Share Purchase Agreement
dated as of ____ day of _____ 1999
between
TALLA COMMUNICATION INDUSTRIES LTD.
and
TADIRAN LTD.
Relating to the purchase and sale
of
100% of the issued and outstanding shares of
TADIRAN COM. LTD.
Table of Contents
PAGE
ARTICLE 1
Definitions.............................................................79
1.1 DEFINITIONS -..............................................79
ARTICLE 2
Purchase and Sale.......................................................81
2.1 PURCHASE AND SALE -........................................81
2.2 CLOSING -..................................................81
ARTICLE 3
Representations and Warranties of Seller................................83
3.1 CORPORATE EXISTENCE AND POWER -............................83
3.2 CORPORATE AUTHORIZATION -..................................83
3.3 GOVERNMENTAL AUTHORIZATION -...............................83
3.4 NONCONTRAVENTION -.........................................83
3.5 CAPITALIZATION -...........................................83
3.6 OWNERSHIP OF SHARES -......................................84
3.7 SUBSIDIARIES -.............................................84
3.8 FINANCIAL STATEMENTS -.....................................85
3.9 ABSENCE OF CERTAIN CHANGES -...............................85
3.10 NO UNDISCLOSED LIABILITIES -...............................87
3.11 INTERCOMPANY ACCOUNTS -....................................88
3.12 MATERIAL CONTRACTS -.......................................88
3.13 LITIGATION -...............................................90
3.14 COMPLIANCE WITH LAWS AND COURT ORDERS -....................90
3.15 PROPERTIES -...............................................90
3.16 PRODUCTS -.................................................91
3.17 INTELLECTUAL PROPERTY -....................................91
3.18 INSURANCE COVERAGE -.......................................92
3.19 LICENSES AND PERMITS -.....................................92
3.20 RECEIVABLES -..............................................92
3.21 CUSTOMERS AND SUPPLIERS -..................................92
3.22 BACKLOG -..................................................93
3.23 WARRANTIES -...............................................93
3.24 FINDERS' FEES -............................................93
3.25 BENEFIT PLANS -............................................93
3.26 SENIOR EMPLOYEES...........................................95
3.27 EMPLOYEES..................................................95
3.28 ENVIRONMENTAL MATTERS -....................................97
3.29 YEAR 2000 COMPLIANCE -.....................................99
3.30 GUARANTEES -...............................................99
3.31 FOREIGN CURRENCY HEDGING TRANSACTIONS -....................99
3.33 BANK ACCOUNTS, LETTERS OF CREDIT AND POWERS OF ATTORNEY...100
3.34 MINUTE BOOKS..............................................100
3.35 CORRUPT PRACTICES -.......................................100
3.36 TAXES -...................................................100
3.37 CONTINUING, REPRESENTATIONS AND WARRANTIES................101
3.38 DISCLOSURE................................................101
ARTICLE 4
Representations and Warranties of Buyer................................101
4.1 CORPORATE EXISTENCE AND POWER -...........................102
4.2 CORPORATE AUTHORIZATION -.................................102
4.3 GOVERNMENTAL AUTHORIZATION -..............................102
4.4 NONCONTRAVENTION -........................................102
4.5 LITIGATION -..............................................102
4.6 REVIEW OF DOCUMENTS -.....................................102
ARTICLE 5
Covenants of Seller....................................................102
5.1 CONDUCT OF THE COMPANY -..................................102
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY -..................104
5.3 BUYER'S NAME AND LOGO -...................................104
5.4 TRANSFER OF DEPOSITS -....................................104
5.5 NOTICE OF CERTAIN EVENTS -................................105
5.6 TAXES -...................................................105
5.7 NON-COMPETE -.............................................106
ARTICLE 6
Covenants of Buyer.....................................................107
6.1 CONFIDENTIALITY -.........................................107
ARTICLE 7
Conditions to Closing..................................................107
7.1 CONDITIONS TO OBLIGATION OF BUYER -.......................107
7.2 CONDITIONS TO OBLIGATIONS OF SELLER -.....................108
ARTICLE 8
Indemnification........................................................109
8.1 INDEMNIFICATION -.........................................109
8.2 PROCEDURES -..............................................110
ARTICLE 9
Miscellaneous..........................................................110
9.1 NOTICE -..................................................110
9.2 FURTHER ASSURANCES -......................................111
9.3 AMENDMENTS AND WAIVERS -..................................112
9.4 EXPENSES -................................................112
9.5 SUCCESSORS AND ASSIGNS -..................................112
9.6 GOVERNING LAW; JURISDICTION -.............................112
9.7 COUNTERPARTS; THIRD PARTY BENEFICIARIES -.................112
9.8 ENTIRE AGREEMENT -........................................112
9.9 PUBLIC ANNOUNCEMENTS -....................................113
9.10 CAPTIONS -................................................113
9.11 SCHEDULES AND EXHIBITS -..................................113
9.12 SEVERABILITY -............................................113
9.13 DOLLARS -.................................................113
SHARE PURCHASE AGREEMENT
AGREEMENT dated as of the ____ day of _____ 1999, between (i) Talla
Communication Industries Ltd., an Israeli corporation ("Buyer"), and (ii)
Tadiran Ltd., an Israeli corporation ("Tadiran" or the "Seller").
WITNESSETH:
WHEREAS, Seller is directly or indirectly the record and beneficial owner
of 9,901,841 ordinary shares par value NIS 1.00 of Tadiran Com. Ltd. (the
"Company") which constitute and shall constitute at the Closing all of the
issued and outstanding shares of the Company (the "Shares") and desires to
sell and/or cause the sale of the Shares to Buyer and Buyer desires to
purchase the Shares from Seller, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual premises and conditions
herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
1.1 Definitions -
The following terms, as used herein, have the following meanings:
"Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common
control with such Person; provided that neither the Company nor any
Subsidiary shall be considered an Affiliate of Seller or Buyer; and
further provided that in the case of Koor Industries Ltd. ("Koor"),
this term shall be limited to Koor and its subsidiaries.
"Balance Sheet" means the audited consolidated balance sheet of the
Company and the Subsidiaries as of December 31, 1998.
"Balance Sheet Date" means December 31, 1998.
"Benefit Plan" means any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical or
other material plan, arrangement, agreement or understanding
providing material benefits to any current or former employee,
officer or director of the Company, its Subsidiaries or any other
Commonly Controlled Entity (as defined in Section 3.25(b)(i) hereof)
or pursuant to which the Company, its Subsidiaries or any other
Commonly Controlled Entity has or may have any liability contingent
or otherwise.
"Business Day" means a day that both Israeli and United States banks
are open for business transactions for their customers.
"Closing Date" means the date upon which the transactions
contemplated hereby are consummated.
"Environmental Laws" means any applicable law, treaty, judicial
decision, regulation, rule, judgment, order, decree, injunction,
permit, restriction or requirement prescribed by governmental or
local authorities or any agreement with any governmental or local
authority or other third party, relating to human health and safety,
the environment or to Hazardous Substances (as hereinafter defined).
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of
governmental or local authorities relating to or required by
Environmental Laws and affecting, or relating in any way to, the
business of the Company or any of its Subsidiaries as currently
conducted.
"Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable, corrosive, reactive
or otherwise hazardous substance, waste or material, or any
substance, waste or material having any constituent elements
displaying any of the foregoing characteristics, including, without
limitation, petroleum, its derivatives, by-products and other
hydrocarbons, and any substance, waste or material regulated under
any Environmental Law.
"Intellectual Property Right" means any trademark, service mark,
trade name, mask work, invention, patent, trade secret, copyright,
know-how, inventions, designs, processes, works of authorship,
computer programs, technical data, information (including any
renewals, registrations or applications for registration of any of
the foregoing and any goodwill associated therewith) or any other
intellectual property right owned, licensed or used by the Company
or any Subsidiary.
"Lease Agreement" means the lease agreement in respect of the Holon
facility to be executed on the Closing Date by Seller and the
Company in the form attached hereto as Exhibit A.
"Lien" means, with respect to any property or asset, any mortgage,
lien, third party rights, pledge, charge, security interest, option,
legal or equitable encumbrance or other adverse claim of any kind in
respect of such property or asset.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets, results of
operations or prospects of the Company or the Subsidiaries.
"Name and Logo Agreement" means the name and logo agreement to be
executed on the Closing Date by Seller and the Company in the form
attached hereto as Exhibit B.
"Non-Compete Agreement" means the non-compete agreement to be
executed on the Closing Date by Seller and the Company in the form
attached hereto as Exhibit C.
"NIS" means New Israeli Shekels.
"Ordinary Shares" means the ordinary shares, par value NIS 1.00 of
the Company.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or
organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Related Party Transaction" means any agreement or transaction
between the Company or any of the Subsidiaries on the one hand and
Seller or one or more of its Affiliates on the other hand.
"Services Agreement" means the services agreement between Affiliates
of the Seller and the Company to be executed on the Closing Date, in
the form attached hereto as Exhibit D.
"Senior Employee" means any officer and/or employee of the Company
or of any of the Subsidiaries whose gross remuneration per annum,
including bonuses, exceeded or is expected to exceed US$80,000 in
1998 or 1999.
"Subsidiary" means the subsidiaries of the Company as specified in
Schedule 3.7.
"Tax " or "Taxes" means any tax, levy, duty, fee or any other
compulsory payment of any kind, including interest linkage
differentials and penalties accrued or accruing with respect
thereto, imposed under the laws of any jurisdiction, including,
without limitation, income tax, sales tax, value added tax,
withholding tax, property tax, import duties, export duties, social
security payments, employment taxes, municipal taxes, levies and
fees.
ARTICLE 2
Purchase and Sale
2.1 Purchase and Sale -
Subject to the satisfaction or waiver of the conditions set forth
below, and on the basis of Seller's representations, warranties and
covenants hereunder, at the Closing, Seller shall sell, and shall
cause the sale by Tadiran Hanpakot (1986) Ltd. ("Tadiran Hanpakot")
of, the Shares to Buyer, and Buyer shall purchase the Shares,
constituting all of the issued share capital of the Company free and
clear of all Liens and restrictions on transfer, for a total
consideration of $109,250,000.00 (one hundred and nine million and
two hundred fifty thousand Dollars) (the "Purchase Price"),payable
in accordance with Section 2.2 hereof.
2.2 Closing -
The closing (the "Closing") of the purchase and sale of the Shares
shall take place at the offices of Zellermayer & Pelossof,
Advocates, Europe House, 37 Shaul Hamelech Blvd., Tel-Aviv, Israel,
five Business Days after satisfaction of the conditions set forth in
Article 7, or at such other time or place as Buyer and Seller may
agree in writing.
