UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PC ETCETERA, INC.
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(Name of Issuer)
Common and Preferred Stock, par value $.001 per share
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(Title of Class of Securities)
693189300
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(CUSIP Number)
Steven A. Meetre
Carter, Ledyard & Milburn
2 Wall Street, New York, New York 10005
(212) 732-3200
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
February 13, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d- 1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
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The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 693189300
1 NAME OF REPORTING PERSON: MASHOV COMPUTERS MARKETING LTD.
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: None
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS: AF, WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e): [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION: Israel
NUMBER OF 7 SOLE VOTING POWER: 8,308,924 shares of Common Stock
SHARES and 658,412 shares of Series C Preferred Stock, where
BENEFICIALLY each such share of Preferred Stock is convertible
OWNED BY into 10 shares of Common Stock and has 10 to 1
EACH voting rights in relation to shares of Common Stock
REPORTING
PERSON WITH 8 SHARED VOTING POWER: -0-
9 SOLE DISPOSITIVE POWER: 8,308,924 shares of Common
Stock and 658,412 shares of Series C Preferred Stock,
where each such share of Preferred Stock is
convertible into 10 shares of Common Stock and has 10
to 1 voting rights in relation to shares of Common
Stock
10 SHARED DISPOSITIVE POWER: -0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 8,308,924 shares of Common Stock and 658,412 shares of Series C
Preferred Stock, where each such share of Preferred Stock is
convertible into 10 shares of Common Stock and has 10 to 1 voting
rights in relation to shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
<PAGE>
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 69% on a
fully diluted basis
14 TYPE OF REPORTING PERSON: CO
Item 1. Security and Issuer.
The class of equity securities to which this Statement relates
is the Common Stock, par value $.001 per share (the "Common Stock"), and the
Series C Preferred Stock, par value $.001 per share (the "Preferred Stock"), of
PC Etcetera, Inc., a Delaware corporation (the "Issuer"). The principal
executive offices of the Issuer are located at 462 7th Avenue, New York, New
York 10018.
Item 2. Identity and Background.
This Statement is being filed by Mashov Computers Marketing Ltd.
("Mashov"), a corporation formed under the laws of the State of Israel. Mashov's
principal businesses are in instructor-led personal computer training and the
development and sale of technology-based training products and services, both
focused on the Israeli market. The address of Mashov's principal business and
principal office, and the business address of its executive officers listed
below, is 5 HaPlada Street, Or-Yehuda, Israel 60218.
The following is information concerning each executive officer or
director of Mashov:
1. Name: Roy Machnes
Position with Mashov: Director and Chief Executive Officer
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Present Principal Occupation:
Chief Executive Officer, PC Etcetera, Inc.
Chief Executive Officer, Mashov
Address: c/o PC Etcetera, Inc.
462 Seventh Avenue
New York, New York 10018
Citizenship: Israeli
2. Name: Elan Penn
Position with Mashov: Director and Chief Financial Officer
Present Principal Occupation:
Chief Financial Officer, Mashov
Director and Chief Financial Officer, PC Etcetera, Inc.
Address: 5 HaPlada Street
Or-Yehuda, Israel 60218
Citizenship: Israeli
3. Name: David Assia
Position with Mashov: Director
Present Principal Occupation:
Director and Chief Executive Officer, Magic Software Enterprises Ltd.,
5 HaPlada Street
Or-Yehuda, Israel 60218
Address: 5 HaPlada Street
Or-Yehuda, Israel 60218
Citizenship: Israeli
4. Name: Jack Dunietz
Position with Mashov: Director
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<PAGE>
Present Principal Occupation:
Chief Executive Officer,
Mashov Computers Ltd., 5 HaPlada Street
Or-Yehuda, Israel 60218
Address: 5 HaPlada Street
Or-Yehuda, Israel 60218
Citizenship: Israeli
5. Name: Shem Tov Elhalal
Position with Mashov: Director
Present Principal Occupation: Vice President, Hamashbir Hamerkazi
Address: 5 HaPlada Street
Or-Yehuda, Israel 60218
Citizenship: Israeli
6. Name: Mira Finkelstein
Position with Mashov: Director
Present Principal Occupation:
Chief Executive Officer, Finkelstein Adagen
Address: 5 HaPlada Street
Or-Yehuda, Israel 60218
Citizenship: Israeli
During the past five years, neither Mashov nor (to the best knowledge
of Mashov) any of its executive officers or directors listed above has been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) a party to a civil proceeding of judicial or
administrative body of competent jurisdiction, as a result of which
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proceeding it or he was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, United States federal or State, or Israeli, securities laws, or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On February 13, 1997, pursuant to a Stock Purchase Agreement dated
February 6, 1997, between the Issuer and Mashov (the "Stock Purchase
Agreement"), Mashov acquired 8,438,924 shares of Common Stock and 658,412 shares
of Preferred Stock (the Preferred Stock together with the Common Stock, the
"Sale Stock"), where each such share of Preferred Stock is convertible into 10
shares of Common Stock and has 10 to 1 voting rights in relation to shares of
Common Stock. The Stock Purchase Agreement and all exhibits thereto are being
filed herewith as Exhibit 1 to this Statement and are hereby incorporated herein
by reference.
In consideration for the Sale Stock, Mashov transferred to the Issuer
all of Mashov's interest in Mashov's subsidiary, Sivan Computers Training Center
(1994) Ltd., a corporation incorporated under the laws of the State of Israel
("Sivan"), where such interest constituted 99.9% of the outstanding share
capital of Sivan,(footnote 1) and all of Mashov's interest in Mashov's
subsidiary, Mashov Computer Based Training (C.B.T.) Ltd., a corporation
incorporated under
- --------
1 Prior to the execution of the Stock Purchase Agreement, Sivan owned
312,547 shares of Mashov and 234,918 options to purchase shares of Mashov
(collectively, the "Mashov Option Shares"). Pursuant to an Agreement dated
February 5, 1997, Sivan granted to Mashov Computers Ltd., an Israeli corporation
and the parent of Mashov, the option to purchase the Mashov Option Shares at the
average market value of the Mashov Option Shares during the five day period
immediately following the consummation of the transactions contemplated by the
Stock Purchase Agreement, as quoted on the Stock Exchange in Tel Aviv Ltd.
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<PAGE>
the laws of the State of Israel ("Mashov CBT"), where such interest constituted
99% of the outstanding share capital of Mashov CBT.(footnote 2) As a result of
the foregoing and other transactions provided for in the Stock Purchase
Agreement, Mashov owns 69% of the Issuer's equity and voting securities on a
fully diluted basis.
Item 4. Purpose of Transaction.
Mashov acquired the Sale Stock as part of a series of transactions
provided for in the Stock Purchase Agreement, by which Mashov acquired a
controlling interest in PCE. Management of Mashov determined that such
transactions would create opportunities for growth in the United States ("U.S.")
markets for the core products and services that Mashov currently provides in
Israel. Management of Mashov anticipates that the Issuer may in the future merge
with or acquire other entities who operate in the U.S. and other markets for the
core products and services of Mashov and the Issuer.
The Stock Purchase Agreement provides that Mashov will convert its
Preferred Stock into the Issuer's Common Stock as soon as possible following the
closing of the transaction. The six existing members of the Board of Directors
of the Issuer will nominate and elect a seventh Director as soon as possible. In
the event of a rights offering by Issuer, Mashov may
- ------------------
2 Prior to the execution of the Stock Purchase Agreement, Mashov owned
70% of the issued and outstanding ordinary shares of Mashov CBT. Pursuant to a
Purchase Agreement between Mashov and Elron Electronic Industries Ltd., an
Israeli corporation ("Elron") dated February 6, 1997, Mashov purchased from
Elron all of the ordinary shares of Mashov CBT held by Elron, which shares
represented 30% of issued and outstanding shares of Mashov CBT. In consideration
of such purchase and sale, Mashov paid to Elron upon the execution of the Stock
Purchase Agreement 130,000 shares of Common Stock of the Issuer.
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<PAGE>
call due and payable $600,000 of intercompany debt owing to Mashov from Sivan
for use in the purchase by Mashov of rights of Issuer being offered.
Apart from the foregoing, neither Mashov nor any person named in Item 2
of this Statement (in his or her capacity as a director or officer of Mashov)
has any plan or proposal which relates to or would result in: (a) the
acquisition by any person of additional securities of the Issuer except for the
securities discussed in Item 5 below, or the disposition of securities of the
Issuer; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Issuer or any of
its subsidiaries; (d) any change in the board of directors or management of the
Issuer, including any plan or proposal to change the number or term of directors
or to fill any existing vacancies on the board; (e) any material change in the
capitalization or dividend policy of the Issuer; (f) any other material change
in the Issuer's business or corporate structure; (g) any change in the Issuer's
certificate of incorporation or bylaws or other actions which may impede the
acquisition of control of the Issuer by any person; (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange; (i)
a class of equity securities of the Issuer becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934; or (j) any action similar to any of the foregoing. However, such plans or
proposals may have been considered, and may from time to time hereafter be
considered, by Roy Machnes, Elan Penn, Jack Dunietz and David Assia, the four
designees of Mashov named in Item 2 of this Statement, in their capacities as
directors and executive officers of the Issuer.
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<PAGE>
Item 5. Interest in Securities of the Issuer.
(a) and (b) Mashov is the beneficial owner of 8,308,924 shares of
Common Stock and 658,412 shares of Preferred Stock of the Issuer, where each
such share of Preferred Stock is convertible into 10 shares of Common Stock and
has 10 to 1 voting rights in relation to shares of Common Stock. Such Common
Stock and Preferred Stock represent 69% of the equity securities of the Issuer
on a fully diluted basis. Mashov has the power to vote and dispose of the Sale
Stock and does not share power to vote or dispose of any its interests in the
Issuer.
To the best knowledge of Mashov, none of its directors or officers is
the beneficial owner of any interest in the Issuer except that Roy Machnes and
Elan Penn have been granted incentive stock options (the "Stock Options") in
connection with their respective employment agreements attached hereto as
Exhibits C and D, respectively, of the Stock Purchase Agreement. Such Stock
Options vest according to the following schedules:
Roy Machnes:
Date on Which Number of Options Vesting on
Options Vest: Such Date:
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August 1, 1997: 108,334
August 1, 1998: 108,333
August 1, 1999: 108,333
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<PAGE>
Elan Penn:
Date on Which Number of Options Vesting on
Options Vest: Such Date:
- ------------- ----------
August 1, 1997: 66,667
August 1, 1998: 66,666
August 1, 1999: 66,666
The exercise price per Stock Option is the average of the bid and asked
price of the shares of the Issuer as quoted on the NASDAQ Bulletin Board for the
10 business days following February 13, 1997. The Options are exercisable for a
period of five years from the date on which such options vest, or until 3 months
after the date of any termination of employment, whichever is earlier.
(c) Apart from the acquisition by Mashov of the Sale Stock and
the acquisition by Roy Machnes and Elan Penn of the Stock Options described in
Item 5 (a) and (b) above, neither Mashov, nor, to the best of its knowledge, any
of its directors and executive officers listed in Item 2 of this Statement, has
effected any transactions in the Common or Preferred Stock of the Issuer since
December 21, 1996.
(d) Reference is made to Items 3 and 5 (a) and (b) of this Statement.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Reference is made to Items 3, 4 and 5 (a) and (b) of this Statement.
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<PAGE>
Item 7. Material to be Filed as Exhibits.
Exhibit No.
1 - Stock Purchase Agreement dated February 6, 1997 by
and between Mashov and the Issuer.
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<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, the undersigned certifies that the information set forth in this
Statement is true, complete and correct.
Date: February 13, 1997 MASHOV COMPUTERS MARKETING LTD.
By: /s/ Elan Penn
-------------------------
Chief Financial Officer
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<PAGE>
EXHIBIT 1
<PAGE>
FORM
OF
STOCK PURCHASE AGREEMENT
between
MASHOV COMPUTERS MARKETING LTD.
and
PC ETCETERA, INC.
-----------------------------------
Dated as of February 6, 1997
<PAGE>
TABLE OF CONTENTS
SUMMARY OF TRANSACTION.......................................................
ARTICLE I SALE OF STOCK AND TERMS OF PAYMENT................................
1.01 The Sale......................................................
1.02 Consideration.................................................
ARTICLE II RELATED AGREEMENTS...............................................
2.01 Related Agreements............................................
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER........................
3.01 Organization; Qualification...................................
3.02 Capitalization................................................
3.03 Title to Stock................................................
3.04 Investments...................................................
3.05 Authority Relative to this Agreement..........................
3.06 Consents and Approvals; No Violation..........................
3.07 Financial Statements..........................................
3.08 Undisclosed Liabilities.......................................
3.09 Absence of Certain Changes and Events.........................
3.10 Title and Condition of Assets.................................
3.11 Proprietary Rights............................................
3.12 Real Property.................................................
3.13 Real Property Leases..........................................
3.14 Insurance.....................................................
3.15 Labor Matters.................................................
3.16 Employee Benefit Plans; ERISA.................................
3.17 Certain Contracts and Arrangements............................
3.18 Legal Proceedings, Etc........................................
3.19 Taxes.........................................................
3.20 Environmental Matters.........................................
3.21 Compliance with Law...........................................
3.22 Certain Interests.............................................
3.23 Powers of Attorney, Absence of Limitation on Competition......
3.24 Net Tangible Deficiency of the Seller Group...................
3.25 Full Disclosure...............................................
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..........................
4.01 Organization; Qualification; Subsidiaries.....................
4.02 Capitalization of Subsidiaries................................
4.03 Title to Stock................................................
4.04 Investments...................................................
4.05 Authority Relative to this Agreement..........................
4.06 Consents and Approvals; No Violation..........................
4.07 Financial Statements..........................................
4.08 Undisclosed Liabilities.......................................
4.09 Absence of Certain Changes and Events.........................
4.10 Title and Condition of Assets.................................
4.11 Proprietary Rights............................................
4.12 Real Property Leases..........................................
4.13 Labor Matters.................................................
4.14 Insurance.....................................................
4.15 Certain Contracts and Arrangements............................
4.16 Legal Proceedings, Etc........................................
4.17 Taxes.........................................................
4.18 Environmental Matters.........................................
4.19 Compliance with Law...........................................
4.20 Employee Benefit Plans........................................
4.21 Certain Interests.............................................
4.22 Powers of Attorney, Absence of Limitation on Competition......
4.23 The Subsidiaries..............................................
4.24 Full Disclosure...............................................
ARTICLE V THE CLOSING AND CERTAIN CLOSING DELIVERIES........................
5.01 Time and Place of Closing.....................................
5.02 Deliveries by Seller..........................................
5.03 Deliveries by Buyer...........................................
ARTICLE VI POST-CLOSING COVENANTS...........................................
6.01 Expenses......................................................
6.02 Further Assurances............................................
6.03 Public Announcements..........................................
6.04 Commissions and Fees..........................................
6.05 Sales and Transfer Taxes......................................
6.06 Other Tax Matters.............................................
6.07 Shareholder Claims............................................
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6.08 Special Meeting...............................................
6.09 Post-Closing Audits; Adjustments to Purchase Price............
6.10 Seller Board Composition......................................
6.11 Buyer Conversion Covenant.....................................
6.12 Covenant Not to Call Intercompany Debt........................
6.13 Tag-Along Rights for Certain Shareholders.....................
ARTICLE VII MISCELLANEOUS PROVISIONS........................................
7.01 "Piggy Back" Registration Rights..............................
7.02 Amendment and Modification....................................
7.03 Waiver of Compliance..........................................
7.04 Survival......................................................
7.05 Notices.......................................................
7.06 Assignment....................................................
7.07 Governing Law.................................................
7.08 Arbitration...................................................
7.09 Counterparts..................................................
7.10 Interpretation................................................
7.11 Entire Agreement..............................................
7.12 Specific Performance..........................................
7.13 Severability of Covenants.....................................
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EXHIBITS AND SCHEDULES
Page and Section
Exhibits Description Reference
- -------- ----------- ---------
A Conversion and Waiver Agreement [section 2.01]
B Form of Employment Agreement [section 2.01]
with Terry Steinberg
C Form of Employment Agreement [section 2.01]
with Roy Machnes
D Form of Employment Agreement [section 2.01]
with Elan Penn
E Certificate of Designation of PCE [section 2.01]
Series C Preferred Stock
F Purchase Agreement between [section 2.01]
Buyer and Elron Electronic Industries Ltd.
Page and Section
Schedules Description Reference
Relating to
Seller
3.01 Qualifications [section 3.01]
3.02 Capitalization [section 3.02]
3.04 Investment [section 3.04]
3.07 Financial Statements [section 3.07]
3.08 Liabilities [section 3.08]
3.09 Certain Changes and Events [section 3.09]
3.10 Condition of Assets [section 3.10]
3.11 Proprietary Rights [section 3.11]
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<PAGE>
3.12 Real Property [section 3.12]
3.13 Real Property Leases [section 3.13]
3.14 Insurance [section 3.14]
3.15 Labor Matters [section 3.15]
3.16 Employee Benefit Plans [section 3.16]
3.17 Certain Contracts [section 3.17]
3.18 Legal Proceedings, Etc. [section 3.18]
3.19 Taxes [section 3.19]
3.20 Environmental Matters [section 3.20]
3.22 Certain Interests [section 3.22]
3.23 Powers of Attorney; [section 3.23]
Limitations on Competition
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<PAGE>
Page and Section
Schedules Description Reference
Relating to
Buyer and the
Buyer's Subsidiaries
4.01 Qualifications [section 4.01]
4.02 Capitalization [section 4.02]
4.04 Investments [section 4.04]
4.07 Financial Statements of Subsidiaries [section 4.07]
4.08 Liabilities [section 4.08]
4.09 Certain Changes and Events [section 4.09]
4.10 Property Liens [section 4.10]
4.11 Proprietary Rights [section 4.11]
4.12 Real Property Leases [section 4.12]
4.13 Labor Matters [section 4.13]
4.14 Insurance [section 4.14]
4.15 Certain Contracts [section 4.15]
4.16 Legal Proceedings, Etc. [section 4.16]
4.17 Taxes [section 4.17]
4.18 Environmental Matters [section 4.18]
4.20 Employee Benefit Plans [section 4.20]
4.21 Certain Interests [section 4.21]
4.22 Powers of Attorney; [section 4.22]
Limitations on Competition
6.05 Title Exceptions [section 4.19]
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<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 6, 1997 ("the
Agreement"), between PC Etcetera, Inc., a corporation incorporated in the State
of Delaware ("Seller"), and Mashov Computers Marketing Ltd., a corporation
incorporated under the laws of the State of Israel ("Buyer").
SUMMARY OF TRANSACTION
Buyer desires to purchase, and Seller desires to issue and sell, 69% of
the common stock of Seller, par value $.001 per share ("PCE Common Stock"), upon
the terms and subject to the satisfaction of the conditions set forth in this
Agreement. In consideration of the foregoing, Buyer shall transfer to Seller all
of Buyer's interest in Buyer's subsidiary, Sivan Computers Training Center
(1994) Ltd., a corporation incorporated under the laws of the State of Israel
("Sivan"), where such interest constitutes 99.9% of the outstanding share
capital of Sivan, and all of Buyer's interest in Buyer's subsidiary, Mashov
Computer Based Training (C.B.T.) Ltd., a corporation incorporated under the laws
of the State of Israel ("Mashov CBT"), where such interest constitutes 99% of
the outstanding share capital of Mashov CBT.
To effect such purchase and sale and in consideration of the mutual
covenants, representations, warranties and agreements hereinafter set forth, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
SALE OF STOCK AND TERMS OF PAYMENT
1.01 The Sale. Upon the terms and subject to the satisfaction of the
conditions contained in this Agreement, at the Closing (as hereinafter defined),
Seller will sell, assign, transfer and deliver to Buyer, and Buyer will purchase
and acquire from Seller, 8,438,924 shares of PCE Common Stock and 658,412 shares
of Seller's preferred stock, par value $.001 per share ("PCE Preferred Stock"),
to be designated as a new series of PCE Preferred Stock ("PCE Series C Preferred
Stock"), each share being convertible into ten shares of PCE Common Stock and
having a ten to one voting right in relation to shares of PCE Common Stock, such
PCE Preferred Stock being issued to Buyer solely due to the lack of a sufficient
number of shares of PCE Common Stock in the capital structure of Seller. The PCE
Common Stock to be issued to Buyer hereunder, and the shares of PCE Common Stock
into which the PCE Series C Preferred Stock is convertible, shall together
constitute 69% of the outstanding PCE Common Stock on a fully-diluted basis
after giving effect to the transactions contemplated by this Agreement, subject
to adjustment as contemplated by Section 6.09 hereof (the "Sale Stock").
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<PAGE>
1.02 Consideration. Upon the terms and subject to the satisfaction of
the conditions contained in this Agreement, in consideration of the aforesaid
sale, assignment, transfer and delivery of the Sale Stock, Buyer will transfer
to Seller 999 Ordinary Shares of Sivan NIS 1 par value ("Sivan Ordinary Shares")
and 999 Ordinary Shares of Mashov CBT, NIS 1 par value ("Mashov CBT Ordinary
Shares, and together with the foregoing, the "Purchase Price").
ARTICLE II
RELATED AGREEMENTS
2.01 Related Agreements. Prior to, or simultaneously with, the Closing
hereunder the following agreements (together with all certificates, instruments
and documents required hereby or thereby, the "Related Agreements") shall be
executed and delivered by the parties:
(a) Conversion and Waiver Agreement ("Conversion and Waiver
Agreement") among Seller and the individuals or entities listed therein
in the form attached hereto as Exhibit A.
(b) Employment Agreements between Seller and each of Terry
Steinberg, Roy Machnes and Elan Penn in the forms attached hereto as
Exhibits B, C and D.
(c) Certificate of Designation of Preferred Stock authorized
by resolution of the Board of Directors of Seller providing for an
issuance of 658,412 shares of PCE Preferred Stock designated as "Series
C Preferred Shares" in the form attached hereto as Exhibit E.
(d) Purchase Agreement between Buyer and Elron Electronic
Industries Ltd. with respect to the Ordinary Shares of Mashov CBT in
the form attached hereto as Exhibit F.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
As an inducement to Buyer to enter into this Agreement, Seller hereby
represents and warrants to Buyer that as of the Closing Date:
3.01 Organization; Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now
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<PAGE>
conducted. Seller is in good standing in each of the jurisdictions set forth in
Schedule 3.01 hereto in which it is qualified or registered to do business as a
foreign corporation. Seller is not required to be qualified or licensed to do
business as a foreign corporation in any other jurisdiction in which Seller
owns, leases or operates property or otherwise conducts business, except where
the failure to be so qualified or licensed would not have a material adverse
effect on the business, results of operations or financial condition of Seller
(a "Material Adverse Effect"), and Seller has not received notice from any
governmental agency or authority that it is required to register or qualify to
do business as a foreign corporation in any jurisdiction other than such
jurisdictions in which it has already registered. Seller does not have any
subsidiaries., except PC Etcetera (Israel) Ltd. ("PCE Israel") an Israeli
corporation that is in the process of being dissolved.
3.02 Capitalization. The total authorized capital stock of Seller prior
to the Closing consists of 15,000,000 shares of PCE Common Stock, of which
3,169,129 shares are issued and outstanding, and 5,000,000 shares of PCE
Preferred Stock, par value $.001 per share, of which 1,000,000 shares of Series
A Preferred Stock ("PCE Series A Preferred Stock) are issued and outstanding
(which will be converted to PCE Common Stock simultaneously with the Closing).
