3.21. FINDERS OR BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.22. BOARD RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.23. OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.24. INTERESTED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . 20
3.25 INFORMATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . 21
4.1. ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . 21
4.2. AUTHORITY; NO CONFLICTS. . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 NO FINDER'S FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 NO VIOLATIONS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 COMMISSION FILINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.8 INFORMATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE V
REQUIRED APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1. SHAREHOLDERS AND COURT APPROVALS . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI
COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE ARRANGEMENT . . . . . . 25
6.2 INFORMATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3. ADDITIONAL AGREEMENTS, COOPERATION . . . . . . . . . . . . . . . . . . 28
6.4. PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 NO SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.6. ACCESS TO INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 31
6.7. NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . . . . . 31
6.8. RESIGNATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . 31
6.9. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.10. FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.11. ISRAELI PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.12. SHAREHOLDER LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . 34
6.13 DETERMINATION OF OPTIONHOLDERS . . . . . . . . . . . . . . . . . . . . 34
6.14 TERMINATION OF 401(k) PLAN . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE ARRANGEMENT. . . . 35
7.2. CONDITIONS TO OBLIGATIONS OF BUYER . . . . . . . . . . . . . . . . . . 36
7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY . . . . . . . . . . . . . . . 37
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VIII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2. EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . 40
9.2. CLOSING AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.3. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.4. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.5. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.6. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.7. NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . 43
9.8. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.9. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.10. VALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.11 APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. . . . . . . . . . . . . . 43
</TABLE>
-iii-
<PAGE>
INDEX
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Buyer Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Buyer Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Buyer Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Buyer Measurement Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Buyer Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 4
Charter Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Company Current SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Company Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Company Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Company Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . .7
Company Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Company Optionholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Company Optionholders Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Company Ordinary Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Company SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Company Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Company Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Company Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Exchange Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Exchange Paying Agent Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .3
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5
Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Final Court Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
First Motion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Governing Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Governmental Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Indemnified Persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Information Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Interested Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Investment Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Measurement Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
OCS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Optionholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Per Share Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Potential Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Research Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Second Motion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 233. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Share Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Superior Proposal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Tax" or "Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Total Buyer Trading Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Total Weighted Trading Price . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
U.S. 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
U.S. Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
voting stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Year 2000 Compatible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 34
</TABLE>
-v-
<PAGE>
EXHIBITS
EXHIBITS
- --------
A Plan of Arrangement
B Opinion of Meitar, Littman & Co.
C Employment Agreement
D Opinion of Yigal Arnon & Co.
E Opinion of Dorsey & Whitney LLP
F Mathematical Illustration
-vi-
<PAGE>
AGREEMENT
AGREEMENT, dated as of September 16, 1998, by and between ADC
Telecommunications, Inc., a corporation formed under the laws of the State of
Minnesota ("BUYER"), and Teledata Communications Ltd., a corporation formed
under the laws of the State of Israel (the "COMPANY").
WITNESSETH:
WHEREAS, the Board of Directors of the Company deems it desirable and in
the best interests of the Company and its shareholders and holders of Company
Options (as defined in Section 2.3(a) hereof) (the "OPTIONHOLDERS") that the
Company and its shareholders and Optionholders enter into an arrangement in the
form of Exhibit A hereto pursuant to Section 233 of the Companies Ordinance (New
Version) 5743-1983, whereby, among other things, all of the issued and
outstanding Ordinary Shares, par value NIS 0.10 per share of the Company
("COMPANY ORDINARY SHARES"), shall be deemed transferred to Buyer in exchange
for an amount of cash equal to U.S. $15.75 per Company Ordinary Share, as it may
be adjusted in accordance with Section 1.4 hereof, and the Company Options shall
be assumed by Buyer and converted into options (each, a "BUYER OPTION") for the
purchase of shares of common stock, par value $.20 per share, of Buyer
(collectively, the "ARRANGEMENT") upon the terms and subject to the conditions
set forth herein and in accordance with the laws of the State of Israel; and
WHEREAS, the Board of Directors of the Company deems it desirable and in
the best interest of the Company and its shareholders that the Company enter
into this Agreement with Buyer, pursuant to which the Company will propose to
its shareholders and the Optionholders to enter into the Arrangement, on the
terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of Buyer deems it desirable and in the
best interests of Buyer and its shareholders that Buyer enter into this
Agreement, pursuant to which the Arrangement will be consummated.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
ARRANGEMENT
1.1. THE ARRANGEMENT. At the Effective Time (as hereinafter defined)
by virtue of the filing described in Section 1.2 hereof and with no further
action on behalf of the shareholders of the Company, all issued and outstanding
Company Ordinary Shares as of the Effective Time (as defined herein) shall be
deemed transferred to Buyer (except that, at Buyer's election, six (6) of the
Company Ordinary Shares shall be deemed transferred to up to six (6) nominees
designated by Buyer), in exchange for an amount of cash per share equal to U.S.
$15.75 per Company Ordinary Share (the "PER SHARE AMOUNT").
<PAGE>
1.2. FILING. As soon as practicable after the fulfillment or waiver
of the conditions set forth in Sections 7.1, 7.2 and 7.3 hereof, or on such
later date as may be mutually agreed to between Buyer and the Company, the
Company will cause to be filed with the Registrar of Companies in Israel a final
court order approving the Arrangement (the "FINAL COURT ORDER"), as described in
Article V hereof.
1.3. EFFECTIVE TIME OF THE ARRANGEMENT. The Arrangement shall be
effective at the time of the filing in accordance with Section 1.2 hereof of the
Final Court Order with the Registrar of Companies in Israel, or at such later
time specified by such Final Court Order, which time is herein sometimes
referred to as the "EFFECTIVE TIME" and the date thereof is herein sometimes
referred to as the "EFFECTIVE DATE." The parties shall use their respective best
efforts to cause the Effective Date to occur on or before October 29, 1998. The
foregoing notwithstanding, if the Effective Date does not occur on or prior to
October 29, 1998, the parties shall use their respective best efforts to cause
the Effective Date to occur as soon as practicable thereafter.
1.4. STOCK SPLIT, RECLASSIFICATION, ETC. If, between the date of
this Agreement and the Effective Time, the outstanding Company Ordinary Shares
are changed into a different number or class of shares by reason of any stock
split, stock dividend, reverse stock split, reclassification, recapitalization
or other similar transaction, then the Per Share Amount shall be appropriately
adjusted.
1.5. RESERVATION OF RIGHT TO REVISE STRUCTURE. At Buyer's election,
the Arrangement may alternatively be structured so that the issued and
outstanding Company Ordinary Shares transferred to Buyer under Section 1.1
hereof, shall be transferred to a newly formed, wholly owned subsidiary of
Buyer; PROVIDED, HOWEVER, that no such change shall alter or change the Per
Share Amount or the Exchange Ratio (as hereinafter defined). In the event of
such an election by Buyer, the parties agree to execute the appropriate
documents to reflect such an election.
ARTICLE II
CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES
2.1. DELIVERY OF CONSIDERATION. Buyer and the Company shall
mutually agree upon a commercial bank , trust company or other financial
institution to act as Exchange Paying Agent ("EXCHANGE PAYING AGENT") prior to
the hearing on the Second Motion (as defined in Section 5.1). In accordance
with and subject to the provisions of this Agreement and the Exchange Paying
Agent Agreement (as hereinafter defined), in consideration of the Arrangement,
immediately prior to the Filing (as hereinafter defined), Buyer shall pay an
amount equal to the Per Share Amount multiplied by the total number of Company
Ordinary Shares issued and outstanding at the Effective Time (the "EXCHANGE
FUND") by wire transfer of immediately available funds to the Exchange Paying
Agent. The agreement to be entered into between the
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Exchange Paying Agent and Buyer is referred to herein as the "EXCHANGE PAYING
AGENT AGREEMENT".
2.2 SURRENDER AND EXCHANGE PROCEDURE.
(a) At and after the Effective Time (subject to Section
2.2(d) hereof), each holder of record of any outstanding Company
Ordinary Shares shall be entitled, upon surrender to the Exchange Paying
Agent of the certificate or certificates theretofore representing
Company Ordinary Shares (each, a "CERTIFICATE") and such other documents
as the Exchange Paying Agent may request, to receive therefor the Per
Share Amount multiplied by the number of Company Ordinary Shares
represented by the Certificate or Certificates so surrendered, as shall
be more particularly provided in the Exchange Paying Agent Agreement.
(b) On or before the second business day following the
Effective Time, the Exchange Paying Agent will send a notice and a
transmittal form to each holder of record of outstanding Company
Ordinary Shares at the address of each such holder as it appears on the
books of the Bank of New York, the Company's registrar and transfer
agent ("COMPANY TRANSFER AGENT") and, if applicable, at the Israeli
Registrar of Companies, advising such holder of the terms of the
Arrangement and the procedure for the surrender of Certificates and
payment of the Per Share Amount as provided in the Exchange Paying Agent
Agreement.
(c) From the Effective Time, and until so surrendered
thereafter, each such outstanding Certificate shall be deemed canceled
and shall not entitle the holders of Company Ordinary Shares to any
rights whatsoever, except to evidence the right to receive the Per Share
Amount multiplied by the number of Company Ordinary Shares represented
by such Certificate. After the Effective Time, there shall be no
further registry of transfers of Company Ordinary Shares and, if
Certificates representing such Company Ordinary Shares are presented to
Buyer, the Company or the Company Transfer Agent, they shall be canceled
and exchanged for the right to receive the Per Share Amount multiplied
by the number of Company Ordinary Shares evidenced by such Certificates
as provided in the Exchange Paying Agent Agreement. No interest shall
be paid to holders of record of Company Ordinary Shares with respect to
the Per Share Amount, except that interest, at the prime rate at the
Effective Date announced by U.S. Bank National Association, Minneapolis
office, shall be paid with respect to such Per Share Amount if payment
is not made by the Exchange Paying Agent to such holder within ten
business days after surrender to the Exchange Paying Agent of the
applicable Certificates and all other documentation in the form
satisfactory to the Exchange Paying Agent from the date of such
surrender to the date of payment.
(d) Any portion of the Exchange Fund that remains unclaimed
by the former shareholders of the Company for one year after the
Effective Time shall be delivered by
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the Exchange Paying Agent to Buyer, upon demand of Buyer, and any
former shareholders of the Company shall thereafter look only to
Buyer for payment of their claim for the Per Share Amount in respect
of Company Ordinary Shares.
(e) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact, in form and
substance acceptable to the Exchange Paying Agent, by the person
claiming such Certificate to be lost, stolen or destroyed, and complying
with such other conditions as the Exchange Paying Agent may reasonably
impose (including the posting of an indemnity bond or other surety in
favor of the Exchange Paying Agent and Buyer with respect to the
Certificate alleged to be lost, stolen or destroyed), the Exchange
Paying Agent will pay to such person, the Per Share Amount multiplied by
the number of Company Ordinary Shares represented by the lost, stolen or
destroyed Certificate.
2.3 SHARE OPTIONS.
(a) At the Effective Time, by virtue of the filing of the Final
Court Order described in Section 1.2 hereof and with no further action on behalf
of the Optionholders, each option to purchase Company Ordinary Shares (each a
"COMPANY OPTION") issued by the Company pursuant to the Company's Key Employee
Share Option Plan (1992), the Company's Key Employee Share Option Plan (1994),
the Company's Key Employee Share Option Plan (1996), the Company's Key Employee
Share Option Plan (1997) the Company's Key Employee Share Option Plan (1998) and
the Company's Share Purchase Plan (1998) (collectively, the "SHARE OPTION
PLANS"), outstanding and unexercised on such date, whether or not vested or
exercisable, shall be assumed by Buyer and converted to a Buyer Option to
acquire, on substantially the same terms and conditions as were applicable under
such Company Option (including any vesting pursuant to any applicable agreement
or Share Option Plan, subject to Sections 2.3(e) and 2.3(f) hereof), the same
number of whole shares of common stock, par value $.20 per share, of Buyer
("BUYER COMMON STOCK") equal to the number of Company Ordinary Shares that were
issuable upon exercise of such Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio (as determined below), rounded up to the
nearest whole number of shares of Buyer Common Stock, and the per share exercise
price of the shares of Buyer Common Stock issuable upon exercise of such Buyer
Option shall be equal to the exercise price per share of Company Ordinary Shares
at which such Company Option was exercisable immediately prior to the Effective
Time divided by the Exchange Ratio (as determined below), rounded up to the
nearest whole cent. For purposes of this Agreement, the "EXCHANGE RATIO" shall
be determined by dividing (i) the Per Share Amount, by (ii) the Buyer
Measurement Price. The "BUYER MEASUREMENT PRICE" shall be determined by
dividing (i) the Total Weighted Trading Price, by (ii) the Total Buyer Trading
Volume. The "TOTAL WEIGHTED TRADING PRICE" shall be the sum of the Weighted
Trading Prices for the period of the ten (10) trading days ending on the third
trading day immediately preceding the Effective Date (the "MEASUREMENT PERIOD").
The "WEIGHTED TRADING PRICE" for any trading day shall be (i) the total trading
volume of Buyer Common Stock on the Nasdaq National Market as reported in the
Midwest Edition of The Wall Street Journal for
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such trading day multiplied by (ii) the closing sale price of one share of
Buyer Common Stock on the Nasdaq National Market for such trading day. The
"TOTAL BUYER TRADING VOLUME" shall be the sum of the daily trading volumes
for each trading day during the Measurement Period.
(b) As soon as practicable, but no later than ten (10) days
after the Effective Time, Buyer shall deliver to the holders of Company
Options appropriate notices setting forth such holders' rights pursuant
to the Share Option Plans and the agreements evidencing the grants of
such Company Options shall continue in effect on the same terms and
conditions (subject to the adjustments, and amendments, if any, to the
Share Option Plans, required by this Section 2.3 after giving effect to
the Arrangement and the assumption by Buyer as set forth above).