At the Closing:
(a) Seller shall deliver the following to Buyer:
(i) Share certificates representing the Shares;
(ii) Share transfer deeds, duly signed by Seller and Tadiran
Hanpakot and endorsed to Buyer (and/or its designee(s))
with respect to the Shares;
(iii) Confirmation of legal counsel of Seller that the
relevant governing bodies of each of Seller and Tadiran
Hanpakot have resolved, and such resolutions shall not
have been rescinded or modified, to authorize the
execution of this Agreement and the consummation of the
transactions contemplated hereby;
(iv) Copies of minutes or resolutions of the board of
directors of the Company, which shall not have been
rescinded or modified, approving unconditionally the
sale of the Shares to Buyer (or its designee(s)) and
instructing the register of the transfer of the Shares
to Buyer (or its designee(s)) in the Register of Members
of the Company at the Closing Date;
(v) A certificate, duly signed by the Secretary of the
Company, evidencing the entry of Buyer's (and/or its
designee(s)) names in the Register of Members of the
Company with respect to the Shares as of the Closing
Date;
(vi) Copies, certified by the secretary of the Company of
minutes or resolutions of the relevant governing bodies
of the Company, which shall not have been rescinded or
modified, authorizing the execution of the Lease
Agreement and the Services Agreement;
(vii) Copies of letters of resignation from offices of all of
the directors of the Company and of the Subsidiaries
except the directors of Tallahassee Technologies, Inc.
who were not appointed by Seller or its Affiliates and
are necessary to maintain Tallahassee Technologies,
Inc.'s special security clearance, effective as of the
Closing Date;
(viii) Irrevocable termination and waiver letters duly signed
by Seller and/or any of its Affiliates in the form
attached hereto as Exhibit E;
(ix) The certificate in the form attached hereto as Exhibit F
signed by the Chief Executive Officer of Seller;
(x) Counsel's opinion in the form attached hereto as Exhibit
G signed by Herzog, Fox & Neeman;
(xi) Documents reasonably satisfactory to Buyer and its
counsels, evidencing that the approvals and consents
specified in Section 7.1(d) hereof, have been obtained;
(xii) Irrevocable assignment letters transferring to the
Company or any Subsidiary all of Seller's and/or its
Affiliates' rights, title and interest in and to the
agreements listed on Schedule 3.12(c);
(xiii) Certificates pursuant to Section 5.6(a) of this
Agreement; and
(xiv) The Lease Agreement, the Services Agreement, the Name
and Logo Agreement and the Non-Compete Agreement duly
signed by Seller, Affiliates of Seller, as the case may
be, and the Company.
(b) Buyer shall deliver the following to Seller:
(i) The Purchase Price by wire transfer of immediately
available funds to an account or accounts specified by
Seller in a notice delivered not later than four (4)
Business Days prior to the Closing Date; and
(ii) The certificate in the form attached hereto as Exhibit H
signed by a director of Buyer.
ARTICLE 3
Representations and Warranties of Seller
Seller being aware that Buyer is entering into this Agreement on the basis
of and in reliance upon Seller's representations and warranties hereunder,
represents and warrants to Buyer as follows:
3.1 Corporate Existence and Power -
(a) Each of Seller and Tadiran Hanpakot are corporations duly
incorporated and validly existing under the laws of the State of
Israel with all powers and each has all governmental licenses,
authorizations, permits, consents and approvals required to own,
sell and transfer the Shares.
(b) The Company is a corporation duly incorporated and validly existing
under the laws of the State of Israel, except as set forth in
Schedule 3.1(b), with all powers and has all governmental licenses,
authorizations, permits, consents and approvals required to carry
on its business as now conducted and to own all of its properties
and assets under the laws of the State of Israel. To the best
knowledge of the Company and Seller and based upon the past
business practice of the Company, the Company has all material
governmental licenses, authorizations, permits, consents and
approvals required to perform its contractual obligations in any
other jurisdiction. Schedule 3.1 sets forth true and complete
copies of the Certificate of Incorporation, Articles of Association
and the Memorandum of Association of the Company as amended
heretofore and as currently in effect.
3.2 Corporate Authorization -
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Seller, Tadiran
Hanpakot and the Company. This Agreement contains valid and binding
obligations of Seller enforceable in accordance with their terms, except as
enforcement thereof may be limited by insolvency laws.
3.3 Governmental Authorization -
Save for as set out in Schedule 3.3, the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby require no approval, permit or consent of, or action by
or in respect of, or filing with, any governmental body or official
authority, domestic or foreign.
3.4 Noncontravention -
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
(i) violate the Articles of Association or the Memorandum of Association or
any constituent documents of Seller, Tadiran Hanpakot, the Company or any
Subsidiary, (ii) violate any applicable law, rule, regulation, judgment,
injunction, order or decree of any court, governmental authority or
regulatory agency applicable to Seller, Tadiran Hanpakot, the Company or
any Subsidiary, (iii) except for Schedule 3.4, require any consent or other
action by any Person under, constitute a default under, or give rise to any
right of termination, cancellation or acceleration of any right or
obligation of Seller, Tadiran Hanpakot, the Company or any Subsidiary or to
a loss of any benefit to which the Company or any Subsidiary is entitled
under any provision of any agreement or other instrument or provision of
law binding upon Seller, Tadiran Hanpakot, the Company or any Subsidiary,
or (iv) result in the creation or imposition of any Lien on any asset of
the Company or any Subsidiary.
3.5 Capitalization -
(a) The entire authorized share capital of the Company is and at the
Closing shall be NIS 10,000,000 divided into 10,000,000 Ordinary
Shares. The entire issued share capital of the Company is, and at
the Closing shall be 9,901,841 Ordinary Shares.
(b) All issued and outstanding Ordinary Shares have been duly
authorized and validly issued, are fully paid and non-assessable
and are owned by Seller which owns 9,901,840 Ordinary Shares and by
Tadiran Hanpakot which owns 1 Ordinary Share. There are no, and at
the Closing there will be no outstanding (i) shares of capital
stock or voting securities of the Company other than the Shares,
(ii) securities of the Company or any Subsidiary convertible into
or exchangeable for share capital or voting securities of the
Company, or (iii) options, warrants, preemptive rights, refusal
rights, or other rights to acquire from the Company, or other
obligations of the Company, Seller or Tadiran Hanpakot to issue,
sell or transfer any share capital, voting securities or securities
convertible into or exchangeable for share capital or voting
securities of the Company (the items in clauses 3.5(b)(i),
3.5(b)(ii) and 3.5(b)(iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise
acquire any Company Securities.
3.6 Ownership of Shares -
Seller and Tadiran Hanpakot are the record and beneficial owners of the
Shares, free and clear of any Lien and any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose
of the Shares), and will transfer and deliver to Buyer at the Closing valid
ownership title to the Shares, free and clear of any Lien and any such
limitation or restriction. Seller and Tadiran Hanpakot do not have any
rights to acquire any additional shares or any other share capital of the
Company.
3.7 Subsidiaries -
(a) Each Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation (where the concept of good standing is applicable),
has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry
on its business as now conducted under the Federal laws of the
United States of America and under any applicable U.S. state law
and is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where such qualification
is necessary. To the best knowledge of the Company, the
Subsidiaries or Seller and based upon the past business practice of
the Company or the Subsidiaries, the Subsidiaries have all material
governmental licenses, authorizations, permits, consents and
approvals required to perform the Subsidiaries' obligations in any
other jurisdiction. Schedule 3.7(a) sets forth (i) all entities in
which the Company holds shares, securities or other ownership
interests and their respective jurisdictions of incorporation (ii),
the number and class of such shares and/or securities held by the
Company and the percentage of such shares owned by the Company of
the entire issued and outstanding share capital of each Subsidiary
and (iii) a complete list of all jurisdictions in which the Company
or the Subsidiaries have unincorporated branch offices.
(b) Except as sets forth in Schedule 3.7(b), the shares or other
securities of each Subsidiary which are owned by the Company,
directly or indirectly, are free and clear of any Lien and free of
any other limitation or restriction (including any restriction on
the right to vote, sell or otherwise dispose of such shares or
other securities). There are no outstanding (i) securities of the
Company or any Subsidiary convertible into or exchangeable for
share capital or voting securities of any Subsidiary or (ii)
options, preemptive rights, refusal rights or other rights to
acquire from the Company or any Subsidiary, or other obligation of
the Company or any Subsidiary to issue, sell or transfer any share
capital, voting securities or securities convertible into or
exchangeable for share capital or voting securities of any
Subsidiary (the items in clauses 3.7(b)(i) and 3.7(b)(ii) being
referred to collectively as the "Subsidiary Securities"). There are
no outstanding obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any outstanding Subsidiary
Securities.
3.8 Financial Statements -
The audited financial statements of the Company as of December 31, 1998,
the audited financial statements of the Subsidiaries as of December 31,
1998, the consolidated balance sheet of the Company and the Subsidiaries as
of December 31, 1998 and the unaudited interim consolidated financial
statements of the Company and the Subsidiaries for the 6 months ended June
30, 1999 (the "Financial Statements"), were prepared in accordance with
applicable generally accepted accounting principles and practices applied
on a consistent basis, fairly present, in all material respects, the
financial position, assets, liabilities, results of operation and cash
flows or other information included therein of the Company and the
Subsidiaries for the periods or as of the dates therein set forth (subject
to normal year-end adjustments in accordance with generally accepted
accounting principles and practices in the case of any unaudited interim
financial statements). Schedule 3.8 sets forth true, complete and correct
copies of the Financial Statements. The books and records of the Company
and Subsidiaries as of the date hereof are accurate and complete in all
material respects.