The issued and outstanding shares of PCE Common Stock and PCE Preferred Stock
immediately after giving effect to the Closing of the transactions contemplated
hereby shall be 15,000,000 shares of PCE Common Stock and 658,412 shares of PCE
Series C Preferred Stock. Upon its issuance to Buyer, the Sale Stock will be
validly issued, fully paid and nonassessable in the hands of Buyer. All of the
shares of PCE Common Stock into which the PCE Series C Preferred Stock is
convertible have been duly authorized and reserved for issuance to Buyer upon
conversion of the PCE Series C Preferred Stock to the extent possible given the
current capital structure of Seller. The total authorized share capital of PCE
Israel consists of 500 Ordinary Shares, par value NIS .001 per share, 99.8% of
which is owned by Seller. Other than this Agreement and the Related Agreements,
and except as set forth on Schedule 3.02 hereto, there is no subscription,
option, warrant, call, right, agreement or commitment relating to the issuance,
sale, delivery or transfer (including any right of conversion or exchange under
any outstanding security or other instruments) by Seller or PCE Israel, of the
PCE Common Stock or other capital stock of Seller or PCE Israel. There are no
outstanding contractual obligations of Seller to repurchase, redeem or otherwise
acquire any outstanding shares of capital stock of Seller or PCE Israel. At the
Closing, Seller will cause the transfer of the one share of PCE Israel presently
owned by KH Trustees Limited to be transferred to Sivan.
3.03 Title to Stock. Seller represents that it has unissued in its
authorized capital structure no less than such number of shares of PCE Common
Stock as shall equal the number of shares of PCE Common Stock.
3.04 Investments. Schedule 3.04 hereto sets forth each of the equity or
similar investments of Seller and PCE Israel, directly or indirectly, in or with
any subsidiary, corporation, partnership, association, joint venture or other
entity. Except as described in Schedule 3.04, no such investment is subject to
any restriction (contractual, statutory or otherwise) which would impair
Seller's ability to dispose of any such investment at any time, and all of such
investments are owned free and clear of any lien, claim, charge, pledge,
security interest, option or other legal or equitable encumbrance.
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3.05 Authority Relative to this Agreement. Seller represents and
warrants (a) that it has full legal power and authority to execute and deliver
this Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby, and (b) that this Agreement and each of the
Related Agreements has been duly and validly executed and delivered by Seller
and constitute valid and binding obligations of Seller, enforceable against it
in accordance with their respective terms.
3.06 Consents and Approvals; No Violation. Except for the amendment of
Seller's Certificate of Incorporation required hereby solely to increase the
capitalization of Seller, neither the execution and delivery of this Agreement
and the Related Agreements by Seller, the issuance by Seller of the Sale Stock
and the Derivative Securities pursuant to this Agreement nor the consummation of
the other transactions contemplated by this Agreement and the Related Agreements
will (a) conflict with or result in any breach of any provision of the
Certificate of Incorporation or By-Laws (or other similar governing documents)
of the Seller, (b) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority other
than those that have been made or obtained; (c) to the best of Seller's
knowledge, result in a default (or give rise to any right of termination,
cancellation or acceleration) under the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which the Seller is a party or by which the Seller or any of its
assets may be bound, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained; (d) to the best of Seller's knowledge, result in the creation of
any encumbrance, security interest, equity or right of others upon any of the
properties or assets of the Seller or under the terms, conditions or provisions
of any agreement, instrument or obligation to which the Seller or any of its
assets may be bound or affected; or (e) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Seller or any of its
assets. The execution and delivery by Seller of this Agreement and the Related
Agreements, and the transactions contemplated hereby and thereby does not
require any approval of the shareholders of Seller which has not yet been
obtained.
3.07 Financial Statements. Seller has previously furnished to Buyer a
true and correct copy of (a) the balance sheets of Seller as at December 31,
1993 and 1994 audited by Seller's certified public accountant, Norman Stumacher,
C.P.A., and the balance sheets as at December 31, 1995 audited by Seller's
certified public accountants Arthur Anderson LLP; (b) the related audited income
statements and cash flow statements of Seller for the fiscal years ended
December 31, 1993, 1994 and 1995; and (b) the unaudited balance sheets of Seller
for each of the first three calendar quarters of 1996, and (c) the unaudited
balance sheets and income statements of Seller for the nine months ended
September 30, 1996 (collectively referred to hereinafter as the "Financial
Statements"). The management of Seller has also previously furnished to Buyer at
December 31, 1996, its projected revenue ("Seller's Projected Revenue") and net
income ("Seller's Projected Net Income") for the fourth quarter of 1996. The
balance sheets included in the Financial Statements (including the related notes
thereto) present fairly the financial position of Seller as of their respective
dates, and the related income statements included in the Financial
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Statements (including the related notes thereto) present fairly the results of
operations of Seller for the periods then ended, all in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis,
except as otherwise noted therein or as disclosed on Schedule 3.07 hereto. The
Financial Statements dated at and as of September 30, 1996 are hereinafter
referred to as the "Seller's Recent Financial Statements".
3.08 Undisclosed Liabilities. Except as otherwise disclosed on Schedule
3.08 hereto, neither Seller nor PCE Israel have any liabilities or obligations,
secured or unsecured (whether absolute, accrued, contingent or otherwise, and
whether due or to become due), which are not fully reflected or reserved against
in Seller's Recent Financial Statements and those incurred in the ordinary
course of business since the date thereof, and Seller knows of no basis for any
claim against Seller or PCE Israel of any material liability or obligation of
such nature not fully reflected or reserved against in the Seller's Recent
Financial Statements.
3.09 Absence of Certain Changes and Events. Except as otherwise
contemplated by this Agreement, between the date of the Recent Financial
Statements and the Closing Date:
(a) the business of Seller and PCE Israel has been conducted only in
the ordinary course and substantially in the manner that such business was
heretofore conducted (except for the filing for dissolution of PCE Israel), and
there has not been, except in the ordinary course and consistent with past
practice:
(i) any purchase or other acquisition of property, any sale,
lease or other disposition of property, or any expenditure in excess of
$25,000 in the aggregate not disclosed on Schedule 3.09;
(ii) any material incurrence of liability not disclosed on
Schedule 3.09; or
(iii) any encumbrance or consent to encumbrance of any
property or assets in excess of $25,000 in the aggregate not disclosed
on Schedule 3.09;
(b) Neither Seller nor PCE Israel has entered into any agreement or
transaction which, based upon the good faith application of its best business
knowledge and experience, has resulted or will result in a transfer of assets
for other than full and fair consideration;
(c) there has been no change in the condition (financial or otherwise),
assets, liabilities, business, results of operations, licenses, permits,
franchises or affairs of Seller or PCE Israel (except for the filing for
dissolution of PCE Israel) which has or is likely to have a Material Adverse
Effect on Seller and PCE Israel, when taken together (the "Seller Group").
(d) there has been no declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock, property or any
combination thereof) in respect of, or split, combination or reclassification
of, the PCE Common Stock, or any redemption or other acquisition by Seller of
any shares of Common Stock;
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(e) there has not been any damage, destruction or casualty loss having
a Material Adverse Effect on the Seller Group;
(f) there has not been (i) any increase in the rate or terms of
compensation payable or to become payable by Seller to its directors, officers,
key employees or commission sales personnel, except increases occurring in the
ordinary course of business in accordance with its customary practices, (ii) any
increase in the rate or terms of any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such directors,
officers, key employees or commission sales personnel, except increases
occurring in the ordinary course of business in accordance with its customary
practices, or (iii) any entering by the Seller into any new employment agreement
or any modification of the terms of any existing employment agreement;
(g) there has not been any entry into any agreement, commitment or
transaction (including, without limitation, any borrowing, capital expenditure
or capital financing) by Seller except in the ordinary course of business and
consistent with the practices of the Seller in the last fiscal year and except
as otherwise contemplated by this Section 3.09;
(h) there has not been any change by Seller in accounting methods,
principles or practices;
(i) there has not been any issuance, sale, encumbrance, or gift of any
capital stock of Seller or of any option, security convertible into or right to
purchase any such capital stock; and
(j) there has been no threatened occurrence or development relating to
the business, operations, financial condition or affairs of Seller which would
have a Material Adverse Effect on the Seller Group.
3.10 Title and Condition of Assets. Seller has good and marketable
title to all of the properties and assets which it purports to own, including
without limitation the properties reflected in the Recent Financial Statements
(other than those which have been disposed of since the date of the Recent
Financial Statements in the ordinary course of business consistent with the
practices of the Seller in the last fiscal year), free and clear of all
liabilities, obligations, mortgages, security interests, liens, claims, charges,
title defects or other encumbrances ("Liens") other than those described in
Schedule 3.10 hereto. The Seller's assets are in good working condition,
reasonable wear and tear excepted.
3.11 Proprietary Rights. Schedule 3.11 hereto sets forth a complete
list of all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade secrets, trade names,
copyrights, licenses, inventions, drawings, designs, proprietary know-how or
information, or other rights with respect thereto (collectively referred to as
"Proprietary Rights") which are held or owned by Seller. Except as set forth in
Schedule 3.11, no one has asserted to Seller, and Seller has no knowledge, that
the operations of Seller conflict with or infringe upon any Proprietary Rights
owned by any other person.
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3.12 Real Property. Neither Seller nor PCE Israel owns any real
property.
3.13 Real Property Leases. Schedule 3.13 hereto sets forth all real
property leases under which Seller or PCE Israel is a lessee; all such leases
are valid and binding, and are in full force and effect; there are no existing
defaults by Seller thereunder; except as set forth on Schedule 3.13, no event
has occurred which (whether with or without notice, lapse of time, or both)
would constitute a default thereunder by Seller or PCE Israel; and all lessors
under such leases have consented (where such consent is necessary) to the
consummation of the transactions contemplated by this Agreement without
requiring modification in the rights or obligations of the lessee under such
leases.
3.14 Insurance. All policies of fire, products liability, general
liability, worker's compensation and other forms of insurance (including
"key-man" insurance policies covering Seller or other key employees of Seller in
which Seller is a beneficiary or named insured) owned or held by and insuring
Seller are set forth on Schedule 3.14 hereto and such policies are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy which was not
replaced on substantially similar terms prior to the date of such cancellation
or termination. Except as set forth in Schedule 3.14, such policies will not in
any way be affected by or terminate or lapse by reason of the transactions
contemplated by this Agreement. The insurance policies to which Seller is a
party are sufficient for compliance with all requirements of applicable laws and
of all agreements to which Seller is a party or by which Seller is bound. Except
as set forth on Schedule 3.14, in the three years preceding the date of this
Agreement, Seller has not been refused any insurance with respect to its assets
or operations or had its coverage limited by any insurance carrier to which it
has applied for any such insurance or with which it has carried insurance.
3.15 Labor Matters. Except as set forth in Schedule 3.15, (a) Seller
and PCE Israel are in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice; (b) there is no unfair
labor practice complaint against Seller or PCE Israel pending or threatened
before the National Labor Relations Board (the "NLRB") or any other tribunal;
(c) there is no labor strike, dispute, slowdown or stoppage actually pending or,
to the best of Sellers' knowledge, threatened against or affecting Seller; (d)
neither Seller nor PCE Israel has received notice that any representation or
petition respecting the employees of Seller has been filed with the NLRB or any
other similar tribunal; (e) no grievance nor any arbitration proceeding arising
out of or under any collective bargaining agreements is pending against Seller
or PCE Israel; and (f) Seller has not experienced any strike or work stoppage or
other industrial dispute involving its employees in the past five years.
3.16 Employee Benefit Plans; ERISA.
(a) Except as set forth in Schedule 3.16 hereto, neither Seller nor PCE
Israel maintains, administers or otherwise contributes to any "employee benefit
plan," as defined in
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section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not such plan is subject to any of the provisions of
ERISA, or any qualified or non-qualified current or deferred compensation (other
than base salary and base wages), bonus, incentive compensation, stock right,
stock option, stock appreciation right, severance pay, retirement, pension,
profit-sharing, stock bonus, salary continuation, tuition assistance, dependent
care assistance, legal assistance, vacation, fringe benefit (cash and non-cash),
group or individual health, medical, dental, vision, disability, life insurance
or survivor benefit or similar plan, policy or arrangement, which covers any
employee, self-employed individual or beneficiary of any employee or
self-employed individual, whether active or retired, of the Company (any such
plan being herein referred to as an "Employee Plan"). The Company has no
commitment to create any additional Employee Plans. Except as set forth in
Schedule 3.16, (i) none of such Employee Plans is a money purchase plan or a
defined benefit plan, and (ii) none of such Employee Plans is a "multi-employer
plan" as defined in Section 3(37) of ERISA and the Company has not been
obligated to make a contribution to any "multi-employer plan" within the past
five years. The Company would have no withdrawal liability if it withdrew from
any "multi-employer plan" in which it participates. Each of the Employee Plans
that is intended to be qualified under Section 401(a) of the Internal Revenue
Code (the "Code") has been determined by the Internal Revenue Service ("IRS") to
be so qualified, such determination by the IRS covers the most recent
restatement of each such Employee Plan, such determination may be relied upon by
Seller as of the Closing Date, any amendment upon which any such determination
is conditioned has been duly adopted by Seller and Seller is not aware of any
fact which would adversely affect the qualified status of any such Employee
Plan.
(b) True and complete copies of each Employee Plan, including all
amendments thereto and related trust or other funding agreements and the latest
financial statements thereof, have been heretofore delivered to Buyer, together
with (i) a true and complete copy of the three most recent annual reports (if
required by law) for each such plan including any and all schedules, opinions
and attachments thereto prepared in connection with any such reports, (ii) a
copy of the most recent summary plan description and summary of material
modifications of each such plan, and (iii) for each Employee Plan intended to be
covered under Section 401(a) of the Code, a copy of the most recent IRS
determination letter and the application therefore. None of Seller or PCE
Israel, any Employee Plan, any "party in interest" as defined in section 3(14)
of ERISA or any "disqualified person" as defined under Section 4975 of the Code
has engaged in a "prohibited transaction", as defined in Section 406 of ERISA or
Section 4975 of the Code, with respect to any Employee Plan which could subject
any of them or Buyer to liability or penalty under Section 409 or 502(i) of
ERISA or Section 4975 of the Code.
(c) Seller, PCE Israel and each fiduciary for each of the Employee
Plans, is in compliance with the terms of the Employee Plans and with the
requirements of any and all laws, statutes, orders, decrees, rules and
regulations, including but not limited to ERISA, applicable to each such plan.
Neither Seller nor PCE Israel has failed to make any contribution to, or to pay
any amount due and owing, as required by applicable law or by the terms of any
Employee Plan, or to avoid a funding deficiency, to or with respect to any
Employee Plan as of the last day of the most recent plan year of each of such
plans ended prior to the Closing Date.
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(d) There is no pending or, to the best of the knowledge of Seller,
threatened legal action, arbitration or other proceedings or investigations
against Seller, PCE Israel or any Employee Plan with respect to any Employee
plan, other than routine claims for benefits, which could result in liability to
any such Employee Plan, Seller or Buyer, and there is no basis for any such
legal action or proceeding.
(e) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not result in payment (either of
severance pay or otherwise) becoming due from any of the Employee Plans, Seller,
PCE Israel or Buyer to any current or former employee or self-employed
individual, and will not result in the payment, vesting, acceleration or
increase of any benefit payable under any Employee Plan to any current or former
employee or self-employed individual.
(f) There does not exist any liability, obligation or claim (other than
a routine claim for benefits) resulting from, relating to or arising out of any
Employee Plan, or any liability, obligation or claim (other than a routine claim
for benefits) resulting from, relating to or arising out of any employee benefit
plan, as defined in section 3(3) of ERISA, maintained by an employer which, with
Seller, is considered to be, or to be part of, a single employer under Section
414(b), (c), (m) or (o) of the Code, including, but not limited to, any
liability, obligation or claim (other than a routine claim for benefits) in
connection with a "multi-employer plan" as defined in Section 3(37) of ERISA, or
in connection with the Consolidated Omnibus Budget Reconciliation Act of 1985
(COBRA).
3.17 Certain Contracts and Arrangements. Except as listed in Schedule
3.17 hereto or as reflected in the Recent Financial Statements, neither Seller
nor PCE Israel is a party to or bound by any written or oral: (a) employment,
consulting, compensation or similar agreement or understanding which is not
terminable at will by Seller or PCE Israel (without penalty or liability on the
part of Seller) on 30 or fewer days' notice; (b) indenture, mortgage, note,
installment obligation, agreement or other instrument relating to the borrowing
of money in excess of $10,000 in any one case or $25,000 in the aggregate by
Seller or PCE Israel or the guaranty of any obligation for the borrowing of
money in excess of $10,000 in any one case or $25,000 in the aggregate by Seller
or PCE Israel; or (c) agreement which (i) is not terminable by Seller or PCE
Israel on 30 or fewer days' notice at any time without penalty, (ii) has a
remaining term, as of the date of this Agreement, of over one year in length of
obligation on the part of Seller or PCE Israel; or (iii) involves the receipt or
payment by Seller or PCE Israel on or after the date hereof of more than
$25,000. Except as set forth on Schedule 3.17 hereto, or as set forth in
Seller's Recent Financial Statements, there is not, under any of the aforesaid
obligations, any default or event which, with notice or lapse of time, or both,
would constitute a default on the part of Seller or PCE Israel, except such
events of default and other events as to which requisite waivers or consents
have been obtained or which would not, in the aggregate, have a Material Adverse
Effect on the Seller Group.
Schedule 3.17 also lists all indentures, mortgages, notes, installment
obligations, agreements or other instruments relating to the borrowing of money,
regardless of amount, by
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Seller, any officer, director, employee or stockholder of Seller or any relative
or other affiliate of any of the foregoing, from Seller or the guarantee by
Seller of, or the contractual obligation of Seller to be responsible for, any
obligation for the borrowing of money or otherwise by such persons ("Related
Party Loans and Guarantees"), including the amount thereof, the parties thereto
and a brief description thereof.
3.18 Legal Proceedings, Etc. Except as listed in Schedule 3.18 hereto,
there is no claim, action, proceeding or investigation which is pending or, to
the best of Seller's knowledge, any basis for or any threatened claim, action,
proceeding or investigation, against or relating to the Seller or PCE Israel
before any court, arbitrator or governmental or regulatory authority or body
acting in an investigative or adjudicative capacity and neither Seller nor PCE
Israel is subject to any outstanding order, writ, injunction or decree which if
adversely determined would have a Material Adverse Effect on Seller or PCE
Israel.
3.19 Taxes.
(a) Except as set forth on Schedule 3.19 hereto: (i) all Tax Returns
(as hereinafter defined) required to be filed on or before the Closing Date have
been filed by or on behalf of Seller and PCE Israel and all Taxes (as
hereinafter defined) shown to be due on such Tax Returns have been paid or
provided for in full; (ii) all accruals or reserves for Taxes reflected in the
Recent Financial Statements are adequate to cover Taxes accruing with respect to
or payable by Seller through the date thereof and Seller has not incurred or
accrued any liability for Taxes subsequent to such date other than in the
ordinary course of business; (iii) all Tax Returns filed or required to be filed
on or before the Closing by Seller and PCE Israel are or will be true, correct
and complete in all material respects; (iv) no Tax Return of Seller or PCE
Israel is being audited by the relevant authorities, and neither Seller nor PCE
Israel has received any notice that any Tax Return is under examination; (v) no
extension of the statute of limitations with respect to any claim for Taxes has
been granted by Seller or PCE Israel; and (vi) there are no liens for Taxes upon
the assets of Seller or PCE Israel except liens for Taxes not yet due.
(b) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, gains,
use, value added, withholding, license, occupation, privileges, payroll and
franchise taxes, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof; and such term shall include any
interest, penalties or additions to tax attributable to such assessments. For
purposes of this Agreement, the term "Tax Return" shall mean any report,
statement, return or other information required to be supplied by Seller or PCE
Israel to a taxing authority in connection with Taxes.
(c) Seller has not filed a consent to the application of Section 341(f)
of the Code.
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3.20 Environmental Matters.
(a) Except as set forth in Schedule 3.20 hereto, (i) Seller and PCE
Israel are in compliance with all environmental laws, regulations, permits and
orders applicable to it, and with all laws, regulations, permits and orders
governing or relating to asbestos removal and abatement; (ii) neither Seller nor
PCE Israel has transported, stored, treated or disposed, or allowed or arranged
for any third parties to transport, store, treat or dispose, of any Hazardous
Substances (as hereinafter defined) or other waste to or at any location other
than a site lawfully permitted to receive such Hazardous Substances or other
waste for such purposes, or had performed, arranged for or allowed by any method
or procedure such transportation, storage, treatment or disposal in
contravention of any laws or regulations, nor has Seller disposed, or allowed or
arranged for any third parties to dispose of, Hazardous Substances or other
waste upon property owned or leased by it; (iii) there has not occurred, nor is
there presently occurring, a Release of any Hazardous Substance on, into or
beneath the surface of any parcel of real property in which Seller or PCE Israel
has an ownership interest; (iv) neither Seller nor PCE Israel has transported or
disposed, or allowed or arranged for any third parties to transport or dispose,
any Hazardous Substance or other waste to or at a site which, pursuant to the
U.S. Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA") or any similar law, (A) has been placed on the
National Priorities List or its state equivalent, or (B) the Environmental
Protection Agency or the relevant state agency has proposed or is proposing to
place on the National Priorities List or its state equivalent; (v) neither
Seller nor PCE Israel has received notice and has no knowledge of any facts
which could give rise to any notice, that Seller or PCE Israel is a potentially
responsible party for a federal or state environmental cleanup site or for
corrective action under CERCLA or any other applicable law or regulation or
notice of any other Environmental Claim; (vi) neither Seller nor PCE Israel has
received any written or oral request for information in connection with any
federal or state environmental cleanup site and has not undertaken (or been
requested to undertake) any response or remedial actions or cleanup actions of
any kind at the request of any federal, state or local governmental entity, or
at the request of any other person or entity; (vii) there are no laws,
regulations, ordinances, licenses, permits or orders relating to environmental
or worker safety matters requiring any work, repairs, construction or capital
expenditures with respect to the assets or properties of the Seller or PCE
Israel; and (viii) Schedule 3.20 identifies (A) all environmental audits,
assessments or occupational health studies undertaken by Seller, PCE Israel or
its agents or by any governmental agencies with respect to the operations or
properties of the Seller; (B) the results of any groundwater, soil, air or
asbestos monitoring undertaken with respect to any real property owned by Seller
or PCE Israel; (C) all written communications of the Seller or PCE Israel with
environmental agencies; and (D) all citations issued with respect to Seller or
PCE Israel under the Occupational Safety and Health Act (29 U.S.C. Sections 651
et seq.).
(b) For the purposes of this Agreement, "Environmental Claim" shall
mean any demand, claim, governmental notice or threat of litigation or the
actual institution of any action, suit or proceeding at any time by a person
which asserts that an Environmental Condition constitutes a violation of or
otherwise may give rise to any liability or obligation under any statute,
ordinance, regulation, or other governmental requirement or the common law,
including, without limitation, any such statute, ordinance, regulation, or other
governmental requirement relating to the emission, discharge, or release of any
Hazardous Substance into the environment
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or the generation, treatment, storage, transportation, or disposal of any
Hazardous Substance. "Environmental Condition" shall mean the presence on the
Closing Date, whether discovered or undiscovered on the Closing Date, in surface
water, ground water, drinking water supply, land surface, subsurface strata or
ambient air of any pollutant, contaminant, industrial solid waste or Hazardous
Substance arising out of or otherwise related to the operations or other
activities of Seller or PCE Israel, or of any predecessor in interest or line of
business to Seller or PCE Israel, conducted or undertaken prior to the Closing
Date. "Hazardous Substance" shall mean any substance defined in the manner set
forth in Section 101(14) of the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and shall include any
additional substances designated under Section 102(a) thereof. "Release" shall
mean releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment.
3.21 Compliance with Law. Seller and PCE Israel have conducted their
businesses in compliance in all material respects with, and is in compliance in
all material respects with, all applicable foreign, federal, state and local
laws and regulations and all orders, judgments, decrees or rules of any foreign,
federal or state court or governmental authority, or regulatory agency or
authority.
3.22 Certain Interests.
(a) Except as disclosed in Schedule 3.22 hereto (and except for Related
Party Loans and Guarantees disclosed in Schedule 3.17), Seller represents that
neither Seller nor, to the best of Seller's knowledge, any officer, director,
employee or stockholder of Seller or any relative of any officer or director, or
other affiliate of any of the foregoing, has any material interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Seller and no such person is indebted to the Seller. Except as
disclosed in Schedule 3.22, Seller is not indebted to or required to indemnify
or hold harmless any such person except for amounts due under normal
compensation and for reimbursement of ordinary business expenses and the
consummation of the transactions contemplated by this Agreement will not (either
alone or upon the occurrence of any act or event, or with the lapse of time, or
both) result in any payment (severance or other) becoming due from Seller to any
such person.