(c) Buyer shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Buyer Common Stock
for delivery upon exercise of the Company Options assumed in accordance
with this Section 2.3 and will file all documents required to be filed
to cause the shares of Buyer Common Stock issuable upon exercise of the
Buyer Options to be listed on the Nasdaq National Market System. On the
Effective Date, Buyer shall file a registration statement with the U.S.
Securities and Exchange Commission (the "SEC") on Form S-8 (or any
successor form) or another appropriate form with respect to shares of
Buyer Common Stock subject to such options and shall maintain the
effectiveness of such registration statement or registration statements
(and maintain the current status of the prospectuses contained therein)
for so long as such options remain outstanding.
(d) Buyer will apply to qualify the Buyer Options issued to
Optionholders who are residents of Israel under Section 102 ("Section
102") or another similar provision of the Israeli Income Tax Ordinance
(including Section 3(9) thereto) and use commercially reasonable efforts
to obtain confirmation from the Israeli tax authorities that the
assumption and conversion of options under this Section 2.3 is not a
taxable event and that tacking of the holding period shall be allowed
with respect to the two-year holding period required under Section 102
for such periods in which the Company Options were held before the
Effective Time or cooperate with the Company in finding a reasonably
acceptable alternative solution to such tax issues.
(e) Upon conversion of the outstanding Company Options into
Buyer Options, the vesting schedules for all such options shall be
adjusted so that (i) 15% of each tranche of options which would
otherwise have vested after June 1, 1999 shall vest on June 1, 1999; and
(ii) all other options which would otherwise have vested at any time
after June 1, 1999 shall have their respective vesting dates advanced by
the lesser of (x) six months or (y) the number of days necessary to
cause such options to vest on June 1, 1999. There shall be no change to
the vesting schedule of any options which otherwise vest on or prior to
June 1, 1999. For illustrative purposes, the parties hereto have set
forth a mathematical example of the foregoing terms of acceleration of
vesting attached as Exhibit F hereto.
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<PAGE>
Notwithstanding the amendments to the vesting schedule, if and to the
extent required under Section 102 (as in effect from time to time),
no Optionholder shall be entitled to sell any shares purchasable upon
exercise of the Buyer Options until the two-year holding period
under Section 102 has been satisfied. For any Buyer Options which
vest prior to the date on which the two-year holding period under
Section 102 would have been satisfied, the time period in which the
holder of such option may exercise the option following a termination
of employment with the Company, to the extent such option is
exercisable as of the date of termination, shall be extended to
enable the holder to exercise for a period of 90 days following the
satisfaction, if and to the extent required under Section 102, of the
two-year holding period under Section 102 (as in effect from time to
time).
(f) If an employee of the Company or its subsidiaries is
terminated by Buyer or the Company or such subsidiary for reasons other
than cause, as described in Section 7.5.4 of the Company's Share
Purchase Plan (1998), within 12 months following the Effective Date and
the Company Options held by such employee did not otherwise vest, any
unvested Company Options owned by such employee shall become vested upon
such termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that, except as set forth
in the Disclosure Schedule delivered by the Company to Buyer on the date hereof
(the "DISCLOSURE SCHEDULE") (which Disclosure Schedule sets forth the exceptions
to the representations and warranties contained in this Article III under
captions referencing the Sections to which such exceptions apply):
3.1. ORGANIZATION AND QUALIFICATION.
(a) Each of the Company and its subsidiaries (as defined in
Section 9.5 hereof) is a corporation duly organized, validly existing,
duly registered (if applicable) and, with respect to any subsidiaries
incorporated in the U.S., in good standing under the laws of the
jurisdiction of its organization and each such corporation has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each of
the Company and its subsidiaries is duly qualified or licensed to carry
on its business as it is now being conducted, and is qualified to
conduct business in each jurisdiction where the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except for failures to be so qualified that
would not, individually or in the aggregate, have a Company Material
Adverse Effect (as defined in Section 3.1(b) hereof). Section 3.1 of
the Disclosure Schedule sets forth a true and complete list, by
corporation, of all jurisdictions
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<PAGE>
in which each of the Company and its subsidiaries is qualified and in
good standing, if applicable. None of the Company or any of its
subsidiaries is in violation of any of the provisions of its
Memorandum of Association, Certificate of Incorporation or other
applicable charter document (any such document of any corporation
hereinafter referred to as its "CHARTER DOCUMENT") or its Articles of
Association, By-Laws, or other applicable governing document (any
such documents of any corporation hereinafter referred to as its
"GOVERNING DOCUMENT"). The Company has delivered to Buyer accurate
and complete copies of the respective Charter Documents and Governing
Documents, as currently in effect, of each of the Company and its
subsidiaries (other than the subsidiaries incorporated in the
Philippines and Germany).
(b) For purposes of this Agreement, "COMPANY MATERIAL
ADVERSE EFFECT" shall mean with respect to the Company any effect,
development, change or event that, individually or in the aggregate, and
when taken together with all other effects, developments, changes or
events occurring or existing at or about the same time, (i) has a
material adverse effect on the business, assets, operations, results of
operations, financial condition or prospects of the Company and its
subsidiaries, taken as a whole, or (ii) has a material adverse effect on
the ability of the Company to conduct its business as currently being
conducted or as currently proposed to be conducted as described in the
Company's Form 20-F for the year ended December 31, 1997, or to impair
the Company's ability to perform its obligations under this Agreement,
or to consummate the Arrangement or the other transactions contemplated
by this Agreement.
3.2. CAPITAL STOCK OF SUBSIDIARIES. Neither the Company nor any of
its subsidiaries owns, controls or holds with the power to vote, directly or
indirectly, of record, beneficially or otherwise, any capital stock or any
equity or ownership interest in any corporation, partnership, association, joint
venture or other entity, except for the subsidiaries listed in Section 3.2 of
the Disclosure Schedule. Except as set forth in Section 3.2 of the Disclosure
Schedule, the Company is directly or indirectly the record and beneficial owner
of all of the outstanding shares of capital stock of each of its subsidiaries,
there are no proxies with respect to such shares, and no equity securities of
any of such subsidiaries are or may be required to be issued by reason of any
options, warrants, scrip, rights to subscribe for, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any capital stock of any such subsidiary, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any such subsidiary is bound to issue, transfer or sell any shares of
such capital stock or securities convertible into or exchangeable for such
shares. Other than as set forth in Section 3.2 of the Disclosure Schedule, all
of such shares so owned by the Company are validly issued, fully paid and
nonassessable and are owned by it free and clear of any claim, lien or
encumbrance of any kind with respect thereto.
3.3. CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 Company Ordinary Shares, par value NIS 0.10 per share.
As of the date hereof, 12,573,561 Company Ordinary Shares are issued and
outstanding. All of such issued and
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outstanding shares are validly issued, fully paid and nonassessable and free
of preemptive rights. As of the date hereof, 1,422,618 Company Ordinary
Shares are reserved for issuance upon exercise of outstanding Company
Options. Section 3.3 of the Disclosure Schedule lists all of the Share
Option Plans. Concurrently herewith, the Company has delivered a correct and
complete list to Buyer, setting forth the outstanding and unexercised Company
Options, the name of each holder of such Company Options, the number of
Company Ordinary Shares subject to each such Company Option, the relevant
vesting dates and whether such vesting will accelerate as a result of the
consummation of the transactions contemplated hereby. Other than the Share
Option Plans, the Company has no other plan which provides for the grant of
options or warrants to purchase Company Ordinary Shares, share appreciation
or similar rights or share awards. Except as set forth above, there are not
now, and at the Effective Time, except for Company Ordinary Shares issued
after the date hereof upon the exercise of Company Options outstanding on the
date hereof, there will not be, any Company Ordinary Shares issued or
outstanding or any subscriptions, options, warrants, calls, claims, rights
(including without limitation any share appreciation or similar rights),
convertible securities or other agreements or commitments of any character
obligating the Company to issue, transfer or sell any of its securities.
3.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and, subject to obtaining the necessary approval of its shareholders and
Optionholders and the approval of the Controller of Restrictive Trade Practices
as referred to in Section 3.5(b)(vi) hereof (and other requisite governmental
approvals, if any), to consummate the Agreement, the Arrangement and the other
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the Arrangement and other transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Arrangement or other
transactions contemplated hereby (other than the approval and adoption of this
Agreement and the Arrangement by the Company's shareholders, approval and
adoption of the Arrangement by the Optionholders, the issuance of the Final
Court Order, the approval of the Controller of Restrictive Trade Practices as
set forth in Section 3.5(b)(vi) hereof and other requisite governmental
approvals, if any). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Buyer, constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally and by general equitable principles.
3.5. NO VIOLATIONS, ETC.
(a) Assuming that all filings, permits, authorizations,
consents and approvals or waivers thereof have been duly made or
obtained as contemplated by Section 3.5(b) hereof, neither the execution
and delivery of this Agreement by the Company nor the consummation of
the Arrangement or other transactions contemplated hereby nor
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<PAGE>
compliance by the Company with any of the provisions hereof will,
except as set forth in Section 3.5(a) of the Disclosure Schedule, (i)
violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the
termination or suspension of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or
any of its subsidiaries under, any of the terms, conditions or
provisions of (x) their respective Charter Documents or Governing
Documents, (y) any note, bond, charge, lien, pledge, mortgage,
indenture or deed of trust, or (z) any license, lease, agreement or
other instrument or obligation to which the Company or any such
subsidiary is a party or to which they or any of their respective
properties or assets may be subject, or (ii) violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its subsidiaries or any of their
respective properties or assets, except, in the case of clauses
(i)(y), (i)(z) and (ii) above, for such violations, conflicts,
breaches, defaults, terminations, suspensions, accelerations, rights
of termination or acceleration or creations of liens, security
interests, charges or encumbrances which would not, individually or
in the aggregate, have a Company Material Adverse Effect.
(b) No filing or registration with or notification to and no
permit, authorization, consent or approval of any court, commission,
governmental body, regulatory authority, agency or tribunal wherever
located (a "GOVERNMENTAL ENTITY") is required to be obtained, made or
given by the Company in connection with the execution and delivery of
this Agreement or the consummation by the Company of the Arrangement or
other transactions contemplated hereby except (i) in connection with the
applicable requirements of antitrust or similar laws or regulations of
jurisdictions other than the United States, if any, (ii) the obtaining
of the Final Court Order and making of the Filing with the Registrar of
Companies in Israel, (iii) the approval of the Company's shareholders
and Optionholders pursuant to Israeli Law, (iv) the approval of the
Israel Investment Center of the Israeli Ministry of Trade & Industry,
(v) the approval of the Office of the Chief Scientist of the Israeli
Ministry of Trade & Industry ("OCS"), (vi) filings with and the
approval of the Israeli Controller of Restrictive Trade Practices, and
(vii) filings with and receipt of a permit or exemptive order from the
Israeli Securities Authority ("ISA") if necessary as to Company Options.
(c) Except as set forth in Section 3.5 of the Disclosure
Schedule, neither the Company nor any of its subsidiaries, nor, to the
knowledge of the Company, any other party thereto, is in violation of or
default under (x) any note, charge, lien, pledge, bond, mortgage,
indenture or deed of trust, or (y) any license, lease, agreement or
other instrument or obligation to which the Company or any of its
subsidiaries is a party or to which they or any of their respective
properties or assets may be subject, except for such violations or
defaults which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
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3.6. COMMISSION FILINGS; FINANCIAL STATEMENTS; BOOKS AND RECORDS.
(a) The Company has filed all forms, reports, schedules,
statements and other documents required to be filed by it since January
1, 1995, excluding the Company's Report on Form 20-F for the year ended
December 31, 1994, to the date hereof (collectively, including all
Reports on Form 6-K filed during such period, and as supplemented and
amended since the time of filing, the "COMPANY SEC REPORTS") with the
SEC. The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company and its
subsidiaries included or incorporated by reference in such Company SEC
Reports (collectively, the "FINANCIAL STATEMENTS") have been prepared in
accordance with United States or Israeli (as stated therein) generally
accepted accounting principles applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
present fairly, in all material respects, the financial position and
results of operations and, where applicable, cash flows of the Company
and its subsidiaries on a consolidated basis at the respective dates and
for the respective periods indicated (except, in the case of all such
financial statements that are interim financial statements, for normal
year-end adjustments). The Company SEC Reports, including all Company
SEC Reports filed after the date of this Agreement and prior to the
Effective Time, (i) were or will be prepared in all material respects
with all applicable requirements of the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the
"SECURITIES ACT") and the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"EXCHANGE ACT"), as the case may be and (ii) did not at the time they
were filed or will not at the time they are filed (or, solely with
respect to each Report on Form 6-K of the Company filed or to be filed
with the SEC as of the date or dates of the exhibits thereto), 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 were
made, not misleading.
(b) Since January 1, 1994, the books and records of the
Company and its subsidiaries have fairly reflected, and fairly reflect,
in all material respects the transactions to which it is a party or by
which its properties are subject or bound. Such books and records have
been properly kept and maintained and are in compliance in all material
respects with all applicable legal and accounting requirements. The
minute books of the Company and its subsidiaries contain records which
are accurate in all material respects of all corporate actions of the
respective shareholders and Board of Directors of the Company and its
subsidiaries.
(c) All trade receivables of the Company and of any
subsidiary shown on the audited consolidated balance sheet contained in
the Company's Form 20-F for the fiscal year ended December 31, 1997 (the
"BALANCE SHEET"), and all trade receivables of the Company and of any
subsidiary after that date, arose from sales in the ordinary course of
business.