3.9 Absence of Certain Changes -
The Company and the Subsidiaries have always operated, and until the
Closing Date will continue to operate their business in the normal and
customary manner. Except as specifically reflected in the unaudited
consolidated financial statements for the 6 months ended June 30, 1999 and
except as sets forth on Schedule 3.9, since the Balance Sheet Date, the
business of the Company and its Subsidiaries has been conducted in the
ordinary course consistent with past practices and:
(a) there has not been any adverse change in the business, assets,
liabilities, operations or conditions (financial or otherwise) of
the Company or any Subsidiary, other than changes in the ordinary
course of business, none of which individually or in the aggregate
has been materially adverse;
(b) there has not been issuance or sale or authorization for issuance
or sale, or grant of any options or other agreements with respect
to any shares of capital stock or any other securities of the
Company or any Subsidiary; or
(c) there has not been making of any Tax election or settlement or
compromise of any material state, local or foreign Tax liability;
or
(d) there has not been settlement or compromise of any pending or
threatened suit, action or claim which is material or which relates
to any of the transactions contemplated by this Agreement; or
(e) there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to any Ordinary Shares
of the Company or other equity or debt securities, or any
repurchase, redemption or other acquisition by the Company or any
Subsidiary of any outstanding Ordinary Shares or other securities
of the Company or any Subsidiary; or
(f) there has not been any amendment of any material term of its
charter documents or of any outstanding equity or debt security of
the Company or any Subsidiary including, without limitation,
reclassification, combination, split and subdivision; or
(g) there has not been any incurrence, assumption or guarantee by the
Company or any Subsidiary of any indebtedness including, without
limitation, for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past
practices, but not in any event exceeding $500,000; or
(h) there has not been any creation or other incurrence by the Company
or any Subsidiary of any Lien on any material asset other than in
the ordinary course of business consistent with past practices; or
(i) there has not been any making of any loan, advance or capital
contributions to or investment in any Person other than loans,
advances or capital contributions, to or investments in
Subsidiaries made in the ordinary course of business consistent
with past practices; or
(j) there has not been any damage, destruction or other casualty loss
(whether or not covered by insurance) adversely affecting the
business or assets of the Company or any Subsidiary; or
(k) there has not been any transaction or commitment made, or any
contract or agreement entered into, by the Company or any
Subsidiary relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by
the Company or any Subsidiary of any contract or other right, other
than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by
this Agreement; or
(l) there has not been any change in any method of accounting or
accounting practices by the Company or any Subsidiary; or
(m) there has not been any (i) employment, deferred compensation,
severance, retirement, collective labor agreement, collective labor
arrangements or other similar agreement entered into with any
director, officer, Senior Employee or employees' union of the
Company or any Subsidiary (or any amendment to any such existing
agreement), (ii) grant of any severance or termination pay to any
director, officer or Senior Employee of the Company or any
Subsidiary, or (iii) change in compensation or other benefits
payable to any director, officer or Senior Employee of the Company
or any Subsidiary other than customary adjustments in the ordinary
course of business consistent with past practices; or
(n) there has not been any labor dispute, other than routine individual
grievances, or any activity or to the knowledge of the Company or
Seller, proceeding by a labor union or representative thereof to
organize any employees of the Company or any Subsidiary, or any
lockouts, strikes, slowdowns, work stoppages or to the knowledge of
the Company or Seller, threats thereof by or with respect to any
employees of the Company or any Subsidiary; or
(o) there has not been any capital expenditure, or commitment for a
capital expenditure, for addition or improvements to property,
plant and equipment exceeding $500,000; or
(p) there has not been any termination, cancellation or acceleration or
indication to that effect of any right or obligation of the Company
or any Subsidiary or a loss of any benefit to which the Company or
any Subsidiary is entitled under any provision of any agreement or
other instrument including without limitation any agreement for the
purchase of materials, supplies, goods, services, equipment, any
sales, distribution and other customers agreement, except for
benefits which individually or in the aggregate are immaterial; or
(q) there has not been any making of any payment for any guarantee or
warranty of any kind given by the Company or any Subsidiary, other
then product warranties which were given in the ordinary course of
business; or
(r) there has not been any written notice from any customer,
challenging the quality of the Company's or any Subsidiary's
products, expressing dissatisfaction with the Company or any
Subsidiary or disputing or challenging their obligation to fulfill
their obligations to the Company or any Subsidiary or any other
indication implying an adverse effect on the prospects of the
Company or any Subsidiary; or
(s) there has not been any Related Party Transactions including,
without limitation, the payment of any management fees or services
fees or any other payments whatsoever to Seller or any of its
Affiliates; or
(t) the inventories and work in progress of the Company and its
Subsidiaries have been maintained in the ordinary course of
business. Except as set forth in Schedule 3.9(t), all such
inventories and work in progress are owned free and clear of all
Liens, other than as security under agreements disclosed under
Section 3.12(a)(ii). All of the inventories, finished products and
work in progress recorded in the Financial Statements consist of,
and all inventories, finished products and work in progress of the
Company and its Subsidiaries and such inventory held by the Company
for the benefit of the Israeli Ministry of Defense on the Closing
Date will consist of, items of a quality usable or saleable
(subject, in the case of work-in-progress inventory, to completion
in the ordinary course of business) in the normal course of
business consistent with past practices and are and will be in
quantities sufficient for the normal operation of the business of
the Company and its Subsidiaries in accordance with past practice.
Such inventories are located at the locations set forth in Schedule
3.09 (t).
3.10 No Undisclosed Liabilities -
Except as and to the extent reflected, reserved against or otherwise
disclosed in the Financial Statements or specifically in this Agreement,
and except as disclosed in Schedule 3.10, (a) there are no material
liabilities of the Company or any Subsidiary of any kind whatsoever,
whether accrued, contingent, absolute, asserted, unasserted, determined,
determinable or otherwise, and there is no existing condition, situation or
set of circumstances which could reasonably be expected to result in such a
liability, and (b) the Company and the Subsidiaries have not applied for or
received any grant or allowance to which the Company or any Subsidiary is
not liable, or which may in the future become liable to be repaid.
3.11 Intercompany Accounts -
Except as disclosed in Schedule 3.11 or in the Financial Statements, there
are no direct or indirect agreements, arrangements, commitments, contracts
or other transactions between the Company or any Subsidiary on the one
hand, and Seller or its Affiliates, or any directors and officers thereof
on the other hand and since June 30, 1999 neither the Company nor any
Subsidiary has transferred any payments whatsoever to Seller, its directors
or its Affiliates. No relationship, direct or indirect, exists between or
among the Company or any Subsidiary on the one hand and the directors,
officers (other than employee-employer relationship of directors and
officers who serve as employees of the Company), or shareholders of the
Company, on the other hand. Except as stated in the Balance Sheet there has
not been any accrual of liability by the Company or any Subsidiary to
Seller or any of its Affiliates or other transaction between the Company or
any Subsidiary on the one hand and Seller and any of its Affiliates on the
other hand.
3.12 Material Contracts -
(a) Except as disclosed in Schedule 3.12(a), neither the Company nor
any Subsidiary is currently a party to or is bound by any:
(i) lease (whether of real or personal property) providing for
annual rentals of $100,000 or more;
(ii) agreement for the purchase of materials, supplies, goods,
services, equipment or other assets providing for either (a)
annual payments by the Company and the Subsidiaries of
$500,000 or more or (b) aggregate payments by the Company
and the Subsidiaries of $1,000,000 or more.
(iii) sales, distribution or other similar agreement providing for
the outstanding or future sale by the Company or any
Subsidiary of materials, supplies, goods, services,
equipment or other assets that provide for either (a) annual
payments to the Company and the Subsidiaries of $500,000 or
more or (b) aggregate payments to the Company and the
Subsidiaries of $1,000,000 or more;
(iv) partnership, joint venture, offset or buy back agreements or
other teaming agreement or arrangement;
(v) agreement relating to the acquisition or disposition of any
business or relating to reorganization or restructuring
(whether by merger, sale of stock, sale of assets or
otherwise);
(vi) agreement relating to indebtedness for borrowed money or the
deferred purchase price of property or other similar
agreements (in either case, specifying whether incurred,
assumed, guaranteed or secured by any asset), except any
such agreement with an aggregate outstanding principal
amount not exceeding $100,000, which may be prepaid on not
more than 30 days notice without the payment of any penalty,
and except any agreement disclosed under Section 3.12
(a)(ii);
(vii) option, technology license granted by the Company or any
Subsidiary or franchise other than manufacturing licenses
under agreements disclosed under Section 3.12(a)(iii)
(viii) agreement in excess of $50,000 to which the Company or the
Subsidiaries is a party with respect to any assignment,
discounting or reduction of any receivables of the Company
or the Subsidiaries;
(ix) distributorship, sales agency, sales representative (other
than such agreements which are substantially in the standard
form of Agency Agreement made available to Buyer), reseller
or marketing, value added reseller, original equipment
manufacturing, technology transfer, source code license
agreement and any other agreements containing or restricting
the right to sublicense software and/or technology (except
for off-the-shelf standard licenses for the use of software
or other commercially available tools), in each case, to
which the Company or the Subsidiaries is a party;
(x) written employment or consulting contract entered into by
the Company or the Subsidiaries (i) with any Senior Employee
or consultant to the Company or the Subsidiaries, (ii)
involving a term of more than one year, (iii) providing for
payments by the Company or the Subsidiaries in excess of
$100,000 per year or (iv) which materially differs from the
standard form of employment or consulting contract
previously provided by the Company to the Buyer and which is
utilized by the Company or the Subsidiaries in the
jurisdiction where such employment occurs or such consulting
services are provided;
(xi) arrangements and agreements with the Office of the Chief
Scientist, the Investment Center of the State of Israel, the
Marketing Incentive Fund and the Ministry of Defense
(Schedule 3.12(a)(xi) includes a brief, accurate and current
description of the arrangements and agreements with respect
to the Ministry of Defense as of the date hereof);
(xii) agreement that limits the freedom of the Company or any
Subsidiary to compete in any line of business or with any
person or in any area or which would so limit the freedom of
the Company or any Subsidiary after the Closing Date;
(xiii) agreement containing a change of control provision,
anti-assignment provisions or any other provision requiring
the consent of third parties to the transactions
contemplated by this Agreement;
(xiv) other agreement, commitment or arrangement not made in the
ordinary course of business or which materially affects or
impairs the business of the Company or any Subsidiary.
(b) Except as set forth in Schedule 3.12(b) each agreement, arrangement
or commitment disclosed in any Schedule to this Agreement or
required to be disclosed pursuant to this Section is in full force
and effect, and none of the Company, any Subsidiary or, to the
knowledge of Seller or the Company, any other party thereto is in
default or breach under the terms of any such agreement,
arrangement or commitment which may result in the termination
thereof or in damages claims with respect thereto, and, to the
knowledge of Seller and the Company, no event or circumstance has
occurred that, with notice or lapse of time or both, would
constitute any event of default thereunder. True and complete
copies (or descriptions in case of oral agreements) of each such
agreement, arrangement or commitment have been made available to
Buyer (except for agency and personal employment agreements which
do not materially differ from the Company's standard forms such
forms have been made available to Buyer, and except for classified
technology descriptions).
(c) Except as set forth in Schedule 3.12(c) there are no agreements
between Seller or any of its Affiliates and third parties which are
necessary for the business of the Company or any of its
Subsidiaries.
3.13 Litigation -
Except as disclosed in Schedule 3.13, there is no action, suit,
investigation or proceeding (or any basis therefor) pending against, and to
the knowledge of Seller or the Company, threatened against or affecting,
the Company or any Subsidiary or any of their respective properties or
business before or by any court or arbitrator or any governmental or
administrative body, agency or official or which in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement. Except as set forth in Schedule 3.13,
neither the Company nor the Subsidiaries is the plaintiff in any such
proceeding and neither the Company nor the Subsidiaries is contemplating
commencing legal action against any other Person.
3.14 Compliance with Laws and Court Orders -
Except as set forth in Schedule 3.14, neither the Company nor any
Subsidiary is in violation of, or is under investigation with respect to or
to the knowledge of Seller or the Company has been threatened to be charged
with or given notice of any violation of, any applicable law, rule,
regulation, judgment, injunction, order or decree (in Israel in relation to
the Company and in the United States of America in relation to the
Subsidiaries and to the best knowledge of the Company and based upon the
past business practice of the Company or any Subsidiary in any other
jurisdiction) in any material respect. Except as set forth in Schedule
3.14, there is no judgment or outstanding orders, injunctions, decrees or
awards rendered by a court, governmental or administrative body or
arbitration affecting the Company or any Subsidiary or any of their
respective properties or business.
3.15 Properties -
(a) The Company and the Subsidiaries have good title to, or in the case
of leased property and assets have valid leasehold interests in,
all property and assets (whether real, personal, tangible or
intangible) reflected on the Balance Sheet or acquired after the
Balance Sheet Date. None of such property or assets is subject to
any Lien, except Liens disclosed on the Balance Sheet or in
Schedule 3.15.
(b) There are no developments affecting any such property or assets
pending or, to the knowledge of Seller or the Company, threatened,
which might materially detract from the value, interfere with any
present or intended use or affect the marketability of any such
property or assets.
(c) The buildings and equipment used by the Company or any Subsidiary,
are in good repair and operating condition suitable for their uses.
(d) The property and assets owned or leased by the Company or any
Subsidiary, or which they otherwise have the right to use,
constitute all of the property and assets used or held for use in
connection with the businesses of the Company or any Subsidiary and
are adequate to conduct such businesses as currently conducted.