(b) Schedule 3.22 hereto contains a complete and correct list and brief
description of (i) all contracts and other transactions entered into within the
past three years involving Seller with respect to which any officer, director,
employee or principal stockholder of Seller, or any relative of any officer,
director or principal stockholder of Seller, or other affiliate of any of the
foregoing, is or was a party or is or was otherwise interested (other than an
interest existing solely by virtue of, arising solely from and limited solely
to, his position as an employee, officer, director or stockholder of Seller and
(ii) the amount of all salary, bonus or other cash or stock payment paid for
services to or from the aforementioned persons rendered during each of the three
calendar years prior to the date of Closing as well as the aggregate amount of
all such payments made in the current calendar year through the date hereof to
Seller by or on behalf of Seller regardless of the materiality thereof.
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3.23 Powers of Attorney, Absence of Limitation on Competition. Except
as set forth in Schedule 3.23: (a) no material power of attorney or similar
authorization given by Seller presently is in effect or outstanding and (b) no
contract or agreement to which Seller or PCE Israel is a party or is bound or to
which any of its properties or assets is subject limits the freedom of Seller or
PCE Israel to compete in any line of business or with any person.
3.24 Net Tangible Deficiency of Seller. Seller shall ensure that as of
December 31, 1996, the Seller Group shall have a net tangible deficiency of no
greater than $1,370,000.
3.25 Full Disclosure. All information furnished in the Schedules hereto
is, and as of the Closing Date shall be, correct and complete in all respects in
accordance with the representations and warranties made by Seller under this
Article III. No representation or warranty of Seller and no information,
Schedule or certificate furnished or to be furnished by or on behalf of Seller
to Buyer, its affiliates or its agents pursuant to or in connection with this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statement contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that as of the Closing Date:
4.01 Organization; Qualification; Subsidiaries. Buyer and Buyer's
subsidiaries, Sivan and Mashov CBT, are corporations duly organized, validly
existing and in good standing under the laws of the State of Israel. Unless
otherwise indicated, Sivan and Mashov CBT are each hereinafter individually
referred to as "a Subsidiary" and collectively referred to as "the
Subsidiaries." Buyer and the Subsidiaries have all requisite corporate power and
authority to own, lease and operate their properties and to carry on their
business as now conducted. Buyer and the Subsidiaries are in good standing in
each of the jurisdictions set forth in Schedule 4.01 hereto in which each is
qualified or registered to do business as a foreign corporation. Neither Buyer
nor either of the Subsidiaries is required to be qualified or licensed to do
business as a foreign corporation in any other jurisdiction in which it owns,
leases or operates property or otherwise conducts business, except where the
failure to be so qualified or licensed would not have a Material Adverse Effect
on Buyer or such Subsidiary, as the case may be, and neither Buyer nor either of
the Subsidiaries have received notice from any governmental agency or authority
that it is required to register or qualify to do business as a foreign
corporation in any jurisdiction other than such jurisdictions in which it has
already registered.
4.02 Capitalization of Subsidiaries. As of the Closing Date, the total
authorized capital stock of Sivan consists of 25,500 Ordinary Shares NIS 1 per
Ordinary Share, of which 1,000 shares are issued and outstanding. Buyer
represents that it owns beneficially and of record 999 Ordinary Shares of Sivan
("the Sivan Stock") and Buyer's affiliate, Mashov Computers Ltd.
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("MCL"), owns beneficially 1 Ordinary Share of Sivan. Sivan has issued no stock
options or warrants. Other than this Agreement and the Related Agreements, and
except as set forth on Schedule 4.02 hereto, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the issuance, sale,
delivery or transfer (including any right of conversion or exchange under any
outstanding security or other instruments) by Sivan, of the Sivan Stock. There
are no outstanding contractual obligations of Sivan to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of Sivan. At the
Closing, Buyer will cause the transfer of the share of Sivan presently owned by
MCL to be transferred to Mashov CBT.
As of the Closing Date, the total authorized capital stock of Mashov
CBT consists of 29,400 Ordinary Shares, of which 1,000 shares are issued and
outstanding. Buyer represents that it owns beneficially and of record 999
Ordinary Shares of Mashov CBT ("the Mashov CBT Stock") and MCL owns one Ordinary
Share of Mashov CBT. Mashov CBT has issued no stock options and no warrants.
Other than this Agreement and the Related Agreements, and except as set forth on
Schedule 4.02 hereto, there is no subscription, option, warrant, call, right,
agreement or commitment relating to the issuance, sale, delivery or transfer
(including any right of conversion or exchange under any outstanding security or
other instruments) by Mashov CBT, of the Mashov CBT Common Stock. There are no
outstanding contractual obligations of Mashov CBT to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of Mashov CBT.
Unless otherwise indicated, the Sivan Stock and Mashov CBT Stock are
collectively referred to as "the Subsidiary Sale Stock."
4.03 Title to Stock. Buyer represents that it owns and at the Closing
will own the Subsidiary Sale Stock free and clear of all pledges, security
interests, liens, charges, encumbrances, equities, claims, options or
limitations affecting its ability to vote such Subsidiary Sale Stock or to
transfer such Subsidiary Sale Stock to Seller. At the Closing Buyer will
transfer, assign and deliver good title to the Subsidiary Sale Stock to Seller,
free and clear of all pledges, security interests, liens, charges, encumbrances,
equities, claims, options or limits of whatever nature.
4.04 Investments. Schedule 4.04 hereto sets forth each of the equity or
similar investments of Buyer and the Subsidiaries, directly or indirectly, in or
with any subsidiary, corporation, partnership, association, joint venture or
other entity. Except as described in Schedule 4.04, no such investment is
subject to any restriction (contractual, statutory or otherwise) which would
impair the ability of Buyer or the Subsidiaries, as the case may be, to dispose
of any such investment at any time, and all of such investments are owned free
and clear of any lien, claim, charge, pledge, security interest, option or other
legal or equitable encumbrance. Buyer is an "Accredited Investor", as such term
is defined in Regulation D promulgated by Section 3(b) of the Act. Buyer is
capable of evaluating the merits and risks of acquiring the Sale Stock and is
able to bear the economic risks of owning such Securities. Buyer
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is acquiring the Sale Stock for Buyer's own account for investment without any
intention of selling or distributing all or any part thereof.
4.05 Authority Relative to this Agreement. Buyer represents and
warrants (a) that it has full legal power and authority to execute and deliver
this Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby, and (b) that this Agreement and each of the
Related Agreements has been duly and validly executed and delivered by Buyer and
constitute valid and binding obligations of Buyer, enforceable against it in
accordance with their respective terms.
4.06 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement and the Related Agreements by Buyer, the transfer by
Buyer to Seller of the Subsidiary Sale Stock nor the consummation of the other
transactions contemplated by this Agreement and the Related Agreements will (a)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or By-Laws (or other similar governing documents) of the Buyer or
the Subsidiaries, (b) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority
other than those that have been made or obtained; (c) to the best of Buyer's or
the Subsidiaries' knowledge, result in a default (or give rise to any right of
termination, cancellation or acceleration) under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Buyer or a Subsidiary is a party or by
which the Buyer or a Subsidiary or any of their assets may be bound, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained; (d) to the best of
Buyer's knowledge, result in the creation of any encumbrance, security interest,
equity or right of others upon any of the properties or assets of the Buyer or a
Subsidiary under the terms, conditions or provisions of any agreement,
instrument or obligation to which the Buyer or a Subsidiary or any of their
assets may be bound or affected; or (e) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Buyer or a Subsidiary
or any of their assets. The execution and delivery by Buyer of this Agreement
and the Related Agreements, and the transactions contemplated hereby and thereby
does not require any approval of the shareholders of Buyer which has not yet
been obtained.
4.07 Financial Statements. Buyer has previously furnished to Seller
true and correct copies of (a) the balance sheets of Sivan as at December 31,
1994 and 1995 audited by the Subsidiaries' certified public accountants Kost,
Levary & Forer; (b) the related audited income statements and cash flow
statements of Sivan for the fiscal years ended December 31, 1994 and 1995; and
(b) the unaudited balance sheets of Sivan for each of the first three calendar
quarters of 1996, and (c) the unaudited balance sheets and income statements of
Sivan for the nine months ended September 30, 1996 (collectively referred to
hereinafter as the "Subsidiary Financial Statements"). The balance sheets
included in the Subsidiary Financial Statements (including the related notes
thereto) present fairly the financial position of such Subsidiary as of their
respective dates, and the related income statements included in the Financial
Statements (including the related notes thereto) present fairly the results of
operations of such Subsidiary for the periods then ended, all in conformity with
GAAP applied on a consistent basis, except as otherwise noted
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therein or as disclosed on Schedule 4.07 hereto. The Financial Statements dated
at and as of September 30, 1996 are hereinafter referred to as the "Subsidiary
Recent Financial Statements". Seller acknowledges that Buyer will not provide
any financial statements for Mashov CBT.
4.08 Undisclosed Liabilities. Except as disclosed on Schedule 4.08
hereto, the Subsidiaries have no liabilities or obligations, secured or
unsecured (whether absolute, accrued, contingent or otherwise, and whether due
or to become due), which are not fully reflected or reserved against in the
Subsidiaries' Recent Financial Statements, except those which have been incurred
in the ordinary course of business since the date thereof, and Buyer knows of no
basis for any claim against a Subsidiary of any material liability or obligation
of such nature not fully reflected or reserved against in a Subsidiary's Recent
Financial Statements.
4.09 Absence of Certain Changes and Events. Except as otherwise
contemplated by this Agreement, between the date of the Recent Financial
Statements and the Closing Date:
(a) the businesses of the Subsidiaries have been conducted only in the
ordinary course and substantially in the manner that such business was
heretofore conducted, and there has not been, except in the ordinary course and
consistent with past practice:
(i) any purchase or other acquisition of property, any sale,
lease or other disposition of property, or any expenditure in excess of
$25,000 in the aggregate not disclosed on Schedule 4.09;
(ii) any material incurrence of liability not disclosed on
Schedule 4.09; or
(iii) any encumbrance or consent to encumbrance of any
property or assets in excess of $25,000 in the aggregate not disclosed
on Schedule 4.09;
(b) a Subsidiary has not entered into any agreement or transaction
which, based upon the good faith application of its best business knowledge and
experience, has resulted or will result in a transfer of assets for other than
full and fair consideration;
(c) there has been no change in the condition (financial or otherwise),
assets, liabilities, business, results of operations, licenses, permits,
franchises or affairs of a Subsidiary which has or is likely to have a Material
Adverse Effect on a Subsidiary;
(d) there has been no declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock, property or any
combination thereof) in respect of, or split, combination or reclassification
of, the Ordinary Shares of a Subsidiary, or any redemption or other acquisition
by a Subsidiary of any Ordinary Shares of such Subsidiary;
(e) there has not been any damage, destruction or casualty loss having
a Material Adverse Effect on a Subsidiary;
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(f) there has not been (i) any increase in the rate or terms of
compensation payable or to become payable by a Subsidiary to its directors,
officers, key employees or commission sales personnel, except increases
occurring in the ordinary course of business in accordance with its customary
practices, (ii) any increase in the rate or terms of any bonus, insurance,
pension or other employee benefit plan, payment or arrangement made to, for or
with any such directors, officers, key employees or commission sales personnel,
except increases occurring in the ordinary course of business in accordance with
its customary practices, or (iii) any entering by a Subsidiary into any new
employment agreement or any modification of the terms of any existing employment
agreement;
(g) there has not been any entry into any agreement, commitment or
transaction (including, without limitation, any borrowing, capital expenditure
or capital financing) by a Subsidiary except in the ordinary course of business
and consistent with the practices of a Subsidiary in the last fiscal year and
except as otherwise contemplated by this Section 4.09;
(h) there has not been any change by a Subsidiary in accounting
methods, principles or practices;
(i) there has not been any issuance, sale, encumbrance, or gift of any
capital stock of a Subsidiary or of any option, security convertible into or
right to purchase any such capital stock; and
(j) there has been no threatened occurrence or development relating to
the business, operations, financial condition or affairs of a Subsidiary which
would materially adversely affect the business, operations, financial condition
or affairs of a Subsidiary.
4.10 Title and Condition of Assets. The Subsidiaries have good and
marketable title to all of the properties and assets which the Subsidiaries
purport to own, including without limitation the properties reflected in the
Subsidiary Recent Financial Statements (other than those which have been
disposed of since the date of the Subsidiary Recent Financial Statements in the
ordinary course of business consistent with the practices of the Subsidiaries in
the last fiscal year), free and clear of all liabilities, obligations,
mortgages, security interests, liens, claims, charges, title defects or other
encumbrances ("Liens") other than those described in Schedule 4.10 hereto. The
Subsidiaries' assets are in good working condition, reasonable wear and tear
excepted.
4.11 Proprietary Rights. Schedule 4.11 hereto sets forth a complete
list of all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade secrets, trade names,
copyrights, licenses, inventions, drawings, designs, proprietary know-how or
information, or other rights with respect thereto (collectively referred to as
"Proprietary Rights") which are held or owned by a Subsidiary. Except as set
forth in Schedule 4.11, no one has asserted to the Buyer or to a Subsidiary, and
Buyer has no knowledge, that the operations of a Subsidiary conflict with or
infringe upon any Proprietary Rights owned by any other person.
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4.12 Real Property Leases. Schedule 4.12 hereto sets forth all real
property leases under which a Subsidiary is a lessee; all such leases are valid
and binding, and are in full force and effect; there are no existing defaults by
a Subsidiary thereunder; no event has occurred which (whether with or without
notice, lapse of time, or both) would constitute a default thereunder by a
Subsidiary; and all lessors under such leases have consented (where such consent
is necessary) to the consummation of the transactions contemplated by this
Agreement without requiring modification in the rights or obligations of the
lessee under such leases.
4.13 Labor Matters. Except as set forth in Schedule 4.13, (a) each
Subsidiary is in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (b) there is no unfair labor
practice complaint against either Subsidiary pending or, to the best of Buyer's
knowledge, threatened before any tribunal; (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the best of Buyer's
knowledge, threatened against or affecting a Subsidiary; (d) neither Subsidiary
has received a notice that any representation or petition respecting the
employees of such Subsidiary has been filed with any tribunal similar in
significance to the NLRB; (e) no grievance nor any arbitration proceeding
arising out of or under any collective bargaining agreements is pending against
either Subsidiary; (f) neither Subsidiary has experienced any strike or work
stoppage or other industrial dispute involving its employees in the past five
years, and (g) there is currently no compensation due or payable to any employee
of the Subsidiaries, except those included in the Subsidiary Recent Financial
Statements.
4.14 Insurance. All policies of fire, products liability, general
liability, worker's compensation and other forms of insurance (including
"key-man" insurance policies covering a Subsidiary or other key employees of a
Subsidiary in which a Subsidiary is a beneficiary or named insured) owned or
held by and insuring a Subsidiary are set forth on Schedule 4.14 hereto and such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Closing Date have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy which was not replaced on substantially similar terms prior to the date
of such cancellation or termination. Except as set forth in Schedule 4.14, such
policies will not in any way be affected by or terminate or lapse by reason of
the transactions contemplated by this Agreement. The insurance policies to which
a Subsidiary is a party are sufficient for compliance with all requirements of
applicable laws and of all agreements to which a Subsidiary is a party or by
which a Subsidiary is bound. Except as set forth on Schedule 4.14, in the three
years preceding the date of this Agreement, a Subsidiary has not been refused
any insurance with respect to its assets or operations or had its coverage
limited by any insurance carrier to which it has applied for any such insurance
or with which it has carried insurance.
4.15 Certain Contracts and Arrangements. Except as listed in Schedule
4.15 hereto or as reflected in the Subsidiary Recent Financial Statements,
neither Subsidiary is a party to or bound by any written or oral: (a)
employment, consulting, compensation or similar agreement or understanding which
is not terminable at will by a Subsidiary (without penalty or liability on the
part of a Subsidiary) on 30 or fewer days' notice; (b) indenture, mortgage,
note, installment
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obligation, agreement or other instrument relating to the borrowing of money in
excess of $10,000 in any one case or $25,000 in the aggregate by a Subsidiary or
the guaranty of any obligation for the borrowing of money in excess of $10,000
in any one case or $25,000 in the aggregate by a Subsidiary; or (c) agreement
which (i) is not terminable by a Subsidiary on 30 or fewer days' notice at any
time without penalty, (ii) has a remaining term, as of the date of this
Agreement, of over one year in length of obligation on the part of a Subsidiary;
or (iii) involves the receipt or payment by a Subsidiary on or after the date
hereof of more than $25,000. There is not, under any of the aforesaid
obligations, any default or event which, with notice or lapse of time, or both,
would constitute a default on the part of a Subsidiary, except such events of
default and other events as to which requisite waivers or consents have been
obtained or which would not, in the aggregate, have a Material Adverse Effect on
such Subsidiary.
Schedule 4.15 also lists all indentures, mortgages, notes, installment
obligations, agreements or other instruments relating to the borrowing of money,
regardless of amount, by a Subsidiary, any officer, director, employee or
stockholder of a Subsidiary or any relative or other affiliate of any of the
foregoing, from a Subsidiary or the guarantee by a Subsidiary of, or the
contractual obligation of a Subsidiary to be responsible for, any obligation for
the borrowing of money or otherwise by such persons, including the amount
thereof, the parties thereto and a brief description thereof.
4.16 Legal Proceedings, Etc. Except as listed in Schedule 4.16 hereto,
there is no claim, action, proceeding or investigation which is pending or, to
the best of Buyer's knowledge, any basis for or any threatened claim, action,
proceeding or investigation, against or relating to a Subsidiary before any
court, arbitrator or governmental or regulatory authority or body acting in an
investigative or adjudicative capacity and a Subsidiary is not subject to any
outstanding order, writ, injunction or decree which adversely affects the
business, operations or financial condition of a Subsidiary.
4.17 Taxes.
(a) Except as set forth on Schedule 4.17 hereto: (i) all Tax Returns
required to be filed on or before the Closing Date have been filed by or on
behalf of a Subsidiary and all Taxes shown to be due on such Tax Returns have
been paid or provided for in full; (ii) all accruals or reserves for Taxes
reflected in the Subsidiary Recent Financial Statements are adequate to cover
Taxes accruing with respect to or payable by a Subsidiary through the date
thereof and a Subsidiary has not incurred or accrued any liability for Taxes
subsequent to such date other than in the ordinary course of business; (iii) all
Tax Returns filed or required to be filed on or before the Closing by a
Subsidiary are or will be true, correct and complete in all material respects;
(iv) no Tax Return of a Subsidiary is being audited by the relevant authorities,
and a Subsidiary has not received any notice that any Tax Return is under
examination; (v) no extension of the statute of limitations with respect to any
claim for Taxes has been granted by a Subsidiary; and (vi) there are no liens
for Taxes upon the assets of a Subsidiary except liens for Taxes not yet due.
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(b) Neither Subsidiary nor any of its respective predecessors has filed
a consent to the application of Section 341(f) of the Code.
4.18 Environmental Matters. Except as set forth in Schedule 4.18
hereto, the Subsidiaries are in compliance in all material respects with all
environmental laws, regulations, permits and orders applicable to it, and with
all laws, regulations, permits and orders governing or relating to asbestos
removal and abatement.
4.19 Compliance with Law. The Subsidiaries have conducted their
business in compliance in all material respects with, and are in compliance in
all material respects with, all applicable foreign, federal, state and local
laws and regulations and all orders, judgments, decrees or rules of any foreign,
federal or state court or governmental authority, or regulatory agency or
authority.
4.20 Employee Benefit Plans.
The Employee Benefit Plans maintained by the Subsidiaries comply in all
material respect with all applicable laws except where the failure to so comply
would not have a Material Adverse Effect on such Subsidiary.
4.21 Certain Interests.
(a) Except as disclosed in Schedule 4.21 hereto (and except for Related
Party Loans and Guarantees disclosed in Schedule 4.21), Buyer represents that
neither a Subsidiary nor, to the best of Buyer's knowledge, any officer,
director, employee or stockholder of a Subsidiary or any relative or other
affiliate of any of the foregoing, has any material interest in any property,
real or personal, tangible or intangible, used in or pertaining to the business
of a Subsidiary and no such person is indebted to a Subsidiary. Except as
disclosed in Schedule 4.21, a Subsidiary is not indebted to or required to
indemnify or hold harmless any such person except for amounts due under normal
salary and for reimbursement of ordinary business expenses and the consummation
of the transactions contemplated by this Agreement will not (either alone or
upon the occurrence of any act or event, or with the lapse of time, or both)
result in any payment (severance or other) becoming due from a Subsidiary to any
such person.
(b) Schedule 4.21 hereto contains a complete and correct list and brief
description of (i) all contracts and other transactions entered into within the
past three years involving a Subsidiary with respect to which any officer,
director, or principal stockholder of a Subsidiary, or any relative or other
affiliate of any of the foregoing, is or was a party or is or was otherwise
interested (other than an interest existing solely by virtue of, arising solely
from and limited solely to, his position as an officer, director or stockholder
of a Subsidiary and (ii) the amount of all salary, bonus or other cash or stock
payment paid for services to or from the aforementioned persons rendered during
each of the three calendar years prior to the date of Closing as well as the
aggregate amount of all such payments made in the current calendar year
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through the date hereof to Buyer by or on behalf of a Subsidiary regardless of
the materiality thereof.
4.22 Powers of Attorney, Absence of Limitation on Competition. Except
as set forth in Schedule 4.22: (a) no material power of attorney or similar
authorization given by a Subsidiary presently is in effect or outstanding and
(b) no contract or agreement to which a Subsidiary is a party or is bound or to
which any of its properties or assets is subject limits the freedom of a
Subsidiary to compete in any line of business or with any person.
4.23 The Subsidiaries. Buyer shall ensure that as of the Closing Date,
Mashov CBT and Sivan together shall have net tangible assets of at least
$2,200,000 (including, for such calculations, $1,500,000 in cash to be
contributed to the capital of Seller by Buyer), free and clear of all
liabilities, obligations, liens, mortgages, security interests, encumbrances,
claims or similar adverse interests of any kind or character except the title
exceptions listed on Schedule 6.05 hereto and liens for taxes not yet due and
payable, and that at least $1,500,000 of such assets will be cash held by Sivan
(or contributed to the capital of Seller by Buyer). Buyer shall also obtain
prior to the Closing all required governmental approvals in order to permit
Sivan to distribute any excess cash to the Seller following the Closing. In the
event that a post-closing audit reflects that, as of the Closing Date, the cash
requirements of this Section 4.23 have not been met, Buyer shall, within 30 days
of Buyer's receipt of the results of a post-closing audit, contribute to Seller
cash in an amount equal to such shortfall.
4.24 Full Disclosure. All information furnished in the Schedules hereto
is, and as of the Closing Date shall be, correct and complete in all respects in
accordance with the representations and warranties made by Buyer under this
Article IV. No representation or warranty of Buyer and no information, Schedule
or certificate furnished or to be furnished by or on behalf of Buyer or the
Subsidiaries, their affiliates or agents pursuant to or in connection with this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statement contained herein or therein not misleading.
ARTICLE V
THE CLOSING AND CERTAIN CLOSING DELIVERIES
5.01 Time and Place of Closing. Upon the terms and subject to
satisfaction or waiver of the conditions contained in this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") will
take place as of the close of business on February 6, 1997, or on such other
date on which the parties hereto agree, at the offices of Carter, Ledyard &
Milburn, U.S. counsel for Buyer, or at such other place or time as the parties
may agree in writing. The effective time of the Closing is hereinafter referred
to as the "Closing Date".