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(d) Except as set forth in Section 3.6(d) of the Disclosure
Schedule, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature, whether absolute, accrued,
unmatured, contingent or otherwise whether due or to become due, known
or unknown, or any unsatisfied judgments or any leases of personalty or
realty or unusual or extraordinary commitments that are required to be
disclosed under applicable generally accepted accounting principles,
except the liabilities recorded on the Company's consolidated balance
sheet at December 31, 1997 included in the financial statements referred
in Section 3.6(a) hereof and the notes thereto, and except for
liabilities or obligations since December 31, 1997, that either are
incurred in the ordinary course of business and consistent with past
practice or that are not reasonably likely to have, individually or in
the aggregate, have a Company Material Adverse Effect.
3.7. ABSENCE OF CHANGES OR EVENTS. Except as set forth in
Section 3.7 of the Disclosure Schedule and in the Company's Form 20-F for the
fiscal year ended December 31, 1997, as filed with the SEC, or any other filing
(including, without limitation, any filings under Form 6-K and exhibits thereto)
made by the Company with the SEC since January 1, 1998 (together, the "COMPANY
CURRENT SEC FILINGS"), since December 31, 1997, the Company and its subsidiaries
have not incurred any liability reasonably likely to result in a Company
Material Adverse Effect, and there has not been any change in the business,
financial condition or results of operations or prospects of the Company or any
of its subsidiaries which has had, or is reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect and the Company and its
subsidiaries have conducted their respective businesses in the ordinary course
consistent with their past practices. The description set forth in Section 3.7A
of the Disclosure Schedule is accurate.
3.8. ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in the
Company Current SEC Filings or as set forth in Section 3.8 of the Disclosure
Schedule, since December 31, 1997, the Company has not taken any of the actions
set forth in Section 6.1 hereof (except with respect to the capital expenditures
described in Section 6.1(h) hereof, the amount applicable in determining whether
the Company has taken any such action shall be $3 million).
3.9. LITIGATION. Except as set forth in Section 3.9 of the
Disclosure Schedule or except for such matters as are not reasonably likely to
result in a liability of the Company in excess of U.S. $250,000, in each case,
there is no (i) claim, action, suit or proceeding pending or, to the best
knowledge of the Company or any of its subsidiaries, threatened against or
relating to the Company or any of its subsidiaries before any Governmental
Entity, or (ii) outstanding judgment, order, writ, injunction or decree, or
application, request or motion therefor, of any Governmental Entity in a
proceeding to which the Company, any subsidiary of the Company or any of their
respective assets was or is a party and neither the Company nor any subsidiary
is in default in any material respect with respect to any such judgment, order,
writ, in junction or decree.
3.10. TITLE TO AND CONDITION OF PROPERTIES. The Company and its
subsidiaries do not own any real property. The Company and its subsidiaries own
outright all of the personal
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property (except for leased property or assets for which it has a valid and
enforceable right to use) which is reflected on the Balance Sheet, except for
property since sold or otherwise disposed of in the ordinary course of
business and consistent with past practice and except for liens, charges or
other encumbrances for current taxes not delinquent or taxes being protested
in good faith, mechanics liens not yet due and payable, and such
imperfections in title thereto and liens, charges or other encumbrances, if
any, as do not materially detract from the value, or interfere with the
present condition or use, of the property of the Company or any subsidiary or
otherwise impair their business or operations. Except as set forth in the
Financial Statements, none of the properties or assets, the value of which is
reflected in the Financial Statements, is held by the Company or any
subsidiary as lessee or subject to any lease or as conditional vendee under
conditional sale or other title retention agreement or as optionee under any
option to purchase. All of the material equipment owned by or in the
possession of the Company or any subsidiary is in good operating condition
and, subject to normal maintenance and wear and tear, is available for use.
3.11. CERTAIN CONTRACTS.
(a) Except as set forth in Section 3.11 of the Disclosure
Schedule and except for agreements, indentures, arrangements and
contracts which are exhibits to the Company's Form F-3 dated May 1997
(collectively, "CONTRACTS"), neither the Company nor any of its
subsidiaries is a party to, is bound by, owns properties subject to, or
receives benefits under:
(i) any agreement, arrangement or any contract not
made in the ordinary course of business that (x) would be
required to be filed as an exhibit to a Form 20-F under the
Exchange Act or (y) is or may reasonably be expected to be
material to the financial condition, business or results of
operations or prospects of the Company and its subsidiaries,
taken as a whole;
(ii) any agreement, indenture or other instrument
relating to the borrowing of money by the Company or any of its
subsidiaries or the guarantee by the Company or any of its
subsidiaries of any such obligation in excess of $250,000 other
than loans between the Company and its subsidiaries made in the
ordinary course of business;
(iii) any agreement, arrangement or commitment which
cannot be terminated at will (subject to provisions of
applicable law) relating to the employment, election or
retention of any present or former director or officer or key
employee;
(iv) any collective agreement, arrangement or
understanding (whether formal or otherwise) with a labor union;
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(v) any agreement containing covenants that limit
the ability of the Company or any of its subsidiaries to compete
in any line of business or with any Person (as defined in
Section 9.5 hereof), or that involve any restriction on the
geographic area in which, or method by which, the Company or any
of its subsidiaries may carry on its business (except for
agreements set forth in Section 3.11(a)(vii) hereof);
(vi) all license agreements (except for agreements
set forth in Section 3.11(a)(vii) hereof or standard license
agreements in connection with sales to customers of the Company
in the ordinary course of business which contain standard
software licensing terms offered by the Company to purchasers of
its equipment, a copy of which has been provided to Buyer),
agreements primarily for the purpose of developing technology,
transfer or joint-use agreements or other agreements providing
for the payment or receipt of royalties or other compensation by
the Company in connection with the Company Intellectual
Property, other than third party software used by the Company
pursuant to "shrink-wrap" or "off-the-shelf" license agreements;
(vii) any agency agreements, distribution agreements
or agreements with third party sales representatives; or
(viii) all other contracts or commitments and
undertakings that, in each case, involve payments in excess of
$250,000 in the aggregate.
(b) Neither the Company nor any subsidiary is a party to or
bound by any Contract that is not in writing. All Contracts are valid,
binding and in full force and effect. Except as set forth in
Section 3.11(b) of the Disclosure Schedule, no consent, approval, waiver
or authorization of, or notice to any Person is needed in order that
each such Contract shall continue in full force and effect in accordance
with its terms without rights of early termination by reason of the
consummation of the Arrangement and the other transactions contemplated
by this Agreement. The Company has performed in all material respects
all obligations required to be performed by it in connection with the
Contracts and is not in receipt of any claim of default under any
Contract that would if not cured result in any penalty, acceleration or
rights of early termination. The Company does not have any actual
knowledge of any material breach or anticipated material breach by any
other party to any Contract and neither the Company nor any subsidiary
has affirmatively waived any material right under any Contract. To the
best knowledge of the Company, all existing contracts or subcontracts
with the Company's customers can be performed in all material respects
by the Company (assuming performance by the other parties thereto and
necessary third parties) on time, and without extraordinary expenditures
of time or money.
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<PAGE>
3.12. LABOR MATTERS. Neither the Company nor any of its subsidiaries
is a party to any collective agreement, arrangement or labor contract, whether
formal or otherwise. Each of the Company and its subsidiaries is in compliance
in all material respects with all applicable laws (including, without
limitation, all applicable extension orders) respecting employment and
employment practices, terms and conditions of employment and wages and hours.
There is no labor strike, slowdown or stoppage pending (or, to the best
knowledge of the Company, any labor strike or stoppage threatened) against or
affecting the Company or any of its subsidiaries.
3.13. COMPLIANCE WITH LAW. All activities of the Company and its
subsidiaries have been, and are currently being, conducted in compliance in all
material respects with all applicable Israeli, U.S. federal, state and local and
foreign laws, ordinances, regulations, judgments, decrees, injunctions, material
permits, material licenses, material certificates, governmental rules, orders
and other similar items of any court or other Governmental Entity or any
nongovernmental self-regulatory agency), and no claims have been filed against
the Company alleging a violation of any such laws, regulations or other
requirements. The Company and its subsidiaries have all permits, licenses and
franchises from Governmental Entities required to conduct their businesses as
now being conducted, except for such permits, licenses and franchises the
absence of which would not, individually or in the aggregate, have a Company
Material Adverse Effect.
3.14. GRANTS, INCENTIVES AND SUBSIDIES. Correct copies of all letters
of approval with respect to the Company or any of its subsidiaries from the
Investment Center for receipt of Approved Enterprise Status in accordance with
the Encouragement of Capital Investments Law-1959 ("INVESTMENT LAW") and from
the OCS since January 1, 1996 under the Law for the Encouragement of Industrial
Research and Development, 1986 (the "RESEARCH LAW") have been furnished to
Buyer. All such letters of approvals, and supplements thereto, granted by the
Investment Center and granted by the OCS (which OCS letters of approval and
supplements thereto constitute all such letters or supplements pertaining to
programs of the Company in progress as of the date hereof), respectively, are
listed in Section 3.14 of the Disclosure Schedule. The Company is in
compliance, in all material respects, with the terms and conditions of all of
its grants and incentives from the Government of the State of Israel or any
agency thereof including, without limitation, the Investment Center and the OCS
(the "COMPANY GRANTS") and, except as disclosed in Section 3.14 of the
Disclosure Schedule, has duly fulfilled, in all material respects, all the
undertakings due as of the date hereof relating thereto. The Company is unaware
of any event as to which consent or approval of a Governmental Entity is
required but has not been obtained, the absence of which might lead to the
annulment, amendment, acceleration, payment of royalties or material limitation
of any of the Company Grants, except for expected reductions in the budget of
the OCS generally applicable to all companies receiving such funds.
3.15. INTELLECTUAL PROPERTY RIGHTS.
(a) Section 3.15 of the Disclosure Schedule contains a
complete and accurate list of all registered (and applications for
registration of) patents, trademarks, trade names, service marks,
copyrights and applications for or registrations of any of the foregoing
as
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<PAGE>
to which the Company is the owner along with the name of the relevant
country, registration numbers, dates of issuance, title of the patent or
copyright , names of the inventors or authors of such patents and
copyright (if not assigned by such person or persons to the Company),
the trade and service mark and trade name and relevant goods or
services. The Company owns, free and clear of any lien, is licensed to
use, or has the valid right to use, all patents, trademarks, trade
names, service marks, copyrights, applications for or registrations of
any of the foregoing, processes, inventions, designs, technology,
formulas, computer software programs (other than "OFF-THE-SHELF"
programs) and know-how (including trade secrets and/or other
unpatentable proprietary or confidential information, systems or
procedures) and other rights or interests in items of intellectual
property used in or necessary for the conduct of its respective business
as currently conducted or as currently proposed to be conducted as
described in the Company's Form 20-F for the year ended December 31,
1997 (the "COMPANY INTELLECTUAL PROPERTY"). Except to the extent
specifically disclosed in Section 3.15 of the Disclosure Schedule, no
claim has been asserted or, to the knowledge of the Company, threatened
by any person, and, to the Company's knowledge, no valid basis for any
claim exists, with respect to the use of the Company Intellectual
Property owned by the Company. Except to the extent specifically
disclosed in Section 3.15 of the Disclosure Schedule or the Company SEC
Reports, the Company has not received notice and is not otherwise aware
of any infringement of or conflict with asserted rights of others with
respect to any of the Company Intellectual Property owned by the
Company, or of any facts, or assertion of any facts which would render
any of the Company Intellectual Property owned by the Company invalid or
inadequate to protect the interests of the Company therein. Except to
the extent specifically disclosed, in Section 3.15 of the Disclosure
Schedule, no current or former shareholder, employee, officer, director
or consultant of the Company has any rights in or to any of the Company
Intellectual Property owned by the Company. All the Company
Intellectual Property owned by the Company listed in Section 3.15 of the
Disclosure Schedule has the status indicated therein and all
applications are still pending in good standing and have not been
abandoned. Except to the extent specifically disclosed in Section 3.15
of the Disclosure Schedule or the Company SEC Reports:
(i) the Company Intellectual Property owned by the
Company is valid and has not been challenged in any judicial or
administrative proceeding;
(ii) the Company has made all statutorily required
filings, if any, to record its interests, and taken reasonable
actions as is customary in the industry to protect its rights,
in the Company Intellectual Property owned by the Company;
(iii) to the knowledge of the Company, no Person nor
such Person's business or products has infringed, misused or
misappropriated the Company Intellectual Property or currently
is infringing, misusing or misappropriating the Company
Intellectual Property owned by the Company; and
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<PAGE>
(iv) to the knowledge of the Company, no other Person
has any right to receive or any obligation to pay a royalty with
respect to any of the Company Intellectual Property owned by the
Company or any product or service supplied by the Company.
(b) Section 3.15(b) of the Disclosure Schedule sets forth a
list of the material licenses and agreements (with the exception of
licenses and agreements to use "shrink-wrapped" or "off-the-shelf"
intellectual property) (the "LICENSES") permitting the Company, as
licensee, the valid right to use the Company Intellectual Property
identified therein. The Licenses are valid and binding obligations of
the licensors to the Company or its subsidiaries, enforceable against
such licensors in accordance with their respective terms, and the
Company or subsidiary, as applicable, is not in material breach or
default thereunder. No claim has been asserted or to the knowledge of
the Company, threatened by any person, and, to the Company's knowledge,
no valid basis for any claim exists (i) alleging that the use of the
Licenses in the business of the Company, as currently conducted or as
currently proposed to be conducted as described in the Company's Form
20-F for the year ended December 31, 1997, infringes upon or constitutes
the unauthorized use of the intellectual property rights of any third
party or (ii) challenging the validity or enforceability of the Licenses
or the use of the Company Intellectual Property pursuant to the
Licenses.