3.16 Products -
Except as set forth in Schedule 3.16, each of the products produced or sold
by the Company or any Subsidiary is, and at all times up to and including
the sale thereof has been substantially in compliance with all
specifications for such products.
3.17 Intellectual Property -
(a) Schedule 3.17(a) contains a list of all Intellectual Property
Rights of the Company or any Subsidiary issued or registered or in
respect of which an application for such issuance or registration
has been filed, and a list of all Intellectual Property Rights
relating to the Company's material technologies and know-how,
specifying as to each, as applicable: (i) the nature of such
Intellectual Property Right, (ii) the owner of such Intellectual
Property Right, (iii) the jurisdictions by or in which such
Intellectual Property Right has been issued or registered or in
which an application for such issuance or registration has been
filed, (iv) the registration or application numbers and (v) the
termination or expiration dates.
(b) Except as set forth in Schedule 3.17(b), the Company and the
Subsidiaries own or have the right to use, free and clear of all
liens, claims and restrictions, all Intellectual Property Rights
without infringing upon or violating any right, lien, or claim of
others, including without limitation former employees. Neither the
Company nor any Subsidiary is obligated or under any liability
whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any
patent, trademark, service mark, trade name, copyright or other
intangible asset with respect to the use thereof or in connection
with the conduct of its business or otherwise. The Intellectual
Property Rights are sufficient for use in the conduct of the
Company's and the Subsidiaries' business as now conducted and to
meet all of its outstanding commitments .
(c) Schedule 3.17(c) sets forth a list of all Intellectual Property
Rights' licenses (other than manufacturing licenses under
agreements disclosed under Section 3.12(a)(iii) and off-the-shelf
standard licenses for the use of software or other commercially
available tools), sublicenses and other similar agreements as to
which the Company or any Subsidiary is a party including (i) the
identity of all parties thereto, (ii) a description of the nature
and subject matter thereof, (iii) the applicable royalty and (iv)
the term thereof.
(d) (i) Neither the Company nor any Subsidiary has been a defendant in
any action, suit, investigation or proceeding relating to, or
otherwise has been notified of, any alleged claim of infringement
of any Intellectual Property Right, and Seller or the Company have
no knowledge of any other such infringement by the Company or any
Subsidiary and (ii) Seller and the Company have no outstanding
claim or suit for, and have no knowledge of, any continuing
infringement by any other Person of any Intellectual Property
Rights. Except as set forth in Schedule 3.17(d), No Intellectual
Property Right is subject to any outstanding judgment, injunction,
order, decree or agreement restricting the use thereof by the
Company or any Subsidiary or restricting the licensing thereof by
the Company or any Subsidiary to any Person and neither the Company
nor any Subsidiary has entered into any agreement to indemnify any
other Person against any charge or infringement of any Intellectual
Property Rights.
(e) None of the processes and formulae, research and development
results and other know-how of the Company or any Subsidiary, the
value of which to the Company or such Subsidiary is contingent upon
maintenance of the confidentiality thereof, has been disclosed by
Seller, the Company, the Subsidiaries or any of their Affiliates to
any Person other than employees, consultants, representatives,
agents, customers, potential customers, suppliers and joint
venturers of the Company or any Subsidiary all of whom are bound by
written confidentiality agreements.
3.18 Insurance Coverage -
Schedule 3.18 sets forth a list of insurance policies relating to the
assets, business, operations, products, employees, officers and directors
of the Company and the Subsidiaries (the "Policies"). There is no claim by
the Company or any Subsidiary pending under any of the Policies as to which
coverage has been questioned, denied or disputed by the issuers of the
Policies or in respect of which such issuers have reserved their rights.
All premiums payable under the Policies have been timely paid and the
Company and the Subsidiaries have otherwise complied fully with the terms
and conditions of the Policies. The Policies will remain in full force and
effect until the Closing Date. The Policies are of the type and in amounts
customarily carried by Persons conducting businesses similar to those of
the Company or any Subsidiary. Seller or the Company do not know of any
threatened termination of, premium increase with respect to, or material
alteration of coverage under, any of the Policies.
3.19 Licenses and Permits -
Except as set forth in Schedule 3.19, each license, franchise, permit,
certificate, approval or other similar authorization (in Israel in relation
to the Company and in the United States of America in relation to the
Subsidiaries and to the best knowledge of the Company and based upon the
past business practice of the Company or any Subsidiary in any other
jurisdiction) affecting, or relating in any way to the assets or business
of the Company or its Subsidiaries (the "Permits") has been obtained, is
valid and will remain in full force and effect until the Closing Date,
except immaterial Permit issued outside the State of Israel and the United
States of America. Neither the Company nor any Subsidiary is in default
under, and no condition exists that with notice or lapse of time or both
would constitute a default under the Permits, except immaterial default
under Permit issued outside the State of Israel and the United States of
America. None of the Permits will be terminated or impaired or become
terminable, in whole or in part, as a result of the transactions
contemplated hereby.
3.20 Receivables -
All accounts, notes receivable and other receivables stated on the
Financial Statements are and all accounts and notes receivable arising from
or otherwise relating to the business of the Company and the Subsidiaries
as of the Closing Date will be, valid and genuine (without making any
representation with respect to the collectability of such accounts
receivable) in the aggregate amount thereof, subject to normal and
customary trade discounts, less any reserves for doubtful accounts recorded
in the Balance Sheet. All accounts, notes receivable and other receivables
reflected in the Financial Statements were accrued in the normal course of
business of the Company and the Subsidiaries.
3.21 Customers and Suppliers -
No customer of the Company or the Subsidiaries which individually accounted
for more than 5% of the Company's or the Subsidiaries, gross revenues
during 1998 or during 1999 has terminated any agreement with the Company or
the Subsidiaries during the 24-month period preceding the date hereof.
During the 24-month period preceding the date hereof, and except in the
ordinary course of business, no material supplier of the Company or the
Subsidiaries has indicated in writing that it will stop, or decrease the
rate of, supplying materials, products or services to the Company or the
Subsidiaries.
3.22 Backlog -
The Company's and any Subsidiary's purchase orders, backlog of confirmed
orders are valid, genuine and recorded in the ordinary course of business
and as of March 31, 1999 equal $211 million of sales.
3.23 Warranties -
The provisions for warranties and repairs stated in the Financial
Statements are adequate and in accordance with existing agreements to cover
the Company's and any Subsidiary's obligations and liabilities in respect
thereof. Schedule 3.23 sets forth all warranty claims with respect to all
products or services sold or provided by the Company or any Subsidiary
brought or settled during the past two fiscal years, which individually or
in the aggregate for any related warranties, had remedy or settlement costs
of more than $25,000.
3.24 Finders' Fees -
Except as disclosed in Schedule 3.24 for which Seller solely shall be
responsible to pay any Finder's Fees or any other fees, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Seller or the Company or
any Subsidiary who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement.
3.25 Benefit Plans -
(a) All amounts which the Company is required by law, custom or by
agreement to deduct from its employees' salaries and/or transfer to
such employees' pension, severance pay, early retirement funds,
life insurance, incapacity insurance, continuing education fund,
bonus or vacation, have been duly paid into the appropriate fund or
funds or fully provided and accrued for in the Financial
Statements, and the Company does not have any outstanding
obligation to make any such transfer or provision to any employee
including subcontractors employed on a consistent basis. Except as
disclosed in Schedule 3.25(a), funds and insurance policies
covering such obligations are either (i) administered and managed
by the Company or any Subsidiary; (ii) under the custody of the
Company or any Subsidiary; (iii) deposited in the Company's or any
Subsidiary's accounts; or (iv) owned by the Company or any
Subsidiary, respectively. Except as set forth on Schedule 3.25(a),
there are no agreements or arrangements for the payment of any
severance pay, pensions, allowances, lump sums, prior notice or
other benefits on retirement, dismissal, death or termination or
during periods of sickness or disablement for the benefit of any
officer or former officer or employee or, former employee of the
Company or for the benefit of the dependents of any such Person in
effect as of the date hereof. Except as set forth in Schedule
3.25(a) there has been no amendment to, written interpretation of
or announcement (whether or not written) by Seller or any of its
Affiliates or the Company or any Subsidiary relating to (i) any
Benefit Plan, employment agreement or custom that would increase
materially the expense of maintaining any such plans, agreements or
customs above the level of the expense incurred in respect thereof
for the most recent fiscal year ended prior to the date hereof; or
(ii) any employees' wages, benefits or other remuneration not in
the ordinary course of business.
(b) With respect to the Subsidiaries:
(i) Schedule 3.25(b)(i) contains a list and brief description of
all "employee pension benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (sometimes referred to as "Pension
Plans"), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA) (sometimes referred to as "Welfare
Plans") and all other Benefit Plans (together with the
Pension Plans and Welfare Plans, the "Plans"), which is now
or previously has been sponsored, maintained, or contributed
to, or required to be sponsored, maintained or contributed
to by the Subsidiaries or any of their Affiliates or any
Person that, together with its Subsidiaries or any of its
Affiliates, is treated as a single employer under Section
414(b),(c),(m) or (o) of the U.S. Internal Revenue Code (the
"Code") (the Subsidiaries, such Affiliates and each such
other Person, a "Commonly Controlled Entity") for the
benefit of any current or any former employees, officers or
directors of the Subsidiaries, or pursuant to which a
Commonly Controlled Entity has or may have any liability,
contingent or otherwise. Seller has made available to the
Buyer true, complete and correct copies of (i) each Plan
(or, in the case of any unwritten Benefit Plans,
descriptions thereof), and all other documents embodying or
relating to each plan, (ii) the two most recent annual
reports on Form 5500 (and all schedules thereto) filed with
the IRS and annual actuarial valuation with respect to each
Plan (if any such report or valuation was required), (iii)
the most recent summary plan description for each Plan for
which such summary plan description is required, and each
subsequent summary of material modifications for each such
plan (iv) each trust agreement, group annuity contract or
other funding agreement relating to any Plan, (v) all
correspondence with the IRS, the Pension Benefit Guaranty
Corporation or the United States Department of Labor
relating to any outstanding controversy or audit, and (vi)
the most recent determination letter received from the IRS,
if any, for each Plan and related trust which is intended to
satisfy the requirements of Section 401(a) of the Code. (i)
each Plan has been administered in accordance with its
terms, and in material compliance with all applicable laws,
statues, orders, rules and regulations, (ii) each Commonly
Controlled Entity has performed all obligations required to
be performed by it under all Plans and all Plans are in
compliance with applicable provisions of ERISA and the Code,
and (iii) there are no actions, proceedings, arbitrations,
suits or claims pending, or to the knowledge of the Seller
or any Commonly Controlled Entity, threatened or anticipated
(other than routine claims for benefits) relating to any
plan.
(ii) Except as set forth in Schedule 3.25(b)(ii), each Pension
Plan that is intended to be qualified under Section 401(a)
of the Code has been the subject of a determination letter
from the IRS to the effect that such Pension Plan is so
qualified and the trust thereunder is exempt from Federal
income taxes under Section 501(a) of the Code, and no such
determination letter has been revoked nor has any event
occurred since the date of such Plan's most recent such
determination letter that would adversely affect its
qualification or materially increase its costs.