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5.02 Deliveries by Seller. At the Closing, Seller will deliver to Buyer
the following:
(a) One or more stock certificates representing all of the Sale Stock,
accompanied by stock powers duly executed in blank or duly executed instruments
of transfer and any other documents that are necessary to transfer to Buyer good
and marketable title to all of the Sale Stock;
(b) The Related Agreements to which Seller is a party;
(c) The minute books and corporate seals of the Seller, to the extent
in the possession of Seller;
(d) Resignations dated the Closing Date of the officers and directors
of the Seller requested by Buyer;
(e) An opinion or opinions from Fulbright & Jaworski L.L.P., counsel
for Seller, dated the Closing Date and satisfactory in form and substance to
Buyer and its counsel, to the effect that:
(i) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) Seller has the corporate power and authority to execute
and deliver this Agreement and the Related Agreements to which it is to
be a party and to consummate the transactions contemplated hereby and
thereby, and the execution and delivery of this Agreement and the
Related Agreements to which Seller is to be a party and the
consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by requisite corporate action taken on
the part of Seller and no other corporate proceedings on the part of
Seller are necessary to authorize this Agreement or the Related
Agreements to which Seller is to be a party or to consummate the
transactions contemplated hereby and thereby;
(iii) This Agreement and the Related Agreements have been duly
and validly executed and delivered by Seller and, assuming the
Agreement and the Related Agreements are valid and binding obligations
of Buyer, constitute valid and binding obligations of Seller,
enforceable against Seller in accordance with their terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally, and by general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(iv) Except for those approvals and consents which have
already been obtained, neither execution and delivery by Seller of this
Agreement and the Related Agreements, the sale by Seller of the Sale
Stock pursuant to this Agreement nor the consummation of
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the other transactions contemplated by this Agreement and the Related
Agreements will (A) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-Laws (or other
similar governing documents) of the Seller, (B) require any consent,
approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority other than those that have
been made or obtained; (C) to the best of such counsel's knowledge
based on its representation of PCE in connection with this Agreement
and the transactions contemplated hereby, result in a default (or give
rise to any right of termination, cancellation or acceleration) under
the terms, conditions or provisions of any material note, material
bond, material mortgage, material indenture, material license, material
agreement or other material instrument or material obligation to which
the Seller is a party or by which the Seller or any of its assets may
be bound, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents
have been obtained; (D) to the best of such counsel's knowledge based
on its representation of PCE in connection with this Agreement and the
transactions contemplated hereby, result in the creation of any
encumbrance, security interest, equity or right of others upon any of
the properties or assets of the Seller or under the terms, conditions
or provisions of any material agreement, material instrument or
material obligation to which the Seller or any of its assets may be
bound or affected; or (E) violate any order, writ, injunction, decree,
law, statute, rule or regulation applicable to the Seller or any of its
assets.
(v) By reason of delivery of certificates for the Sale Stock
as contemplated by this Agreement, Seller has issued, assigned and
delivered to Buyer good and marketable title to such shares of PCE
Common Stock, free and clear, to the best of such counsel's knowledge
after reasonable investigation, of any liens, encumbrances, equities
and claims of whatever nature, except as provided by applicable
securities laws and except as created by Buyer;
(vi) The total authorized capital stock of the Seller is as
set forth in Section 3.02 of this Agreement; all of the Sale Stock is
duly authorized, validly issued, fully paid and nonassessable;
(vii) Except as disclosed in Schedule 3.18 to this Agreement,
such counsel has no knowledge of any claim, action, proceeding or
investigation pending or threatened against or relating to the Seller
before any court or governmental or regulatory authority or body acting
in an investigative or adjudicative capacity or of any outstanding
order, writ, injunction or decree to which the Seller is a party or is
subject which adversely affects the business, operations or financial
condition of the Seller; and
(viii) The transactions contemplated by this Agreement and the
Related Agreements require no federal or state governmental or
securities exchange or shareholder approval, authorization or
certification which has not previously been obtained.
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As to any matters contained in such opinion which involve the laws of
any jurisdiction other than the federal laws of the United States of America, or
the laws of the States of New York and Delaware, Seller's counsel may rely upon
opinions of counsel admitted in such other jurisdictions. Any opinions relied
upon by Seller's counsel as aforesaid shall be in form and substance
satisfactory to Buyer and its counsel, and the counsel rendering such opinions
shall be satisfactory to Buyer and its counsel. Any such opinions shall be
delivered to Buyer together with the opinion of Seller's counsel. The opinion of
Seller's counsel may expressly rely as to matters of fact upon certificates
furnished by Seller, appropriate officers and directors of the Seller and public
officials;
(f) All other documents, instruments and writings required to be
delivered by Seller at or prior to the Closing Date pursuant to this Agreement
or otherwise required in connection herewith.
5.03 Deliveries by Buyer. At the Closing, Buyer will deliver the
following to or for the account of Seller:
(a) One or more stock certificates representing all of the Subsidiary
Sale Stock, accompanied by stock powers duly executed in blank or duly executed
instruments of transfer and any other documents that are necessary to transfer
to Seller good and marketable title to all of the Subsidiary Sale Stock;
(b) The stock books, stock ledgers and minute books of the
Subsidiaries, to the extent in the possession of Buyer;
(c) The Related Agreements to which Buyer is a party;
(d) An opinion from Carter, Ledyard & Milburn, U.S. counsel to Buyer,
dated the Closing Date and satisfactory in form and substance to Seller and its
counsel, to the effect that such U.S. counsel has relied upon the opinion of
Buyer's Israeli counsel and, based upon such opinion of Israeli counsel, this
Agreement and the Related Agreements have been duly and validly executed and
delivered by Buyer and, assuming the Agreement and the Related Agreements are
valid and binding obligations of Seller, constitute valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally, and by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(e) An opinion or opinions from Efrima, Ben-Yacov, Sherman, Milstein,
Israeli counsel for Buyer, dated the Closing Date and satisfactory in form and
substance to Seller and its counsel, to the effect that:
(i) Buyer and the Subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of
Israel;
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(ii) Buyer has the corporate power and authority to execute
and deliver this Agreement and the Related Agreements to which it is to
be a party and to consummate the transactions contemplated hereby and
thereby, and the execution and delivery of this Agreement and the
Related Agreements to which Buyer is to be a party and the consummation
of the transactions contemplated hereby and thereby have been duly and
validly authorized by requisite corporate action taken on the part of
Buyer and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or the Related Agreements to
which Buyer is to be a party or to consummate the transactions
contemplated hereby and thereby;
(iii) This Agreement and the Related Agreements have been duly
and validly executed and delivered by Buyer and, assuming the Agreement
and the Related Agreements are valid and binding obligations of Seller,
constitute valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally, and by general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law);
(iv) Except for those approvals and consents which have
already been obtained, neither execution and delivery by Buyer of this
Agreement and the Related Agreements, the transfer by Buyer of the
Subsidiary Sale Stock to Seller pursuant to this Agreement nor the
consummation of the other transactions contemplated by this Agreement
and the Related Agreements will (A) conflict with or result in any
breach of any provision of the Articles or Memorandum of Associations
(or other similar governing documents) of the Buyer, (B) require any
consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority other than
those that have been made or obtained; (C) to the best of such
counsel's knowledge based on its representation of Buyer in connection
with this Agreement and the transactions contemplated hereby, result in
a default (or give rise to any right of termination, cancellation or
acceleration) under the terms, conditions or provisions of any material
note, material bond, material mortgage, material indenture, material
license, material agreement or other material instrument or material
obligation to which the Buyer is a party or by which the Buyer or any
of its assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained; (D) to the best of such
counsel's knowledge based on its representation of Buyer in connection
with this Agreement and the transactions contemplated hereby, result in
the creation of any encumbrance, security interest, equity or right of
others upon any of the properties or assets of the Buyer or under the
terms, conditions or provisions of any material agreement, material
instrument or material obligation to which the Buyer or any of its
assets may be bound or affected; or (E) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the
Buyer or any of its assets.
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(v) By reason of delivery of certificates for the Subsidiary
Sale Stock and duly executed stock powers as contemplated by this
Agreement, Buyer has transferred, assigned and delivered to Seller good
and marketable title to such shares of Common Stock, free and clear, to
the best of such counsel's knowledge, of any liens, encumbrances,
equities and claims of whatever nature, except as provided by
applicable securities laws and except as created by Seller;
(vi) The total authorized capital stock of the Subsidiaries is
as set forth in Section 4.02 of this Agreement; all of the Subsidiary
Sale Stock are duly authorized, validly issued, fully paid and
nonassessable; and
(vii) Except as disclosed in Schedule 4.14 to this Agreement,
such counsel has no knowledge of any claim, action, proceeding or
investigation pending or threatened against or relating to the
Subsidiaries before any court or governmental or regulatory authority
or body acting in an investigative or adjudicative capacity or of any
outstanding order, writ, injunction or decree to which the Subsidiaries
are a party or are subject which adversely affects the business,
operations or financial condition of the Subsidiaries.
As to any matters contained in such opinion which involve the laws of
any jurisdiction other than the laws of the State of Israel, counsel may rely
upon opinions of counsel admitted to practice in such other jurisdictions. Any
opinions relied upon by Buyer's counsel as aforesaid shall be in form and
substance satisfactory to Seller and its counsel, and the counsel rendering such
opinions shall be satisfactory to Seller and its counsel. Any such opinions
shall be delivered to Seller together with the opinion of Buyer's U.S. counsel.
The opinion of Buyer's counsel may expressly rely as to matters of fact upon
certificates furnished by appropriate officers and directors of Buyer and its
affiliates and public officials;
(f) All other documents, instruments and writings required to be
delivered by Buyer at or prior to the Closing Date pursuant to this Agreement or
otherwise required in connection herewith.
ARTICLE VI
POST-CLOSING COVENANTS
6.01 Expenses. Except as otherwise provided herein, Seller and Buyer
shall each bear their own costs and expenses incurred in connection with this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby. Buyer shall be responsible for fees, commissions, expenses and
reimbursements incurred by or required to be paid to its professional advisors
and Seller shall be responsible for the fees, commissions, expenses and
reimbursements incurred by or required to be paid to Seller's professional
advisors.
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6.02 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Sale Stock and the Subsidiary Sale
Stock and the other transactions contemplated by this Agreement and the Related
Agreements. From time to time after the date hereof (including after the Closing
Date if requested), the parties hereto will, at their own expense and without
further consideration, execute and deliver such documents to the other party
hereto as such party may reasonably request in order more effectively to vest in
such party good title to the Sale Stock, the Subsidiary Sale Stock and other
consideration contemplated by this Agreement, as the case may be, and to more
effectively consummate the transactions contemplated by this Agreement and the
Related Agreements.
6.03 Public Announcements. Even if required by law or by the rules of
(or any agreement of the parties or their affiliates with) any stock exchange,
the parties agree that neither party will issue any press releases or other
statements with respect to this Agreement, the Related Agreements or the
transactions contemplated hereby and thereby, without consulting with each other
before issuing any press release or otherwise making any public statement with
respect to this Agreement and the transactions contemplated hereby and neither
Seller nor Buyer shall issue any such press release or make any such public
statement prior to such consultation.
6.04 Commissions and Fees. Seller and Buyer each represent and warrant
to the other that no broker, finder, financial adviser or other person is
entitled to any brokerage fees, commissions or finder's fees in connection with
the transactions contemplated hereby by reason of any action taken by the party
making such representation, other than Helix Capital LLC, the fees and expenses
of whom shall be borne entirely by Seller prior to the Closing. Seller and Buyer
will pay to the other or otherwise discharge, and will indemnify and hold the
other harmless from and against, any and all claims or liabilities for all
brokerage fees, commissions and finder's fees incurred by reason of any action
taken by such party.
6.05 Sales and Transfer Taxes. All sales and transfer taxes (including
all stock transfer taxes, if any) incurred in connection with this Agreement and
the Related Agreements and the transactions contemplated hereby and thereby will
be borne by Seller, and Seller will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such sales and transfer
taxes, and, if required by applicable law, Buyer will join in the execution of
any such Tax Returns or other documentation.
6.06 Other Tax Matters.
(a) Buyer shall have exclusive control and responsibility to file all
Tax Returns reflecting the operations of the Seller and required to be filed by
or on behalf of the Seller for all taxable periods ending after the Closing
Date. Seller shall have exclusive control and responsibility to file all Tax
Returns reflecting the operations of the Subsidiaries and required to be filed
by or on behalf of the Subsidiaries for all taxable periods ending after the
Closing Date. The parties shall cooperate fully in connection with the filing of
such returns, including the
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provision of copies of any return or report for a period which includes the
Closing Date to the other party before filing. No party shall destroy or allow
the destruction of any books, records or files pertaining to the operations of
the Seller and the Subsidiaries prior to the Closing without first having
offered in writing to deliver such books, records or files to the other party at
such other party's expense. In any instance in which a party hereto is required
to file or cause to be filed Tax Returns covering a period commencing prior to
but ending after the Closing, the parties hereto will furnish all information
and records reasonably available to them and reasonably requested by such party,
as the case may be, and necessary or appropriate for use in preparing such
returns. Any Taxes for a period commencing prior to but ending after the Closing
will be apportioned, in the case of real and personal property Taxes, on a per
diem basis and, in the case of other Taxes, on the basis of the actual
activities, taxable income or taxable loss of the Seller or the Subsidiaries
during the periods before and after the Closing.
(b) The parties hereto will provide the other with such assistance as
may reasonably be requested by either of them in connection with the preparation
of any Tax Return, any audit or any examination by any taxing authority, any
judicial or administrative proceedings relating to liability for Taxes, or any
claim arising under this Agreement with respect to Taxes, and each will retain
and provide the other with any records or information which may be relevant to
such Taxes. The parties hereto shall be permitted to participate (at their own
expense) in any audit or examination by any taxing authority with respect to any
Tax Return for which Seller or Buyer, as the case may be, may be required to
provide indemnification.
(c) The parties hereto will not consent, and will cause the Seller or
the Subsidiaries not to consent, to the extension of any statute of limitations
with respect to any Tax Return for which Seller, Buyer or the Subsidiaries may
be required to provide indemnification without the consent of the Seller or
Buyer, as the case may be, so long as such party provides assurances reasonably
satisfactory to Seller or Buyer, as the case may be, that they will be able to
satisfy any potential deficiency.
(d) If Seller and Buyer disagree as to the amount of Taxes for which
each is liable under this Agreement, Seller and Buyer hereby agree to appoint a
firm of certified public accountants acceptable to the parties to act as
arbitrator to resolve said dispute. All determinations by such arbitrator shall
be final and binding on the parties and all fees and expenses with respect to
such arbitrator shall be shared equally by Seller and Buyer.
(e) In the event that a party hereto makes an election under Section
338 of the Code, Seller or Buyer, as the case may be, shall cooperate with such
party in the making of such election and in the preparation and the filing of
Form 8023 and any schedules required to be attached thereto. The party making
such election shall assume full responsibility for any Taxes attributable to
such election.
6.07 Shareholder Claims. Seller and Buyer hereby waive, effective on
the Closing Date, all claims against each other, whether such claims accrue
prior to or after the Closing; provided, however, that the parties hereto do not
waive claims which may arise with respect to: (i) contracts
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<PAGE>
or agreements between the Buyer and the Subsidiaries contemplated by this
Agreement or entered into after the Closing, or (ii) rights to indemnity (other
than in respect of claims as to which the parties hereto specifically undertake
to indemnify each other hereunder) as corporate officers and directors to the
full extent permitted by the Certificate of Incorporation and the By-laws (or
similar governing documents) of the parties hereto or agreements between the
parties hereto and the directors and officers of the respective parties, in each
case which have been disclosed to the parties and as are in effect on the date
hereof.
6.08 Special Meeting. Seller will, if Buyer so requests, hold a special
meeting of shareholders for the purpose of approving an amendment to Seller's
Certificate of Incorporation increasing the authorized Common Stock of Seller in
order to permit conversion of the Series C Preferred Shares.
6.09 Post-Closing Audits; Adjustments to Purchase Price. On or before
March 31, 1997, Buyer shall provide Seller with: (i) the audited balance sheet
of Sivan at December 31, 1996, prepared in accordance with GAAP and certified by
Ernst & Young LLP ("E&Y"), or another nationally recognized firm of independent
auditors and (ii) the unaudited balance sheet of Mashov CBT at December 31,
1996, reviewed by Ernst & Young LLP or another nationally recognized firm of
independent auditors, and Seller shall provide Buyer with the audited balance
sheet of Seller and PCE Israel at December 31, 1996, prepared in accordance with
GAAP and certified by E&Y or another nationally recognized firm of independent
auditors. Based upon such balance sheets, the Purchase Price shall be adjusted
so that Buyer's total ownership percentage of the outstanding PCE Common Stock
on a fully-diluted basis after giving effect to the transactions contemplated by
this Agreement and the adjustment contemplated by this Section 6.09, shall be
equal to the following:
Buyer's percentage ownership = (10.33 +SB)/(17.33 +SB+PB) X 100
where "SB" equals the net tangible book value of Sivan and Mashov CBT at
December 31, 1996 (expressed in millions of U.S. dollars), together with the
$1,500,000 in cash capital contributions made to Seller by Buyer, and "PB"
equals the net tangible book value of the Seller Group at December 31, 1996
(expressed in millions of U.S. dollars). If, after such adjustment, Buyer shall
be entitled to additional shares of PCE Common Stock, such shares shall be
issued and delivered to Buyer within 30 days of the determination of the
adjustment to the Purchase Price. If, after such adjustment, shareholders of
record of Seller as of the date of Closing shall be entitled to additional
shares of PCE Common Stock, such shares shall be issued to such shareholders pro
rata in the form of a dividend and delivered to such shareholders within 30 days
of the determination of the adjustment to the Purchase Price. The balance sheets
of Seller used in connection with this Section 6.09 shall include adequate
reserves for: (i) liens against Seller's former subsidiary, PC
Etcetera-California, and (ii) 100% of the legal, accounting and other cash costs
incurred by Seller in connection with this Agreement and the transactions
contemplated hereby.
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6.10 Seller Board Composition. As soon as practicable following the
Closing, the Board of Directors of Seller shall be expanded to six members, four
of which shall be nominated by Buyer and two of which shall be nominated by
Seller, and shall be expanded further at a later date to seven members, the
seventh member being appointed by the Board of Directors.
6.11 Buyer Conversion Covenant. Buyer covenants and agrees to vote it's
Sale Stock in favor of amending the certificate of incorporation of Seller for
the sole purpose of increasing the authorized capital stock of Seller in order
to effect the conversion of the PCE Series C Preferred Stock issued to Buyer
hereunder. Buyer further covenants and agrees to exercise the conversion of the
PCE Series C Preferred Stock as soon as practicable following the aforementioned
amendment of the certificate of incorporation of Seller.
6.12 Covenant Not to Call Intercompany Debt. Buyer hereby covenants and
agrees that for a period of one year after the Closing Date, Buyer shall not
demand payment of $600,000 of intercompany debt owing to Buyer from the
Subsidiaries, except in the event of a rights offering made to Buyer's
shareholders.
6.13 Tag-Along Rights for Certain Shareholders. Buyer covenants and
agrees that in the event that Buyer proposes to sell any of the Sale Stock
within one year after the Closing Date in a bona fide third party transaction
(excluding, for such purposes, any sale of Sale Stock to Elron Electronic
Industries, Inc. on or within two days of the Closing Date), those shareholders
of Seller who acquired shares of PCE Common Stock as a result of conversion of
PCE Series A Preferred Stock or Seller's Series B Warrants in connection with
the Conversion and Waiver Agreement shall have the right to participate in such
proposed sale, on the same terms and conditions as those negotiated by Buyer,
pro rata, with respect to all shares of PCE Common Stock held by such
shareholders immediately following the Closing.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01 "Piggy Back" Registration Rights. (a) Whenever Seller proposes to
file under the Securities Act of 1933, as amended (the "Act"), a registration
statement relating to Sale Stock, Seller shall, at least 30 days prior to such
filing, give effective written notice of such proposed filing to the holders of
all shares of PCE Common Stock not registered for resale under the Act
("Unregistered Shares"). Upon receipt by Seller, not more than 20 days after
such effective notice, of a written request or written requests from one or more
of such holders for registration of Unregistered Shares, Seller shall use its
best efforts to (A) include in such registration statement or in a separate
registration statement concurrently filed, and cause such registration statement
to become effective with respect to the Unregistered Shares as to which such
holder or holders request registration and (B), if such proposed registration is
in connection with an
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underwritten offering of PCE Common Stock, upon request of such holder or
holders cause the managing underwriter therefor to include in such offering the
Unregistered Shares as to which such holder or holders request such inclusion,
on terms and conditions comparable to those of the securities offered on behalf
of Seller, provided that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, Seller shall
determine for any reason not to register or to delay registration of such
securities, Seller may, at its election, give written notice of such
determination to each holder of Unregistered Shares and, thereupon, (1) in the
case of a determination not to register, shall be relieved of its obligation to
register any Unregistered Shares in connection with such registration, and (2)
in the case of delay in registering, shall be permitted to delay registering any
Unregistered Shares for the same period as the delay in registering such other
securities.
(b) Priority in "Piggyback" Registrations. If a registration pursuant
to this subsection 7.01 involves an underwritten offering and the managing
underwriter advises Seller in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, Seller will include in such registration, to
the extent of the number of which Seller is so advised can be sold in such
offering, securities of Seller requested to be included in such registration,
pro rata among the holders thereof requesting such registration on the basis of
the number of shares of such securities requested to be included by such
holders.
7.02 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written instrument executed by Seller and
Buyer.
7.03 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of either party to comply with any obligation, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but any such waiver, or the failure to insist upon strict compliance
with any obligation, covenant, agreement or condition herein, shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure or
breach.
7.04 Survival. Each and every representation, warranty, covenant and
agreement contained in this Agreement or in any document delivered pursuant to
or in connection with this Agreement shall survive the Closing and shall not be
affected by any investigation made by any party.
7.05 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by facsimile
transmission, telexed or mailed by reputable overnight delivery service or by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address as any party shall
specify by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof):
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(a) if to Seller to:
PC Etcetera, Inc.
462 Seventh Avenue
New York, New York 10018
Attention: Terry Steinberg
Phone No.: 212-736-5870
Fax No.: 212-736-0039
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Richard Gilden, Esq.
Phone No.: 212-318-3000
Fax No.: 212-752-5958
(b) if to Buyer to:
Mashov Computer Marketing Ltd.
c/o Magic Software Enterprises Ltd.
5 HaPlada Street
Or-Yehuda, Israel 60218
Attention: Elan Penn
Phone No.: 972-3-538-9201
Fax No.: 972-3-538-9393
with a copy to:
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Attention: Steven J. Glusband, Esq.
Phone No.: 212-732-3200
Fax No.: 212-732-3232
7.06 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, personal representatives, successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either party hereto without the prior
written consent of the other party. Any purported assignment in violation of the
provisions hereof shall be void.
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<PAGE>
7.07 Governing Law. This Agreement shall be governed by the laws of the
State of New York as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
7.08 Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement or the Related Agreements or the transactions
contemplated hereby or thereby shall be settled and finally determined by
arbitration in the State of Israel, or at such other location as the parties may
agree, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in force at the time of such arbitration. Judgment upon
any award rendered by such an arbitration may be rendered in any court having
jurisdiction. All fees and charges of the American Arbitration Association and
of the arbitrators and all arbitration-related costs of the parties shall be
borne as the arbitrators shall determine in their award.
7.09 Counterparts. This Agreement may be executed in any number of
counterparts, and by either party on separate counterparts, each of which as so
executed and delivered shall be deemed an original, but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any party hereto to produce or account for
more than one such counterpart executed and delivered by such party.
7.10 Interpretation. The table of contents and the article and section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement. As used in this Agreement, the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a governmental entity
or any department or agency thereof. As used in this Agreement, the term
"subsidiary", when used in reference to any other person, shall mean any
corporation of which outstanding securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation are owned
directly or indirectly by such other person. As used in this Agreement, the term
"generally accepted accounting principles" means generally accepted accounting
principles as in effect and as applied in the United States. As used in this
Agreement, the term "affiliate" shall have the meaning set forth in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934.
When used herein, the masculine, feminine or neuter gender and the singular or
plural number shall each be deemed to include the others whenever the context so
indicates or permits.
7.11 Entire Agreement. This Agreement and the Related Agreements,
including the schedules, exhibits, documents, certificates and instruments
referred to herein and therein, embody the entire agreement and understanding of
the parties hereto in respect of the transactions contemplated by this Agreement
and supersede all prior agreements and understandings between the parties with
respect thereto.