(c) To the knowledge of the Company after conducting such
due diligence as would be necessary to enable the Company to comply with
the disclosure requirements of the SEC's Release No. 33-7558, except as
set forth in Section 3.15(c) of the Disclosure Schedule, all hardware
and software used by the Company in the ordinary course of business,
including without limitation, all hardware and software included in the
products sold or products currently proposed to be sold by the Company
or any of its subsidiaries, is Year 2000 Compatible. For purposes of
this Agreement, "YEAR 2000 COMPATIBLE" means that neither performance
nor functionality is affected by dates prior to, during, spanning, or
after January 1, 2000, and shall include, but not be limited to:
(i) accurately processing (including, but not limited to, calculating,
comparing and sequencing) date/time data from, into and between the
twentieth and twenty-first centuries and the years 1999 and 2000 and
leap year calculations; (ii) functioning without error, interruption, or
decreased performance relating to such date/time data; (iii) accurately
processing such date/time data when used in combination with other
technology; (iv) accurate date/time data century recognition;
(v) calculations that accurately use same century and multi-century
formulas and date/time values; (vi)date/time interface values that
reflect the correct century; and (vii) processing, storing, receiving
and outputting all date/time data in a format that accurately indicates
the century of the date/time data.
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<PAGE>
3.16. TAXES.
(a) "TAX" or "TAXES" shall mean all Israeli or United States
federal, state or local taxes and any other applicable taxes, duties,
levies, fees, charges and assessments of any nature, including income,
gross receipts, property, sales, use, license, excise, franchise, ad
valorem, value-added, transfer, social security payments, National
Insurance Institute payments, health taxes and withholding on wages,
salaries and benefits and payments to subcontractors (to the extent
required under applicable Tax law), and also including all interest,
penalties and additions imposed with respect to such amounts.
(b) (i) The Company and its subsidiaries have prepared and
timely filed or will timely file with the appropriate governmental
agencies all franchise, income and all other material Tax returns and
reports required to be filed for any period ending on or before the
Effective Time (collectively "RETURNS"), taking into account any
extension of time to file granted to or obtained on behalf of the
Company and/or its subsidiaries; (ii) all Taxes of the Company and its
subsidiaries in respect of the pre-Arrangement period which are, or
shall become prior to or as of the Effective Time, due and payable have
been or will be paid in full to the proper authorities, other than such
Taxes as are being contested in good faith by appropriate proceedings
and are adequately reserved for in accordance with applicable generally
accepted accounting principles; (iii) all deficiencies resulting from
Tax examinations of federal, state and foreign income, sales and
franchise and all other material Tax returns filed by the Company and
its subsidiaries, of which the Company or its subsidiaries has received
written notice, have either been paid or are being contested in good
faith by appropriate proceedings; (iv) except for ordinary requests for
additional information, no deficiency has been asserted or assessed
against the Company or any of its subsidiaries, and no examination of
the Company or any of its subsidiaries is pending or threatened for any
material amount of Tax by any taxing authority, of which the Company or
its subsidiaries has received written notice; (v) no extension of the
period for assessment or collection of any material Tax is currently in
effect and no extension of time within which to file any material Tax
return has been requested, which Tax return has not since been filed;
(vi) all Returns filed by the Company and its subsidiaries are true,
correct and complete in all material respects, (vii) no material Tax
liens have been filed with respect to any Taxes; (viii) the Company and
each of its subsidiaries have not made and do not intend to make any
voluntary adjustment by reason of a change in their accounting methods
for any pre-Arrangement period, or any material election, that would
change the taxable income or deductions of the Company or any of its
subsidiaries for any period ending after the Effective Date, except as
may be required by a change in applicable generally accepted accounting
principles; (ix) the Company and its subsidiaries have made timely
payments of the Taxes required to be deducted and withheld from the
wages paid to their employees; (x) the Company and its subsidiaries are
not parties to any tax sharing or tax matters agreement; and (xi) to the
knowledge of the Company, no facts exist that could constitute grounds
for
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<PAGE>
the assessment of any material liability for Tax by any Governmental
Entity against the Company or any subsidiary.
(c) Section 3.16(c) of the Disclosure Schedule, lists each
tax incentive to which the Company is entitled on the date hereof under
the Laws of the State of Israel, other than incentives generally
available by law, the period for which such tax incentive applies, and
the nature of such tax incentive. The Company has complied in all
material respects with all requirements of Israeli law to be entitled to
claim the tax incentive set forth in Section 3.16(c) of the Disclosure
Schedule. The consummation of the Arrangement (without giving effect to
any action taken by Buyer after the Effective Time or by Buyer in
connection with the Arrangement other than as specifically contemplated
by this Agreement or the Arrangement) will not materially adversely
affect the ability of the Company to claim the benefit of any tax
incentive for 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 set forth
in Section 3.5(b) hereof, prior to the consummation of the Arrangement
in order to preserve the entitlement of the Company to any such
incentive. Except as set forth in Section 3.16(c) of the Disclosure
Schedule, no subsidiary is entitled to any tax incentive of the type
described in this Section 3.16(c).
3.17. EMPLOYEE BENEFIT PLANS.
(a) Section 3.17(a) of the Disclosure Schedule contains a
list of all current salaried employees of each of the Company and its
subsidiaries as of the date of this Agreement who received compensation
or is expected to receive compensation (including compensation payable
pursuant to bonus, deferred compensation or commission arrangements) in
excess of US $100,000 in either 1997 or 1998, and correctly reflects, in
all material respects, their salaries, any other compensation payable to
them (including compensation payable pursuant to bonus, deferred
compensation or commission arrangements), their dates of employment and
their positions.
(b) Section 3.17(b) of the Disclosure Schedule sets forth a
true and accurate schedule of all management insurance policies,
education funds, pension or provident funds, severance payment funds,
disability, death benefit or health insurance plans or any other plans,
funds or arrangements maintained or contributed to by the Company or any
of its subsidiaries for the benefit of employees of the Company or any
of its subsidiaries (the "EMPLOYEE BENEFIT PLANS").
(c) With respect to the Employee Benefit Plans, individually
and in the aggregate, no event has occurred, and to the knowledge of the
Company or any of its subsidiaries, there exists no condition or set of
circumstances in connection with which the Company or any of its
subsidiaries could be subject to any liability that is reasonably
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likely to have a Company Material Adverse Effect on the Company, under
any applicable law.
(d) With respect to the Employee Benefit Plans, individually
and in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with applicable
generally accepted accounting principles, on the financial statements of
the Company or any of its subsidiaries.
(e) All material contributions to, and payments from, the
Employee Benefit Plans which are required to have been made in
accordance with the Employee Benefit Plans have been made by the Company
and any of its subsidiaries.
(f) There are (i) no investigations, audits or examinations
pending, or to the best knowledge of the Company, threatened by any
Governmental Entity involving any of the Employee Benefit Plans, (ii) no
termination proceedings involving the Employee Benefit Plans and (iii)
no pending or, to the best of the Company's knowledge, threatened claims
(other than routine claims for benefits), suits or proceedings against
any Employee Benefit Plan.
(g) Except as disclosed in Section 3.17(g) of the Disclosure
Schedule, the consummation of the transactions contemplated by this
Agreement will not, either alone or in connection with an employee's
termination of employment or other event, result in an increase in the
amount of compensation or benefits or accelerate the vesting or timing
of payment of any benefits or compensation payable to or in respect of
any employee of the Company or any of its subsidiaries.
3.18. ENVIRONMENTAL MATTERS. The Company has been in compliance and
is presently complying, in each case in all material respects, with all
applicable health, safety and environmental laws. The Company has obtained all
material permits and authorizations which are required under all applicable
health, safety and environmental laws and are in compliance in all material
respects with such permits and authorizations. There is no environmental matter
which could expose the Company to a claim to clean-up or remedy any pollution or
damage at any of the properties utilized in the Company's business.
3.19. INSURANCE. The Company has delivered to Buyer a list of all
material insurance policies in force on the date hereof covering the businesses,
properties and assets of the Company and its subsidiaries, which policies are
set forth in Section 3.19 of the Disclosure Schedule, and all such policies are
currently in effect. Except as disclosed in Section 3.19 of the Disclosure
Schedule, there are no circumstances concerning the Company which might lead to
any liability under such insurance being avoided by the insurers or the premiums
being increased. There are no material claims outstanding under any insurance
policy and to the best of the Company's
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knowledge, the Company has not failed to give any notice or to present any
claim with respect to its business under any such policy in due and timely
fashion.
3.20. EMPLOYMENT AND LABOR CONTRACTS. The Company is not a party to
any employment contract or other similar contract or any other contract for the
provision of management or consulting services to the Company with any past or
present officer, director, employee or, to the best of the Company's knowledge,
any entity affiliated with any past or present officer, director or employee
other than those described in the Company SEC Reports or those set forth in
Section 3.20 of the Disclosure Schedule and other than the agreements executed
by employees generally.
3.21. FINDERS OR BROKERS. Except for Salomon Smith Barney Inc. and
Dovrat, Shrem & Co. Ltd. whose fees will be paid by the Company, none of the
Company, the subsidiaries of the Company, the Board of Directors or any member
of the Board of Directors has employed any agent, investment banker, broker,
finder or intermediary in connection with the transactions contemplated hereby
who might be entitled to a fee or any commission in connection with the
Arrangement or the other transactions contemplated hereby. The Company has
provided to Buyer copies of all commitments, agreements or other documentation
in respect of such fees or commissions, the amount of which in no event shall
exceed an aggregate of one percent (1%) of the consideration to be paid by Buyer
hereunder in addition to reimbursement of expenses payable thereunder.
3.22. BOARD RECOMMENDATION. The Board of Directors of the Company
has, at a meeting of such Board duly held on September 15, 1998: (a) by a vote
of its disinterested directors, duly approved and adopted this Agreement, the
Arrangement and the other transactions contemplated hereby, (b) determined by
such vote that the Agreement, and the Arrangement are in the best interests of
the Company, its shareholders and Optionholders and (c) recommended on that
basis that (i) the shareholders of the Company approve and adopt this Agreement,
the Arrangement and the other transactions contemplated hereby and (ii) that the
Optionholders approve and adopt the Arrangement.
3.23. OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has received the opinion of Salomon Smith Barney Inc. dated the date of
this Agreement, to the effect that, as of such date, the Per Share Amount is
fair from a financial point of view to the holders of Company Ordinary Shares.
3.24. INTERESTED PARTY TRANSACTIONS. All interested party
transactions in which the Company is a party that require special approval under
the Companies Ordinance, (New Version) 5743-1983 ("INTERESTED PARTY
TRANSACTIONS") have been approved in accordance with such provisions, except for
such interested party transactions relating to this Agreement, the Arrangement
and the transactions contemplated hereby.
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<PAGE>
3.25 INFORMATION STATEMENT. None of the information supplied by the
Company specifically for inclusion or incorporation by reference in the
Information Statement to be distributed by the Company will, at the date mailed
to the Company's shareholders and Optionholders and at the time of the meetings
of shareholders and Optionholders to be held in connection with the Arrangement,
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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company that:
4.1. ORGANIZATION AND QUALIFICATION. Buyer is a corporation duly
organized, validly existing, duly registered and in good standing under the laws
of the State of Minnesota, with the corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted
and to enter into and consummate the transactions contemplated by this
Agreement.
4.2. AUTHORITY; NO CONFLICTS. The execution, delivery and
performance by Buyer of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly and validly
executed and delivered by Buyer and is a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except to the extent
that its enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors
rights generally or by general equitable principles. Neither the execution,
delivery or performance of this Agreement by Buyer, nor the consummation of the
transactions contemplated hereby, nor compliance by Buyer with any provision
hereof will (i) conflict with or result in a breach of any provision of the
Articles of Incorporation or By-Laws of Buyer, (ii) cause a default (or give
rise to any right of termination, cancellation or acceleration or loss of a
material benefit under, or result in the creation of any lien, charge or other
encumbrance upon any of the properties of Buyer under any of the terms,
conditions or provisions of any note, bond, mortgage or indenture, or any other
material instrument, obligation or agreement to which Buyer is a party or by
which its properties or assets may be bound or (iii) violate any law applicable
to Buyer or binding upon any of its properties, except for, in the case of
clauses (ii) and (iii), such defaults or violations that individually or in the
aggregate would not result in a Buyer Material Adverse Effect. For purposes of
this Agreement, "BUYER MATERIAL ADVERSE EFFECT" shall mean with respect to the
Buyer any effect, development, change or event that, individually or in the
aggregate, and when taken together with all other effects, developments, changes
or events occurring at or about the same time, (i) has a material adverse effect
on the business, assets, operations, results of operations, financial condition
or prospects of the Buyer and its subsidiaries, taken as a whole, or (ii) has a
material
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adverse effect on the ability of the Buyer to conduct its business as
currently being conducted or as currently proposed to be conducted, or to
impair the Buyer's ability to perform its obligations under this Agreement,
or to consummate the Arrangement or the other transactions contemplated by
this Agreement.
4.3 NO FINDER'S FEES. Except for CIBC Oppenheimer & Co., whose fees
will be paid by Buyer (except as otherwise contemplated by Section 6.10(b)
hereof), neither Buyer nor any of its employees or agents has employed or
incurred any liability to any broker, finder or agent for any brokerage fees,
finder's fees, commissions or other amounts with respect to the transactions
contemplated by this Agreement.
4.4 NO VIOLATIONS, ETC. No filing or registration with or
notification to and no permit, authorization, consent or approval of any
Governmental Entity is required to be obtained, made or given by Buyer in
connection with the execution and delivery of this Agreement or the consummation
by Buyer of the Arrangement or other transactions contemplated hereby except (i)
in connection with the applicable requirements of antitrust or other similar
laws or regulations of jurisdictions other than the United States, if any, (ii)
the obtaining of the Final Court Order and making of the Filing with the
Registrar of Companies in Israel, (iii) the approval of the Company's
shareholders and Optionholders pursuant to Israeli Law, (iv) the approval of the
Israel Investment Center of the Israeli Ministry of Trade & Industry, (v) the
approval of the OCS, (vi) filings with and the approval of the Israeli
Controller of Restrictive Trade Practices, and (vii) filings with and receipt of
a permit or exemptive order from the ISA, if necessary, as to Company Options.
4.5 COMMISSION FILINGS. Buyer has filed all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 1995 to the date hereof (excluding its Annual Report on Form 10-K for
the fiscal year ended October 31, 1994) (collectively, as supplemented and
amended since the time of filing, the "BUYER SEC REPORTS") with the SEC. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of the Buyer and its subsidiaries included or incorporated
by reference in such Buyer SEC Reports (collectively, the "BUYER FINANCIAL
STATEMENTS") have been prepared in accordance with United States applicable
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
present fairly, in all material respects, the financial position and results of
operations and, where applicable, cash flows of the Buyer and its subsidiaries
on a consolidated basis at the respective dates and for the respective periods
indicated (except, in the case of all such financial statements that are interim
financial statements, for normal year-end adjustments). Buyer SEC Reports,
including all Buyer SEC Reports filed after the date of this Agreement and prior
to the Effective Time, (i) were or will be prepared in all material respects
with all applicable requirements of the Securities Act and the Exchange Act, as
the case may be and (ii) did not at the time they were filed or will not at the
time they are filed, 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 were
made, not misleading.
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4.6 OPTIONS. The Buyer Options to be issued by Buyer as set forth in
Section 2.3 hereof shall be duly authorized and validly issued in accordance
with the terms of this Agreement and any Buyer Common Stock issued upon exercise
thereof and payment therefor in accordance with the terms of the relevant Share
Option Plans and option agreements under which the Company Options were granted
(as amended in accordance with the terms of this Agreement) and this Agreement
shall, when issued, be duly and validly issued, fully paid and nonassessable.
4.7 PURCHASE OF SHARES. As of the date of this Agreement, neither
the Buyer nor any of its subsidiaries owns any Company Ordinary Shares.
4.8 INFORMATION STATEMENT. None of the information supplied by
Buyer specifically for inclusion or incorporation by reference in the
Information Statement to be distributed by the Company will, at the date mailed
to the Company's shareholders and Optionholders and at the time of the meetings
of shareholders and Optionholders to be held in connection with the Arrangement,
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.
4.9 FINANCING. Buyer is not aware of any fact, circumstance or
event which would prevent Buyer from paying the Exchange Fund to the Exchange
Paying Agent in accordance with the terms of Section 2.1 of this Agreement and
the Exchange Paying Agent Agreement.
ARTICLE V
REQUIRED APPROVALS
5.1. SHAREHOLDERS AND COURT APPROVALS.
(a) The Company undertakes to take appropriate action to
file a motion (the "FIRST MOTION") with the Tel Aviv-Jaffa District
Court (the "COURT") requesting the Court to order that a special meeting
of the Company's shareholders be convened at the earliest practicable
date for the purpose of considering and approving (if they deem fit) the
Arrangement and the other transactions contemplated hereby (the "COMPANY
SHAREHOLDERS MEETING") and that a special meeting be convened of the
Company's Optionholders at the earliest practicable date for the purpose
of considering and approving (if they deem fit) those aspects of the
Arrangement pertaining to the Optionholders (the "COMPANY OPTIONHOLDERS
MEETING"), which shall have been recommended for approval by the
Company's Board of Directors consistent with its fiduciary obligations.
(b) As soon as practicable subsequent to approval of the
First Motion by the Court, the Company shall take appropriate action to
convene the Company Shareholders
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Meeting and the Company Optionholders Meeting, in accordance with the
Court's instructions, the provisions of law and the Company's
Governing Documents.
(c) The Company shall take appropriate action to submit to
the vote of the shareholders of the Company at the Company Shareholders
Meeting the approval of the Interested Party Transactions relating to
this Agreement, the Arrangement and the transactions contemplated
hereby.
(d) Subsequent to (i) approval of the Arrangement at the
Company Shareholders Meeting (the "COMPANY SHAREHOLDER APPROVAL")and at
the Company Optionholders Meeting (the "COMPANY OPTIONHOLDER APPROVAL"),
by the requisite vote required under Section 233 of the Companies
Ordinance (New Version) 5743-1983 ("SECTION 233") and in accordance with
the Company's Governing Documents and (ii) the approval of the
Interested Party Transactions referenced in Section 5.1(c) hereof,
except for approval of certain option grants as set forth in Section
3.3(3) of the Disclosure Schedule, by the shareholders of the Company,
the Company shall as soon as possible, but no later than five days after
such vote has been taken, file with the Court a motion (the "SECOND
MOTION") requesting that the Court issue the Final Court Order approving
the Arrangement.
(e) As soon as possible subsequent to the issuance of the
Final Court Order and the satisfaction or waiver of all Closing
conditions but without waiting for the expiration of any appeal period,
unless there is a stay of further proceedings issued by a court of
competent jurisdiction, the Company shall, immediately after receipt of
confirmation from the Exchange Paying Agent that the Exchange Fund has
been transferred to the Exchange Paying Agent, file the Final Court
Order with the Registrar of Companies in Israel (the "FILING").
(f) The First Motion, the Second Motion and any related
motions and the description of the Arrangement to the Israeli court
shall be reviewed and approved by Buyer and Buyer's counsel prior to the
filing thereof by the Company. The Company shall consult with Buyer
regarding the conduct of the court proceedings, shall advise Buyer or
Buyer's counsel of the dates of any hearings and, upon request of Buyer,
permit Buyer to participate therein.
(g) In connection with the Company Shareholders Meeting and
the Company Optionholders Meeting, the Company will duly solicit the
vote of the shareholders and the Optionholders of the Company for their
respective approval, as set forth above in this Section 5.1, by mailing
or delivering to each such shareholder and Optionholder the applicable
Information Statement referred to in Section 6.2 hereof, after Court
approval of the First Motion.
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ARTICLE VI
COVENANTS AND AGREEMENTS
6.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE ARRANGEMENT.
Except as contemplated by this Agreement or as expressly agreed to in writing by
Buyer, during the period from the date of this Agreement to the Effective Time,
each of the Company and its subsidiaries will conduct their respective
operations according to its ordinary course of business consistent with past
practice, and will use all commercially reasonable efforts to preserve intact
its business organization, will use all commercially reasonable efforts to keep
available the services of its officers and employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which is
reasonably likely to adversely affect the ability of the parties to consummate
the transactions contemplated by this Agreement, or the timing thereof. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to the Effective Time, the Company will not
nor will it permit any of its subsidiaries to, without the prior written consent
of Buyer (which consent will not be unreasonably withheld):
(a) amend its Charter Document or Governing Document;
(b) authorize for issuance, issue, sell, deliver, grant any
options (except as set forth in Section 6.1(b) of the Disclosure
Schedule) or warrants for, or otherwise agree or commit to issue, sell,
deliver, pledge, dispose of or otherwise encumber any shares of any
class of its share capital or any securities convertible into shares of
any class of its share capital, except pursuant to and in accordance
with the terms of Company Options outstanding on the date hereof except
for (i) preparation of documents relating to issuance of Company Options
approved prior to the date hereof and appearing in the stock option
table provided in accordance with Section 3.3 of the Disclosure Schedule
and (ii) issuance of shares in G-Connect Ltd. in connection with a
contemplated financing; PROVIDED, that, in no event shall any such
issuance of shares decrease the Company's ownership of the voting
securities of G-Connect Ltd. to less than a majority of the outstanding
voting securities (representing at least a majority of the outstanding
voting power of the shareholders of G-Connect Ltd.) on a fully diluted
basis taking into account any and all options or other rights to acquire
shares of G-Connect Ltd.;
(c) split, combine or reclassify any shares of its share
capital, issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its share
capital, declare, set aside or pay any dividend or other distribution
(whether in cash, shares or property or any combination thereof) in
respect of its share capital or purchase, redeem or otherwise acquire
any shares of its own share capital or of any of its subsidiaries,
except as otherwise expressly provided in this Agreement;
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(d) (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 consistent with past practice
and except for contracts for the purpose of non-speculative currency
hedging of non-United States dollar-denominated contracts entered into
in the ordinary course of business consistent with past practice; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the material
obligations of any other person (other than subsidiaries of the Company)
other than performance guarantees to customers made in the ordinary
course of business consistent with past practice; or (iii) make any
material loans, advances or capital contributions to, or investments in,
any other person (other than subsidiaries of the Company);
(e) except as otherwise expressly contemplated by this
Agreement, (i) increase in any manner the compensation of (x) any
employee, except in the ordinary course of business consistent with past
practice or in accordance with existing contracts with employees or (y)
any of its directors or officers, except in the ordinary course of
business, consistent with past practice, after consultation with Buyer,
(ii) pay or agree to pay any pension, retirement allowance or other
employee benefit not required, or enter into, amend or agree to enter
into or amend any agreement or arrangement with such director or officer
or employee, whether past or present, relating to any such pension,
retirement allowance or other employee benefit, except to the extent
accrued in the Financial Statements, as required under currently
existing agreements, plans or arrangements or with respect to employees,
in the ordinary course of business consistent with past practice; (iii)
grant any severance or termination pay to, or enter into or amend any
employment, severance or change in control agreement with, any employee
or any of its directors or officers except as required by applicable law
or pursuant to any existing contract; or (iv) except as may be required
to comply with applicable law, become obligated (other than pursuant to
any new or renewed collective bargaining agreement) under any new
pension plan, welfare plan, multiemployer plan, employee benefit plan,
benefit arrangement, or similar plan or arrangement, which was not in
existence on the date hereof, including any bonus, incentive, deferred
compensation, share purchase, share option, share appreciation right,
group insurance, severance pay, retirement or other benefit plan,
agreement or arrangement, or employment or consulting agreement with or
for the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof; PROVIDED, HOWEVER, that this
clause (iv) shall not prohibit the Company from renewing any such plan,
agreement or arrangement already in existence on terms no more favorable
to the parties to such plan, agreement or arrangement;
(f) except as otherwise expressly contemplated by this
Agreement, enter into, amend in any material respect or terminate any
other material agreements, commitments or contracts, except in the
ordinary course of business consistent with past practice;
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(g) acquire, sell, lease or dispose of any asset, other than
transactions in the ordinary course of business consistent with past
practice, except as may be required or contemplated by this Agreement;
(h) authorize or commit to make any capital expenditures in
excess of U.S. $500,000 in the aggregate during such period;
(i) make any change in the accounting methods or accounting
practices followed by the Company, except as required by applicable
generally accepted accounting principles or applicable law;
(j) settle any action, suit, claim, investigation or
proceeding (legal, administrative or arbitrative) in excess of $100,000
without the consent of Buyer;
(k) make any election under Israeli tax law which would (if
made) or is reasonably likely to have a Company Material Adverse Effect;
(l) alter (through merger, liquidation, reorganization,
restructuring or in any fashion) the corporate structure or ownership of
the Company or any subsidiary;
(m) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any corporation, limited
liability company, partnership, association or other business
organization or division thereof or otherwise acquire or agree to
acquire any assets, other than the acquisition of assets that are in the
ordinary course of business consistent with past practice and not
material to the Company and its subsidiaries taken as a whole;
(n) prepare or file any Tax Return inconsistent with past
practice or, on any such Tax Return, take any position, make any
election, or adopt any method that is inconsistent with positions taken,
elections made or methods used in preparing or filing similar Tax
Returns in prior periods;
(o) except as set forth in Item 2 of Section 6.1 of the
Disclosure Schedule, pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) in excess of U.S. $250,000, other than the payment, discharge
or satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the Financial Statements (or
the notes thereto) of the Company included in the Company Current SEC
Filings or incurred in the ordinary course of business consistent with
past practice; or
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(p) authorize, recommend, propose, agree or announce an
intention to do any of the foregoing or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
6.2 INFORMATION STATEMENT. The Company will, as promptly as
practicable, prepare an information statement and form of proxy in connection
with the votes of the Company's shareholders and Optionholders with respect to
the Arrangement and this Agreement ( such information statement, together with
any amendments thereof or supplements thereto, in each case in the form or forms
mailed to Company's shareholders and Optionholders is called the "INFORMATION
STATEMENT"). The Company will use its best efforts to cause the Information
Statement to be mailed to shareholders and Optionholders of the Company at the
earliest practicable date after approval by the Court of the First Motion, and
shall use its best efforts to hold the Company Shareholders Meeting and Company
Optionholders Meeting as soon as practicable, subject to the Company's Governing
Documents, after approval by the Court of the First Motion. Buyer shall provide
all information reasonably requested by the Company for inclusion in the
Information Statement. The Information Statement shall not include 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 made therein, in light of the
circumstances under which they are made, not misleading. In the Information
Statement, the Company's Board of Directors shall state that it unanimously
recommends that the Company's shareholders and Optionholders approve the
Arrangement. The Company shall provide Buyer and its counsel with a copy of the
Information Statement in the form proposed to be disseminated and Buyer and such
counsel shall be afforded a reasonable opportunity to review and comment
thereon. The Company shall not disseminate the Information Statement if Buyer
shall have reasonably objected thereto in writing.
6.3. ADDITIONAL AGREEMENTS, COOPERATION.
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use commercially reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by
this Agreement, and to cooperate with each other in connection with the
foregoing, including using commercially reasonable efforts (i) to obtain
all necessary waivers, consents and approvals from other parties to loan
agreements, material leases and other material contracts, if applicable,
(ii) to obtain all necessary consents, approvals and authorizations as
are required to be obtained under any Israeli, U.S. federal or state, or
foreign law or regulations, (iii) to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, (iv) to lift or rescind any injunction
or restraining order or other order adversely affecting the ability of
the parties to consummate the transactions contemplated hereby arising
out of or related to the Final Court Order referred to in Article V
hereof, (v) to effect all necessary registrations and filings and
submissions of information requested by Governmental Entities, and
(vi) to fulfill all conditions to this Agreement.
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(b) Each of the parties hereto agrees to furnish to each
other party hereto such necessary information and reasonable assistance
as such other party may request in connection with its preparation of
necessary filings or submissions to any regulatory or governmental
agency or authority, including, without limitation, any filing necessary
under the provisions of antitrust or other similar laws or regulations
of jurisdictions other than the United States, the Israeli Restrictive
Trade Practices Act, or any other Israeli, United States federal or
state, or foreign statute or regulations.
6.4. PUBLICITY. Except as otherwise required by law or the rules of
any applicable securities exchange or Nasdaq national market system, prior to
the Effective Time, Buyer and the Company will not, and will not permit any of
their respective representatives to, issue or cause the publication of any press
release or make any other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld. Buyer and the Company will
cooperate with each other in the development and distribution of all press
releases and other public announcements with respect to this Agreement and the
transactions contemplated hereby, and will furnish the other with drafts of any
such releases and announcements as far in advance as possible.
6.5 NO SOLICITATION.
(a) Prior to the termination of this Agreement pursuant to
Article VIII hereof, the Company and its subsidiaries will not, nor
shall the Company authorize or permit any officers, directors, employees
and investment bankers, attorneys or other agents retained by or acting
on behalf of the Company or any of its subsidiaries to, (i) initiate,
solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal that constitutes an Acquisition Proposal (as
hereinafter defined), (ii) except as permitted below, engage or
participate in negotiations or discussions with, or furnish any
information or data to, or take any other action to, facilitate any
inquiries or making any proposal by, any third party relating to an
Acquisition Proposal, or (iii) except as permitted below, enter into any
agreement with respect to any Acquisition Proposal or approve an
Acquisition Proposal. Notwithstanding anything to the contrary
contained in this Section 6.5 or in any other provision of this
Agreement, prior to the Company Shareholders Meeting and Company
Optionholders Meeting, the Company and its Board of Directors may
participate in discussions or negotiations with or furnish information
to any third party making an unsolicited Acquisition Proposal (a
"POTENTIAL ACQUIROR") or approve an unsolicited Acquisition Proposal if
both (A) the Company's Board of Directors, having complied with the
rules regarding Interested Party Transactions, duly determines in good
faith, after receiving advice from its financial advisor, that a
Potential Acquiror has submitted to the Company an Acquisition Proposal
that is a Superior Proposal (as hereinafter defined), and (B) the
Company's Board of Directors, having complied with the rules regarding
Interested Party Transactions, determines in good faith, after receiving
advice from reputable outside legal counsel experienced in such matters
(including, the Company's current outside counsel), that the failure to
participate in such
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discussions or negotiations or to furnish such information is
reasonably likely to violate the Board's fiduciary duties under
applicable law. In the event that the Company shall receive any
Acquisition Proposal, it shall promptly (and in no event later than
24 hours after receipt thereof) furnish to Buyer the identity of the
recipient of such information and/or the Potential Acquiror and the
terms of such Acquisition Proposal, and shall further promptly inform
Buyer in writing as to the fact such information is to be provided
after compliance with the terms of the preceding sentence. Without
limiting the foregoing, the Company understands and agrees that any
violation of the restrictions set forth in this Section 6.5(a) by any
executive officer of the Company or any of its subsidiaries or any
financial advisor, attorney or other advisor or representative, in
each case, who is currently or in the future retained by the Company
or any of its subsidiaries shall be deemed to be a breach of this
Section 6.5(a). Nothing contained in this Section 6.5(a) shall
prohibit the Company's Board of Directors from taking or disclosing
to the Company's shareholders a position with respect to an
Acquisition Proposal in the form of a tender offer by a Potential
Acquiror or making such other disclosure to the Company's
shareholders which position or disclosure, in the judgment of the
Board, after receiving advice from reputable outside legal counsel
experienced in such matters (including the Company's current outside
counsel), is required by applicable law; PROVIDED, that if the Board
takes a position or makes any disclosure adverse to consummation of
the Arrangement or the other transactions contemplated hereby (or
withdraws its recommendations of the Arrangement or this Agreement)
Buyer's right to terminate under Section 8.1(d)(ii) hereof shall
immediately arise, with the consequences set forth in Section 6.10(c)
hereof.
(b) For the purposes of this Agreement, "ACQUISITION
PROPOSAL" shall mean any proposal made by any person other than Buyer
and its subsidiaries to acquire "beneficial ownership" (as defined under
Rule 13(d) of the Exchange Act) of 50% or more of the assets of the
Company and its subsidiaries, taken as a whole, or 20% or more of the
outstanding capital stock of the Company pursuant to a merger,
consolidation, exchange of shares or other business combination, sale of
shares of capital stock, sales of assets, tender offer or exchange offer
or similar transaction involving the Company and its subsidiaries, taken
as a whole.
(c) The term "SUPERIOR PROPOSAL" means any BONA FIDE
Acquisition Proposal to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the
Company Ordinary Shares then outstanding or all or substantially all the
assets of the Company, for which financing, to the extent required, is
then committed or the Company's independent international financial
advisor has delivered a written opinion to the Company's Board of
Directors to the effect that such advisor is highly confident such
financing can be obtained by the Proposed Acquiror in a timely fashion,
and otherwise on terms that the Board of Directors, having complied with
the rules regarding Interested Party Transactions, determine, in good
faith, to be more favorable to the Company and its shareholders than the
Arrangement (after receiving the
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oral advice of the Company's independent international financial
advisor that the value of the consideration provided for in such
Acquisition Proposal exceeds the value of the consideration provided
for in the Arrangement, which advice shall include a commitment to
deliver a written opinion confirming such advice at the time the
Board of Directors considers whether to approve such Acquisition
Proposal).
6.6. ACCESS TO INFORMATION. From the date of this Agreement until
the Effective Time, the Company will give Buyer and its authorized
representatives (including counsel, other consultants, accountants and auditors)
reasonable access during normal business hours to all facilities, personnel and
operations and to all books and records of it and its subsidiaries, will permit
Buyer to make such inspections as it may reasonably require, will cause its
officers and those of its subsidiaries to furnish Buyer with such financial and
operating data and other information, including applications submitted under the
Investment Law and the Research Law, and information related thereto, with
respect to its business and properties as Buyer may from time to time reasonably
request and confer with Buyer to keep it reasonably informed with respect to
operational and other business matters relating to Company and its subsidiaries
and the status of satisfaction of conditions to the Closing. From the date of
this Agreement until the Effective Time, the Company will provide Buyer with
copies of all Company SEC Reports filed with the SEC after the date hereof. All
nonpublic information obtained by Buyer pursuant to this Section 6.6 or
otherwise at any time prior to or after the date hereof shall be kept
confidential in accordance with the Confidentiality Agreement, dated April 22,
1998, between Buyer and the Company (the "Confidentiality Agreement").
6.7. NOTIFICATION OF CERTAIN MATTERS. The Company or Buyer, as the
case may be, shall promptly notify the other of (i) its obtaining of actual
knowledge as to the matters set forth in clauses (x), (y) and (z) below, or (ii)
the occurrence, or failure to occur, of any event, which occurrence or failure
to occur would be likely to cause (x) any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time, (y) any material failure of the
Company or Buyer, as the case may be, or of any officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or (z) the institution
of any claim, suit, action or proceeding arising out of or related to the
Arrangement or the transactions contemplated hereby; PROVIDED, HOWEVER, that no
such notification shall affect the representations or warranties of the parties
or the conditions to the obligations of the parties hereunder.
6.8. RESIGNATION OF DIRECTORS. At or prior to the Effective Time,
the Company shall deliver to Buyer the resignations of such directors of the
Company and of its subsidiaries designated by the Company as Buyer shall
specify, to be effective as of the Effective Time.
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6.9. INDEMNIFICATION.
(a) As of the Effective Time and for a period of seven (7)
years following the Effective Time, Buyer will indemnify and hold
harmless from and against all claims, damages, losses, obligations or
liabilities ("LOSSES") submitted during such seven (7) year period, any
persons who were directors or officers of the Company or a subsidiary of
the Company prior to the Effective Time (the "INDEMNIFIED PERSONS") to
the fullest extent such person would have been indemnified for such
Losses under applicable law, under the Charter Document or Governing
Document of the Company or any subsidiary of the Company in effect
immediately prior to the date hereof, or the indemnification agreements
set forth in Section 3.11(a)(i) of the Disclosure Schedule, with respect
to any act or failure to act by any such Indemnified Person prior to the
Effective Time.
(b) Any determination required to be made with respect to
whether an Indemnified Person's conduct complies with the standards set
forth under the Israeli law or other applicable corporate law for
purposes of this Section 6.9 shall be made by independent counsel
selected by Buyer and reasonably acceptable to the Indemnified Persons.
Buyer shall pay such counsel's fees and expenses (it being agreed that
neither the Indemnified Persons nor Buyer shall challenge any such
determination by such independent counsel).
(c) In the event that Buyer or any of its successors or
assigns (i) consolidates with or merges into any other person, and Buyer
or such successor or assign is not the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers
all or substantially all of its properties and assets to any person,
then, and in each case, proper provision shall be made so that such
person or the continuing or surviving corporation assumes the
obligations set forth in this Section 6.9 and none of the actions
described in clauses (i) and (ii) above shall be taken until such
provision is made. Notwithstanding the foregoing, Buyer acknowledges
that the provisions of this Section 6.9 shall be binding on all
successors of Buyer.
(d) Buyer shall maintain in effect for not less than seven
(7) years from the Effective Time the current polices of directors' and
officers' liability insurance maintained by the Company and its
subsidiaries (provided that Buyer may substitute therefor policies of at
least the same coverage containing terms and conditions which are no
less advantageous to the Indemnified Parties in all material respects so
long as no lapse in coverage occurs as a result of such substitution)
with respect to all matters, including the transactions contemplated
hereby, occurring prior to, and including the Effective Time; PROVIDED
that, in the event that any Claim is asserted or made within such seven
(7)-year period, such insurance shall be continued in respect of any
such Claim until final disposition of any and all such Claims; and
PROVIDED, FURTHER, that Buyer shall not be obligated to make annual
premium payments for such insurance to the extent such premiums exceed
200% of the premiums paid as of the date hereof by the Company for
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such insurance. In such case, Buyer shall purchase as much coverage
as possible for 200% of the premiums paid as of the date hereof for
such insurance, which coverage shall be at least as favorable as that
provided by Buyer to its directors.
6.10. FEES AND EXPENSES.
(a) Except as provided in this Section 6.10, whether or not
the Arrangement is consummated, the Company and Buyer shall bear their
respective expenses incurred in connection with the Arrangement,
including, without limitation, the preparation, execution and
performance of this Agreement and the transactions contemplated hereby,
and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants.
(b) Notwithstanding any provision in this Agreement to
the contrary, if this Agreement is terminated (x) by the Company or
Buyer pursuant to Section 8.1(b)(ii), 8.1(b)(iii) or 8.1(b)(v), (y)
by Buyer pursuant to Section 8.1(d)(ii), or (z) by the Company or
Buyer at a time when Buyer is entitled to terminate this Agreement
pursuant to Section 8.1(b)(ii), 8.1(b)(iii), 8.1(b)(v) or 8.1(d)(ii),
then, in each case, the Company shall reimburse Buyer upon demand
for all out-of-pocket fees and expenses incurred or paid by or on
behalf of Buyer in connection with this Agreement and transactions
contemplated herein, including all fees and expenses of counsel,
investment banking firms, accountants and consultants; PROVIDED,
HOWEVER, that in no event shall such out-of-pocket fees and expenses
exceed U.S. $250,000.
(c) Notwithstanding any other provision in this Agreement to
the contrary, if (x) this Agreement is terminated by the Company or
Buyer at a time when Buyer is entitled to terminate this Agreement
pursuant to Section 8.1(b)(ii), 8.1(b)(iii) or 8.1(d)(i) and,
concurrently with or within six months after such a termination either a
definitive agreement with respect to an Acquisition Proposal is executed
by the Company or an Acquisition Proposal is consummated, or (y) this
Agreement is terminated pursuant to Section 8.1(b)(v) or 8.1(d)(ii),
then, in each case, the Company shall pay to Buyer U.S. $6,000,000, less
any amounts payable to Buyer pursuant to Section 6.10(b) hereof (the
"TERMINATION FEE") in cash, such payment to be made promptly, but in no
event later than the second business day following, in the case of
clause (x), the later to occur of such termination and such Acquisition
Proposal, or, in the case of clause (y), such termination. Buyer
acknowledges that, except for liability that the Company might have to
Buyer arising from a breach of this Agreement due to the fraudulent or
willful misconduct of the Company, the Termination Fee, once paid as
contemplated by this Section 6.10(c), shall be the sole remedy of Buyer
in the circumstances described in this Section 6.10(c). The Company
acknowledges that the agreements contained in Sections 6.10(b) and (c)
hereof are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Buyer would not enter
into this Agreement. Accordingly if the Company fails promptly to pay
the amounts due pursuant to Sections 6.10(b) and (c)
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hereof, (i) the Company shall pay interest on such amounts at the
prime rate announced by U.S. Bank National Association, Minneapolis
office, in effect on the date the Termination Fee was required to be
made and (ii) if in order to obtain such payment Buyer commences a
suit or takes other action which results in a judgment or other
binding determination against the Company for the fees and expenses
in Section 6.10(b) hereof or the Termination Fee, the Company shall
also pay to Buyer, its costs and expenses (including reasonable
attorneys' fees) in connection with such suit, together with interest
payable under the preceding clause (i).
6.11. ISRAELI PROSPECTUS. Buyer shall use reasonable best efforts
either to (a) obtain an exemption from the ISA from any prospectus requirements
with respect to the assumption of Company Options of the Israeli Optionholders
by Buyer and conversion thereof into Buyer Options in accordance with Section
2.3 hereof, or (b) comply with the prospectus requirements of the Israel
Securities Law of 1968 or (c) provide an alternate method of compliance with the
requirements of the ISA. The Company shall cooperate in these efforts, to the
extent requested by Buyer.
6.12. SHAREHOLDER LITIGATION. The Company shall give Buyer the
reasonable opportunity to participate in the defense of any shareholder
litigation against or in the name of the Company and/or its respective directors
relating to the transactions contemplated by this Agreement.
6.13 DETERMINATION OF OPTIONHOLDERS. At least five (5) business days
before the Effective Date, the Company shall provide Buyer with a true and
complete updated list required by Section 3.3 of the Disclosure Schedule
following which there shall be no additional grants of Options by the Company
without Buyer's prior consent.
6.14 TERMINATION OF 401(k) PLAN. The Company shall cause its wholly
owned subsidiary incorporated in the United States (the "U.S. SUB") to (i) take
all action necessary to terminate the 401(k) plan sponsored by the U.S. Sub (the
"U.S. 401(K) PLAN") effective as of immediately prior to the Effective Time and
(ii) submit application to the United States Internal Revenue Service for a
favorable determination letter for the termination of the U.S. 401(k) Plan as
soon as practicable following the Effective Time. Buyer will permit each
employee of the U.S. Sub affected by such plan termination to roll any account
balances of such employee in the terminated U.S. 401(k) Plan to a 401(k) plan
sponsored by Buyer (or one of Buyer's wholly owned U.S. subsidiaries). As of
the Effective Time, employees of the U.S. Sub shall be eligible to participate
in Buyer's 401(k) plan in accordance with its terms provided that Buyer shall
credit such employees' service with the Company and its subsidiaries for
purposes of eligibility and vesting under the Buyer 401(k) plan.
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ARTICLE VII
CONDITIONS TO CLOSING
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE ARRANGEMENT.
The respective obligation of each party to effect the Arrangement is subject to
the satisfaction or waiver on or prior to the Effective Date of the following
conditions:
(a) SHAREHOLDER/OPTIONHOLDER APPROVALS. Each of the Company
Shareholder Approval and the Company Optionholder Approval as referred
to in Section 5.1 hereof shall have been obtained.
(b) NO INJUNCTIONS OR RESTRAINTS. No judgment, order,
decree, statute, law, ordinance, rule or regulation entered, enacted,
promulgated, enforced or issued by any court or other Governmental
Entity of competent jurisdiction or other legal restraint or prohibition
(collectively, "RESTRAINTS") shall be in effect preventing the
consummation of the Arrangement.
(c) GOVERNMENTAL ACTION. No action or proceeding shall be
instituted by any Governmental Entity seeking to prevent consummation of
the Arrangement, asserting the illegality of the Arrangement or seeking
material damages in connection with the transactions contemplated hereby
which continues to be outstanding.
(d) CONSENTS. All necessary consents and approvals of any
Governmental Entity of any applicable jurisdiction or any other third
party required for the consummation of the transactions contemplated by
this Agreement shall have been obtained which the failure to obtain,
make or occur would have the effect of making the Arrangement or any of
the transactions contemplated hereby illegal or which individually or in
the aggregate would have a Buyer Material Adverse Effect (assuming the
Arrangement had taken place), including, but not limited to:
(i) the issuance of the Final Court Order in Israel,
but without waiting for the expiration of any appeal period,
unless there is a stay of further proceedings issued by a court
of competent jurisdiction;
(ii) either (a) an exemption from the ISA from any
prospectus requirements with respect to the assumption of
Company Options of the Israeli Optionholders by Buyer shall be
obtained or (b) Buyer shall have complied with the prospectus
requirements of the Israel Securities Law of 1968 or (c) Buyer
shall use commercially reasonable efforts to provide an
alternate method of compliance with the requirements of the ISA;
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(iii) the approval of the Israeli Controller of
Restrictive Trade Practices in substance reasonably satisfactory
to the Company and Buyer, but without waiting for the expiration
of any appeal period, unless there is a stay of further
proceedings issued by a court of competent jurisdiction; and
(iv) a ruling of the Israeli tax authorities, in form
and substance reasonably satisfactory to the Company and Buyer,
relating to the assumption of the Company Options as set forth
in Section 2.3(d) hereof.
7.2. CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
effect the Arrangement is further subject to satisfaction or waiver of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth herein shall be true and correct
both when made and at and as of the Effective Date (subject to any
modifications resulting from actions taken after the date hereof in
strict compliance with Section 6.1 hereof, but not any modifications not
specifically authorized and contemplated by the express agreement in
writing of Buyer given, to the extent required, under Section 6.1
hereof), as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date),
except where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to
"MATERIALITY" or "MATERIAL ADVERSE EFFECT" set forth therein) does not
have, and is not likely to have, individually or in the aggregate, a
Company Material Adverse Effect; PROVIDED, HOWEVER that, for purposes of
this Section 7.2(a), any failure of the representations and warranties
set forth in Section 3.3 hereof (other than due to the exercise, in
accordance with the terms of the governing Share Option Plan and
applicable options agreement, of Company Options outstanding on the date
hereof and identified in Schedule 3.3 of the Disclosure Schedule or
pursuant to action taken by the Company in accordance with the terms of
Section 6.1 (b) hereof) shall be deemed to have a Company Material
Adverse Effect unless the Company is able to cure such failure in some
reasonable manner (and within some reasonable time period) that does not
result in Buyer paying any amount in cash in excess of the amount which
it would have been obligated to pay or assume additional Company Options
in the absence of such failure of such representations and warranties.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective
Date; PROVIDED that, the Company's failure to complete all actions
specified in Section 6.14 hereof shall not constitute a failure of this
condition.
(c) NO MATERIAL ADVERSE CHANGE. At any time after the date
hereof, there shall not have occurred any effect, development, change or
event that, individually or in the aggregate, and when taken together
with all other effects, developments, changes or
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events, occurring or existing at or about the same time, results in a
material adverse change in the business, assets, operations, results
of operations or financial condition or prospects of the Company and
its subsidiaries, taken as a whole.
(d) DELIVERY OF CLOSING DOCUMENTS. At or prior to the
Effective Time, the Company shall have delivered to Buyer all of the
following:
(i) a certificate of the President and the Chief
Financial Officer of the Company, dated as of the Effective
Date, stating that the conditions precedent set forth in
Sections 7.2(a), (b) and (c) hereof have been satisfied; and
(ii) a copy, dated as of a date not more than five
business days in advance of the Effective Date, of the Articles
of Association of the Company, certified by the Secretary of the
Company.
(e) OPINION OF COUNSEL. Buyer shall have received the
opinion of Meitar, Littman & Co, counsel for the Company, dated the date
of the Effective Date, in substantially the form attached hereto as
Exhibit B.
(f) EMPLOYMENT AGREEMENT. The employment agreement in the
form attached hereto as Exhibit C entered into on the date hereof (to be
effective only at and after the Effective Time) between Buyer and Mr.
Joseph Atsmon shall not have been amended or terminated.
(g) DIRECTOR RESIGNATIONS. Buyer shall have received the
resignation of directors of the Company and its subsidiaries as set
forth in Section 6.8 hereof.
(h) APPROVAL OF THE OCS. The approval of the OCS for change
in control of the Company with respect to the Company Grants pursuant to
the Research Law (including use of certain technologies outside of the
State of Israel) on terms (including royalty terms) and in substance
reasonably satisfactory to Buyer shall be obtained. Buyer acknowledges
that any royalty terms approved by the OCS as provided in the
Encouragement of Industrial Development (Rate of Royalties and Rules for
the Payment Thereof) Regulations 5796-1996 shall be deemed satisfactory
to Buyer for purposes of this Section 7.2(h).
(i) The approval of the Israel Investment Center for change
in control with respect to the Company's approved investment plans in
substance reasonably satisfactory to Buyer.
7.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to effect the Arrangement is further subject to satisfaction or waiver
of the following conditions:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth herein shall be true and correct both when
made and at and as of the Effective Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "MATERIALITY" or "MATERIAL ADVERSE
EFFECT" set forth therein) does not have, and is not likely to have,
individually or in the aggregate, a Buyer Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Date.
(c) DELIVERY OF CLOSING DOCUMENTS. At or prior to the
Effective Time, the Buyer shall have delivered to the Company a
certificate of the Chief Executive Officer and the Chief Financial
Officer, dated as of the Effective Date, stating that the conditions
precedent set forth in Sections 8.3(a) and (b) hereof have been
satisfied.
(d) OPINION OF COUNSEL. The Company shall have received the
opinions of Yigal Arnon & Co. and Dorsey &Whitney LLP, counsel for
Buyer, dated the date of the Effective Date, in substantially the forms
attached hereto as Exhibit D and Exhibit E.
ARTICLE VIII
TERMINATION
8.1. TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after the approval of this Agreement by
either the Company's shareholders or Optionholders:
(a) by mutual written consent of the Company and Buyer;
(b) by either the Company or Buyer;
(i) if the Arrangement shall not have been completed
by December 31, 1998; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 8.1(b)(i)
shall not be available to any party whose failure to perform any
of its obligations under this Agreement results in the failure
of the Arrangement to be consummated by such time;
(ii) if Company Shareholder Approval shall not have
been obtained at the Company Shareholder Meeting duly convened
therefor or at any adjournment or postponement thereof;
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(iii) if the Company Optionholder Approval shall not
have been obtained at the Company Optionholder Meeting duly
convened therefor or at any adjournment or postponement thereof;
(iv) if any restraint having any of the effects set
forth in Section 7.1(b) or (c) hereof shall be in effect and
shall have become final and nonappealable; or
(v) if the Company enters into a merger, acquisition
or other agreement (including an agreement in principle) to
effect a Superior Proposal or the Board of Directors of the
Company or a committee thereof resolves to do so; PROVIDED,
HOWEVER, that the Company may not terminate this Agreement
pursuant to this Section 8.1(v) unless (a) the Company has
delivered to Buyer a written notice of the Company's intent to
enter into such an agreement to effect such Acquisition
Proposal, (b) five business days have elapsed following delivery
to Buyer of such written notice by the Company and (c) during
such five business day period, the Company has fully cooperated
with Buyer, including without limitation, informing Buyer of the
terms and conditions of the Acquisition Proposal and the
identity of the Person making the Acquisition Proposal, to allow
Buyer within such five-business-day period to propose amendments
to the terms of this Agreement to be at least as favorable as
the Acquisition Proposal; PROVIDED, FURTHER, that the Company
may not terminate this Agreement pursuant to this Section 8.1(v)
unless, at the end of such five-business-day-period, the Board
of Directors of the Company continues reasonably to believe that
the Acquisition Proposal constitutes a Superior Proposal, and
the Company pays to Buyer the amounts specified under and in
accordance with Sections 6.10(b) and (c) hereof;
(c) by the Company, if Buyer shall have breached any of the
representations and warranties contained in Article IV hereof which
breach has or is reasonably likely to have a Buyer Material Adverse
Effect or Buyer shall have breached or failed to perform in any material
respect any of its covenants or other agreements contained in this
Agreement, in each case, which breach or failure to perform has not been
cured by Buyer within 30 days following receipt of notice thereof from
the Company; PROVIDED, HOWEVER, that Buyer must cure any failure to
deposit the Exchange Fund with the Exchange Paying Agent in accordance
with Section 2.1 hereof within 14 days after all other conditions set
forth in Sections 7.1, 7.2 and 7.3 hereof have been satisfied; or
(d) by Buyer:
(i) if the Company shall have breached any of its
representations and warranties contained in Article III hereof
which breach has or is reasonably likely to have a Company
Material Adverse Effect or the Company shall have breached or
failed to perform in any material respect any of its covenants
or other agreements contained in this Agreement, in each case,
which breach or failure to
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perform has not been cured by the Company within 30 days
following receipt of notice thereof from Buyer; or
(ii) if (a) the Board of Directors of the Company or
any committee thereof shall have withdrawn or modified in a
manner adverse to Buyer its approval or recommendation of the
Arrangement or this Agreement, or approved or recommended an
Acquisition Proposal (including, a Superior Proposal) or (b) the
Board of Directors of the Company or any committee thereof shall
have resolved to take any of the foregoing actions.
8.2. EFFECT OF TERMINATION. The termination of this Agreement
pursuant to the terms of Section 8.1 hereof shall become effective upon delivery
to the other party of written notice thereof. In the event of the termination
of this Agreement pursuant to the foregoing provisions of this Article VIII,
this Agreement shall become void and have no effect, with no liability on the
part of any party (except as provided in Section 6.10 hereof) or its
shareholders or directors or officers in respect thereof, EXCEPT for agreements
which survive the termination of this Agreement and EXCEPT for liability that
Buyer or the Company might have to the other party arising from a breach of this
Agreement due to termination of this Agreement in accordance with Sections
8.1(c) or 8.1(d) or due to the fraudulent or willful misconduct of such party.
ARTICLE IX
MISCELLANEOUS
9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
9.2. CLOSING AND WAIVER.
(a) Unless this Agreement shall have been terminated in
accordance with the provisions of Section 8.1 hereof, a closing (the
"CLOSING" and the date and time thereof being the "CLOSING DATE") will
be held on the Effective Date and in any event within three business
days after the conditions set forth in Sections 7.1, 7.2 and 7.3 hereof
shall have been satisfied or waived. The Closing will be held at the
offices of Yigal Arnon & Co., 3 Daniel Frisch Street, Tel Aviv, Israel,
or at such other place as the parties may agree.
(b) At any time prior to the Effective Date, any party
hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (ii) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements of any other party or with
any conditions to its
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own obligations contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing duly authorized by and signed
on behalf of such party.
9.3. NOTICES.
(a) Any notice or communication to any party hereto shall be
duly given if in writing and delivered in person or mailed by first
class mail and airmail, if overseas (registered or return receipt
requested), facsimile (with receipt electronically acknowledged) or
overnight air courier guaranteeing two days' delivery, to such other
party's address.
If to Buyer:
ADC Telecommunications, Inc.
12501 Whitewater Drive
Minnetonka, Minnesota U.S.A. 55343
Facsimile No.: (612) 946-3209
Attention: Jeffrey D. Pflaum, Esq.
Darryl E. Ponder, Vice President-Business
Development
with a copy to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
Facsimile No.: (612) 340-8738
Attention: Robert A. Rosenbaum, Esq.
Yigal Arnon & Co.
3 Daniel Frisch Street
Tel Aviv 65257 Israel
Facsimile No.: 011-972-3-696-4770
Attention: Paul H. Baris, Adv.
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If to the Company:
Teledata Communications Ltd.
Beit Teledata
10 Hasadnaot Street
Herzila-B 46120, Israel
Facsimile: 011-972-9-959-1434
Attention: Joseph Atsmon, President
with copies to:
Meitar, Littman & Co.
16 Abba Hillel Road
Ramat Gan
Israel
Facsimile No.: 011-972-3-610-3111
Attention: Dan Shamgar, Adv.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 735-2000
Attention: Hildy Shandell, Esq.
(b) All notices and communications will be deemed to have
been duly given: at the time delivered by hand, if personally delivered;
seven business days after being deposited in the mail, if mailed; when
sent, if sent by facsimile; and two business days after timely delivery
to the courier, if sent by overnight air courier guaranteeing two days
delivery.
9.4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5. INTERPRETATION. The headings of articles and sections herein
are for convenience of reference, do not constitute a part of this Agreement,
and shall not be deemed to limit or affect any of the provisions hereof. As
used in this Agreement, "PERSON" means any individual, corporation, limited
liability company, limited or general partnership, joint venture, association,
joint stock company, trust, unincorporated organization or other entity;
"SUBSIDIARY" of any person means (i) a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by such
person or by one or more other subsidiaries of such person or by such person and
one or more subsidiaries thereof or (ii) any other person (other than a
corporation) in which such person, or one or more other subsidiaries of such
person or such
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person and one or more other subsidiaries thereof, directly or indirectly,
have at least a majority ownership and voting power relating to the policies,
management and affairs thereof; "VOTING STOCK" of any person means capital
stock of such person which ordinarily has voting power for the election of
directors (or persons performing similar functions) of such person, whether
at all times or only so long as no senior class of securities has such voting
power by reason of any contingency; and all amounts shall be deemed to be
stated in U.S. dollars, unless specifically referenced otherwise.
9.6. AMENDMENT. This Agreement may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Arrangement by the shareholders and Optionholders of the Company;
PROVIDED, HOWEVER, that after any such approval, there shall not be made any
amendment that by law requires further approval by such shareholders or
Optionholders or the Israeli Court without obtaining such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
9.7. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall
confer any rights upon any person or entity which is not a party or permitted
assignee of a party to this Agreement.
9.8. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Israel.
9.9. ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement together constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
9.10. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
9.11 APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. Buyer hereby
irrevocably appoints Yigal Arnon & Co. to serve as agent for service of process
for any action, suit or proceeding commenced in the State of Israel by or
against Buyer with respect to the Arrangement or this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK. SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the day and year first
above written.
ADC TELECOMMUNICATIONS, INC.
By: /s/ William J. Cadogan
--------------------------
Its: Chief Executive Officer
--------------------------
TELEDATA COMMUNICATIONS LTD.
By: /s/ J. Atsmon
--------------------------
Its: Chief Executive Officer
--------------------------
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EXHIBIT A
PLAN OF ARRANGEMENT
AMONG: TELEDATA COMMUNICATIONS LTD. (THE "COMPANY")
AND: ALL THE HOLDERS OF THE ORDINARY SHARES PAR VALUE NIS 0.10 PER SHARE
OF THE COMPANY (THE "COMPANY ORDINARY SHARES")
AND: ALL THE HOLDERS OF OPTIONS TO PURCHASE COMPANY ORDINARY SHARES (THE
"COMPANY OPTIONS")
In this Arrangement the following terms shall have the meanings assigned
to them respectively hereunder:
The "ARRANGEMENT": This Plan of Arrangement, as set forth herein, or
with such amendments, supplements or conditions that the Court may determine or
require.
The "AGREEMENT": The Agreement, dated September 16, 1998, between the
Company and Buyer attached as Exhibit A hereto.
The "BOARD": The Board of Directors of the Company.
The "BUYER": ADC Telecommunications, Inc., a Minnesota corporation.
The "BUYER COMMON STOCK": The common stock, par value U.S. $.20 per
share of Buyer.
The "BUYER MEASUREMENT PRICE": The price determined by dividing (i) the
total Weighted Trading Price, by (ii) the Total Trading Volume. The "TOTAL
WEIGHTED TRADING PRICE" shall be the sum of the Weighted Trading Prices for the
period of the ten (10) trading days ending on the third trading day immediately
preceding the date on which the Effective Time occurs (the "MEASUREMENT
PERIOD"). The "WEIGHTED TRADING PRICE" for any trading day shall be (i) the
total trading volume of Buyer Common Stock on the Nasdaq National Market as
reported in the U.S. Midwest Edition of The Wall Street Journal for such trading
day multiplied by (ii) the closing sale price of one share of Buyer Common Stock
on the Nasdaq National Market for such trading day. The "TOTAL BUYER TRADING
VOLUME" shall be the sum of the daily trading volumes for each trading day
during the Measurement Period.
The "COURT": The Tel-Aviv-Jaffa District Court or any other court of
competent jurisdiction.
The "COMPANIES ORDINANCE": The Companies Ordinance New Version, 1983.
The "EFFECTIVE TIME": The time of the Filing.
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The "EXCHANGE FUND": An amount in cash to be delivered by Buyer to the
Exchange Paying Agent equal to the Per Share Amount multiplied by the total
number of Company Ordinary Shares issued and outstanding at the Effective Time.
The "EXCHANGE PAYING AGENT": The commercial bank, trust company or other
financial institution selected to act as exchange paying agent, as mutually
agreed by Buyer and the Company.
The "EXTRAORDINARY GENERAL MEETING": The Extraordinary General Meeting
of the Company's Record Ordinary Shareholders, and any adjournments or
postponements thereof, in which the Company's shareholders will be requested to
approve this Arrangement.
The "FILING": The filing of the Final Court Order with the Registrar of
Companies in accordance with Section 233 of the Companies Ordinance.
The "FINAL COURT ORDER": The order of the Court approving this
Arrangement.
The "FIRST COURT ORDER": The order of the Court convening the
Extraordinary General Meeting and the Meeting of Optionholders.
The "FIRST MOTION": The motion filed with the Court seeking the First
Court Order.
The "MEETING OF OPTIONHOLDERS": The Meeting of Optionholders, and any
adjournments or postponements thereof, in which the Company's Optionholders will
be requested to approve this Arrangement.
"NASDAQ": The National Association of Securities Dealers, Inc.
Automated Quotation System/National Market, in the United States.
The "OPTIONHOLDERS": The holders of Company Options.
The "PER SHARE AMOUNT": The sum of U.S. $15.75 for each issued and
outstanding Company Ordinary Share.
The "RECORD DATE": [DATE OF FIRST COURT ORDER OR SUCH OTHER DATE AS THE
COURT MAY DIRECT.]
The "RECORD ORDINARY SHAREHOLDERS": The holders of Ordinary Shares, as
of the Record Date.
WHEREAS, the Company has an authorized share capital of NIS 2,000,000
consisting of 20,000,000 Company Ordinary Shares, of which _________ shares were
issued and outstanding as of [DATE OF APPLICATION OF FIRST MOTION]; and
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WHEREAS, the Company Ordinary Shares are listed for trading on Nasdaq;
and
WHEREAS, the Company granted to certain current and former employee,
consultants and directors Company Options, under certain share option plans as
described in the Agreement (the "Company Option Plans"); and
WHEREAS, the Board deems it desirable and in the best interests of the
Company and its shareholders and Optionholders that the Company and all its
shareholders and Optionholders enter into the Arrangement, pursuant to which,
(i) at the Effective Time by virtue of the Filing and with no further action on
behalf of the shareholders of the Company, all issued and outstanding Ordinary
Shares as of the Effective Time shall be deemed transferred to Buyer in exchange
for an amount per share equal to the Per Share Amount, as described herein and
in the Agreement; and (ii) at the Effective Time, by virtue of the Filing and
with no further action on behalf of Optionholders, the outstanding and
unexercised Company Options will be assumed by Buyer as described herein and in
the Agreement; and
WHEREAS, under the Agreement, Buyer agreed that (i) at the Effective
Time by virtue of the Filing and with no further action on behalf of the
shareholders of the Company, all issued and outstanding Ordinary Shares as of
the Effective Time shall be deemed transferred to Buyer in exchange for an
amount per share equal to the Per Share Amount; and (ii) at the Effective Time,
by virtue of the Filing and with no further action on behalf of Optionholders,
the outstanding and unexercised Company Options will be assumed by Buyer, in
each case as described herein and in the Agreement; and
WHEREAS, on September 15, 1998, the Board received an opinion of Salomon
Smith Barney Inc., the Company's financial advisor in connection with the
Arrangement, that as of the date of such opinion, the Per Share Amount to be
received in the Arrangement by the holders of Company Ordinary Shares was fair
from a financial point of view to such holders; and
WHEREAS, the Board at such meeting approved by a vote of its
disinterested directors the Arrangement and the Agreement, and determined by
such vote (i) that the terms of the Agreement and the Arrangement are in the
best interests of, the Company and its shareholders and Optionholders; and (ii)
that the Company commence proceedings under Section 233 of the Companies
Ordinance, under which the Court would be requested to convene the Extraordinary
General Meeting and the Meeting of Optionholders and to approve the Arrangement.
NOW THEREFORE, it as agreed between the parties, as follows:
1. The preamble and Annexes of this Arrangement constitute
an integral part hereof.
2. At the Effective Time by virtue of the Filing and with
no further action on behalf of the shareholders of the Company, all
issued and outstanding Company Ordinary
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Shares as of the Effective Time shall be deemed transferred to Buyer
(except that, at Buyer's election, six (6) of the Company Ordinary
Shares shall be deemed transferred to up to six (6) nominees
designated by Buyer), in exchange for an amount of cash per share
equal to the Per Share Amount in accordance with the terms and
conditions of the Agreement.
3. (i) At and after the Effective Time (subject to Section
3(iii) below), each holder of record of any outstanding Company
Ordinary Shares shall be entitled, upon surrender to the
Exchange Paying Agent of the certificate or certificates
theretofore representing Company Ordinary Shares (each, a
"CERTIFICATE") and such other documents as the Exchange Paying
Agent may request, to receive therefor the Per Share Amount
multiplied by the number of Company Ordinary Shares represented
by the Certificate or Certificates so surrendered, as shall be
more particularly provided in the Exchange Paying Agent
Agreement.
(ii) From the Effective Time and thereafter and until
so surrendered, each such outstanding Certificate shall be
deemed canceled and shall not entitle the holders of Company
Ordinary Shares to any rights whatsoever, except to evidence the
right to receive the Per Share Amount multiplied by the number
of Company Ordinary Shares represented by such Certificate.
(iii) Any portion of the Exchange Fund that remains
unclaimed by the former shareholders of the Company for one year
after the Effective Time shall be delivered by the Exchange
Paying Agent to Buyer, upon demand of Buyer, and any former
shareholders of the Company shall thereafter look only to Buyer
for payment of their claim for the Per Share Amount in respect
of Company Ordinary Shares.
(iv) Buyer and its nominees as aforesaid shall be
registered in the Company's register of members as the holders
of all the Company Ordinary Shares and the Company shall issue
to Buyer and its nominees share certificates in respect of all
of the Company Ordinary Shares, and Buyer, together with such
nominees, shall for all purposes be the sole holders of all the
outstanding Company Ordinary Shares.
4. At the Effective Time by virtue of the Filing and with
no further action on behalf of Optionholders, in accordance with the
terms and conditions of the Agreement, each Company Option issued by the
Company pursuant to the Company Option Plans, outstanding and
unexercised on such date, whether or not vested or exercisable on such
date, shall be assumed by Buyer and converted to an option to acquire,
on substantially the same terms and conditions as were applicable under
such Company Option (including any vesting pursuant to any applicable
agreement or Company Option Plan), the same number of whole shares of
Buyer Common Stock (a "Buyer Option") equal to the number
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of Company Ordinary Shares that were issuable upon exercise of such
Company Option immediately prior to the Effective Time multiplied by
the Exchange Ratio rounded up to the nearest whole number of shares
of Buyer Common Stock, and the per share exercise price of the shares
of Buyer Common Stock issuable upon exercise of such Buyer Option
shall be equal to the exercise price per share of Company Ordinary
Shares at which such Company Option was exercisable immediately prior
to the Effective Time divided by the Exchange Ratio, rounded up to
the nearest whole cent. For purposes of this Arrangement, the
"EXCHANGE RATIO" shall be determined by dividing (i) the Per Share
Amount, by (ii) the Buyer Measurement Price. Upon conversion of the
outstanding Company Options into Buyer Options, the vesting schedules
for such options shall be adjusted as set forth in Section 2.3(e) and
Section 2.3(f) of the Agreement.
5. The Agreement shall be approved as of the date of the
resolution of the Extraordinary General Meeting.
6. The above constitutes one integral Arrangement, is not
separable, and cannot be partially performed.
7. This Arrangement will become effective upon the Filing.
8. The Company is entitled to agree, on behalf of all
parties to this Arrangement, to any amendment or revision of, or
supplement to, this Arrangement, or to any term or condition that the
Court will deem fit to determine or require.
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