(iii) Neither the Subsidiaries, any of their Affiliates nor any
Commonly Controlled Entity has maintained, contributed to or
been obligated to maintain or contribute to any Pension Plan
that is subject to Title IV of ERISA or to any
"multi-employee plan" within the meaning of Sections 3(37)
or 4001(a)(3) of ERISA.
(iv) Neither the Subsidiaries, any of their Affiliates nor any
Commonly Controlled Entity has any liability or obligation
to provide life insurance or medical, severance or other
welfare benefits after termination of employment to any
employee or dependent other than as required by Section
4980B of the Code.
(v) the Subsidiaries have no stock option plans and no options
to purchase or rights to acquire Ordinary Shares of the
Company or any subsidiary have been issued or are
outstanding.
(vi) the Subsidiaries have not issued any shares of its capital
stock to any Person other than the Company.
(vii) Except for ordinary compensation paid to each employee and
any benefits to be received by such employee as set forth in
Schedule 3.25(b)(vii), no employee or former employee of the
Subsidiaries will be entitled to any additional compensation
or other benefits or any acceleration of the time of payment
or vesting of any compensation or benefits under any Plan as
a result of the transactions contemplated by this Agreement,
and no compensation or benefits payable to any employee of
the Company or any Subsidiary will constitute an "excess
purchase payment" within the meaning of Section 280G of the
Code.
(viii) No Commonly Controlled Entity has any liability, contingent
or otherwise, to, or with respect to any Benefit Plan (other
than the Plans set forth on Schedule 3.25(b)(viii), which is
now previously has been sponsored, maintained, contributed
to, or required to be contributed to, by Seller, the Company
or any Commonly Controlled Entity.
3.26 Senior Employees
Except as set forth in Schedule 3.26, no Senior Employee of the Company or
the Subsidiaries has resigned or terminated his or her employment with the
Company or any Subsidiary since the Balance Sheet Date. Seller has
delivered to Buyer true and complete copies of the personal employment
agreements of all Senior Employees containing all terms and conditions of
their employment. Save for such agreements, there are no agreements with
respect to Senior Employees which would obligate the Company or the
Subsidiaries to make any payment or provide any benefit, including payments
and benefits the deduction of which is limited by Section 280G of the Code
or that could be subject to tax under Section 4999 of the Code. Except as
set forth in Schedule 3.25 or Schedule 3.26, the deduction of any amount
payable to a Senior Employee will not be subject to disallowance under
Section 162(m) of the Code.
3.27 Employees
(a) With respect to the Company: (i) Except as set forth in Schedule
3.27 (a)(i), the Company is not a party to any collective labor
agreement or arrangement or to any labor custom and the Company
does not have any agreement or arrangement with a trade union or
the Company's Workers Committee (Va'ad Ha'Ovdim).
(ii) Except as referred to in Schedule 3.27(a)(ii), as of the date
hereof, there are no outstanding claims against the Company by any
person who is now or has been or claims to have been an officer or
employee of the Company, and there have been no disputes between
the Company and any material number or category of employees.
(iii) Except as referred to in Schedule 3.27 (a)(iii, there is no
organized strike, slowdown, work stoppage or lockout existing, and
to the knowledge of the Company or Seller, no such action is
threatened, by or with respect to the employees of the Company.
(iv) Except as set forth in Schedule 3.27 (a)(iv), the Company has
materially complied with all customs, agreements (including,
without limitation, all collective labor agreements or
arrangements), legislative or other official provisions relating to
the employees, and their terms and conditions of employment.
(v) Any and all amounts due to employees of the Company as of the
Closing Date either on account of wages, annual leave, sick pay or
any other remuneration, and all amounts required to cover the
Company's liability with respect to termination of
employers-employee relationship as of June 30 , 1999, pursuant to
any law, custom, agreement or arrangement were either fully paid or
is fully funded or provided and accrued for in the Financial
Statements and all such amounts with respect to the period until
the Closing Date were either fully paid or are fully funded or
provided and accrued for in the Financial Statements or are
reflected in Schedule 3.27(a)(v). No cause of action exists giving
right to employees to any claim for compensation on termination of
employment beyond the severance pay and other benefits to which
such employee is entitled under the Incorporation Agreement between
management of the Military Communication Division of Seller and the
Employees Union dated as of February 2, 1996, the Special
Collective Bargaining Employment Agreement between the Military
Communication Division of Seller and the Holon Employees Union
dated as of February 2, 1996, the Special Collective Bargaining
Agreement, Memorandum of Understanding between the Company and the
Holon Employees Union dated as of June 17, 1998 or Special
Collective Bargaining Agreement between the Company and Histadrut
Kiryat Shemona regarding the Tel-Hai facility dated as of July 27,
1998 or for payment of any compensation, including, without
limitation, any compensation, bonus, retirement, severance, job
security or similar benefit or enhanced such benefit (including
acceleration of vesting or exercise of an incentive award) as a
result of the transactions contemplated hereby. The employees have
submitted the demands mentioned in Schedule 3.27(a)(v), and to the
knowledge of the Company or Seller, have made no other claims with
respect to the transaction contemplated hereby.
(b) With respect to the Subsidiaries and except as set out in Schedule
3.27(b):
(i) Each of the Subsidiaries has complied in all material
respects with all applicable laws, rules and regulations
respecting employment and employment practices, terms and
conditions of employment, wages and hours and the
Subsidiaries are not liable for any arrears of wages or any
taxes or penalties for failure to comply with any such laws,
rules or regulations.
(ii) There are no disputes or claims pending or to the knowledge
of the Company or Seller threatened between the Subsidiaries
and their respective employees or with respect to any
Benefit Plans.
(iii) There is no strike, slowdown, work stoppage or lockout
existing, or, to the knowledge of the Company or Seller
threatened by or with respect to any employees of the
Subsidiaries.
(iv) None of the Subsidiaries is a party to any collective
bargaining agreement or other labor union contract
applicable to persons employed by such Subsidiaries and no
such agreement or contract is currently being negotiated.
(v) There are no activities or proceedings of any labor union to
organize any employees of the Subsidiaries.
(vi) There are no unfair labor practice or discrimination
complaints pending against the Subsidiaries before the
National Labor Relations Board and there are no pending
requests for recognition or petitions for elections
regarding union representation.
(vii) No charges, claims or disputes are pending before any state,
local or foreign agency responsible for the prevention of
unlawful employment practices with respect to the
Subsidiaries.
(viii) There are no claims pending against the Subsidiaries before
any workers' compensation board.
(ix) The Subsidiaries have not received notice that any federal,
state, local or foreign agency responsible for the
enforcement of labor or employment laws intends to conduct
an investigation of or relating to the Subsidiaries and, to
the knowledge of the Seller, no such investigation is in
progress.
3.28 Environmental Matters -
(a) Except as disclosed in Schedule 3.28(a):
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint
has been filed, no penalty has been assessed and no
investigation, action, claim, suit, proceeding or review is
pending, or to Company's or Seller's knowledge, threatened
by any governmental entity or administrative entity or other
Person against the Company or any Subsidiary and relating to
or arising out of any Environmental Law;
(ii) there are no liabilities of or relating to the Company or
any Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable, arising
under any Environmental Law (in Israel in relation to the
Company and in the United States of America in relation to
the Subsidiaries and to the best knowledge of the Company
and based upon the past business practice of the Company or
any Subsidiary in any other jurisdiction), and the Company
or Seller are unaware of any facts, conditions, situations
or set of circumstances which could reasonably be expected
to result in or be the basis for any such liability;
(iii) no polychlorinated biphenyls, radioactive material, lead,
asbestos-containing material, incinerator, sump, surface
impoundment, lagoon, landfill, septic, wastewater treatment
or other disposal system or underground storage tank (active
or inactive) is or has been present at, on or under any
property now or previously owned, leased or operated by the
Company or any Subsidiary;
(iv) no Hazardous Substance has been discharged, disposed of,
sumped, injected, pumped, deposited, spilled, leaked,
emitted or released at, on or under any property now or
previously owned, leased or operated by the Company or any
Subsidiary;
(v) neither the Company nor any Subsidiary has, directly or
indirectly transported or disposed, or arranged for the
transportation or disposal, of any Hazardous Substances to
any location which is listed or proposed for listing on the
National Priorities List, CERCLIS list, or any similar list
of sites requiring investigation or clean-up.
(vi) the Company and the Subsidiaries are in all material
respects in compliance with all Environmental Laws (in
Israel in relation to the Company and in the United States
of America in relation to the Subsidiaries and to the best
knowledge of the Company and based upon the past business
practice of the Company or any Subsidiary in any other
jurisdiction) and have obtained and are in compliance with
the Environmental Permits; such Environmental Permits are
valid and in full force and effect and will not be
terminated or impaired or become terminable, in whole or in
part, as a result of the transactions contemplated hereby.
(b) Except as set forth in Schedule 3.28(b), there has been no
environmental investigation, study, audit, test, review or report
prepared of which Seller and/or the Company have knowledge in
relation to the current or prior business of the Company or any
Subsidiary or any property or facility now or previously owned,
leased or operated by the Company or any Subsidiary which has not
been delivered to Buyer at least ten days prior to the date hereof.
(c) For purposes of this Section, the terms "Company" and "Subsidiary"
shall include any entity which is, in whole or in part, a
predecessor of the Company or any Subsidiary which was engaged in
the business of the Company or any Subsidiary.
3.29 Year 2000 Compliance -
(a) Except as disclosed on Schedule 3.29(a), each item of hardware,
software or firmware (a "System") that is, or is part of, any
material asset, or any product or service designed, manufactured,
sold or provided by, or that is used in connection with the
business of the Company or its Subsidiaries, is in all material
respects Year 2000 Compliant. For purposes of this Section 3.29,
"Year 2000 Compliant" means that the System shall be able
accurately to process (including, without limitation, calculate,
compare and sequence) date and time data from, into and between the
years 1999 and 2000 and any other years in the 20th and 21st
centuries.
(b) Except as disclosed on Schedule 3.29(b), neither Seller nor the
Company or any Subsidiary knows of any inability on the part of any
supplier, customer or service provider to timely ensure that its
Systems are Year 2000 Compliant.
3.30 Guarantees -
As of July 31, 1999 the Company and Subsidiaries have obtained third party
guarantees from banks and insurance companies to secure performance by the
Company and the Subsidiaries of obligations under customer contracts for
the amount of approximately $35,500,000 (the "Guarantees"). Except as set
forth in Schedule 3.30 with respect to a certain supplier of the Company,
the Company and the Subsidiaries have not guaranteed, and are not liable
for the nonperformance of, any obligation (financial or other) of others.
The Company and the Subsidiaries have no liability unrelated to their
respective business or operations.
3.31 Foreign Currency Hedging Transactions -
Except as set forth in Schedule 3.31 neither the Company nor any of its
subsidiaries has entered into any foreign currency hedging arrangement that
is in force as of the date of this Agreement, including without limitation,
any derivative transactions, forward exchange agreements, set-off
commodities arrangements and any other arrangements of this nature.