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7.12 Specific Performance.
(a) Seller and Buyer acknowledge that, in view of the uniqueness of the
business of the Seller and the Subsidiaries and the transactions contemplated
hereby, Seller and Buyer may not have an adequate remedy at law for money
damages in the event that this Agreement with respect to the sale and delivery
of the Sale Stock and other consideration contemplated by this Agreement has not
been performed in accordance with its terms by Seller or Buyer, and therefore
the parties hereto agree that each party hereto shall be entitled to specific
enforcement of the terms hereof with respect to the sale, transfer and delivery
of the consideration contemplated by Section 1.02 of this Agreement and the
other transactions contemplated hereby in the event of breach by either party
hereto in addition to any other remedy to which such party may be entitled, at
law or in equity, for such breach.
(b) In the event of a breach or threatened breach by Seller or Buyer of
its covenants under Article VI, the parties hereto acknowledge that Seller or
Buyer may not have an adequate remedy at law for money damages. Accordingly, in
the event of such breach or threatened breach, Seller or Buyer, as the case may
be, will be entitled to such equitable and injunctive relief as may be available
to restrain Seller or Buyer, as the case may be, from the violation of the
provisions of Article VI in addition to any other remedy to which Seller or
Buyer may be entitled, at law or in equity, for such breach or threatened
breach.
7.13 Severability of Covenants. In the event that any provision of this
Agreement, including any sentence, clause or part hereof, shall be deemed
contrary to law or invalid or unenforceable in any respect by a court of
competent jurisdiction, the remaining provisions shall remain in full force and
effect to the extent that such provisions can still reasonably be given effect
in accordance with the intentions of the parties, and any invalid and
unenforceable provisions shall be deemed, without further action on the part of
the parties, modified, amended and limited solely to the extent necessary to
render the same valid and enforceable.
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IN WITNESS WHEREOF, Seller and Buyer have each caused this Agreement to
be executed by its duly authorized officer, each as of the date first above
written.
MASHOV COMPUTERS MARKETING LTD.
By: __________________________
Name:
Title:
PC ETCETERA, INC.
By:___________________________
Name:
Title:
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EXHIBIT A
CONVERSION AND WAIVER AGREEMENT
CONVERSION AND WAIVER AGREEMENT (the "Agreement") dated as of February
6, 1997 among PC Etcetera, Inc., a Delaware corporation ("PCE" or the "Company")
and the individuals or entities listed on Schedule 2 hereto (each such
individual or entity listed on Schedule 2 hereto being referred to as a "Holder"
and such individuals and entities being referred to collectively as the
"Holders").
WHEREAS, PCE entered into an Asset Purchase Agreement dated as of
August 12, 1994 (the "Asset Purchase Agreement") with Elron Electronic
Industries Ltd. ("Elron") and certain other parties thereto, pursuant to which,
among other things, PCE issued to Elron shares of its Common Stock ("PCE Common
Stock"), shares of its Series A Preferred Stock (the "Series A Shares") and
warrants for the purchase of PCE Common Stock and Series A Preferred Shares (the
"Series A Warrants"); and
WHEREAS, effective March 15, 1995 PCE and Special Situations Fund III,
L.P., Special Situations Cayman Fund, L.P., Gibraltar Trust, Justy Ltd., Yozma
Venture Capital Ltd., SVE STAR Ventures Enterprises No. II GbR., SVE STAR
Ventures Enterprises No. III GbR. and SVE STAR Ventures Enterprises No. IIIA
GbR. (collectively, the "Series B Purchasers") entered into a Stock Purchase
Agreement (the "Series B Stock Purchase Agreement") pursuant to which, among
other things, PCE issued to the Series B Purchasers shares of its Series B
Preferred Stock (the "Series B Shares") and warrants (the "Series B Warrants"),
and the Series B Purchasers became entitled to shares of PCE Common Stock
pursuant to penalty provisions in the Series B Stock Purchase Agreement (the
"S-2 Penalty Shares"); and
WHEREAS, effective December 5, 1995 PCE entered into a Loan and
Registration Rights Agreement (the "1995 Loan Agreement") with Gibraltar Trust,
Justy Ltd., Yozma Venture Capital Ltd., SVE STAR Ventures Enterprises No. II
GbR., SVE STAR Ventures Enterprises No. III GbR., SVE STAR Ventures Enterprises
No. IIIA GbR., Elron and Gilbert H. Steinberg (collectively, the "1995
Lenders"), pursuant to which, among other things, PCE issued to the 1995 Lenders
warrants (the "1995 Loan Warrants") for the purchase of shares of PCE Common
Stock; and
WHEREAS, effective October 25, 1996, PCE entered into a Loan and
Registration Rights Agreement (the "1996 Agreement") with RHO Management Trust
I, a/k/a Gibraltar Trust, Elron and Gilbert H. Steinberg (collectively, the
"1996 Lenders"), pursuant to which, among other things, PCE issued to the 1996
Lenders Warrants (the "1996 Loan Warrants") for the purchase of shares of PCE
Common Stock; and
WHEREAS, PCE intends to enter into a Stock Purchase Agreement (the
"Mashov Agreement") with Mashov Computers Marketing Ltd. ("Mashov"), pursuant to
which, among other
<PAGE>
things, Mashov will purchase approximately 69% of the issued and outstanding PCE
Common Stock, it being a condition of the Mashov Agreement that the parties
hereto enter into this Agreement;
NOW THEREFORE, in consideration of the premises agreements contained
herein, the parties hereto hereby agree as follows:
1. Conversion of Securities by Elron. Elron hereby agrees that as of
the date hereof, it shall convert all of the Series A Preferred Shares held by
it into 200,000 shares of PCE Common Stock, and that such conversion shall be
deemed to have taken place as of the date hereof.
2. Conversion of 1995 and 1996 Loan Warrants.
(a) Each of the 1995 Lenders hereby agrees that as of the date
hereof, it shall convert all of the 1995 Loan Warrants held by it into the
number of shares of PCE Common Stock set forth opposite each 1995 Lender's name
on Schedule 1 hereto, and that such conversions shall be deemed to have taken
place as of the date hereof.
(b) Each of the 1996 Lenders hereby agrees that as of the date
hereof, it shall convert all of the 1996 Loan Warrants held by it into the
number of shares of PCE Common Stock set forth opposite each 1996 Lender's name
on Schedule 1 hereto, and that such conversions shall be deemed to have taken
place as of the date hereof.
3. Conversion of Series A and Series B Warrants. Each Holder who holds
Series A Warrants and/or Series B Warrants hereby agrees that as of the date
hereof or simultaneously with the closing of the Mashov Agreement, whichever is
earlier, it shall convert all of the Series A Warrants and/or Series B Warrants
held by it into the number of shares of PCE Common Stock set forth opposite each
such Holder's name on Schedule 1 hereto, and that such conversions shall be
deemed to have taken place as of such date.
4. Waiver of Anti-Dilution Rights. Each Series B Purchaser hereby
waives all anti-dilution rights to which such Series B Purchaser is entitled
pursuant to the Series B Stock Purchase Agreement (i) as of the date hereof, in
connection with the transactions contemplated by the Mashov Agreement and (ii)
as of, and subject to, the closing of the Mashov Agreement, in the future. All
such anti-dilution rights shall be of no further force and effect as of the
closing of the transactions contemplated under the Mashov Agreement.
5. No Further Anti-Dilution Rights. PCE acknowledges and agrees that
immediately after giving effect to the provisions of this Agreement and the
transactions contemplated by the Mashov Agreement, no shareholder of PCE or any
other party shall own or be entitled to any anti-dilution rights relating to PCE
Common Stock.
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<PAGE>
6. Registration.
(a) Not later than six months after the date hereof, the
Company shall file a supplement or Post-Effective Amendment to its currently
effective registration statement on Form S-2 (the "Current Registration
Statement") (File No. 33-93842) relating to the sale of 2,405,744 shares of PCE
Common Stock under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (collectively, the "Securities Act"), as necessary, so
that each Holder shall be able, for the period set forth in Section 6(f) hereof,
to sell its PCE Common Stock covered by such Current Registration Statement. PCE
represents and warrants to each Holder that the prospectus contained in the
Current Registration Statement will not, after the filing of a supplement or
Post-Effective Amendment thereto, include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing.
(b) Not later than six months after the date hereof, the
Company shall file a registration statement (the "New Registration Statement")
under the Securities Act covering the resale of all PCE Common Stock issued and
outstanding at such date which (i) is not included in the Current Registration
Statement which is effective at such time and (ii) has not been sold to the
public by the holder thereof; provided, however, that any stockholder of the
Company (each, an "Investor" and collectively, the "Investors") may inform the
Company in writing that it wishes to exclude all or a portion of its PCE Common
Stock from such registration.
(c) The Company shall use its best efforts to have any
supplement or PostEffective Amendment to the Current Registration Statement (to
the extent such supplement or amendment is necessary to comply with Section 6(a)
above) and the New Registration Statement declared effective by the Securities
and Exchange Commission ("SEC") as soon as practicable after the filings
thereof, but in no event later than December 31, 1997 (the "First Target
Effective Date"). If either any required supplement or Post-Effective Amendment
to the Current Registration Statement or the New Registration Statement is not
declared effective by the First Target Effective Date, the Company shall use its
best efforts to have any required supplement or Post-Effective Amendment to the
Current Registration Statement and/or the New Registration Statement, as the
case may be, declared effective by the SEC as soon as practicable after the
First Target Effective Date, but in no event later than by March 31, 1998 (the
"Second Target Effective Date"). The last day of each successive quarter after
the Second Target Effective Date will be an additional target effective date
(collectively, the "Additional Target Effective Dates"), and such Additional
Target Effective Dates will continue indefinitely for those shares that are not,
at the end of such quarter, freely tradeable by the Holder thereof pursuant to
Rule 144(k) of the Securities Act.
(d) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to subsections (a), (b) and (c) of this
Section 6 with respect to each Investor that such Investor shall furnish to the
Company such information regarding itself, the PCE Common Stock held by it, and
the intended method of disposition of such securities as shall be reasonably
required to effect the registration of the PCE Common Stock and shall execute
such documents in connection with such registration as the Company may
reasonably request. At least thirty days prior to the first anticipated filing
date of the New Registration Statement, the Company shall notify each Investor
of the information the Company requires from each such Investor (the "Requested
Information") unless such Investor elects not to include its PCE Common Stock in
the New Registration Statement. If within seven business days before the
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<PAGE>
proposed filing date of the New Registration Statement the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including PCE Common Stock of such Non-Responsive Investor.
(e) If either any necessary supplement or Post-Effective
Amendment to the Current Registration Statement or the New Registration
Statement has not become effective by the First Target Effective Date, then, in
each such case, each of the Holders shall be entitled to receive as liquidated
damages such number of shares of PCE Common Stock equal to 10% of the shares of
PCE Common Stock then owned by such Holder but not then registered under the
Securities Act. If either any necessary supplement or Post-Effective Amendment
to the Current Registration Statement or the New Registration Statement has not
become effective by the Second Target Effective Date, then, in each such case,
each of the Holders shall be entitled to receive as liquidated damages such
number of shares of PCE Common Stock equal to 10% of the shares of PCE Common
Stock then owned by such Holder (including any shares issued upon the penalty
for missing the First Target Effective Date, if any) but not then registered
under the Securities Act. If either any necessary supplement or Post-Effective
Amendment to the Current Registration Statement or the New Registration
Statement has not become effective by any Additional Target Effective Date,
then, in each such case, each of the Holders shall be entitled to receive as
liquidated damages such number of shares of PCE Common Stock equal to 10% of the
shares of PCE Common Stock then owned by such Holder (including any shares
issued upon the penalty for missing the First Target Effective Date, the Second
Target Effective Date or any prior Additional Target Effective Date(s), if any)
but not then registered under the Securities Act. PCE will issue and deliver the
shares of PCE Common Stock required to be delivered by PCE hereunder to each
Holder within 10 days following the First Target Effective Date, the Second
Target Effective Date, and each Additional Target Effective Date, as the case
may be.
(f) The Company shall use its best efforts to maintain the
continued effectiveness of the Current Registration Statement for a period of 24
months from the date when Section 6(a) has been complied with and the New
Registration Statement for a period of 24 months after the effectiveness
thereof. The Company, at all times, shall furnish to each Holder such number of
copies of the Current Registration Statement and the New Registration Statement,
and of each amendment and supplement thereto, and such number of copies of the
prospectus included therein, as shall be requested by such Holder. The Company
shall also use its best efforts to register or qualify all the shares of PCE
Common Stock held by the Holders and covered by the Current Registration
Statement and the New Registration Statement under such securities or "blue sky"
laws of the states reasonably requested by each Holder, and to keep such
registration or qualification in effect for as long as either of such
Registration Statements shall remain in effect and to do any and all other acts
which may be necessary or advisable to enable each Holder to sell its shares of
PCE
- 4 -
<PAGE>
Common Stock in such jurisdictions; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business, to file a general consent to service of process or to subject itself
to general taxation in any such states or jurisdictions or to provide any
undertaking or make any change in its charter or bylaws which the Board of
Directors determines to be contrary to the best interest of the Company and its
shareholders.
(g) The Company shall notify the Investors, at any time when a
prospectus relating to the securities covered by the Current Registration
Statement or the New Registration Statement is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in the Current Registration Statement or the New
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. The Company shall promptly amend or supplement the
Current Registration Statement or the New Registration Statement to correct any
such untrue statement or omission.
(h) All expenses other than underwriting discounts and
commissions incurred in connection with registration, filings, or qualification,
including, without limitation, all registration, listing, filing and
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one firm of
counsel for the Investors shall be borne by the Company.
(i) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor, its officers, directors and agents, each
person, if any, who controls such Investor, any underwriter (as defined in the
Securities Act) for such Investor and each person, if any, who controls any such
underwriter for such Investor (including but not limited to any broker-dealer
who sell shares of PCE Common Stock for the account of any Investor) within the
meaning of the Securities Act, against any losses, claims, damages, expenses or
liabilities (joint or several) to which any of them may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages, expenses
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Current or New Registration
Statement, including any prospectus (other than a preliminary prospectus)
contained therein or any amendments or supplements thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading (collectively, a "Violation"); provided,
however, that the indemnity agreement contained in this Section 6(i) shall not
apply to any loss, claim, damage, liability or action arising out of or based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Investor or any such underwriter (including but not limited to any
broker-dealer who sell shares of PCE Common Stock for the account of any
Investor) or controlling person, as the case may be.
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<PAGE>
(j) Additionally, each of the Holders shall receive from
Mashov such tag-along rights with respect to their shares of PCE Common Stock as
shall be set forth in the Mashov Agreement.
7. Ownership of Securities. The Company acknowledges that, after giving
effect to the provisions of this Agreement and the anti-dilution rights set
forth in the instruments heretofore held by such Holder, the number of shares of
PCE Common Stock set forth opposite each Holder's name on Schedule 2 hereto is
accurate and correct. Each Holder acknowledges that, after giving effect to the
provisions of this Agreement, it will only be entitled, upon conversion of its
Warrants, to the number of shares of PCE Common Stock set forth opposite its
name on Schedule 1 hereto.
8. Notices. All notices hereunder shall be given in accordance with the
respective agreement between PCE and the Holder giving or receiving, as the case
may be, such notice.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same instrument.
10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW).
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first written above.
PC ETCETERA, INC.
By:
Name:
Title:
ELRON ELECTRONIC INDUSTRIES LTD.
By:
Name:
Title:
SPECIAL SITUATIONS FUND III, L.P.
By:
Name:
Title:
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By:
Name:
Title:
<PAGE>
JUSTY LTD.
By:
Name:
Title:
By:
Name:
Title:
YOZMA VENTURE CAPITAL LTD.
By:
Name:
Title:
By:
Name:
Title:
SVE STAR VENTURES ENTERPRISES NO.
II GBR.
By: SVM STAR Ventures Management GmbH
Nr. 3
By:
By:
<PAGE>
SVE STAR VENTURES ENTERPRISES NO.
III GBR.
By: SVM STAR Ventures Management GmbH
Nr. 3
By:
By:
SVE STAR VENTURES ENTERPRISES NO.
IIIA GBR.
By: SVM STAR Ventures Management GmbH
Nr. 3
By:
By:
GILBERT H. STEINBERG
RHO MANAGEMENT TRUST I
By: Rho Management Company, Inc., an
Investment Advisor
By:
Name:
Title:
<PAGE>
Schedule 1
Conversion of 1995 Loan Warrants
1995 Lender Number of shares
of PCE Common Stock
Gibraltar Trust 12,762
Justy Ltd. 3,829
Yozma Venture Capital Ltd. 2,552
SVE Star Ventures Enterprises
No. II GbR. 1,659
SVE Star Ventures Enterprises
No. III GbR. 4,339
SVE Star Ventures Enterprises
No. IIIA GbR. 382
Gilbert H. Steinberg 12,762
Elron Electronics Industries Ltd. 12,762
Conversion of 1996 Loan Warrants
1996 Lender Number of shares
of PCE Common Stock
RHO Management Trust I, a/k/a Gibraltar Trust 45,366
Elron Electronics Industries Ltd. 45,366
Gilbert H. Steinberg 45,366
Conversion of Series A Warrants
Holder Number of shares
of PCE Common Stock
Elron Electronics Industries Ltd. 656
Conversion of Series B Warrants
Holder Number of shares
of PCE Common Stock
Special Situations Fund III, L.P. 37,547
Special Situations Cayman Fund, L.P. 12,516
Gibraltar Trust 50,061
Justy Ltd. 15,017
Yozma Venture Capital Ltd. 10,012
SVE Star Ventures Enterprises
No. II GbR. 6,508
SVE Star Ventures Enterprises
No. III GbR. 17,020
SVE Star Ventures Enterprises
No. IIIA GbR. 1,502
<PAGE>
Schedule 2
Ownership of PCE Common Stock
after conversions and anti-dilution rights
Holder Number of shares
of PCE Common Stock
Elron Electronic Industries Ltd. 1,360,405
Gibraltar Trust 1,166,671
Justy Ltd. 261,392
Yozma Venture Capital Ltd. 174,260
SVE Star Ventures Enterprises 112,610
No. II GbR.
SVE Star Ventures Enterprises 297,422
No. III GbR.
SVE Star Ventures Enterprises 25,620
No. IIIA GbR.
Gilbert H. Steinberg 807,207
Special Situations Fund III, L.P. 455,191
Special Situations Cayman Fund, L.P. 151,731
<PAGE>
EXHIBIT B
EMPLOYMENT AGREEMENT BY AND BETWEEN
TERRY STEINBERG
AND PC ETCETERA, INC.
<PAGE>
TERRY STEINBERG
EMPLOYMENT AGREEMENT
This agreement is dated February 6, 1997 among PC ETCETERA, INC., a
Delaware corporation ("PCE"), and TERRY STEINBERG (the "Executive" and, together
with PCE, the "Parties").
The Executive has been a key employee of PCE, and the Parties desire,
subject to the execution of that certain Stock Purchase Agreement dated February
6, 1997 by and between Mashov Computers Marketing Ltd. and PCE (the "Stock
Purchase Agreement"), to enter into an employment agreement on the terms and
conditions hereinafter set forth. This Agreement shall become effective
immediately.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the Parties agree as follows:
Section 1. Employment and Term
PCE hereby employs the Executive, and the Executive hereby agrees to
serve, as Executive Vice President of PCE, with the duties set forth in
Section2, for a term (hereinafter called the "Term of Employment") of three
years beginning on the date hereof and ending on the third annual anniversary of
the date hereof. Notwithstanding the provisions of the immediately preceding
sentence of this Section1, this Agreement may automatically terminate earlier in
the manner set forth in Section5.
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<PAGE>
Section 2. Duties
(a) The Executive is to serve as Executive Vice President of PCE. The
immediately preceding sentence of this Section2(a) shall not be construed to
limit the power of the Board of PCE (the "Board") to elect officers annually or
to remove officers in accordance with the bylaws of PCE.
(b) The Executive agrees that during the Term of Employment his duties
and assignments shall be as the Executive Vice President of PCE, except that the
Executive shall not be required to perform any duties or assignments
inconsistent with his experience and qualifications.
(c) During the Term of Employment the Executive shall, except during
customary vacation periods and periods of illness, devote a substantial amount
of his business time and attention to the performance of his duties hereunder
and to the business and affairs of PCE and to promoting the best interests of
PCE and he shall not, either during or outside such normal business hours,
engage in any activity inimical to such best interests. The Executive shall
competently perform all assigned duties; carry out the policies, directives, and
decisions of the Board; not withhold information from the Board, and will
promptly report to the Board any information which may affect PCE's or any
affiliate's business; and refrain from any conduct which is illegal, dishonest,
fraudulent, or detrimental to PCE's or any affiliate's business, as determined
by the Board.
Section 3. Compensation During the Term of Employment
(a) Base Salary. During the Term of Employment, PCE shall pay to the
Executive base compensation (in addition to the compensation provided for
elsewhere in this Agreement)
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<PAGE>
at such rate as the Executive and the Board shall agree (the "Base Salary"), but
at not less than the rate of $155,000 per annum, less appropriate payroll taxes,
payable in such periodic installments as PCE may determine but not less often
than monthly, with annual reviews and adjustments, if any, at the discretion of
the Board.
(b) Bonus Compensation. With respect to each fiscal year of PCE falling
in whole or in part within the Term of Employment beginning with the fiscal year
ending December 31, 1997, the Executive shall be eligible for a bonus (in
addition to his Base Salary), in amount established at the discretion of the
Board. One-half of such bonus compensation shall be payable to the Executive in
July (on an estimated basis) and the balance in the succeeding January.
With respect to any fiscal year of PCE which falls in part but not in
whole within the Term of Employment, the bonus compensation to which the
Executive is eligible under this Section3(b) shall be prorated on the basis of
the number of days of such fiscal year falling within the Term of Employment
except that if the Term of Employment ends within five days before or after the
end of a fiscal year, there shall be no proration and such bonus compensation
shall be payable with respect to the full fiscal year ending within such
five-day period.
(c) Expenses. PCE shall reimburse the Executive, upon presentation of
proper documentation, for reasonable expenses incurred by the Executive in the
performance of his assigned duties.
(d) Fringe Benefits and Perquisites. During the Term of Employment, the
Executive shall enjoy the customary perquisites of office, including but not
limited to an automobile befitting his status and associated expenses, office
space and furnishings, secretarial services, expense reimbursements, and any
similar emoluments customarily afforded to the executive
3
<PAGE>
officers of PCE. The Executive shall also be entitled to receive or participate
in all "fringe benefits" and employee benefit plans provided or made available
by PCE to its executives or management personnel generally, such as, but not
limited to, group hospitalization, medical, life and disability insurance, and
pension, retirement and profit-sharing plans.
(e) Vacations. The Executive shall be entitled each year to four weeks'
vacation or vacations in accordance with the policies of PCE as determined by
PCE from time to time. PCE shall not pay the Executive any additional
compensation for any vacation time not used by the Executive.
Section 4 The PCE Stock Options.
(a) Terms. PCE shall grant to the Executive 240,000 options to purchase
Common Shares of PCE ( the "Options"). The Options shall vest and shall be
deemed earned in accordance with the following schedule, provided that such
Options scheduled to vest on such dates shall not vest or be deemed earned if
the Executive is not employed by PCE for any reason on the date on which the
Option is scheduled to vest:
Date on Which Options Vest: Number of Options Vesting on
Such Date:
August 1, 1997: 80,000
August 1, 1998: 80,000
August 1, 1999: 80,000
In the event of a sale, merger or consolidation of PCE after February 1, 1998,
all unexercised Options shall immediately vest.
4
<PAGE>
(b) Exercise Price. The exercise price per Option shall be the average
of the bid and asked price of the shares of PCE as quoted on the NASDAQ Bulletin
Board for the 10 business days subsequent to the date hereof.
(c) Period During Which Exercisable. Options shall be exercisable for a
period of five years from the date on which such options vest, or until three
months after the date of any termination of employment, whichever is earlier.
Options not timely exercised shall lapse and be of no further force or effect.