3.32 Export Control Laws
(a) The Company and the Subsidiaries have conducted their export
transactions in accordance with applicable (in Israel relating to
the Company and in the United States of America in relation to the
Subsidiaries) provisions of United States and Israeli export
control laws and regulations, including but not limited to the
Export Administration Act and implementing Export Administration
Regulations, Israel's Import Export Ordinance, the Supervision of
Commodities and Services Law and relevant regulations and orders
issued pursuant thereto. Without limiting the foregoing and except
as set forth in Schedule 3.32:
(i) The Company and the Subsidiaries have obtained all export
licenses and other approvals from the Ministry of Defense
and all other governmental authorities required for their
exports of products, software and technologies to and from
the United States and to and from Israel;
(ii) The Company and the Subsidiaries are in compliance with the
terms of all applicable export licenses or other approvals
received by them;
(iii) There are no pending or to the knowledge of the Company or
Seller threatened claims against the Company or the
Subsidiaries with respect to such export licenses or other
approvals; and
(b) No consents or approvals for the transfer of export licenses to the
Buyer are required, or such consents and approvals can be obtained
expeditiously without material cost.
3.33 Bank Accounts, Letters of Credit and Powers of Attorney
Schedule 3.33 lists (a) all bank accounts, lock boxes and safe deposit
boxes relating to the business and operations of each of the Company and
the Subsidiaries (including the name of the bank or other institution where
such account or box is located and the name of each authorized signatory
thereto), (b) all outstanding letters of credit issued by financial
institutions for the account of the Company or the Subsidiaries (setting
forth, in each case, the financial institution issuing such letter of
credit, the maximum amount available under such letter of credit, the terms
(including the expiration date) of such letter of credit and the party or
parties in whose favor such letter of credit was issued), and (c) the name
and address of each Person who has a power of attorney to act on behalf of
the Company or the Subsidiaries. Seller has heretofore delivered to the
Buyer true, correct and complete copies of each letter of credit and each
power of attorney described on Schedule 3.33.
3.34 Minute Books
The minute books of the Company and the Subsidiaries made available to
Buyer contain an accurate summary of all meetings of directors and
shareholders or actions by written resolutions from the time each of the
Company and the Subsidiaries was organized through the date of this
Agreement, and reflect all transactions referred to in such minutes and
resolutions accurately, except for omissions which are not material.
3.35 Corrupt Practices -
The activities and operations of each of the Company, the Subsidiaries and
their respective officers, directors, employees, representatives and, to
the best knowledge of the foregoing, and without any reason for the
foregoing to know to the contrary, agents, have complied with applicable
laws governing corrupt or illicit business practices.
3.36 Taxes -
(a) The Company and each Subsidiary directly or through their
representatives have timely filed all necessary Tax returns and
notices (including, without limitation, all Tax returns required
under the laws of the State of Israel). The books and records of
the Company and each Subsidiary are maintained and have at all
times until the Closing Date been maintained in compliance with all
applicable tax laws.
Seller and the Company have no knowledge, or any reasonable grounds
to know, of any Tax deficiencies which might be assessed against
the Company or any of its Subsidiaries. The Company and any
Subsidiary has paid all Taxes which have become due, whether
pursuant to any assessments or otherwise, and any liability for any
Taxes has been reserved for in the Financial Statements.
Seller has provided Buyer with true and complete copies of all Tax
filings made by the Company and Subsidiaries and all Tax
assessments issued to the Company and the Subsidiaries.
The Company and any Subsidiary is not a party to any Tax
proceedings, and to the knowledge of Seller and the Company, no
investigation is conducted against the Company or any of its
Subsidiaries by any Tax authority.
(b) No sales Taxes, use Taxes, real estate transfer Taxes, or other
similar Taxes will be imposed on the transactions contemplated by
this Agreement.
(c) No consent to the application of Section 341(f)(2) of the Code has
been filed with respect to any property or assets held or acquired
or to be acquired by the Company or the Subsidiaries. The Company
shall not make any election that could result in any adverse tax
consequences to the Company or the Subsidiaries.
(d) Neither the Company nor the Subsidiaries (i) has agreed to or is
required to make any adjustment pursuant to Section 481(a) of the
Code; (ii) has any knowledge that the Internal Revenue Service
("IRS") has proposed any such adjustment or change in accounting
method with respect to the Company; and (iii) has any application
pending with the IRS or any other tax authority requesting
permission for any change in accounting method.
(e) The Company qualifies, and has qualified as of its incorporation, as
an "Industrial Company" within the definition of the Law for the
Encouragement of Industry (Taxes), 1969.
(f) Schedule 3.36(f) sets forth a list of the "approved enterprise
certificates" issued to the Company or validly assigned to it and
all amendments thereto. Each of Seller (as applicable with respect
to "approved enterprise certificates" assigned to the Company) and
the Company is and has always been in material compliance with all
terms and conditions of all such certificates, and no breach of any
of such terms and conditions would arise through the conduct and
performance of the Company's business and operations or, subject to
the receipt of the approvals set forth in Schedule 3.3, as a result
of the consummation of the transactions contemplated by this
Agreement.
3.37 Continuing Representations and Warranties
The representations and warranties of Seller shall be true and correct and
shall be deemed to have been made again, on and as of the Closing Date.
3.38 Disclosure
None of the representations or warranties of Seller contained herein, none
of the information contained in the Schedules referred to in this Section
3, and none of the other information or documents furnished or to be
furnished to Buyer by Seller pursuant to any specific provision of this
Agreement or referenced in such Schedules of Seller (including any
information or documents provided in accordance therewith by the Company or
the Subsidiaries on behalf of Seller) contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
herein or therein necessary in order to make the statements contained
herein or therein not misleading in any material respects.
ARTICLE 4
Representations and Warranties of Buyer
Buyer being aware that Seller is entering into this Agreement on the basis
of and in reliance upon Buyer's representations and warranties hereunder
represents and warrants to Seller as follows:
4.1 Corporate Existence and Power -
Buyer is a corporation duly incorporated and validly existing under the
laws of the State of Israel and has all powers and all material
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted.
4.2 Corporate Authorization -
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement contains valid and binding obligations of Buyer enforceable in
accordance with their terms, except as enforcement thereof may be limited
by insolvency laws.
4.3 Governmental Authorization -
The execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby require no material
action by or in respect of, or material filing with, any governmental body,
agency or official other than compliance with any applicable requirements
of the Restrictive Business Practices Law of 1988 and with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act").
4.4 Noncontravention -
The execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
(i) violate the Articles of Association or Memorandum of Association of
Buyer or (ii) assuming compliance with the matters referred to in Section
4.3, violate any applicable material law, rule, regulation, judgment,
injunction, order or decree applicable to Buyer.
4.5 Litigation -
There is no action, suit, investigation or proceeding pending against or
to the knowledge of Buyer threatened against or affecting Buyer before any
court or arbitrator or any governmental body, agency or official which in
any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement.
4.6 Review of Documents -
Without derogating from Seller's representations and warranties in Article
3 of this Agreement, Buyer was provided with and has received, reviewed and
is aware of the information contained in the documents and materials
referred to in Seller's disclosure schedules attached to this Agreement.
ARTICLE 5
Covenants of Seller
Seller agrees that:
5.1 Conduct of the Company -
From the date hereof until the Closing Date save with the express prior
written approval of Buyer, Seller shall cause the Company and each
Subsidiary to conduct its businesses in the ordinary course consistent with
past practice and to use its best efforts to preserve intact its business
organizations and relationships with third parties and to keep available
the services of its present officers and employees at no additional cost.
Without limiting the generality of the foregoing, from the date hereof
until the Closing Date, Seller will not permit the Company or any
Subsidiary to:
(a) Adopt or propose any change in its Articles of Association or
Memorandum of Association;
(b) Merge or consolidate with any other Person, reorganize, restructure
or acquire a material amount of assets from any other Person;
(c) Sell, lease, license or otherwise dispose of any material assets or
property except for the sale of inventory in the ordinary course
consistent with past practice;
(d) Except as required by law or in the ordinary course of business
consistent with past practice or the requirements of any existing
and binding collective labor agreement, increase the salary or
other remuneration of any employee;
(e) Adopt any plan, arrangement, custom, or policy that would
constitute a Plan or Benefit Plans;
(f) Adopt or amend any agreements, customs, collective agreements and
collective arrangements respecting employment and retirement or
employment and retirement practices, terms and conditions of
employment and retirement and wages and work hours.
(g) Acquire any assets from any other Person, other than purchase of
inventory in the ordinary course of business;
(h) Acquire any new business or product-line of any other Person
(including through the assumption of any liabilities of such other
Person);
(i) Incur any indebtedness for money borrowed other than in the
ordinary course of business, up to the amount of $500,000;
(j) Pay, declare or set aside for payment, any dividends or services
fees or any other payments whatsoever to Seller or its Affiliates
except payments for rent under existing agreements regarding the
Company's Holon facility;
(k) Issue, sell, pledge, or transfer or propose to issue, sell, pledge
or transfer any shares of its capital stock, or securities
convertible or exchangeable for, or options, with respect to, or
warrants to purchase or rights to subscribe for, any shares of its
capital stock; or
(l) Agree or commit to do any of the foregoing.
Seller will not, and will not permit the Company or any Subsidiary to (i)
take or agree or commit to take any action that would make any
representation or warranty of Seller hereunder inaccurate in any respect
at, or as of any time prior to, the Closing Date or (ii) omit or agree or
commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time.
5.2 Access to Information; Confidentiality -
(a) Subject to restrictions relating to classified information which
shall be in the absolute discretion of the Company, from the date
hereof, Seller will (i) give, and will cause the Company and each
Subsidiary to give, Buyer, its counsels, financial advisors,
auditors and other authorized representatives access to the
offices, properties, books and records of the Company and the
Subsidiaries, (ii) furnish, and will cause the Company and each
Subsidiary to furnish, to Buyer, its counsels, financial advisors,
auditors and other authorized representatives such financial and
operating data and other information relating to the Company or any
Subsidiary as such persons may reasonably request and (iii)
instruct the employees, counsels and financial advisors of the
Company and any Subsidiary to cooperate with Buyer in its
investigation of the Company or any Subsidiary. Any investigation
pursuant to this Section shall be conducted in such manner as not
to interfere unreasonably with the conduct of the business of the
Company or with classified information. No investigation by Buyer
or other information received by Buyer shall operate as a waiver or
otherwise affect any representation, warranty or agreement given or
made by Seller hereunder.
(b) Seller and its Affiliates will hold, and will use their best
efforts to cause their respective officers, directors, employees,
accountants, counsels, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all
confidential documents and information concerning the Company and
the Subsidiaries, except to the extent that such information can be
shown to have been (i) previously known on a nonconfidential basis
by Seller, (ii) in the public domain through no fault of Seller or
its Affiliates or (iii) later lawfully acquired by Seller from
sources other than those related to its ownership interest in the
Company and the Subsidiaries. The obligation of Seller and its
Affiliates to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such
information as they would take to preserve the confidentiality of
their own confidential information.
5.3 Buyer's Name and Logo -
Seller shall agree and shall take all necessary steps to enable the change
of (i) Buyer's registered name to "Tadiran Communications Industries Ltd."
and (ii) pursuant to the Name and Logo Agreement, the Company's registered
name to "Tadiran Communications Ltd.". Seller agrees that Buyer, and
pursuant to the Name and Logo Agreement the Company and the Subsidiaries
may continue to use such names and their logo and trade marks perpetually
and free of any charges whatsoever except for the consideration pursuant to
the Name and Logo Agreement. Seller and its Affiliates shall not use the
"Tadiran Communication" name after the Closing Date.
5.4 Transfer of Deposits -
(a) Prior to the Closing Date, Seller will transfer to the Company or
to any other person designated by the Company all funds referred to
in Schedule 5.4 of this Agreement, and shall repay all outstanding
balances due from Seller or its Affiliates to the Company or to the
Subsidiaries.
(b) Seller agrees that after the Closing Date all of the inter-company
arrangements described in Schedule 3.11 shall not derogate, detract
or diminish from the provisions of this Agreement and the
provisions of all documents delivered in connection herewith.
(c) Seller agrees to use its best efforts to transfer to the Company,
prior to the Closing Date, the patents described in Schedule 3.17
(a)(i). Following the Closing Date, in the event that such patents
will not be assigned to the Company, Seller shall indemnify the
Company and shall hold it harmless from any and all damages arising
from the fact that such patents are still registered under Seller's
name.
(d) As of the Closing Date, the Company or its Subsidiaries shall have
no obligation to pay any additional management fees and other fees
(except for rent) to Seller or its Affiliates and any payment made
in excess will be adjusted pro-rata on an annual basis until the
Closing Date.
5.5 Notice of Certain Events -
Until the Closing Date Seller shall promptly notify Buyer of any:
(a) notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) notice or other communication from the Company's or Subsidiaries'
customers, suppliers, agents, employees or representatives not in
the ordinary course of business;
(c) breach or expected breach by Seller of any of its representations
and warranties and obligations pursuant to this Agreement and the
transactions contemplated hereby;
(d) notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions
contemplated by this Agreement; and
(e) actions, suits, claims, investigations or proceedings commenced or,
to their knowledge threatened against, relating to or involving or
otherwise affecting Seller or the Company or any Subsidiary that,
if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 3.13 or that relate to
the consummation of the transactions contemplated by this
Agreement.
5.6 Taxes -
(a) Seller shall provide Buyer on or before the Closing Date with
certificates for exemption from any withholding tax applicable to
the payment of the Purchase Price under this Agreement. In the
event Seller fails to provide such certificates such tax will be
withheld by Buyer at the applicable rates from any payments
hereunder. Seller shall further provide Buyer with an Authorized
officer certificate pursuant to Public Bodies Transactions
(Enforcement of Bookkeeping and Payment of Tax Debts) Law of 1976.
(b) Consolidation of income tax returns of the Company and Seller for
tax purposes as well as the Tax Indemnification Agreement have been
terminated as of December 31, 1998. Any Tax liability relating to
the income of the Company for the period ending on December 31,
1998 including income derived from the facilities divested from
Seller to the Company and except for Tax liability specifically
reserved for or provided for in the Financial Statements shall be
borne by Seller. Seller shall provide Buyer at the Closing with a
written consent of the assessing officer for said termination as
well as a written consent for the termination of said Tax
Indemnification Agreement signed by all parties thereto.
(c) As of the Closing Date, the Company shall not be a part of a "joint
registration" with Seller and/or its Affiliates for value added tax
purposes. Seller shall provide Buyer with a certificate to that
effect issued by their Auditors. Without derogating from Seller's
indemnification obligation under Section 8.1 hereof, Seller shall
hold the Company harmless from, and shall immediately indemnify
Buyer for, any value added tax collected from the Company in
connection with the business of any other member of the "joint
registration".
(d) Without derogating from Seller's indemnification obligation under
Section 8.1 hereof, Seller shall immediately indemnify Buyer for
any Tax collected from the Company or the Subsidiaries with respect
the period of the Tax Indemnification Agreement, unless
specifically reserved for or provided for in the Financial
Statements.
(e) Without derogating from Seller's indemnification obligation under
Section 8.1 hereof, Seller shall indemnify Buyer for any Tax
assessed to the Company with respect to dividends or other payments
made to Seller or its Affiliates other than the $5 million dividend
referred to in Schedule 3.9(e) and other than any Tax on dividends
resulting from a post-Closing reclassification of income available
to the Company pursuant to the Income Tax authorities professional
circular 10/99 as of April 26, 1999 .
(f) Without derogating from Buyer's indemnification obligation under
Section 8.1 hereof, the Company shall indemnify Seller and its
subsidiaries for any Tax relating to the Company or its
Subsidiaries which was collected from Seller or any of its
subsidiaries after the Closing Date and to the extent that such Tax
was specifically reserved for or provided for in the Financial
Statements.
(g) After the Closing Date, Seller shall procure that its subsidiary
Tadiran Electronics Industries, Inc. ("TEI") shall file a proper
application under section 6411 of the Code with respect to the
Company's Subsidiary, Tallahassee Communications Industries, Inc.'s
("Talla-Com") net operating losses ("NOLs") arising in tax years
1999 and 2000 so that such NOLs may be "carried back" to tax years
1997 and 1998. Talla-Com and the Company shall reasonably cooperate
with TEI to complete the filing of such application. In the event
that TEI will receive tax refunds as a result of such carrybacks,
Seller shall procure that TEI shall immediately pay the amounts of
any such tax refunds to Talla-Com.
5.7 Non-Compete -
Pursuant to the Non-Compete Agreement, as of the Closing Date and for a
period of five years thereafter, Seller and its Affiliates and successors
shall refrain from engaging, directly or indirectly as shareholders,
partners, joint venturers, consultants or otherwise, either in Israel or
abroad, in the design, development, manufacturing, servicing, marketing or
otherwise with respect to equipment, products or systems containing any of
the Intellectual Property Rights or which compete with the business of the
Company and/or any subsidiary thereof as has been conducted until the
Closing Date.
In addition and pursuant to the Non-Compete Agreement, during same
five-year period, Seller, its Affiliates and successors shall not, either
directly or indirectly, (i) contact for business purposes any person or
entity who has engaged or has been engaged by the Company and/or any
Subsidiary or otherwise associated therewith prior to the Closing Date or
(ii) solicit, induce or otherwise invite the performance of services by any
current employee of the Company or any Subsidiary.
It is specifically understood that Seller and its Affiliates may continue
to conduct their respective businesses mentioned in Schedule 5.7 as
currently operated.
5.8 Non-Assigned Contracts
Prior to Closing, Seller shall, in coordination with Buyer, use reasonable
efforts to obtain the written consent for assignment or transfer of each of
the agreements listed in Schedule 3.12(c) (the "Non-Assigned Contracts")
from any person whose consent is necessary for such assignment or transfer.
If any such consent with respect to any of the Non-Assigned Contracts shall
not be obtained prior to Closing, Seller, the Company, each of the
Subsidiaries concerned and Buyer shall cooperate with each other in any
reasonable back-to-back arrangements pursuant to which the Company (and/or
the Subsidiaries) will assume the obligations, will indemnify Seller for
any liabilities arising from any actions of the Company or its Subsidiaries
after the Closing Date and will be provided with the benefits intended to
be transferred or assigned to the Company (and/or the Subsidiaries) under
such Non-Assigned Contract. Seller shall indemnify the Company (and/or the
Subsidiaries) and shall hold them harmless from any and all Damages (as
defined below) arising out of actions or omissions of Seller with respect
to or the non-assignment of the Non-Assigned Contracts.
ARTICLE 6
Covenants of Buyer
Buyer agrees that:
6.1 Confidentiality -
Prior to the Closing Date, Buyer and its Affiliates will hold, and will use
their best efforts to cause their respective officers, directors,
employees, accountants, counsels, consultants, advisors and agents to hold,
in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the Company or any Subsidiary furnished to Buyer or
its Affiliates in connection with the transactions contemplated by this
Agreement, except to the extent that such information can be shown to have
been (i) previously known to Buyer, (ii) in the public domain through no
fault of Buyer or (iii) later lawfully acquired by Buyer from sources other
than Seller or the Company or any Subsidiary; provided that Buyer may
disclose such information to its officers, directors, employees,
accountants, counsels, consultants, advisors and agents in connection with
the transactions contemplated by this Agreement and to its lenders or other
Persons in connection with obtaining the financing for the transactions
contemplated by this Agreement so long as such persons are informed by
Buyer of the confidential nature of such information and are directed by
Buyer to treat such information confidentially. The obligation of Buyer and
its Affiliates to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such information
as they would take to preserve the confidentiality of their own
confidential information. If this Agreement is terminated, Buyer and its
Affiliates will use their best efforts to cause their respective officers,
directors, employees, accountants, counsels, consultants, advisors and
agents to, destroy or deliver to Seller, upon request, all documents and
other materials, and all copies thereof, obtained by Buyer or its
Affiliates or on their behalf from Seller or the Company or any Subsidiary
in connection with this Agreement that are subject to such confidentiality
measures.
ARTICLE 7
Conditions to Closing
7.1 Conditions to Obligation of Buyer -
The obligation of Buyer to consummate the transactions contemplated hereby
is subject to the satisfaction on or prior to the Closing of the following
conditions any of which may be waived by Buyer:
(a) (i) Seller shall have performed (and shall have caused the Company
to perform) in all material respects all of its obligations
hereunder required to be performed by Seller or the Company on or
prior to the Closing Date, and (ii) the representations and
warranties of Seller contained in this Agreement and in any
certificate or other writing delivered by Seller pursuant hereto,
shall be true at and as of the Closing Date, as if made at and as
of such date.
(b) There shall not be threatened, instituted or pending any action or
proceeding by any Person before any court or governmental authority
or agency, domestic or foreign, seeking to (i) restrain, prohibit
or otherwise interfere with the ownership or operation by Buyer or
any of its Affiliates of all or any material portion of the
business or assets of the Company or any Subsidiary or of Buyer or
any of their respective Affiliates or to compel Buyer or any of its
Affiliates to dispose of all or any material portion of the
business or assets of the Company or any Subsidiary or of Buyer or
any of their respective Affiliates, (ii) impose or confirm
limitations on the ability of Buyer or any of its Affiliates
effectively to exercise full rights of ownership of the Shares,
including without limitation, the right to vote any Shares acquired
from or owned by Seller or any of its Affiliates on all matters
properly presented to the Company's shareholders or (iii) require
divestiture by Buyer or any of its Affiliates of any Shares.
(c) There shall not be any action taken, or any statute, rule,
regulations, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable to the purchase
of the Shares, by any court, government or governmental authority
or agency, domestic or foreign, that, in the reasonable judgment of
Buyer could, directly or indirectly, result in any of the
consequences referred to in clauses 7.1(b)(i) through 7.1(b)(iii)
above.
(d) All consents from third parties and authorizations or approvals
from governmental authorities, required to consummate the
transactions contemplated hereby and to preserve the Company's and
the Subsidiaries' businesses intact, have been obtained, including
without limitation, (i) the unconditioned approval of the
Commissioner of Restrictive Trade Practices under the Restrictive
Trade Practices Law of 1988; (ii) the approval of the Office of
Chief Scientist of the Israeli Ministry of Industry and Commerce;
(iii) the consent and approval of the Ministry of Defense; (iv) the
consent of the Investment Center in connection with the Company's
"approved enterprise certificates" set forth on Schedule 3.36; (v)
any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been
terminated; (vi) the consent of IFTRIC and (vii) the approval of
the banks and any other third parties identified on Schedule
7.1(d), in form and substance reasonably satisfactory to Buyer, and
no such consent, authorization or approval shall have been revoked.