(d) Form of Exercise. Options exercisable in accordance with their
terms shall be exercised only by delivering a fully executed Option Exercise
Notice, the form of which is attached hereto as Exhibit A, together with payment
therefor in the form of a cashier's check.
Section 5. Termination
(a) Disability or Death. If, during the Term of Employment, the
Executive, by reason of physical or mental disability, is incapable of
performing his principal duties hereunder for an aggregate of 180 working days
out of any period of twelve consecutive months, PCE at its option may terminate
the Term of Employment effective immediately by notice to the Executive given
within 90 days after the end of such 180-day period. If the Executive shall die
during the Term of Employment or if PCE terminates the Term of Employment
pursuant to the immediately preceding sentence by reason of the Executive's
disability, PCE shall pay to the Executive, or to the Executive's legal
representatives, or in accordance with a direction given by the Executive to PCE
in writing, an amount equal to one year's Base Salary.
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<PAGE>
(b) Retirement.
(i) The Term of Employment shall end automatically, without
action by either party, on the Executive's 65th birthday unless, prior
to such birthday, the Executive and PCE have agreed in writing that the
Term of Employment shall continue past such 65th birthday.
(ii) If the Term of Employment ends pursuant to this paragraph
by reason of a notice given by either party as herein permitted or
automatically at age 65 or any subsequent birthday, PCE shall pay to
the Executive, or to another payee specified by the Executive to PCE in
writing, the Executive's Base Salary and Bonus Compensation prorated to
the date on which the Term of Employment ends.
(iii) Anything hereinabove to the contrary notwithstanding, if
any provision of this paragraph violates federal or applicable state
law relating to discrimination on account of age, such provision shall
be deemed modified or suspended to the extent necessary to eliminate
such violation of law. If at a later date, by reason of changed
circumstances or otherwise, the enforcement of such provision as set
forth herein would no longer constitute a violation of law, then it
shall be enforced in accordance with its terms as set forth herein. (c)
Change of Control. In the event of a sale, merger or consolidation of
PCE such that substantially all of the assets of PCE shall be sold or otherwise
transferred to another entity, and such sale or transfer results in the
termination of Executive, Executive shall receive as severance 6 month's Base
Salary.
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<PAGE>
(d) Termination During the Term of Employment. Should the Board, in
their discretion, terminate the Term of Employment for any reason other than
Executive's Disability, Death, or Retirement, then Executive shall receive as
severance 6 month's Base Salary.
(e) Failure to Renew Executive's Employment With PCE. Should the Board,
in their discretion, choose not to renew Executive's Employment with PCE
following the Term of Employment, then Executive shall receive as severance 6
month's Base Salary.
Section 6. Company's Right to Injunctive Relief
The Executive acknowledges that his services to PCE are of a unique
character, which gives them a peculiar value to PCE, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law, and that
therefore, in addition to any other remedy which PCE may have at law or in
equity, PCE shall be entitled to injunctive relief for a breach of this
Agreement by the Executive.
Section 7. Mergers and Consolidations; Assignability
In the event that PCE, or any entity resulting from any merger or
consolidation referred to in this Section7 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of the
assets of PCE or any such entity shall be sold or otherwise transferred to
another entity, the provisions of this Agreement shall be binding upon and shall
inure to the benefit of the continuing entity in or the entity resulting from
such merger or consolidation or the entity to which such assets shall be sold or
transferred. Except as provided in the immediately preceding sentence of this
Section7, this Agreement shall not be assignable by PCE or by any entity
referred to in such immediately preceding sentence. This Agreement shall not be
assignable by the
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<PAGE>
Executive, but in the event of his death it shall be binding upon and inure to
the benefit of his legal representatives to the extent required to effectuate
the terms hereof.
Section 8. Captions
The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.
Section 9. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns.
Section 10. Execution of Agreement
This Agreement will be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument and agreement.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and construed in
accordance with the laws of the State of New York without reference to its rules
as to conflicts of laws.
Section 12. Notices
All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for PCE,
shall be addressed to it (if sent by mail) or delivered to it (if delivered by
hand) at its principal office for the attention of the Secretary, or at such
other address and for the attention of such other person of which PCE shall have
given
8
<PAGE>
notice to the Executive in the manner herein provided, and, if intended for the
Executive, shall be delivered to him personally or shall be addressed to him (if
sent by mail) at his most recent residence address shown in PCE's employment
records or at such other address or to such designee of which the Executive
shall have given notice to PCE in the manner herein provided. Each such notice
shall be deemed to be given on the date of mailing thereof or, if delivered
personally, on the date so delivered.
Section 13. Amendment and Modification
Any amendment or agreement supplemental hereto shall not be binding
upon either party unless executed in writing by PCE and the Executive.
Section 14. Entire Agreement
This Agreement supersedes and cancels all prior agreements, whether
verbal or written, among PCE and the Executive and constitutes the entire
agreement of the Parties on the subject matter hereof.
Section 15. Severability
Each paragraph of this Agreement or portion thereof shall be treated as
severable, to the end that if any paragraph or portion thereof shall be declared
illegal, invalid or unenforceable, this Agreement shall be interpreted so that
part only is invalid, without invalidating the remainder of this Agreement,
which shall remain in full force and effect as though such paragraph or portion
thereof had never been contained in this Agreement, and the affected part shall
be interpreted, consistent with the law, to carry out the intent of the parties.
9
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
PC ETCETERA, INC.
By: _____________________________
Name:
Title:
-------------------------------------
TERRY STEINBERG
10
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Gentlemen:
In connection with my exercise of stock options granted to me pursuant
to the Employment Agreement made February 6, 1997 by and between myself and PC
Etcetera, Inc., where such stock options are exercisable into shares of common
stock of PC ETCETERA, INC., a Delaware corporation (the "Company"), I hereby
acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be issued to me
pursuant to the exercise of said option have not been registered under the
Securities Act of 1933, as amended (the "Act"), and accordingly, must be held
indefinitely unless such shares are subsequently registered under the Act, or an
exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under the
Act can be made only after the holding period and in limited amounts in
accordance with the terms and conditions provided by that Rule, and in any sale
to which that rule is not applicable, registration or compliance with some other
exemption under the Act will be required.
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the Act.
4. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the time
that I may desire to make a sale pursuant to the Rule, the Company may neither
wish nor be able to comply with such require ment.
In consideration of the issuance of certificates for the shares to me,
I hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge or transfer such shares
in the absence of an effective registration statement covering the same, except
as permitted by the provisions of Rule 144, if applicable, or some other
applicable exemption under the Act. In view of this representation and warranty,
I agree that there may be affixed to the certificates for the shares to be
issued to me, and to all certificates issued hereafter representing such shares
(until in the opinion of counsel, which opinion must be reasonably satisfactory
in form and substance to counsel for the Company, it is no longer necessary or
required) a legend as follows:
<PAGE>
"The shares of common stock represented by this certificate have not
been registered under the Federal Securities Act of 1933, as amended.
and were acquired by the registered holder pursuant to a representation
and warranty that such holder was acquiring such shares for his own
account and for investment, with no intention to transfer or dispose of
the same, in violation of the registration requirements of that Act.
These shares may not be sold, pledged or transferred in the absence of
an effective registration statement under the Securities Act of 1933,
as amended, or an opinion of counsel, which opinion is reasonably
satisfactory to counsel to the Company, to the effect that registration
is not required under said Act."
I further agree that the Company may place a stop order with its
Transfer Agent, prohibiting the transfer of such shares, so long as the legend
remains on the certificates representing the shares.
Very truly yours,
By: ________________________________
Print Name: _________________________
Date: _______________________________
<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENT BY AND BETWEEN
ROY MACHNES
AND PC ETCETERA, INC.
<PAGE>
ROY MACHNES
EMPLOYMENT AGREEMENT
This agreement is dated February 6, 1997 among PC ETCETERA, INC., a
Delaware corporation ("PCE"), and ROY MACHNES (the "Executive" and, together
with PCE, the "Parties").
The Executive has been the Chief Executive Officer of Mashov Computers
Marketing Ltd. ("Mashov"), which is acquiring a 69% stock interest in PCE
pursuant to that certain Stock Purchase Agreement dated February 6, 1997 by and
between Mashov and PCE (the "Stock Purchase Agreement"), and the Parties desire,
subject to the execution of the Stock Purchase Agreement, to enter into an
employment agreement on the terms and conditions hereinafter set forth. This
Agreement shall take effect at such time as all necessary consents and approvals
are obtained from the Israeli companies and shareholders thereof, with which the
Executive is associated, and at such time as the Executive begins full-time
residency in the United States.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the Parties agree as follows:
Section 1. Employment and Term
PCE hereby employs the Executive, and the Executive hereby agrees to
serve, as President and Chief Executive Officer of PCE, with the duties set
forth in Section 2, for a term (hereinafter called the "Term of Employment") of
three years beginning on the date hereof and ending on the third annual
anniversary of the date hereof. Notwithstanding the provisions of the
immediately preceding sentence of this Section1, this Agreement may
automatically terminate earlier in the manner set forth in Section 5.
1
<PAGE>
Section 2. Duties
(a) The Executive is to serve as President and Chief Executive Officer
of PCE. The immediately preceding sentence of this Section 2(a) shall not be
construed to limit the power of the Board of PCE (the "Board") to elect officers
annually or to remove officers in accordance with the bylaws of PCE.
(b) The Executive agrees that during the Term of Employment his duties
and assignments shall be as the President and Chief Executive Officer of PCE,
except that the Executive shall not be required to perform any duties or
assignments inconsistent with his experience and qualifications.
(c) During the Term of Employment the Executive shall, except during
customary vacation periods and periods of illness, devote a substantial amount
of his business time and attention to the performance of his duties hereunder
and to the business and affairs of PCE and to promoting the best interests of
PCE and he shall not, either during or outside such normal business hours,
engage in any activity inimical to such best interests. The Executive shall
competently perform all assigned duties; carry out the policies, directives, and
decisions of the Board; not withhold information from the Board, and will
promptly report to the Board any information which may affect PCE's or any
affiliate's business; and refrain from any conduct which is illegal, dishonest,
fraudulent, or detrimental to PCE's or any affiliate's business, as determined
by the Board.
Section 3. Compensation During the Term of Employment
2
<PAGE>
(a) Base Salary. During the Term of Employment, PCE shall pay to the
Executive base compensation (in addition to the compensation provided for
elsewhere in this Agreement) at such rate as the Executive and the Board shall
agree (the "Base Salary"), but at not less than the rate of $155,000 per annum,
less appropriate payroll taxes, payable in such periodic installments as PCE may
determine but not less often than monthly, with annual reviews and adjustments,
if any, at the discretion of the Board. For such portion of the Term of
Employment that the Executive resides in the United States, the Executive's Base
Salary shall be adjusted quarterly in a percentage amount equal to the increase
in the Consumer Price Index for all urban consumers in the New York, New Jersey
and Connecticut area as published by the Bureau of Labor Statistics. For such
portion of the Term of Employment that the Executive resides in Israel, the
Executive's Base Salary shall be adjusted upwards monthly in a percentage amount
equal to the increase in the Consumer Price Index as published by the Israeli
Bureau of Labor Statistics or comparable agency.
(b) Bonus Compensation. With respect to each fiscal year of PCE falling
in whole or in part within the Term of Employment beginning with the fiscal year
ending December 31, 1997, the Executive shall be eligible for a bonus (in
addition to his Base Salary), in amount established at the discretion of the
Board. One-half of such bonus compensation shall be payable to the Executive in
July (on an estimated basis) and the balance in the succeeding January.
With respect to any fiscal year of PCE which falls in part but not in
whole within the Term of Employment, the bonus compensation to which the
Executive is eligible under this Section3(b) shall be prorated on the basis of
the number of days of such fiscal year falling within the Term of Employment
except that if the Term of Employment ends within five days before
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<PAGE>
or after the end of a fiscal year, there shall be no proration and such bonus
compensation shall be payable with respect to the full fiscal year ending within
such five-day period.
(c) Expenses. PCE shall reimburse the Executive, upon presentation of
proper documentation, for reasonable expenses incurred by the Executive in the
performance of his assigned duties, including reimbursement of any home
telephone expenses incurred in the course of his employment. In addition, PCE
shall reimburse the Executive for the following expenses: (1) $20,000 for
expenses incurred during the relocation of the Executive, his family and their
possessions; (2) all expenses associated with the education of Executive's
children including private school tuition and associated expenses; (3) rental
payments for an apartment in Manhattan, New York befitting the status of the
Executive and his family, including any associated real estate broker's fees,
less the amount of any rental payments received from the sublease of Executive's
home in Israel, net of associated expenses; and (4) any expenses incurred by
Executive in connection with the repatriation of his family to Israel once each
year in a manner befitting Executive's status. All of the expense reimbursements
set forth in the preceding sentence shall be grossed up to account for the
payment of any taxes due if such reimbursement constitutes taxable income to the
Executive and shall be adjusted upwards annually in a percentage amount equal to
the Consumer Price Index for all urban consumers in the New York, New Jersey and
Connecticut area as published by the Bureau of Labor Statistics. Should
Executive's employment be terminated by any means, including, but not limited
to, the events set forth in Section5 hereto, Executive shall be entitled to
relocation expenses of no more than $20,000 in connection with Executive's
relocation to Israel.
4
<PAGE>
(d) Fringe Benefits and Perquisites. During the Term of Employment, the
Executive shall enjoy the customary perquisites of office, including but not
limited to an automobile befitting his status and associated expenses, office
space and furnishings, secretarial services, expense reimbursements, and any
similar emoluments customarily afforded to the executive officers of PCE. The
Executive shall also be entitled to receive or participate in all "fringe
benefits" and employee benefit plans provided or made available by PCE to its
executives or management personnel generally, such as, but not limited to, group
hospitalization, medical, life and disability insurance, and pension, retirement
and profit-sharing plans.
(e) Vacations. The Executive shall be entitled each year to four weeks'
vacation or vacations in accordance with the policies of PCE as determined by
PCE from time to time. PCE shall not pay the Executive any additional
compensation for any vacation time not used by the Executive.
Section 4 The PCE Stock Options.
(d) Terms. PCE shall grant to the Executive 325,000 options to purchase
Common Shares of PCE ( the "Options"). The Options shall vest and shall be
deemed earned in accordance with the following schedule, provided that such
Options scheduled to vest on such dates shall not vest or be deemed earned if
the Executive is not employed by PCE for any reason on the date on which the
Option is scheduled to vest:
Date on Which Options Vest: Number of Options Vesting on
Such Date:
August 1, 1997: 108,334
August 1, 1998: 108,333
August 1, 1999: 108,333
In the event of a sale, merger or consolidation of PCE after February 1, 1998,
all unexercised Options shall immediately vest.
(e) Exercise Price. The exercise price per Option shall be the average
of the bid and asked price of the shares of PCE as quoted on the NASDAQ Bulletin
Board for the 10 business days subsequent to the date hereof.
(f) Period During Which Exercisable. Options shall be exercisable for a
period of five years from the date on which such options vest, or until three
months after the date of any termination of employment, whichever is earlier.
Options not timely exercised shall lapse and be of no further force or effect.
(d) Form of Exercise. Options exercisable in accordance with their
terms shall be exercised only by delivering a fully executed Option Exercise
Notice, the form of which is attached hereto as Exhibit A, together with payment
therefor in the form of a cashier's check.
Section 5. Termination
(a) Disability or Death. If, during the Term of Employment, the
Executive, by reason of physical or mental disability, is incapable of
performing his principal duties hereunder for an aggregate of 180 working days
out of any period of twelve consecutive months, PCE at its option may terminate
the Term of Employment effective immediately by notice to the Executive given
within 90 days after the end of such 180-day period. If the Executive shall die
during the Term of Employment or if PCE terminates the Term of Employment
pursuant to the immediately preceding sentence by reason of the Executive's
disability, PCE shall pay to the Executive, or
5
<PAGE>
to the Executive's legal representatives, or in accordance with a direction
given by the Executive to PCE in writing, an amount equal to one year's Base
Salary.
(b) Retirement.
(i) The Term of Employment shall end automatically, without
action by either party, on the Executive's 65th birthday unless, prior
to such birthday, the Executive and PCE have agreed in writing that the
Term of Employment shall continue past such 65th birthday.
(ii) If the Term of Employment ends pursuant to this paragraph
by reason of a notice given by either party as herein permitted or
automatically at age 65 or any subsequent birthday, PCE shall pay to
the Executive, or to another payee specified by the Executive to PCE in
writing, the Executive's Base Salary and Bonus Compensation prorated to
the date on which the Term of Employment ends.
(iii) Anything hereinabove to the contrary notwithstanding, if
any provision of this paragraph violates federal or applicable state
law relating to discrimination on account of age, such provision shall
be deemed modified or suspended to the extent necessary to eliminate
such violation of law. If at a later date, by reason of changed
circumstances or otherwise, the enforcement of such provision as set
forth herein would no longer constitute a violation of law, then it
shall be enforced in accordance with its terms as set forth herein.
(c) Change of Control. In the event of a sale, merger or consolidation
of PCE such that substantially all of the assets of PCE shall be sold or
otherwise transferred to another entity, and
6
<PAGE>
such sale or transfer results in the termination of Executive, Executive shall
receive as severance 6 month's Base Salary.
(d) Termination During the Term of Employment. Should the Board, in
their discretion, terminate the Term of Employment for any reason other than
Executive's Disability, Death, or Retirement, then Executive shall receive as
severance 6 month's Base Salary.
(e) Failure to Renew Executive's Employment With PCE. Should the Board,
in their discretion, choose not to renew Executive's Employment with PCE
following the Term of Employment, then Executive shall receive as severance 6
month's Base Salary.
Section 6. Company's Right to Injunctive Relief
The Executive acknowledges that his services to PCE are of a unique
character, which gives them a peculiar value to PCE, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law, and that
therefore, in addition to any other remedy which PCE may have at law or in
equity, PCE shall be entitled to injunctive relief for a breach of this
Agreement by the Executive.
Section 7. Mergers and Consolidations; Assignability
In the event that PCE, or any entity resulting from any merger or
consolidation referred to in this Section7 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of the
assets of PCE or any such entity shall be sold or otherwise transferred to
another entity, the provisions of this Agreement shall be binding upon and shall
inure to the benefit of the continuing entity in or the entity resulting from
such merger or consolidation or the entity to which such assets shall be sold or
transferred. Except as provided in the immediately preceding
7
<PAGE>
sentence of this Section7, this Agreement shall not be assignable by PCE or by
any entity referred to in such immediately preceding sentence. This Agreement
shall not be assignable by the Executive, but in the event of his death it shall
be binding upon and inure to the benefit of his legal representatives to the
extent required to effectuate the terms hereof.
Section 8. Captions
The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.
Section 9. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns.
Section 10. Execution of Agreement
This Agreement will be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument and agreement.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and construed in
accordance with the laws of the State of New York without reference to its rules
as to conflicts of laws.
Section 12. Notices
All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for PCE,
shall be addressed to it (if sent by mail) or
8
<PAGE>
delivered to it (if delivered by hand) at its principal office for the attention
of the Secretary, or at such other address and for the attention of such other
person of which PCE shall have given notice to the Executive in the manner
herein provided, and, if intended for the Executive, shall be delivered to him
personally or shall be addressed to him (if sent by mail) at his most recent
residence address shown in PCE's employment records or at such other address or
to such designee of which the Executive shall have given notice to PCE in the
manner herein provided. Each such notice shall be deemed to be given on the date
of mailing thereof or, if delivered personally, on the date so delivered.
Section 13. Amendment and Modification
Any amendment or agreement supplemental hereto shall not be binding
upon either party unless executed in writing by PCE and the Executive.
Section 14. Entire Agreement
This Agreement supersedes and cancels all prior agreements, whether
verbal or written, among PCE and the Executive and constitutes the entire
agreement of the Parties on the subject matter hereof.
Section 15. Severability
Each paragraph of this Agreement or portion thereof shall be treated as
severable, to the end that if any paragraph or portion thereof shall be declared
illegal, invalid or unenforceable, this Agreement shall be interpreted so that
part only is invalid, without invalidating the remainder of this Agreement,
which shall remain in full force and effect as though such paragraph or portion
thereof had never been contained in this Agreement, and the affected part shall
be interpreted, consistent with the law, to carry out the intent of the parties.
9
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
PC ETCETERA, INC.
By: ______________________________
Name:
Title:
-------------------------------------
ROY MACHNES
10
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Gentlemen:
In connection with my exercise of stock options granted to me pursuant
to the Employment Agreement made February 6, 1997 by and between myself and PC
Etcetera, Inc., where such stock options are exercisable into shares of common
stock of PC ETCETERA, INC., a Delaware corporation (the "Company"), I hereby
acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be issued to me
pursuant to the exercise of said option have not been registered under the
Securities Act of 1933, as amended (the "Act"), and accordingly, must be held
indefinitely unless such shares are subsequently registered under the Act, or an
exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under the
Act can be made only after the holding period and in limited amounts in
accordance with the terms and conditions provided by that Rule, and in any sale
to which that rule is not applicable, registration or compliance with some other
exemption under the Act will be required.
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the Act.
4. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the time
that I may desire to make a sale pursuant to the Rule, the Company may neither
wish nor be able to comply with such require ment.
In consideration of the issuance of certificates for the shares to me,
I hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge or transfer such shares
in the absence of an effective registration statement covering the same, except
as permitted by the provisions of Rule 144, if applicable, or some other
applicable exemption under the Act. In view of this representation and warranty,
I agree that there may be affixed to the certificates for the shares to be
issued to me, and to all certificates issued hereafter representing such shares
(until in the opinion of counsel, which opinion must be reasonably satisfactory
in form and substance to counsel for the Company, it is no longer necessary or
required) a legend as follows:
<PAGE>
"The shares of common stock represented by this certificate have not
been registered under the Federal Securities Act of 1933, as amended.
and were acquired by the registered holder pursuant to a representation
and warranty that such holder was acquiring such shares for his own
account and for investment, with no intention to transfer or dispose of
the same, in violation of the registration requirements of that Act.
These shares may not be sold, pledged or transferred in the absence of
an effective registration statement under the Securities Act of 1933,
as amended, or an opinion of counsel, which opinion is reasonably
satisfactory to counsel to the Company, to the effect that registration
is not required under said Act."
I further agree that the Company may place a stop order with its
Transfer Agent, prohibiting the transfer of such shares, so long as the legend
remains on the certificates representing the shares.
Very truly yours,
By: ________________________________
Print Name: _________________________
Date: _______________________________
<PAGE>
EXHIBIT D
EMPLOYMENT AGREEMENT BY AND BETWEEN
ELAN PENN
AND PC ETCETERA, INC.
<PAGE>
ELAN PENN
EMPLOYMENT AGREEMENT
This agreement is dated February 6, 1997 among PC ETCETERA, INC., a
Delaware corporation ("PCE"), and ELAN PENN (the "Executive" and, together with
PCE, the "Parties"). The Executive has been a key employee of Mashov Computers
Marketing Ltd. ("Mashov"), which is acquiring a 69% stock interest in PCE
pursuant to that certain Stock Purchase Agreement dated February 6, 1997 by and
between Mashov and PCE (the "Stock Purchase Agreement"), and the Parties desire,
subject to the execution of the Stock Purchase Agreement, to enter into an
employment agreement on the terms and conditions hereinafter set forth. This
Agreement shall become effective immediately.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the Parties agree as follows:
Section 1. Employment and Term
PCE hereby employs the Executive, and the Executive hereby agrees to
serve, as Chief Financial Officer of PCE, with the duties set forth in Section2,
for a term (hereinafter called the "Term of Employment") of three years
beginning on the date hereof and ending on the third annual anniversary of the
date hereof. PCE acknowledges that the Executive also serves as the Chief
Financial Officer of Mashov Computers Marketing Ltd. and Mashov Computers Ltd.,
and will not devote his full time to the affairs of PCE. Notwithstanding the
provisions of the immediately preceding sentence of this Section1, this
Agreement may automatically terminate earlier in the manner set forth in
Section5.
1
<PAGE>
Section 2. Duties
(a) The Executive is to serve as Chief Financial Officer of PCE. The
immediately preceding sentence of this Section2(a) shall not be construed to
limit the power of the Board of PCE (the "Board") to elect officers annually or
to remove officers in accordance with the bylaws of PCE.
(b) The Executive agrees that during the Term of Employment his duties
and assignments shall be as the Chief Financial Officer of PCE, except that the
Executive shall not be required to perform any duties or assignments
inconsistent with his experience and qualifications.
(c) During the Term of Employment the Executive shall, except during
customary vacation periods and periods of illness, devote a substantial amount
of his business time and attention to the performance of his duties hereunder
and to the business and affairs of PCE and to promoting the best interests of
PCE and he shall not, either during or outside such normal business hours,
engage in any activity inimical to such best interests. The Executive shall
competently perform all assigned duties; carry out the policies, directives, and
decisions of the Board; not withhold information from the Board, and will
promptly report to the Board any information which may affect PCE's or any
affiliate's business; and refrain from any conduct which is illegal, dishonest,
fraudulent, or detrimental to PCE's or any affiliate's business, as determined
by the Board.
Section 3. Compensation During the Term of Employment
2
<PAGE>
(a) Base Salary. During the Term of Employment, PCE shall pay to the
Executive base compensation (in addition to the compensation provided for
elsewhere in this Agreement) at such rate as the Executive and the Board shall
agree (the "Base Salary"), but at not less than the rate of $ 10,000 per month,
less appropriate payroll taxes, payable in such periodic installments as PCE may
determine but not less often than monthly, with annual reviews and adjustments,
if any, at the discretion of the Board. The Executive's Base Salary shall be
adjusted monthly in a percentage amount equal to the increase in the Consumer
Price Index as published by the Israeli Bureau of Labor Statistics or comparable
agency.
(b) Bonus Compensation. With respect to each fiscal year of PCE falling
in whole or in part within the Term of Employment beginning with the fiscal year
ending December 31, 1997, the Executive shall be eligible for a bonus (in
addition to his Base Salary), in amount established at the discretion of the
Board. One-half of such bonus compensation shall be payable to the Executive in
July (on an estimated basis) and the balance in the succeeding January.
With respect to any fiscal year of PCE which falls in part but not in
whole within the Term of Employment, the bonus compensation to which the
Executive is eligible under this Section3(b) shall be prorated on the basis of
the number of days of such fiscal year falling within the Term of Employment
except that if the Term of Employment ends within five days before or after the
end of a fiscal year, there shall be no proration and such bonus compensation
shall be payable with respect to the full fiscal year ending within such
five-day period.
(c) Expenses. PCE shall reimburse the Executive, upon presentation of
proper documentation, for reasonable expenses incurred by the Executive in the
performance of his assigned duties.
3
<PAGE>
(d) Fringe Benefits and Perquisites. During the Term of Employment, the
Executive shall enjoy the customary perquisites of office, including but not
limited to an automobile befitting his status and associated expenses, office
space and furnishings, secretarial services, expense reimbursements, and any
similar emoluments customarily afforded to the executive officers of PCE. The
Executive shall also be entitled to receive or participate in all "fringe
benefits" and employee benefit plans provided or made available by PCE to its
executives or management personnel generally, such as, but not limited to, group
hospitalization, medical, life and disability insurance, and pension, retirement
and profit-sharing plans.
(e) Vacations. The Executive shall be entitled each year to four weeks'
vacation or vacations in accordance with the policies of PCE as determined by
PCE from time to time. PCE shall not pay the Executive any additional
compensation for any vacation time not used by the Executive.
Section4 The PCE Stock Options.
(a) Terms. PCE shall grant to the Executive 200,000 stock options to
purchase Common Shares of PCE ( the "Options"). The Options shall vest and shall
be deemed earned in accordance with the following schedule, provided that such
Options scheduled to vest on such dates shall not vest or be deemed earned if
the Executive is not employed by PCE for any reason on the date on which the
Option is scheduled to vest:
Date on Which Options Vest: Number of Options Vesting on
Such Date:
August 1, 1997: 66,667
August 1, 1998: 66,666
August 1, 1999: 66,666
In the event of a sale, merger or consolidation of PCE after February 1, 1998,
all unexercised Options shall immediately vest.
(b) Exercise Price. The exercise price per Option shall be the average
of the bid and asked price of the shares of PCE as quoted on the NASDAQ Bulletin
Board for the 10 business days subsequent to the date hereof.
(c) Period During Which Exercisable. Options shall be exercisable for a
period of five years from the date on which such options vest, or until 3 months
after the date of any termination of employment, whichever is earlier. Options
not timely exercised shall lapse and be of no further force or effect.
(d) Form of Exercise. Options exercisable in accordance with their
terms shall be exercised only by delivering a fully executed Option Exercise
Notice, the form of which is attached hereto as Exhibit A, together with payment
therefor in the form of a cashier's check.
Section 5. Termination
(a) Disability or Death. If, during the Term of Employment, the
Executive, by reason of physical or mental disability, is incapable of
performing his principal duties hereunder for an aggregate of 180 working days
out of any period of twelve consecutive months, PCE at its option may terminate
the Term of Employment effective immediately by notice to the Executive given
within 90 days after the end of such 180-day period. If the Executive shall die
during the Term of Employment or if PCE terminates the Term of Employment
pursuant to the immediately preceding sentence by reason of the Executive's
disability, PCE shall pay to the Executive, or
4
<PAGE>
to the Executive's legal representatives, or in accordance with a direction
given by the Executive to PCE in writing, an amount equal to one year's Base
Salary.
(b) Retirement.
(i) The Term of Employment shall end automatically, without
action by either party, on the Executive's 65th birthday unless, prior
to such birthday, the Executive and PCE have agreed in writing that the
Term of Employment shall continue past such 65th birthday.
(ii) If the Term of Employment ends pursuant to this paragraph
by reason of a notice given by either party as herein permitted or
automatically at age 65 or any subsequent birthday, PCE shall pay to
the Executive, or to another payee specified by the Executive to PCE in
writing, the Executive's Base Salary and Bonus Compensation prorated to
the date on which the Term of Employment ends.
(iii) Anything hereinabove to the contrary notwithstanding, if
any provision of this paragraph violates federal or applicable state
law relating to discrimination on account of age, such provision shall
be deemed modified or suspended to the extent necessary to eliminate
such violation of law. If at a later date, by reason of changed
circumstances or otherwise, the enforcement of such provision as set
forth herein would no longer constitute a violation of law, then it
shall be enforced in accordance with its terms as set forth herein.
(c) Change of Control. In the event of a sale, merger or consolidation
of PCE such that substantially all of the assets of PCE shall be sold or
otherwise transferred to another entity, and
5
<PAGE>
such sale or transfer results in the termination of Executive, Executive shall
receive as severance 6 month's Base Salary.
(d) Termination During the Term of Employment. Should the Board, in
their discretion, terminate the Term of Employment for any reason other than
Executive's Disability, Death, or Retirement, then Executive shall receive as
severance 6 month's Base Salary.
(e) Failure to Renew Executive's Employment With PCE. Should the Board,
in their discretion, choose not to renew Executive's Employment with PCE
following the Term of Employment, then Executive shall receive as severance 6
month's Base Salary.
Section 6. Company's Right to Injunctive Relief
The Executive acknowledges that his services to PCE are of a unique
character, which gives them a peculiar value to PCE, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law, and that
therefore, in addition to any other remedy which PCE may have at law or in
equity, PCE shall be entitled to injunctive relief for a breach of this
Agreement by the Executive.
Section 7. Mergers and Consolidations; Assignability
In the event that PCE, or any entity resulting from any merger or
consolidation referred to in this Section7 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of the
assets of PCE or any such entity shall be sold or otherwise transferred to
another entity, the provisions of this Agreement shall be binding upon and shall
inure to the benefit of the continuing entity in or the entity resulting from
such merger or consolidation or the entity to which such assets shall be sold or
transferred. Except as provided in the immediately preceding
6
<PAGE>
sentence of this Section7, this Agreement shall not be assignable by PCE or by
any entity referred to in such immediately preceding sentence. This Agreement
shall not be assignable by the Executive, but in the event of his death it shall
be binding upon and inure to the benefit of his legal representatives to the
extent required to effectuate the terms hereof.
Section 8. Captions
The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.
Section 9. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns.
Section 10. Execution of Agreement
This Agreement will be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument and agreement.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and construed in
accordance with the laws of the State of New York without reference to its rules
as to conflicts of laws.
Section 12. Notices
7
<PAGE>
All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for PCE,
shall be addressed to it (if sent by mail) or delivered to it (if delivered by
hand) at its principal office for the attention of the Secretary, or at such
other address and for the attention of such other person of which PCE shall have
given notice to the Executive in the manner herein provided, and, if intended
for the Executive, shall be delivered to him personally or shall be addressed to
him (if sent by mail) at his most recent residence address shown in PCE's
employment records or at such other address or to such designee of which the
Executive shall have given notice to PCE in the manner herein provided. Each
such notice shall be deemed to be given on the date of mailing thereof or, if
delivered personally, on the date so delivered.
Section 13. Amendment and Modification
Any amendment or agreement supplemental hereto shall not be binding
upon either party unless executed in writing by PCE and the Executive.
Section 14. Entire Agreement
This Agreement supersedes and cancels all prior agreements, whether
verbal or written, among PCE and the Executive and constitutes the entire
agreement of the Parties on the subject matter hereof.
Section 15. Severability
Each paragraph of this Agreement or portion thereof shall be treated as
severable, to the end that if any paragraph or portion thereof shall be declared
illegal, invalid or unenforceable, this Agreement shall be interpreted so that
part only is invalid, without invalidating the remainder of this Agreement,
which shall remain in full force and effect as though such paragraph or
8
<PAGE>
portion thereof had never been contained in this Agreement, and the affected
part shall be interpreted, consistent with the law, to carry out the intent of
the parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
PC ETCETERA, INC.
By: _____________________________
Name:
Title:
-------------------------------------
ELAN PENN
9
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
Gentlemen:
In connection with my exercise of stock options granted to me pursuant
to the Employment Agreement made February 6, 1997 by and between myself and PC
Etcetera, Inc., where such stock options are exercisable into shares of common
stock of PC ETCETERA, INC., a Delaware corporation (the "Company"), I hereby
acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be issued to me
pursuant to the exercise of said option have not been registered under the
Securities Act of 1933, as amended (the "Act"), and accordingly, must be held
indefinitely unless such shares are subsequently registered under the Act, or an
exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under the
Act can be made only after the holding period and in limited amounts in
accordance with the terms and conditions provided by that Rule, and in any sale
to which that rule is not applicable, registration or compliance with some other
exemption under the Act will be required.
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the Act.
4. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the time
that I may desire to make a sale pursuant to the Rule, the Company may neither
wish nor be able to comply with such require ment.
In consideration of the issuance of certificates for the shares to me,
I hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge or transfer such shares
in the absence of an effective registration statement covering the same, except
as permitted by the provisions of Rule 144, if applicable, or some other
applicable exemption under the Act. In view of this representation and warranty,
I agree that there may be affixed to the certificates for the shares to be
issued to me, and to all certificates issued hereafter representing such shares
(until in the opinion of counsel, which opinion must be reasonably satisfactory
in form and substance to counsel for the Company, it is no longer necessary or
required) a legend as follows:
<PAGE>
"The shares of common stock represented by this certificate have not
been registered under the Federal Securities Act of 1933, as amended.
and were acquired by the registered holder pursuant to a representation
and warranty that such holder was acquiring such shares for his own
account and for investment, with no intention to transfer or dispose of
the same, in violation of the registration requirements of that Act.
These shares may not be sold, pledged or transferred in the absence of
an effective registration statement under the Securities Act of 1933,
as amended, or an opinion of counsel, which opinion is reasonably
satisfactory to counsel to the Company, to the effect that registration
is not required under said Act."
I further agree that the Company may place a stop order with its
Transfer Agent, prohibiting the transfer of such shares, so long as the legend
remains on the certificates representing the shares.
Very truly yours,
By: ________________________________
Print Name: _________________________
Date: _______________________________
<PAGE>
EXHIBIT E
PC ETCETERA, INC.
Certificate of Designations of Preferred Stock Authorized by
Resolution of the Board of Directors Providing for an Issue of
658,412 Shares of Preferred Stock Designated "Series C
Preferred Shares."
PC Etcetera, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 151 of Title 8 thereof and Article IV
of the Corporation's Certificate of Incorporation, DOES HEREBY CERTIFY THAT:
Pursuant to authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, said Board of Directors, at
a meeting duly held, adopted a resolution providing for the issuance of 658,412
shares of the Corporation's Preferred Stock, par value $.001 per share,
designated "Series C Preferred Shares", which resolution is as follows:
RESOLVED, that, pursuant to the authority vested in the Board
of Directors of the Corporation by the Certificate of Incorporation, the Board
of Directors does hereby provide for and authorize the issuance of 658,412
shares of the Preferred Stock, par value $.001 per share, of the Corporation, to
be designated "Series C Preferred Shares" of the presently authorized but
unissued shares of Preferred Stock. The voting powers, designations,
preferences, and relative, participating, optional or other special rights of
the Series C Preferred Shares authorized hereunder and the qualifications,
limitations and restrictions of such preferences and rights are as follows:
(i) Dividends. The holders of Series C Preferred Shares, on a
pari passu basis with the holders of the Corporation's Common Shares (based upon
the number of Common Shares into which the Series C Preferred Shares are
convertible), shall be entitled to receive such dividends as may be declared by
the Board of Directors. Declared but unpaid dividends shall not bear interest.
(ii) Voting Rights. The holders of the Series C Preferred
Shares shall be entitled to vote on all matters required to be or otherwise
submitted to a vote of holders of the Corporation's Common Shares. The holders
of the Series C Preferred Shares shall vote together with the holders of the
Corporation's Common shares as a single class. In such matters on which the
holders of the Series C Preferred Shares are entitled to vote, each Series C
Preferred Share shall be entitled to ten (10) votes for every one (1) vote to
which each Common Share of the Corporation is entitled.
<PAGE>
(iii) Conversion.
(A) Conversion Right. Subject to the authorization of
shareholders holding a sufficient number of the Corporation's Common Shares to
permit such conversion, each Series C Preferred Share shall be convertible, at
the option of the holder thereof, at the office of the Corporation, into ten
(10) Common Shares of the Corporation.
(B) Procedure. Before any holder of Series C
Preferred Shares shall be entitled to receive Common Shares upon conversion, the
holder shall (I) surrender the certificate(s) therefor, duly endorsed, at the
principal offices of the Corporation and (II) shall give written notice to the
Corporation at such offices that the holder elects to convert the same into
Common Shares and shall further state therein the number of Series C Preferred
Shares being converted. Subject to the provisions hereof, effective upon the
receipt by the Corporation of the certificate(s) pursuant to and in accordance
with (I) above and the written notice pursuant to and in accordance with (II)
above (the "Effective Conversion Date"), the holder shall thereupon be deemed to
be the holder of record of the Common Shares issuable upon conversion,
notwithstanding that the stock transfer books of the Corporation shall then be
closed or that the certificate(s) representing such Common Shares shall not then
be actually delivered to the holder. Subject to the provisions hereof, promptly
following the Effective Conversion Date, the Corporation shall cause its
transfer agent to issue and deliver to such holder of Series C Preferred Shares
a certificate for the number of Common Shares to which the holder shall be
entitled.
- 2 -
<PAGE>
(C) Fractional Shares. No fractional Common Shares
shall be issued upon conversion of Series C Preferred Shares. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay, in cash, an amount equal to the product of (i) such
fraction of a share times (ii) the market price of one Common Share on the
Effective Conversion Date. As used herein, the term "market price" shall mean
the closing selling price or, if not available, the mean of the closing bid and
asked prices, or, if not available, the mean of the highest bid and lowest asked
prices, of the Common Shares as quoted on a national securities exchange, or in
the over-the-counter market as reported by NASDAQ or, if not available, by the
National Quotation Bureau, Incorporated, as the case may be, or, if there is no
selling or bid or asked price on a particular day, then the closing selling
price or, if not available, the mean of the closing bid and asked prices, or, if
not available, the mean of the highest bid and lowest asked prices on the
nearest trading date before that day and for which such prices are available,
and if the Common Shares are not listed on such an exchange or trade in such
market on the Effective Conversion Date, then the market price shall be
determined by the Board of Directors by taking into consideration all relevant
factors, including, but not limited to, the Corporation's net worth, prospective
earning power and dividend paying capacity.
(D) Reservation of Shares Issuable Upon Conversion.
Subject to the authorization of shareholders holding a sufficient number of the
Corporation's Common Shares to permit such reservation of shares, the
Corporation shall at all times reserve and keep available out of its authorized
but unissued Common Shares, solely for the purpose of effecting the conversion
of the Series C Preferred Shares, such number of its Common Shares as shall from
time to time be sufficient to effect the conversion of all outstanding Series C
Preferred Shares; provided, however, that nothing contained herein shall
preclude the Corporation from satisfying its obligations in respect of the
conversion of the Series C Preferred Shares by delivery of Common Shares which
are held in the treasury of the Corporation.
(E) Lost, Stolen or Destroyed Certificates. In the
event that the holder notifies the Corporation that the certificate(s)
representing Series C Preferred Shares have been lost, stolen or destroyed and
either (i) provides a letter, in form satisfactory to the Corporation, to the
effect that he will indemnify the Corporation from any loss incurred by it in
connection therewith, and/or (ii) provides an indemnity bond in such amount as
is reasonably required by the Corporation, the Corporation having the option of
electing either (i) or (ii) or both, the Corporation may, in its sole
discretion, accept such letter and/or indemnity bonds in lieu of the surrender
of the certificate(s) as required by subsections (iii) and (iv) hereof.
(F) Statutory Restrictions. The foregoing provisions
for conversion of the Series C Preferred Shares shall be subject to all
applicable statutory limitations and restrictions.
(iv) Liquidation Preferences. Subject to the liquidation
rights and preferences of the Series A Preferred Shares of the Corporation and
any other stock of the Corporation ranking in liquidation senior to the Series C
Preferred Shares, in the event of any voluntary or involuntary liquidation,
dissolution or winding up or the Corporation, the holders of Series C Preferred
Shares will be entitled to receive, prior and in preference to any distribution
of the assets or surplus funds of the Corporation to the holders of any Common
Shares by reason of the ownership thereof, an amount equal to the fixed sum of
one tenth of one cent ($.001) per share and no more (the "Preferential Amount").
If, upon the occurrence of such an event, the assets and funds thus
distributable among the holders of Series C Preferred Shares shall be
insufficient to permit the payment to such holders of the full Preferential
Amount, then, the entire assets and funds of the Corporation legally available
for distribution to the holders of the Series C Preferred Shares shall be
distributed ratably among such holders in accordance with the respective amounts
which would be payable on such shares if all amounts payable thereon were paid
in full. After the payment or setting apart of the full Preferential Amount
required to be paid to the holders of Series C Preferred Shares, the holders of
Common Shares or any other stock of the Corporation ranking in liquidation
junior to the Series C Preferred Shares shall be entitled to receive ratably all
remaining assets or surplus funds of the Corporation. Neither the merger or
consolidation of the Corporation, nor the sale, lease or conveyance of all or
- 3 -
<PAGE>
part of its assets, shall be deemed to be a liquidation, dissolution or winding
up of the affairs of the Corporation, either voluntarily or involuntarily,
within the meaning of this section.
(v) Sinking Fund. The Series C Preferred Shares shall not be
entitled to the benefit of any sinking fund to be applied to their purchase or
redemption.
IN WITNESS WHEREOF, PC ETCETERA, INC. has caused this
certificate to be executed by its President and attested by its Secretary this
_____ day of _______________, 1997.
PC ETCETERA, INC.
By: __________________________
Terry I. Steinberg,
President
ATTEST:
- --------------------------
Joseph Sabrin,
Secretary
- 4 -
<PAGE>
EXHIBIT F
PURCHASE AGREEMENT
PURCHASE AGREEMENT ("Agreement") dated as of February 6, 1997, between
ELRON ELECTRONIC INDUSTRIES LTD., an Israeli company ("Elron") and MASHOV
COMPUTERS MARKETING LTD., an Israeli company ("Mashov").
WHEREAS, Mashov owns 70% of the issued and outstanding ordinary shares
of Mashov Computer Based Training (C.B.T.) Ltd. ("CBT") and Elron owns 30% of
the issued and outstanding ordinary shares of CBT; and
WHEREAS, Mashov proposes to enter into a Stock Purchase Agreement (the
"Stock Purchase Agreement") with PC Etcetera, Inc., a Delaware corporation
("PCE") pursuant to which Mashov will purchase approximately 69% of the issued
and outstanding common stock of PCE, and Mashov has agreed in connection
therewith to transfer to PCE 100% of the share capital of CBT; and
WHEREAS, in connection with the transactions contemplated by the Stock
Purchase Agreement and subject to the terms and conditions hereinafter set
forth, Mashov desires to purchase from Elron, and Elron desires to sell to
Mashov, its entire interest in CBT.
NOW, THEREFORE, Elron and Mashov agree as follows:
Section 1. Sale and Purchase of Shares.
(a) Subject to the applicable terms and conditions set forth in this
Agreement, Elron will sell to Mashov, and Mashov will purchase from Elron, on
the Closing Date (as hereinafter defined), all of the ordinary shares of CBT
held by Elron (the "CBT Shares"), which shares represent 30% of the issued and
outstanding ordinary shares of CBT as of the date hereof.
(b) The purchase price to be paid by Mashov as consideration for the
CBT Shares on the Closing Date (the "Purchase Price") shall consist of 130,000
shares of Common Stock of PCE (the "PCE Shares").
Section 2. Closing.
(a) On the day on which the closing shall take place under the Stock
Purchase Agreement (herein called the "Closing Date"), immediately before the
closing under the Stock Purchase Agreement takes place, Elron will deliver to
Mashov certificates representing the CBT Shares against Mashov's undertaking to
deliver to Elron as soon as practicable after the closing under the Stock
Purchase Agreement shall take place, the PCE Shares. Mashov shall hold the CBT
Shares in escrow pending the closing under the Stock Purchase Agreement.
<PAGE>
(b) On the Closing Date, immediately after the closing under the Stock
Purchase Agreement takes place or as soon as practicable thereafter, Mashov will
deliver to Elron certificates representing the PCE Shares. If for any reason the
closing under the Stock Purchase Agreement does not take place, Mashov shall
return the CBT Shares to Elron.
Section 3. Director Resignations. Within three (3) business days after
the Closing Date, Elron shall ensure that each director on the Board of
Directors of CBT elected or appointed by or on behalf of Elron submits his
written resignation from the Board of Directors of CBT, effective as of the
Closing Date.
Section 4. Integration and Severability. This Agreement embodies the
entire agreement and understanding between the parties hereto and supersedes all
prior agreements and understandings relating to the subject matter hereof. In
case any one or more of the provisions contained in this Agreement or in any
instrument contemplated hereby for such date, or any application thereof, shall
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and any other
application thereof, shall not in any way be affected or impaired thereby.
Section 5. Counterparts; Facsimile Signatures. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which shall together constitute one and the same instrument.
Facsimile signatures shall be acceptable for the consummation of the
transactions contemplated hereby, provided that any party providing a facsimile
signature hereto shall deliver to the other party an original signature within
five (5) business days after the Closing Date.
Section 6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ISRAEL
(WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each executed this
Agreement by their duly authorized officers as of the date first written above
ELRON ELECTRONIC INDUSTRIES LTD.
By:
Name:
Title:
MASHOV COMPUTERS MARKETING LTD.
By:
Name:
Title:
- 3 -
<PAGE>
SCHEDULE 3.01
JURISDICTIONS SELLER QUALIFIED TO DO BUSINESS IN
New York State
<PAGE>
SCHEDULE 3.02
OUTSTANDING CAPITALIZATION AGREEMENTS
None
<PAGE>
SCHEDULE 3.04
INVESTMENTS
None
<PAGE>
SCHEDULE 3.07
FINANCIAL STATEMENT FAIR PRESENTATION
None
<PAGE>
SCHEDULE 3.08
UNDISCLOSED LIABILITIES
The following is a list of liabilities not disclosed in the recent financial
statements:
1. Elron Electronic Industries: The Company owes Elron the reimbursement
of a lease taken out on behalf of the company's Israeli subsidiary. The total
balance due is approximately $15,000 of which $3,100 is payable each month
2. Ivy Hill Inc.: Ivy Hill billed the Company for $12,927.16 for CBT
production that was done in February 1996. The Company had not recorded the
liability while it was researching the additional charges, and negotiating with
them.
3. Computer Intelligence Info Corp: The Company is in dispute and does not
feel this money is due. However Computer Intelligence has begun legal
proceedings to collect the sum of approximately $6000. Rather than incurring
significant legal fees, the Company is trying to negotiate a settlement
agreement.
4. PC Etcetera Israel: The Company has not received all of the required
documentation from its wholly owned subsidiary prior to the cessation of
operations. At present we are aware of approximately $42,000 of liabilities
still outstanding to vendors. (Of this amount $1,670 are due to Sivan). Only
estimated liabilities of $25,000 are disclosed in the financial statements.
5. Internal Revenue Service (IRS) Audit: The IRS is currently reviewing
the Company's classifications between employees and Non-employees. The IRS has
stated that there will be reclassification where the Company will be responsible
for employment taxes on the individuals involved. While the Company can not
estimate the liability at this time they are hoping the balance due will remain
under $30,000
6. New York State Insurance Department: The Company is currently being
audited by the New York State Insurance fund for Workers Compensation insurance.
The Company is estimating that the three year audit will result in a liability
of approximately $35,000.
7. New Jersey Department of Labor: In 1994 the Company was audited by the
New Jersey Department of Labor. The audit resulted in a balance due of $12,227.
The Company did not agree with this balance and has requested an audit. As of
this date no audit has been scheduled. The Company pays the State $150 per month
as a temporary payment plan until the audit is scheduled.
8. New York State Department of Labor. As a result of the Internal Revnue
Service audit the State of New York will be entitled to Unemployment taxes on
those consultants who are reclassified as employees. The Company's Unemployment
rate is 7.1% of wages up to a maximum wage base of $7,000 per year.
9. PC Etcetera Israel has just received notice of litigation from a
leasing company for payment of $12,000 (See disclosure in Schedule 3.18 Pending
and Threatened litigation)
Revised January 23, 1997
<PAGE>
SCHEDULE 3.09
CERTAIN CHANGES AND EVENTS
Purchase of Certain Assets
A purchase order has been issued to purchase approximately $26,000
worth of pentium pro180 computers.
In December and January
Transaction Borrowing
The Company is under an agreement with Rosenthal and Rosenthal to
finance its trade receivables. The Company borrows funds daily. The loan balance
fluctuates with accounts receivable
<PAGE>
SCHEDULE 3.10
TITLE AND CONDITION OF ASSETS
Borrowings under the Company's receivable financings are secured by the
accounts receivable.
Bank loans and computer equipment leases are secured by the equipment
purchased with the proceeds of such financing.
<PAGE>
SCHEDULE 3.11
PROPRIETARY RIGHTS
TRADEMARKS
The prior PC Etcetera logo is copyrighted, however the logo is not the
one currently used. The current logo is not copyrighted
COPYRIGHTS
All training manuals developed by the Company are copyrighted.
BRAND NAMES
The Company markets its computer based training software under the
brand name of STAR to the corporate client and Help Plus to the retail
industries
PROPRIETARY SYSTEMS
ROSTER The Company's front end registrations system
PATENTS
None
<PAGE>
SCHEDULE 3.12
DESCRIPTION OF REAL PROPERTY OWNED
None
<PAGE>
SCHEDULE 3.13
REAL PROPERTY LEASES
1. 462 Seventh Avenue, New York
Expires December 31, 2003
Current Monthly Rent $25,000
4th Floor (Office space) 8,500 square feet
18th Floor (Classroom location) 7,500 square feet
2. 19 Fulton Street, New York, NY 10018
Expires April 1997
Current Monthly Rent $4,000
Approximately 2,000 square feet
Events that constitute default
Under the terms and conditions of the lease agreements referred to
above the Company can be considered in default for non payment of past due
rents. However, the Company continually communicates with the landlords, who are
working with the Company and have not filed any legal actions.
Notification
The lease agreement for 462 Seventh Avenue requires that the landlord
be notified of this transaction.
<PAGE>
SCHEDULE 3.14
INSURANCE
Comprehensive General Liability
Liability $1,000,000
Aggregate Limit $2,000,000
Umbrella $4,000,000
Employee Benefits $1,000,000
Blanket Employee Dishonesty $250,000
Commercial Automobile $1,000,000
401K fidelity Blanket $50,000
Contents
462 Seventh Avenue $300,000
19 Fulton Street $50,000
Unnamed Locations $50,000
Workers compensation in the following states:
New York
New Jersey (canceled Dec 31, 1996)
"Key-Man"
The Company is the beneficiary of a $500,000 life insurance policy on
both the President and Executive Vice President. The Company, its President and
Executive Vice President are parties to an agreement which requires the Company,
upon the death of either such person, to purchase from the estate of such person
up to $500,000 of the Company's Common Stock at a price per share equal to the
Company's revenues for the last four completed fiscal quarters immediately
preceding the date of death divided by the number of outstanding shares of
Common Stock at the time of death. The Company's purchase obligation is
conditioned upon its receipt of, and is only to the extent of, life insurance
proceeds on such persons.
<PAGE>
SCHEDULE 3.15
LABOR MATTERS
None
<PAGE>
SCHEDULE 3.16
EMPLOYEE BENEFIT PLANS
The Company contributes to the following Employee Benefit Plans
Stock Option
Group Health, Medical and Dental
Life Insurance
Long Term Disability
401(k)
In 1994 the Company created PC Etcetera Israel when it acquired of the Ace
Division of Elron Electonic Industries. Elron gave 60,000 share of PC Etcetera,
Inc. stock to certain of their former employees. These shares of stock are held
in a trust. The trustee's are, Kleinhandler and Halevy, the attorney's of PC
Etcetera, Israel.
The trust remained unchanged even after PC Etcetera Israel ceased operations.
Revised January 31, 1997
<PAGE>
SCHEDULE 3.17
CERTAIN CONTRACTS AND ARRANGEMENTS
Receivable Financing Agreement
The Company may terminate the Agreement on the renewal date by giving
Lender at least sixty (60) days prior written notice.
Equipment Financing
The Company has several equipment leases with Hewlett Packard Financing
Inc. Expiration dates range from September of 1997 through June of 1998.
Bank Financing
Citibank Three year term loan maturing June 1997. Monthly payment of
principal and interest is $6559.
Israel Discount Bank The Company is the guarantor on a loan obtained by
its wholly owned subsidiary, PC Etctera Israel. The company is currently
negotiating payment terms and is presently paying interest of $3,600 per month.
The total outstanding balance is approximately $185,000.
Severance
The Company is under an agreement with the former President of PC
Etcetera, Israel, a current board member, for severance payments in the amount
of $8,333.33 per month. There is presently three payments remaining under the
agreement.
Related Party
The Company is indebted to Gilbert Steinberg, the former Chairman of
the Board of Directors and the President's father. The loan, which was received
in 1991, has a balance of $33,333 plus accrued interest of $5,707.
In an effort to help the Company through serious financial difficulties
the President and Executive Vice President did not accept their salary
compensation for three months. The liabilities on the books to each party is
$20,000
Knowledge Alliance
Simultaneously with the sale of all of the outstanding stock of PC
Etcetera Inc. the Company's wholly owned subsidiary, the purchaser paid to the
Company the sum of $200,000 as a non-refundable license payment in consideration
of the license by the Company to PC Canada of certain computer software. The
Company recognizes $5,556 of revenue a month from this transaction.
<PAGE>
SCHEDULE 3.17
CERTAIN CONTRACTS AND ARRANGEMENTS (Continued)
Negotiations with Creditors
The Company has successfully negotiated a composition agreement with
certain trade vendors. Creditors classifications are broken out into three
categories Creditors whose balances due are in excess of $3,000 will be paid
100% of the outstanding balance over 4 years. Those whose balances are between
$1,000 and $2,999 will be paid 40% of the outstanding balance payable in 8 equal
quarterly payments. Creditors with balances under $1,000 will be paid 35% of the
outstanding balance, with payments due in November 1996 and August 1997.
Avshalom Aderet
Attached is a copy of the agreement the Company entered into with
Avshalom Aderet the former president of PC Etcetera, Israel.
Revised January 23, 1997
<PAGE>
SCHEDULE 3.18
LEGAL PROCEEDINGS
PENDING OR THREATENED
The following is a list of litigations pending or threatened. All of them
pertain to non payment of debt and are being handles by the attorneys who have
been involved in the composition agreement with creditors. There are no other
pending or threatened litigations.
COMPUTER INTELLIGENCE INFO CORP.
Plaintiff is claiming that the Company owe them approximately $6,000.
The Company disputes this amount and is currently attempting to negotiate a
settlement.
MIRROR IMAGES DISKETTE DUPLICATIONS
Mirror Images is not content with the terms of the Composition
agreement and wants payment of the obligation of $1,357.45 in full immediately.
The Company is hopeful that it can convince them to accept the term of the
Composition agreement.
48TH AVENUE CARPET
Also not content with the terms of the Composition agreement and wants
payment of the obligation of $3,280. The Company is hopeful that it can convince
them to accept the term of the Composition agreement.
RDC CORPORATION (IN ISRAEL)
PC Etcetera Israel (through its former president) was served with
papers by RDC. They are demanding payment of a balance due on an equipment
financing lease in the amount of $12,000. Mr. Aderet was under the impression
that PC Israel and RDC had entered into a settlement agreement last year. Mr.
Aderet is currently attempting to get more information from RDC
PC Etcetera Israel ceased operations in April of 1995. The Company has
several outstanding invoices from vendors that they have been unable to pay.
While no papers have been served (other than RDC described above) the vendors
included in the liabilities disclosed in Schedule 3.08 are threatening
litigation.
Revised January 23, 1997
<PAGE>
SCHEDULE 3.18 CONTINUED
LEGAL PROCEEDINGS
SETTLED
AGM OFFICE PRODUCTS
Served the Company with summons to appear in small claims court for
balance of $1,165.86. The Company settled for the sum of $825; $600 paid and
$225 to be paid in January 1997
HOTEL COPY CENTERS OF NYC
D/B/A/ IMAGE TECH
Balance due Image Tech the sum of $26,527.04 was to have been included
in composition agreement. Our attorneys successfully convinced plaintiffs to
sign composition agreement
revised January 23, 1997
<PAGE>
SCHEDULE 3.19
TAXES
Returns not Filed
PC Etcetera Israel has not filed the required tax returns for 1995 nor
1996
Tax Accruals
The following tax accruals are made subsequent to the recent financial
statements
Workers Compensation $36,000
Internal Revenue Service
Audit still in progress and amount not known as yet.
The Company is working together with the IRS in order to determine the
exact amount due prior to the preparation of the audited financial
statements as of December 31, 1996.
New Jersey Department of Labor
Tax Audits
The following returns have been audited or are currently being audited
(See proposed accruals above)
Internal revenue Service Employment Examination of 1995 Form
1099 and W-2 New Jersey Department of Labor 1994 Form 1099
State of New York Unemployement returns will be audited as a
result of the IRS Audit
Additional Tax Liabilities
In connection with the Company's wholly owned subsidiary, the Company
has a liability to Israel's Chief Scientist for certain royalty payments related
to software development funding.
In addition PC Etcetera Isreal has a balance of approximately $12,500
due to the Chief Scientist. (This amount is included in the estimated
liabilities disclosed in Schedule 3.08) The statement of monies due (which is
required to be audited) has yet to be submitted to the Chief Scientist
Revised January 23, 1997
<PAGE>
SCHEDULE 3.20
ENVIRONMENTAL MATTERS
None
<PAGE>
SCHEDULES 3.22
CERTAIN INTEREST
The Company is under and agreement with Cadence Management Company to pay the
sum of $3,000 per month for the advisory services of Martin Kahn, Chairman,
Board of Directors.
<TABLE>
<CAPTION>
COMPENSATION
- ------------
OTHER STOCK OPTIONS
DIRECTOR NOTE SALARY BONUS CASH PAYMENT GRANTED
- -------- ---- ------ ----- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Marty Kahn
1996 (9 months) (1) - - 36,000 - 20,000
1995 (1) - - 18,000 - 20,000
1994 - - - - - -
Terry Steinberg
1996 (9 months) (2) $58,500 - - - -
1995 $99,360 - - - -
1994 $131,750 - - - -
Joseph Sabrin
1996 (9 months) (2) $58,500 - - - -
1995 $103,680 - - - -
1994 $110,400 - - - -
Avshalom Aderet
1996 (9 months) (3) $28,000 - $50,000 -
1995 $84,000 - - -
1994 (4) $42,000 - - -
Avi Peri
1996 (9 months) - - - - -
1995 - - - - -
1995 - - - - -
Gil Steinberg
1996 (9 months) (5) - - - - -
1995 - - - - -
1994 - - - - -
<FN>
NOTES
(1) Payments under the contract was $3,000 each month as of September 30, 1996.
Mr. Kahn has subsequently agreed to reduce his fees as well as balance due by
50%.
(2) Terry Steinberg and Joseph Sabrin did not receive any wages during the
second quarter of 1996. Each is due $22,500 which is recorded in the financial
statements
(3) Avshalom Aderet was formally the President of PC Etcetera Israel, Ltd. He
was paid regular wages from January 1, 1996 through April 30, 1996. As part of
his severance package Mr. Aderet was granted six month salary. Of this amount
$25,000 was paid and $25,000 is still due him.. See additional contracts with
Mr. Aderet disclosed in schedule 3.17.
(4) In 1994 Avshalom Aderet was granted 45,000 options to purchase common stock.
In accordance with the Company's Stock Option Plan, these options became voided
upon the termination of Mr. Aderet's employment with the Company.
(5) Mr. Aderet's 1994 salary only includes the period July 1, 1994 (the
inception of PC Etcetera Israel) through December 31, 1994.
(6) Gilbert Steinberg's warrants issued in connection with certain loans have
been disclosed under the liabilities and have not been included in this section
as compensation
</FN>
</TABLE>
<PAGE>
Revised January 23, 1997
<PAGE>
SCHEDULES 3.23
POWERS OF ATTORNEY
None
LIMITATION ON COMPETITION
Knowledge Alliance
CANADA
In connection with the Company's sale of its wholly owned subsidiary in
Toronto, Canada, the Company agreed not to "within Canada, directly or
indirectly own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected in any manner with, any
business of the type and character engaged in and competitive with the Training
Business.
SAN FRANCISCO AND BOISE OPERATIONS
In connection with the sale of the Company's San Francisco and Boise
Operations, the Company has agreed not to within one hundred fifty (150) miles
of either of the Purchased Locations (the "Restricted Area"), directly or
indirectly own, manage, operate, control or participate in the ownership,
management, operation or control of or be connected in any manner with, any
business of the type and character engaged in and competitive with the Training
Business being acquired by the Purchaser
HELP PLUS ISRAEL SALES
As per the contract with Avshalom Aderet, the former president of PC
Etcetera Israel, attached to schedule 3.17, the Company can not sell Help Plus
in English with in Israel
Revised January 23, 1997
<PAGE>
SCHEDULE 4.01
Qualifications
Sivan Computers Training Center (1994) Ltd.
The Subsidiary is authorized to do business in Israel.
Mashov Computer Based Training (C.B.T.) Ltd.
The Subsidiary is authorized to do business in Israel.
<PAGE>
SCHEDULE 4.02
Capitalization
Sivan Computers Training Center (1994) Ltd.
The authorized Share capital consists of 25,200 Ordinary Shares per value NIS 1
each. There are 1,000 Ordinary Shares issued and outstanding divided as follows:
700 shares issued to Mashov Computer Marketing Ltd. and 300 Ordinary Shares
issued to Elron Electronic Industries Ltd.
Mashov Computer Based Training (C.B.T.) Ltd.
The authorized Share capital consists of 29,400 Ordinary Shares per value NIS 1
each. There are 1,000 Ordinary Shares issued and outstanding divided as follows:
999 Ordinary Shares issued to Mashov Computers Marketing Ltd. and 1 Ordinary
Share issued to Mashov Computers Ltd.
<PAGE>
SCHEDULE 4.04
Investments
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.07
Financial Statements of Subsidiaries
Sivan Computers Training Center (1994) Ltd.
1994-95: Hebrew versions provided.
1996: See attached Balance Sheet and Statement of Operations.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
Balance Sheets
Sept. 30 June 30 March 31
1996 1996 1996
Unaudited
U.S. Dollars (in thousands)
ASSETS
CURRENT ASSETS
Cash & cash equivalents 90 81 133
Marketable securities 7 -- --
Trade receivables 1,887 1,701 1,763
Other accounts receivable 478 488 467
Inventories 34 20 21
-------- -------- --------
2,496 2,290 2,382
------ ------ ------
INVESTMENTS
Investments in an affiliated
company 138 137 109
------ ------ ------
FIXED ASSETS, NET 1,314 1,305 1,188
------ ------ ------
OTHER ASSETS 1,854 1,889 1,971
------ ------ ------
---------- --------- --------
5,802 5,621 5,650
===== ===== =====
Sept. 30 June 30 March 31
1996 1996 1996
Unaudited
U.S. Dollars (in thousands)
LIABILITIES &
SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Trade payables 476 556 527
Related parties 705(1) 700 705
Other accounts payable 2,003 1,817 1,834
----- ----- -----
3,184 3,073 3,066
------ ------ ------
LONG TERM LIABILITIES
Liabilities in respect of employee
rights upon retirement, net 145 109 79
------ ------ ------
SHAREHOLDERS' EQUITY 2,473 2,439 2,505
------ ------ ------
5,802 5,621 5,650
===== ===== =====
- ----------
(1) Includes $480,000 of management fees and interest charges payable to
Mashov Computers Marketing Ltd. which will be non-recurring following the
Closing Date, except for interest charges on the debt referred to in Section
6.12 of the Agreement.
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
STATEMENTS OF OPERATIONS
Sep. 30 June 30 March 31
1996 1996 1996
Unaudited
U.S. Dollars (in thousands)
Revenues from training 2,321 2,057 2,109
Cost of training 1,220 1,133 1,072
----- ----- -----
Gross Profit: 1,101 924 1,037
------ ------ ------
Selling expenses 309 282 272
General and administrative expenses(2) 686 610 590
--- --- ---
995 892 862
------ ------ ------
------ ------- ------
Operating income before financial expenses 106 32 175
Financial expenses, net 104 164 143
------- ------- ------
2 (132) 32
Company's share in earnings of affiliated
companies, net 9 23 8
-------- -------- --------
Net income (loss) for the period 11 109 40
======== ======= =======
- --------
(2) Includes intercompany charges payable to Buyer. See Footnote 1.
<PAGE>
SCHEDULE 4.08
Liabilities
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.09
Changes and Events since September 30, 1996
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.10
Property Liens
Sivan Computers Training Center (1994) Ltd.
None, except the debentures to the bank in the due course of business.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.11
Proprietary Rights
Sivan Computers Training Center (1994) Ltd.
1. An Israeli Trade Mark No. 94936 "Sivan Computers Training" registered
on 2.6.96.
2. An Israeli Trade Mark No. 95986 "Sivan Computers Software and Training"
registered on 1.7.96.
3. An Israeli Trade Mark No. 95985 "Sivan Center for Professional
Training" registered on 1.7.96.
4. An Israeli Trade Mark No. 95984 "Sivan Computers - Training Center"
registered on 1.7.96.
5. An Israeli Trade Mark No. 95983 "Sivan Center for Professional
Extension" registered on 1.7.96.
6. An Israeli Trade Mark No. 95982 "Sivan Professional Preparation for the
Computer Professions" registered on 1.7.96.
7. An Israeli Trade Mark No. 96120 "Sivan" registered 2.6.96.
Mashov Computer Based Training (C.B.T.) Ltd
None.
<PAGE>
SCHEDULE 4.12
Real Property Leases
Sivan Computers Training Center (1994) Ltd.
1. Lease Agreement with Zirak Management and Holdings Ltd. dated March 17,
1996.
2. Lease Agreement with Nave Schuster Ltd. dated May 31, 1996.
3. Lease Agreement with Zeller, Avlagon Leasing Ltd. dated March 14, 1995.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.13
Labor Matters
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.14
Insurance
Sivan Computers Training Center (1994) Ltd.
8. Commercial Vehicle Insurance Policy No. 72615275/96 for the period
March 1, 1996 through February 28, 1997.
9. Business Insurance Policy No. 96-05-63-02428-6 for the period of
January 1, 1996 through December 31, 1996.
10. Private Vehicle Insurance Policy No. 96-93-30-45388-8 for the period of
February 4, 1996 through January 31, 1997.
11. Private Vehicle Insurance Policy No. 96-05-21-29119-2 for the period of
May 1, 1996 through April 30, 1997.
12. Vehicle Insurance Policy.
13. Commercial Vehicle Insurance Policy No. 1221918/96 for the period of
July 1, 1996 through March 31, 1997.
Mashov Computer Based Training (C.B.T.) Ltd.
1. Insurance Policy for Third Party Liability No. 60006455/96 for the
period of April 1, 1996 through March 31, 1997.
2. Insurance Policy for Employers' Liability No. 60006456/96 for the
period of April 1, 1996 through March 31, 1997.
3. Insurance Policy for Electronic Equipment No. 60006454/96 for the
period of April 1, 1996 through March 31, 1997.
4. Insurance Policy for Transported Merchandise No. 60006496/96 for the
period of April 1, 1996 through March 31, 1997.
<PAGE>
SCHEDULE 4.15
Certain Contracts
Sivan Computers Training Center (1994) Ltd.
Agreement with Avigdor Joseph dated May 1996;
Agreement with Integrity Systems Ltd dated 5/21/96;
Memorandum of Understanding with Professor Noam Nissan;
Agreement with Netivim Company Ltd. dated 10/21/94 and
Agreement with Netivim Company Ltd. dated 11/13/95;
Agreement with Yifaat District School dated 9/16/94;
Agreement with P.S. Publishing Systems Ltd dated 3/21/96;
Franchise Agreement with Obstler Rachel dated 9/13/95;
Franchise Agreement with Keset Bina and P'nai Ltd/Inkwell,
Wisdom & Leisure Ltd.;
Agreement with Ziva and Ofer Golan dated 9/28/95;
Agreement with Compulink Ltd. from 1995;
Agreement with Maiman Dahan dated 10/31/96;
Purchase Agreement between Mashov and Elron Electronic Industries Ltd. ("Elron")
with respect to the Ordinary Shares of Mashov CBT dated 2/6/97.
Mashov Computer Based Training (C.B.T.) Ltd.
Agreement between Mashov Computers Marketing Ltd and PC ETC LTD dated 3/25/96;
Management Services Agreement between Mashov Computers Marketing Ltd. and Sivan
Computers Training Center (1994) Ltd. from November 1995.
<PAGE>
SCHEDULE 4.16
Legal Proceedings
Sivan Computers Training Center (1994) Ltd.
Legal Proceedings of the Company against Debtors current and potential:
1. Against "Lev Sherut Machahevim Ltd." - outstanding amount of 19,000 NIS.
2. Against "Nevo Information systems Ltd." - outstanding amount of 12,000 NIS.
3. Against "Levanim Ginmur Metroas Ltd." - outstanding amount of 4,500 NIS.
4. Against "Zukelo Ariye - outstanding amount of 5,000 NIS.
5. Against Tel Aviv Institute - outstanding amount of 34,700 NIS.
6. Against Barkai Yaron - outstanding amount of 1,800 NIS.
7. Miniyevich Diana & Toram - outstanding amount of 12,000 NIS.
8. Nahorai Daniel - outstanding amount of 1,000 NIS.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.17
Taxes
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.18
Environmental Matters
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.20
Employee Benefit Plans
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.21
Certain Interests
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 4.22
Power of Attorney/Limitations on Competition
Sivan Computers Training Center (1994) Ltd.
None.
Mashov Computer Based Training (C.B.T.) Ltd.
None.
<PAGE>
SCHEDULE 6.05
Title Exceptions
None
<PAGE>