(e) No event, occurrence, fact, condition, change or development shall
have occurred that, individually or in the aggregate, has
constituted or resulted or could reasonably be expected to
constitute or result in a Material Adverse Effect.
(f) Each of the Company and Subsidiaries shall conduct its business in
the ordinary course consistent with past practice and no strike or
other organized labor actions with the Company's or the
Subsidiaries' employees will prevent or interfere with the transfer
of control or the conduct of the Company's and each Subsidiary's
business in the ordinary course unless the same shall be resolved
prior to Closing at no additional cost to Buyer or the Company.
7.2 Conditions to Obligations of Seller -
The obligation of Seller to consummate the transactions contemplated hereby
is subject to the satisfaction of the following conditions any of which may
be waived by Seller:
(a) (i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to
the Closing Date, and (ii) the representations and warranties of
Buyer contained in this Agreement and in any certificate or other
writing delivered by Buyer pursuant hereto shall be true in all
material respects at and as of the Closing Date, as if made at and
as of such date.
(b) Buyer shall have received all consents, authorization or approvals
from governmental authorities referred to in Section 4.3, in each
case in form and substance reasonably satisfactory to Seller, and
no such consent, authorization or approval shall have been revoked.
7.3 Unsatisfied Conditions
Either Seller or Buyer may terminate this Agreement without liability to
the other party to this Agreement by delivering a written notice to that
effect in the event that the conditions to the performance of its
respective obligations shall not have been satisfied on or before January
1, 2000; provided, however, that the party seeking termination pursuant to
this Section shall not be at such time in material breach of its
representations, warranties, covenants or agreements pursuant to this
Agreement. The foregoing shall not derogate from the parties respective
obligations to use their best efforts to fulfill the conditions to the
performance of the obligations of the other party and to fulfill their
respective covenants hereunder.
ARTICLE 8
Indemnification
8.1 Indemnification -
(a) Without derogating from any right or remedy available under
applicable law, Seller shall promptly indemnify Buyer and its
Affiliates against and shall hold them harmless from any and all
damages, loss, liabilities and expenses (including, without
limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any claim action,
suit or proceeding) ("Damages"), arising out of, based on or
otherwise incurred or suffered by Buyer or the Company in
connection with (i) any misrepresentation, breach of warranty or
failure to perform any covenant or obligation of Seller under this
Agreement; and (ii) any non-compliance of the actual condition of
the Company or the Subsidiaries with the representations hereunder.
For the removal of doubt it is hereby acknowledged that Seller's
indemnification obligations shall not apply with respect to
liabilities specifically reserved for or provided for in the
Financial Statements and to the extent specifically reserved for or
provided for in the Financial Statements. (b) Without derogating
from any right or remedy available under applicable law, Buyer
shall promptly indemnify Seller and its Affiliates against and
shall hold them harmless from any and all Damages, based on or
otherwise incurred by Seller in connection with the Company, the
Subsidiaries or their Affiliates arising out of any
misrepresentation, breach of warranty, covenant or agreement made
or to be performed by Buyer pursuant to this Agreement.
(c) Seller agrees to assume liability for and hold Buyer, the Company
and the Subsidiaries harmless against any indebtedness of the
Company and its Subsidiary, Talla-Com., incurred as a result of a
compromise agreement among TEI and the U.S. Internal Revenue
Service.
(d) The representations and warranties set forth in Article 3 and
Article 4 shall survive the Closing Date as follows: (a) with
respect to the representations and warranties set forth in Sections
3.1, 3.2, 3.4, 3.5, 3.6, 3.7, 3.11, , 3.17, 3.25, 3.26, 3.27 and
3.36 without limitation as to time; (b) with respect to the
representations and warranties set forth in Sections 3.10, 3.16 and
3.23 for a period of fifteen (15) months following the Closing
Date; (c) with respect to the representations and warranties set
forth in Section 3.28 until the fifth anniversary of the Closing
Date; and (d) with respect to any other representations or
warranties until the third anniversary of the Closing Date.
Notwithstanding the preceding sentence, any representation or
warranty in respect of which indemnity may be sought under this
Agreement shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, if notice of the
circumstance which may give rise to such right of indemnity shall
have been given to the party against whom such indemnity may be
sought prior to such time.
(e) The indemnification hereunder shall not apply in the event the
aggregate of Damages incurred by a party does not exceed the amount
of $100,000. Furthermore, Seller shall not be liable to
indemnification based solely upon a breach of the representations
and warranties set forth in Sections 3.10, 3.16 or 3.23 in the
event the aggregate Damages incurred in respect of the foregoing
Sections (taken as a whole) do not exceed $5,000,000.
(f) The indemnification liability hereunder shall not exceed the amount
of Damages sustained, and the maximum shall not exceed $150 million
plus interest incurred on account thereof and plus $3,000,000.
(g) In calculating the Damages hereunder the relevant Tax consequences
shall be taken into account.
(h) Subject to Section 8.2 below, nothing in this Agreement shall be
deemed to relieve any party from its duty to mitigation of its
losses whether or not such losses are covered by the indemnity
liability of the other party.
8.2 Procedures -
(a) The party seeking indemnification under Sections, 5.6(d), 5.6(e),
5.6(f) and 8.1 (the "Indemnified Party") agrees to give prompt
notice to the party against whom indemnity is sought (the
"Indemnifying party") of the assertion of any claim, or the
commencement of any suit, action or proceeding including the
issuance of a tax assessment against the Company in respect of
which indemnity may be sought under such Section. The Indemnifying
Party may at the request of the Indemnified Party participate in
and control the defense of any such suit, action or proceeding at
its own expense. The Indemnifying Party shall not be liable under
Sections 8.1, 5.6(d), 5.6(e) and 5.6(f) for any settlement effected
without its consent of any claim, litigation or proceeding in
respect of which indemnity may be sought hereunder, which consent
shall not be unreasonably withheld.
(b) Notwithstanding the foregoing, in the event the claim for which the
indemnity sets forth in Section 8.1 is sought shall be made by any
governmental or municipal agency or any supplier of public
utilities, and such claims, if not paid immediately, would risk the
interruption of the operation of the business of the Company, its
Affiliates and/or Subsidiaries, Buyer shall have the right to repay
such claim, under protest, five (5) Business Days following a
notification to Seller of such claim. Such payment shall not
constitute a waiver of the Buyer's right for indemnification as set
forth in Section 8 hereto.
The provisions of this Section 8 shall survive the execution and delivery
of this Agreement and the consummation of the transactions contemplated
herein, regardless of any investigation made by or on behalf of the
parties.
ARTICLE 9
Miscellaneous
9.1 Notice -
All notices, requests and other communications to any party hereunder shall
be in writing (including facsimile transmission) and shall be given, If to
Buyer, to:
Talla Communication Industries Ltd.
26 Hashoftim St.
Holon 58102, Israel
Attention: Mr. Michael Geiger
Fax: [number]
With a copy to:
Zellermayer & Pelossof, Advocates
Europe House, 37 Shaul Hamelech Boulevard
Tel-Aviv 64928, Israel
Attention: Michael Zellermayer, Adv.
Fax No.: 972-3-6952884
If to Seller, to:
Tadiran Ltd.
4 Derech Hachorechet St.
Yehud 56000, Israel
Attention: Yisrael Zamir
Fax: 972-3-5393409
With a copy to:
Herzog, Fox & Neeman
4 Weizmann St.
Tel Aviv 64239, Israel
Attention: Alan Sacks, Adv.
Fax: 972-3-6966464
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior
to 5 p.m. in the place of receipt and such day is a business day in the
place of receipt. Otherwise, any such notice, request or communication
shall be deemed not to have been received until the next succeeding
business day in the place of receipt.
9.2 Further Assurances -
The parties hereto shall do and perform and shall cause to be done and
performed all further acts and things and shall execute and deliver such
other documents, certificates, agreements and other writings and shall take
such other reasonable actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement. Seller and Buyer will as promptly as practicable file with the
United States Trade Commission (the "FTC") and the United States Department
of Justice (the "DOJ") the notification and report form, if any, required
for the transactions contemplated hereby and any supplemental information
requested in connection therewith pursuant to the HSR Act. Any such
notification and report form and supplemental information will be in
substantial compliance with the requirements of the HSR Act. Seller and
Buyer shall furnish to the other such necessary information and reasonable
assistance as the other may request in connection with its preparation of
any filing or submission which is necessary under the HSR Act. Seller and
Buyer shall keep each other apprised of the status of any communications
with, and inquiries or requests for additional information from the FTC and
the DOJ and shall comply promptly with any such inquiry or request.
9.3 Amendments and Waivers -
(a) Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed, in
the case of an amendment, by each party to this Agreement, or in
the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by
law.
9.4 Expenses -
All costs and expenses incurred in connection with this Agreement shall be
paid by the party incurring such cost or expense. Seller shall pay such
costs and expenses incurred by the Company or any Subsidiary.
9.5 Successors and Assigns -
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that no party may assign, delegate or otherwise transfer any of
its rights or obligations under this Agreement without the prior written
consent of each other party hereto, except that Buyer may transfer or
assign, in whole or from time to time in part, the right to purchase all or
a portion of the Shares, but no such transfer or assignment will relieve
Buyer of its obligations hereunder.
9.6 Governing Law; Jurisdiction -
(a) This Agreement, including all exhibits and schedules hereto, and
the rights and obligations of the parties hereunder or pursuant
hereto shall be governed by and construed in accordance with the
laws of the State of Israel.
(b) The competent courts situated in Tel-Aviv shall have exclusive
jurisdiction in all matters relating to this Agreement.
9.7 Counterparts; Third Party Beneficiaries -
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by
the other party hereto. No provision of this Agreement is intended to
confer upon any Person other than the parties hereto and the Company any
rights or remedies hereunder.
9.8 Entire Agreement -
This Agreement and the documents delivered hereunder constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral
and written, between the parties with respect to the subject matter of this
Agreement.
9.9 Public Announcements -
The parties agree to consult with each other before issuing any press
release or making any public statement with respect to this Agreement or
the transactions contemplated hereby and, except as may be required by
applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
9.10 Captions -
The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.
9.11 Schedules and Exhibits -
The Schedules and Exhibits constitute a part of this Agreement and are
incorporated into this Agreement for all purposes as if fully set forth
herein.
9.12 Severability -
If any provision, clause, or part of this Agreement, or the application
thereof under certain circumstances, is held invalid, the remainder of this
Agreement, or the application of such provision, clause or part under other
circumstances, shall not be affected thereby unless such invalidity
materially impairs the ability of the parties to consummate the
transactions contemplated by this Agreement.
9.13 Dollars -
All currency amounts expressed herein (whether or not preceded by US$) are
in the lawful currency of the United States of America or in the NIS
equivalent thereof in accordance with the representative rate of the US
Dollar published by the Bank of Israel and last known on the date of
payment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and
year first above written.
TALLA COMMUNICATION INDUSTRIES LTD.
By: ______________________
Name:
Title
TADIRAN LTD.
By: ______________________
Name:
Title:
