<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 29, 1997
HARMONIC LIGHTWAVES, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or other jurisdiction of incorporation)
000-25826 77-0201147
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(Commission File No.) (IRS Employer Identification Number)
549 Baltic Way
Sunnyvale, California 94089
----------------------------------------
(Address of Principal Executive Offices)
(408) 542-2500
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
Item 5. Other Events
On September 16, 1997, Harmonic Lightwaves, Inc. (the "Registrant"),
N.M. New Media Communication Ltd., a corporation organized under the laws of
Israel ("NMC"), and each shareholder of NMC (collectively, the "Sellers"),
entered into a Stock Purchase Agreement (the "Purchase Agreement"), whereby,
among other things, the Sellers have agreed to sell, and the Registrant has
agreed to purchase, all of the issued and outstanding securities of NMC (the
"Acquisition") and NMC will become a wholly-owned subsidiary of the Registrant.
The Acquisition will be accounted for under the purchase method of accounting.
In connection with the Acquisition, each outstanding Ordinary Share of
NMC ("NMC Ordinary Share"), will be exchanged for approximately 693.8 shares of
Common Stock of the Registrant ("Registrant Common Stock"), resulting in the
issuance of an aggregate of 1,037,911 shares of Registrant Common Stock to the
Sellers. In addition, each outstanding option to purchase an NMC Ordinary Share
will be assumed by the Registrant and substituted with an option to purchase
693.8 shares of Registrant Common Stock, with the exercise price adjusted
accordingly, resulting in the substitution of options to purchase an aggregate
of 138,758 shares of Registrant Common Stock.
Each party's obligation to consummate the Acquisition is contingent
upon approval of the Acquisition by the appropriate governmental bodies,
obtaining certain consents, favorable legal opinions and certain other
conditions set forth in the Purchase Agreement. Each of the Registrant, NMC and
the Sellers have agreed that, among other things, until the consummation of the
Acquisition or the termination of the Purchase Agreement, they will use their
best efforts to consummate the Acquisition. In addition, NMC and the Sellers
have agreed that, among other things, until the consummation of the Acquisition
or the termination of the Purchase Agreement, they (i) will carry on NMC's
business in the ordinary course and attempt to preserve its present business and
relationships with its customers, suppliers and others and (ii) will not
negotiate, solicit, discuss or consider any information with any third party
other than the Registrant relating to any transaction involving the sale of the
business or assets of NMC (other than in the ordinary course of business).
The foregoing description of the Purchase Agreement does not purport to
be complete and is qualified in its entirety by the terms and conditions of the
Purchase Agreement, which is filed as an Exhibit to this Current Report and is
herein incorporated by reference.
It is anticipated that assuming all conditions to the Acquisition are
satisfied, the Acquisition will occur and a closing will be held in October
1997. The obligations of the parties under the Purchase Agreement shall
terminate, at the request of the Registrant, the Sellers or NMC, if the
Acquisition has not occurred by November 30, 1997.
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<PAGE> 3
Item 7. Financial Statements and Exhibits
(a) Exhibits
2.1 Stock Purchase Agreement dated as of September 16, 1997
among Registrant, NMC and the Sellers (the "Purchase
Agreement"), including an index of exhibits and
schedules and Exhibit 2.4(a)(iv).
20.1 Press Release, dated September 16, 1997, announcing the
signing of the Purchase Agreement.
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<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARMONIC LIGHTWAVES, INC.
Dated: September 29, 1997 By: /s/ Anthony J. Ley
-----------------------------
Anthony J. Ley
President and Chief Executive Officer
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<PAGE> 5
HARMONIC LIGHTWAVES
CURRENT REPORT ON FORM 8-K
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Stock Purchase Agreement (the "Purchase Agreement") dated as
of September 16, 1997, among Harmonic Lightwaves, Inc., N.M.
New Media Communication Ltd. ("NMC") and each shareholder of
NMC, including an index of exhibits and schedules and Exhibit
2.4(a)(iv).
20.1 Press Release, dated September 16, 1997, announcing the
signing of the Purchase Agreement.
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<PAGE> 1
EXHIBIT 2.1
N.M. NEW MEDIA COMMUNICATION LTD.
STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 16, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Sale and Transfer of Shares; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Closing Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Issuance of Acquisition Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Assumption of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Representations and Warranties of the Company and Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Condition and Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Employee Matters and Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.14 Compliance with Legal Requirements; Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . 15
3.15 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Absence of Certain Changes and Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.17 Contracts; No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.19 Environmental and Product Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.21 Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.23 Relationships with Related Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.24 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.25 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.26 Authenticity and Entirety of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3A. Hart-Scott-Rodino Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3B. Representations and Warranties of Each Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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3B.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3B.2 Securities Law Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3B.3 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3B.4 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4. Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.5 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.8 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.9 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5. Covenants of the Company and Sellers Prior to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.1 Access and Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.2 Operation of the Businesses of the Acquired Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.3 Negative Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.4 Required Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.5 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.6 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.7 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.8 Israeli Tax Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.9 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6. Covenants of Buyer Prior to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1 Approvals of Governmental Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Negative Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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7. Conditions Precedent to Buyer's Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 The Company's and Sellers' Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 No Claim Regarding Stock Ownership or Sale Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 Termination of Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8. Conditions Precedent to Sellers' Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Buyer's Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10. Indemnification; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 Survival; Right to Indemnification Not Affected by Knowledge . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Indemnification and Payment of Damages by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.3 Indemnification and Payment of Damages by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.4 Time Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.5 Limitations on Amount -- Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.6 Limitations on Amount -- Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.7 Escrow; Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.8 Procedure for Indemnification -- Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.9 Procedure for Indemnification -- Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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11. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.5 Governing Law, Jurisdiction; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.7 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.9 Entire Agreement and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.10 Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.11 Assignments, Successors, and No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.13 Section Headings, Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.14 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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<PAGE> 6
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit 2.4(a)(ii) Form of Seller's Release
Exhibit 2.4(a)(iii)(A) Form of Employment Agreement for Effraim Atad
Exhibit 2.4(a)(iii)(B) Form of Amendment to Employment Agreements
for Other Key Employees of the Company
Exhibit 2.4(a)(iv) Form of Registration Rights Agreement
Exhibit 2.4(a)(vi) Form of Stock Option Substitution Agreement
Exhibit 2.4(c) Form of Escrow Agreement
Exhibit 3.13 Representations and Warrants of the Company
and Sellers with Respect to each Acquired
Company that has assets or Employees in
the United States
Exhibit 7.4(a) Form of Company counsel Legal Opinion
Exhibit 8.4(a) Form of Buyer counsel Legal Opinion
DISCLOSURE LETTER
Company and Sellers Exceptions to Representations and Warranties
SCHEDULES
Schedule of Sellers
Schedule 4.2 Buyer Exceptions to Authority; No Conflict
and Brokers or Finders Representations and
Warranties
Schedule 4.5 Buyer Exceptions to Certain Proceedings
Representation and Warranty
<PAGE> 7
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of September
16, 1997, by Harmonic Lightwaves, Inc., a Delaware corporation ("Buyer"), N.M.
New Media Communication Ltd., a corporation organized under the laws of Israel
(the "Company"), and each Person identified on the Schedule of Sellers attached
hereto (each, a "Seller" and, collectively, "Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of the Company,
for the consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section 1:
"Acquired Companies"--the Company and its Subsidiaries,
collectively.
"Acquisition Shares"--the shares of Buyer Common Stock to be
issued to Sellers pursuant to Section 2.2.
"Applicable Contract"--any Contract existing as of the date of
this Agreement (a) under which any Acquired Company has or may acquire any
rights, (b) under which any Acquired Company has or may become subject to any
obligation or liability, or (c) by which any Acquired Company or any of the
assets owned or used by it is or may become bound.
"Balance Sheet"--as defined in Section 3.4.
"Best Efforts"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible.
"Breach"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Buyer"--as defined in the first paragraph of this Agreement.
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"Buyer Common Stock"--the Common Stock, $0.001 par value per
share, of Buyer.
"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing
actually takes place.
"Company"--as defined in the first paragraph of this
Agreement.
"Company Employee Plan"--any plan, program, policy, practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether
written or unwritten or otherwise, funded or unfunded, which is or has been
maintained, contributed to, or required to be contributed to, by each Acquired
Company or any Seller for the benefit of any Employee.
"Consent"--any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Consultant"-- any independent contractor who regularly
provides service to a Person (other than attorneys, accountants and investment
advisors).
"Contemplated Transactions"--all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer, the
issuance by Buyer of the Acquisition Shares and Buyer's acquisition and
ownership of the Shares;
(b) the execution, delivery, and performance, by those
Persons named in Section 2 below, of the Employment Agreements the Sellers'
Releases, and the Escrow Agreement;
(c) the performance by Buyer, the Company and Sellers of
their respective covenants and obligations under this Agreement.
"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral) that is legally binding.
"Damages"--as defined in Section 10.2.
"Disclosure Letter"--the disclosure letter delivered by the
Company and Sellers to Buyer concurrently with the execution and delivery of
this Agreement.
"$" and "Dollars"--United States dollars.
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"Employee"--any current employee or officer of (a) each
Acquired Company or (b) N.M. New Media Entertainment Ltd. ("NME").
"Employee Agreement"--each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit or
similar agreement or contract between each Acquired Company or NME and any
Employee or Consultant.
"Employment Agreements"--as defined in Section 2.4(a).
"Encumbrance"--any charge, claim, community property interest
(including "Hezkat Shituf" or similar concepts under Israeli law), condition,
lien, option, pledge, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership, and in addition with regard to
any Person in the United States, any security interest.
"Environmental Laws"--as defined in Section 3.19.
"Escrow Agent"--as named in Section 2.4.
"Escrow Agreement"--as defined in Section 2.4.
"Exchange Agent"--as defined in Section 2.5.
"GAAP"--(unless otherwise specifically set forth) generally
accepted Israeli accounting principles, applied on a basis consistent with the
basis on which the Balance Sheet and the other financial statements referred to
in Section 3.4(b) were prepared.
"Governmental Authorization"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise
made available by or under the authority of any Governmental Body or pursuant
to any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
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(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Intellectual Property Assets" -- as defined in Section 3.20.
"Interim Balance Sheet"-- as defined in Section 3.4.
"Israel Securities Law" -- the Israel Securities Law of 1968
or any successor law, and regulations and rules issued pursuant thereto.
"Key Employees" --Efraim Atad, Yoram Shkedi, Eyal Liebovitz,
Beni Shani and Danny Elbaz.
"Knowledge"--an individual will be deemed to have "Knowledge"
of a particular fact if:
(a) such individual is actually aware of such fact; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact, but without independent investigation.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact if any individual who is serving as a director, officer or
partner (with respect to a Person that is a general or a limited partnership)
of such Person (or in any similar capacity) has, or at any time had, Knowledge
of such fact.
"Legal Requirement"--any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"Minority Sellers" -- Joelit Bachrach, Martina Neustadt and
Cotex Enterprises Ltd.
"New Israeli Shekels" or "NIS" --the currency of the State of
Israel. Any dollar amount to be paid in New Israeli Shekels shall be paid
according to the representative rate of exchange published by the Bank of
Israel as in effect at the time of payment.
"Options"--all options or rights to purchase shares of capital
stock of the Company.
"Order"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
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(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person in such Person's primary place of business;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be specifically authorized
by the parent company (if any) of such Person under the laws of such Person's
jurisdiction of organization; and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are
in the same line of business as such Person in such Person's primary place of
business.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any
amendment to any of the foregoing.
"Person"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Registration Rights Agreement"-- as defined in Section
2.4(a).
"Related Person"-- with respect to a specified Person other
than an individual:
(a) a person who holds 5% of more of the issued share
capital or of the voting power in the body corporate, a person entitled to
appoint one or more of the directors in the body corporate or its general
manager, a person who holds the office of director or of general manager of the
body corporate, or a body corporate in which an aforesaid person holds 25% or
more of the issued share capital or of the voting power or is entitled to
appoint 25% or more of its directors; for purposes of this paragraph:
(i) a director of a joint investments trust fund
shall be deemed the person who holds the securities included in the fund's
assets;
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(ii) if a person holds securities through a
trustee, then the trustee shall also be deemed to be holding the said
securities; for this purpose, "trustee" -- exclusive of a registration company;
(b) a subsidiary of a body corporate, exclusive of a
registration company.
"Representative"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor
law.
"Sellers"--as defined in the first paragraph of this
Agreement.
"Sellers' Releases"--as defined in Section 2.4.
"Shares"--as defined in the Recitals of this Agreement.
"Subsidiary"--with respect to the Company, any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Company or one or more of its Subsidiaries.
"Tax" --includes income tax, purchase tax, VAT, land
betterments tax and any other tax of any kind imposed on any of the Acquired
Companies, their assets or their properties.
"Tax Return"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, or
any adjustment thereto, any Governmental Body in connection with the
determination, assessment, collection, or payment of any Tax or in connection
with the administration, implementation, or enforcement of or compliance with
any Legal Requirement relating to any Tax.
"Threatened"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally (but only with respect to a Proceeding) or in writing) or any
notice has been given (orally (but only with respect to a Proceeding) or in
writing) that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
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2. Sale and Transfer of Shares; Closing.
2.1 Shares. Subject to the terms and conditions of this
Agreement, at the Closing, Sellers will sell and transfer the Shares to Buyer,
and Buyer will purchase the Shares from Sellers.
2.2 Purchase Price. The aggregate purchase price (the
"Purchase Price") for the Shares will be (a) an aggregate of 1,037,911
Acquisition Shares, divided among the Sellers as set forth on the Schedule of
Sellers plus (b) an aggregate of $1,000.00, divided among Sellers as set forth
on the Schedule of Sellers.
2.3 Closing. The purchase and sale (the "Closing")
provided for in this Agreement will take place at the offices of the Company at
5:00 p.m. (local time) on the earlier of (i) the date that of seven (7)
business days following the approval of the Office of Restricted Trade Practice
of Israel of the acquisition of the Shares by Buyer or (ii) the date that is
seven (7) business days following the termination of the applicable waiting
period for the approval of the Office of Restricted Trade Practice of Israel of
the acquisition of the Shares by Buyer, or at such other time and place as the
parties may agree. Subject to the provisions of Section 9, failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.3 will not result
in the termination of this Agreement and will not relieve any party of any
obligation under this Agreement. All transactions taking place at the Closing
will be deemed to have taken place simultaneously.
2.4 Closing Obligations. At the Closing:
(a) Sellers will deliver to Buyer:
(i) signed and executed share transfer
deeds, accompanied by share certificates representing the Shares, for transfer
to Buyer accompanied by formal notification documents duly completed for
delivery to the Registrar of Companies;
(ii) releases in the form of Exhibit
2.4(a)(ii) executed by Sellers and the Company's directors (collectively,
"Sellers' Releases");
(iii) an employment agreement in
substantially the form of Exhibit 2.4(a)(iii)(A) executed by Effraim Atad, and
amendments to employment agreements in substantially the form of Exhibit
2.4(a)(iii)(B) executed by each other Key Employee (collectively, the
"Employment Agreements"); and
(iv) a registration rights agreement in
the form of Exhibit 2.4(a)(iv), executed by the Sellers (the "Registration
Rights Agreement");
(v) a certificate executed by the
Company and Sellers representing and warranting to Buyer that the conditions
set forth in Sections 7.1 and 7.2 below have been satisfied; and
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<PAGE> 14
(vi) a Stock Option Substitution
Agreement (the "Substitution Agreement") in the form of Exhibit 2.4(a)(vi)
executed by each holder of an Option who is an employee of the Company.
(b) Buyer will deliver:
(i) stock certificates representing
155,686 shares of Buyer Common Stock to the Escrow Agent referred to in Section
2.4(c);
(ii) to Sellers, a certificate executed
by Buyer representing and warranting that the conditions set forth in Sections
8.1 and 8.2 below have been satisfied;
(iii) to Sellers, checks in the aggregate
amount of $1,000.00, as provided in Section 2.2(b); and
(iv) to Sellers, the Registration Rights
Agreement, executed by Buyer.
(c) Buyer and Sellers will enter into an escrow
agreement in substantially the form of Exhibit 2.4(c) (the "Escrow Agreement")
with Chase Trust Company of California (or an affiliate thereof) (the "Escrow
Agent").
2.5 Issuance of Acquisition Shares.
(a) Prior to the Closing, Buyer shall designate
Chase Mellon Shareholder Services, LLC, or such other bank or trust company
with assets of not less than $50,000,000 as it may determine, to act as
exchange agent (the "Exchange Agent") with respect to the issuance of the
Acquisition Shares.
(b) At the Closing, the Exchange Agent shall
deliver to each Seller a certificate registered in the name of such Seller
representing the number of shares of Buyer Common Stock to which such Seller
shall be entitled pursuant to Section 2.2, less the number of shares deposited
with the Escrow Agent pursuant to the Escrow Agreement.
2.6 Assumption of Options. At the Closing, each holder
of an Option who is an employee of the Company will deliver a Substitution
Agreement pursuant to which each Option held by such holder will be terminated
and exchanged for an option to purchase the number of shares of Buyer Common
Stock as is set forth opposite the name of each such holder on Schedule A to
the form of Substitution Agreement, at an exercise price as is set forth on
said Schedule A.
3. Representations and Warranties of the Company and Sellers.
The Company and each Seller other than the Minority Sellers represent and
warrant to Buyer as follows (except as otherwise expressly set forth therein,
the representations speak as of the date of this Agreement):
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<PAGE> 15
3.1 Organization and Good Standing.
(a) Part 3.1 of the Disclosure Letter contains a
complete and accurate list for each Acquired Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
and Option holder and the number of shares held by each and the number of
shares subject to Options held by each). Each Acquired Company is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all
its obligations under Applicable Contracts. Each Acquired Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in the United States and Israel
and to the Knowledge of Seller and the Acquired Companies, each other
jurisdiction, in each case in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by
it, requires such qualification.
(b) The Company has delivered to Buyer copies of
the Organizational Documents of each Acquired Company, as currently in effect.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid,
and binding obligation of the Company, enforceable against the Company in
accordance with its terms. The Company has the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this Agreement and
to perform its obligations under this Agreement.
(b) Except as set forth in Part 3.2 of the
Disclosure Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions by the
Acquired Companies or Seller will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result
in a violation of (A) any provision of the Organizational Documents of the
Acquired Companies, or (B) any resolution adopted by the board of directors or
the stockholders of any Acquired Company;
(ii) contravene, conflict with, or result
in a violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order existing on the
date hereof, to which any Acquired Company, or any of the assets owned or used
by any Acquired Company, may be subject;
(iii) contravene, conflict with, or result
in a violation of any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Acquired Company
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<PAGE> 16
on the date hereof or that otherwise relates to the business of, or any of the
assets owned or used by, any Acquired Company;
(iv) cause any Acquired Company to become
subject to, or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by any
Acquired Company to be reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) contravene, conflict with, or result
in a violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable Contract;
or
(vii) result in the imposition or creation
of any Encumbrance upon or with respect to any of the assets owned or used by
any Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Acquired
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
(c) The Acquisition Shares will not, as a result
of the Contemplated Transactions, be distributed to more than 34 Persons.
3.3 Capitalization. The authorized equity securities of
the Company consist of 20,000 shares of common stock, par value NIS 1.00 per
share, of which 1,486 shares are issued and outstanding as of the date of this
Agreement and 1,496 shares will be issued and outstanding and constitute the
Shares as of the Closing. Sellers are and will be on the Closing Date the
record and beneficial owners and holders of the Shares, free and clear of all
Encumbrances. Each Seller, as of the Closing, will own the number of Shares as
is set forth opposite the name of such Seller on the Schedule of Sellers. With
the exception of the Shares (which are owned by Sellers), except as set forth
in Part 3.3 of the Disclosure Letter, all of the outstanding equity securities
and other securities of each Acquired Company are owned of record and
beneficially by one or more of the Acquired Companies, free and clear of all
Encumbrances. No legend or other reference to any purported Encumbrance appears
upon any certificate representing equity securities of any Acquired Company.
All of the outstanding equity securities of each Acquired Company have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as described in Part 3.3 of the Disclosure Letter, there are no Options or
other Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of any Acquired Company. None of the outstanding
equity securities or other securities of any Acquired Company was issued in
violation of the Securities Act, the Israel Securities Law or any other Legal
Requirement. No Acquired Company owns, or has any Contract to acquire, any
equity securities or other securities of any Person (other than Acquired
Companies) or any direct or indirect equity or ownership interest in any other
business.
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3.4 Financial Statements. The Company has delivered to
Buyer: (a) a consolidated balance sheet of the Acquired Companies as at
December 31, 1996 (including the notes thereto, the "Balance Sheet"), and the
related consolidated statements of income, changes in stockholders' equity, and
cash flow for the fiscal year then ended, together with the report thereon of
BDO Almagor & Co., independent certified public accountants, and (b) an
unaudited consolidated balance sheet of the Acquired Companies as at June 30,
1997 (the "Interim Balance Sheet") and the related unaudited consolidated
statements of income, changes in stockholders' equity, and cash flow for the
six (6) months then ended, including in each case the notes thereto. Such
financial statements and notes fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow of the
Acquired Companies as at the respective dates of and for the periods referred
to in such financial statements, all in accordance with GAAP, subject, in the
case of interim financial statements, to normal recurring year-end adjustments
(the effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the Balance Sheet); the financial statements
referred to in this Section 3.4 reflect the consistent application of such
accounting principles throughout the periods involved. No financial statements
of any Person other than the Acquired Companies are required by GAAP to be
included in the consolidated financial statements of the Company.
3.5 Books and Records. The books of account, minute
books, stock record books, and other records of the Acquired Companies, all of
which have been made available to Buyer, are complete and correct and have been
maintained in accordance with sound business practices, including the
maintenance of internal controls adequate for companies with the scope of
operations of the Acquired Companies. The minute books of the Acquired
Companies contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders and the Boards of Directors of the
Acquired Companies, and no formal meeting of any such stockholders or Board of
Directors has been held for which minutes have not been prepared and are not
contained in such minute books. There are no committees of the Boards of
Directors of any Acquired Company. At the Closing, all of those books and
records will be in the possession of the Acquired Companies.
3.6 Title to Properties; Encumbrances. Part 3.6 of the
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by any Acquired Company. The
Acquired Companies own all the properties and assets (whether real, personal,
or mixed and whether tangible or intangible) that they purport to own, located
in the facilities owned or operated by the Acquired Companies or reflected as
owned in the books and records of the Acquired Companies, including all of the
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Letter and personal
property sold since the date of the Balance Sheet and the Interim Balance
Sheet, as the case may be, in the Ordinary Course of Business), and all of the
properties and assets purchased or otherwise acquired by the Acquired Companies
since the date of the Interim Balance Sheet (except for personal property
acquired and sold since the date of the Interim Balance Sheet in the Ordinary
Course of Business, which subsequently purchased or acquired properties and
assets (other than inventory and short-term investments) are listed in Part 3.6
of the Disclosure Letter. Except as set forth in Part 3.6 of the Disclosure
Letter, all material properties and assets reflected in the Balance Sheet and
the Interim Balance Sheet are free and clear of all Encumbrances except, with
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<PAGE> 18
respect to all such properties and assets, (a) mortgages or security interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no default (or event that, with notice or lapse of time
or both, would constitute a default) exists, and (c) liens for current taxes
not yet due.
3.7 Condition and Sufficiency of Assets. The building,
plants, structures, and equipment, if any, of the Acquired Companies are
sufficient for the continued conduct of the Acquired Companies' businesses
after the Closing in substantially the same manner as conducted prior to the
Closing.
3.8 Accounts Receivable. All accounts receivable of the
Acquired Companies that are reflected on the Interim Balance Sheet or on the
accounting records of the Acquired Companies as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent as of the
Closing Date valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. To the Knowledge of
Seller and the Acquired Companies, the reserves shown on the Interim Balance
Sheet or on the accounting records of the Acquired Companies as of the Closing
Date are adequate and calculated consistent with past practice and, in the case
of the reserve as of the Closing Date, will not represent a materially greater
percentage of the Accounts Receivable as of the Closing Date than the reserve
reflected in the Interim Balance Sheet represented of the Accounts Receivable
reflected therein and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging. There is no
contest, claim, or asserted claim of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. Part
3.8 of the Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date of the Interim Balance Sheet, which list
sets forth the aging of such Accounts Receivable.
3.9 Inventory. All inventory of the Acquired Companies,
whether or not reflected in the Balance Sheet or the Interim Balance Sheet,
consists of a quality and quantity usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date, as the case may be. All inventories
not written off have been priced at the lower of cost or market on a first in,
first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
3.10 No Undisclosed Liabilities. Except as set forth in
Part 3.10 of the Disclosure Letter, the Acquired Companies have no liabilities
or obligations of any nature (whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business, since the respective dates
thereof.
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3.11 Taxes.
(a) The Acquired Companies have filed or caused
to be filed (on a timely basis since inception) all Tax Returns that are or
were required to be filed by or with respect to any of them, either separately
or as a member of a group of corporations, pursuant to applicable Legal
Requirements. The Company has made available to Buyer copies of, and Part 3.11
of the Disclosure Letter contains a complete and accurate list of, all such Tax
Returns relating to income or other taxes filed since each Acquired Company's
inception. The Acquired Companies have paid, or made provision for the payment
of, all Taxes that have become due on or prior to the date of this Agreement,
pursuant to those Tax Returns (whether or not shown on such Tax Returns) or
otherwise, or pursuant to any assessment received by Sellers or any Acquired
Company, except such Taxes, if any, as are listed in Part 3.11 of the
Disclosure Letter and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in
the Interim Balance Sheet.
(b) To date there have been no audits of the Tax
Returns of any Acquired Company. Except as described in Part 3.11 of the
Disclosure Letter, no Seller or Acquired Company has given or been requested to
give waivers or extensions (or is or would be subject to a waiver or extension
given by any other Person) of any statute of limitations relating to the
payment of Taxes of any Acquired Company or for which any Acquired Company may
be liable.
(c) To the Knowledge of Seller and the Acquired
Companies, (i) the charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are adequate (determined in
accordance with GAAP) and are at least equal to that Acquired Company's
liability for Taxes, (ii) there exists no proposed tax assessment against any
Acquired Company except as disclosed in the Balance Sheet or in Part 3.11 of
the Disclosure Letter and (iii) all Taxes that any Acquired Company is or was
required by Legal Requirements to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) There is no tax sharing agreement that will
require any payment by any Acquired Company after the date of this Agreement.
(e) No claims have been made, which are currently
pending, by any Israeli or any other taxing authority in connection with any of
the returns and reports referred to in Subsection (a) above.
(f) All Israeli, US and foreign income, profits,
franchise, sales, use, occupancy, property, severance, excise, value added and
other taxes (including interest and penalties) due from the Acquired Companies,
have been fully paid, or have been or will be adequately provided for in the
Interim Balance Sheet.
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<PAGE> 20
(g) No waivers of statutes of limitation have
been given or requested with respect to the Acquired Companies in connection
with any tax returns submitted or with respect to any taxes payable by the
Acquired Companies.
(h) The Acquired Companies are not subject to any
adjustment or penalty by reason of underpayment or violation of any order, rule
or regulation of, or a default with respect to, any return or report required
prior to the date thereof to be filed with, any federal, state, local, foreign
or other governmental taxing agency, department, commission, board, bureau or
instrumentality to which they are subject.
3.12 No Material Adverse Change. Since the date of the
Interim Balance Sheet, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of any
Acquired Company, and no event has occurred or circumstance exists that is
reasonably likely to result in such a material adverse change.
3.13 Employee Matters and Benefit Plans.
(a) Part 3.13 of the Disclosure Letter contains a
complete and accurate list of the following information for each Employee or
Consultant of any Acquired Company, including each employee on leave of absence
or layoff status: employer; name; job title; aggregate annual remuneration
(gross salary); vacation accrued; and service credited for purposes of vesting
and eligibility to participate under the Employee Plan (as defined in Section
3.13(d)) or any retirement, severance pay or employee benefit plan. For the
purposes hereof "remuneration" includes bonuses but excludes non-monetary
fringe benefits and additional costs to the Acquired Companies in respect of
remuneration.
(b) Part 3.13 of the Disclosure Letter contains a
complete and accurate list of the following information for each retired
Employee of the Acquired Companies, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
(c) Except as set forth in Part 3.13 of the
Disclosure Letter, the obligation of the Acquired Companies for payment of
severance pay due to all permanent employees of the Acquired Companies is
covered in full by Managers Insurance Policies ("Bituach Menahalim") for senior
Employees and by the reserve provided for in the financial statements and the
Interim Balance Sheet.
(d) To the Knowledge of Seller and the Acquired
Companies, no Employee or Consultant of any Acquired Company is in violation of
any term of any employment, employment contract, patent disclosure agreement or
any other contract or agreement relating to the relationship of any such person
with such Acquired Company or any other party because of the nature of the
business conducted or to be conducted by such Acquired Company. To the
Knowledge of Seller and the Acquired Companies, no Employee or Consultant of
any Acquired Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such Employee or Consultant and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an
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<PAGE> 21
Employee or Consultant of the Acquired Companies, or (ii) the ability of any
Acquired Company to conduct its business, including any Proprietary Rights
Agreement with Sellers or the Acquired Companies by any such Employee or
Consultant or (iii) the ability of such Employee or Consultant to assign to any
Acquired Company or to any other Person any rights to any invention,
improvement or discovery. The Acquired Companies are currently not parties to,
and since their inception have not been parties to, any collective bargaining
agreements or other labor Contracts covering any of their employees. Since the
inception of the Acquired Companies, there has not been, there is not presently
pending or existing, and there is not Threatened, any strike, slowdown,
picketing, work stoppage, or employee grievance process. Each Acquired Company
has complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes and occupational safety and health. No Acquired Company is
liable for the payment of any compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements. The Acquired Companies have one employee benefit
plan presently in force with respect to options granted to five (5) employees
(the "Employee Plan"). The Employee Plan has been adopted in accordance with
Section 3(9) of the Income Tax Ordinance 1961 and provides the employees with a
tax deferment according to the terms therein. Part 3.13 of the Disclosure
Letter contains the names of the employees who have been granted options to
purchase securities of the Acquired Companies under the Employee Plan,
including the terms and conditions of such options. The Company and the Sellers
are not aware of any key employee of any of the Acquired Companies who has any
plans to terminate his or her employment with such Acquired Company.
(e) With respect to each Acquired Company that
has assets or Employees in the United States, the Company and the Sellers
represent and warrant as set forth on Exhibit 3.13.
(f) Each Company Employee Plan has been
established, maintained and administered in compliance with its terms and
conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such Company Employee Plan.
Furthermore, no Company Employee Plan has unfunded liabilities, that as of the
Closing, will not be offset by insurance or fully accrued. Except as required
by law, no condition exists that would prevent the Acquired Companies from
terminating or amending any Company Employee Plan.
3.14 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Part 3.14 of the
Disclosure Letter:
(i) each Acquired Company is, and at all
times since its inception has been, in full compliance with each Legal
Requirement in the United States and Israel and, to the Knowledge of Seller and
the Acquired Companies, each other jurisdiction that is or was applicable to it
or to the conduct or operation of its business or the ownership or use of any
of its assets;
(ii) to the Knowledge of Seller and the
Acquired Companies, no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation
by any Acquired Company of, or a failure on the part of any
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<PAGE> 22
Acquired Company to comply with, any Legal Requirement, or (B) may give rise to
any obligation on the part of any Acquired Company to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature; and
(iii) no Acquired Company has received, at
any time since its inception, any notice or other communication (whether
written or, to the Knowledge of Seller or the Acquired Companies, oral) from
any Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of any Acquired Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
any Acquired Company or that otherwise relates to the business of, or to any of
the assets owned or used by, any Acquired Company. Each Governmental
Authorization listed or required to be listed in Part 3.14 of the Disclosure
Letter is valid and in full force and effect. Except as set forth in Part 3.14
of the Disclosure Letter:
(i) each Acquired Company is, and at all
times since inception has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter;
(ii) to the Knowledge of Seller and the
Acquired Companies, no event has occurred or circumstance exists that may (with
or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter, or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter;
(iii) no Acquired Company has received, at
any time since inception, any notice or other communication (whether written
or, to the Knowledge of Seller and the Acquired Companies, oral) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have
been filed for the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.14 of the Disclosure Letter have been duly
filed on a timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.
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<PAGE> 23
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the Acquired Companies to lawfully conduct and operate their
businesses in the manner they currently conduct and operate such businesses
and to permit the Acquired Companies to own and use their assets in the manner
in which they currently own and use such assets.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the
Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or
against any Acquired Company or that otherwise relates to the business of, or
any of the assets owned or used by, any Acquired Company; or
(ii) to the Knowledge of Seller and the
Acquired Companies, that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller and the Acquired Companies, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding. The Company has delivered to Buyer copies
of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Part 3.15 of the Disclosure Letter.
(b) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) there is no Order to which any of
the Acquired Companies, or any of the assets owned or used by any Acquired
Company, is subject;
(ii) Seller is not subject to any Order
that relates to the business of, or any of the assets owned or used by, any
Acquired Company; and
(iii) to the Knowledge of Seller and the
Acquired Companies, no officer, director, agent, or employee of any Acquired
Company is subject to any Order that prohibits such officer, director, agent,
or employee from engaging in or continuing any conduct, activity, or practice
relating to the business of any Acquired Company.
(c) Except as set forth in Part 3.15 of the
Disclosure Letter:
(i) each Acquired Company is, and at all
times since inception has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets owned or used by
it, is or has been subject;
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<PAGE> 24
(ii) no event has occurred or
circumstance exists that is reasonably likely to constitute or result in (with
or without notice or lapse of time) a violation of or failure to comply with
any term or requirement of any Order to which any Acquired Company, or any of
the assets owned or used by any Acquired Company, is subject; and
(iii) no Acquired Company has received, at
any time since inception, any notice or other communication (whether written
or, to the Knowledge of Seller and the Acquired Companies, oral) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement
of any Order to which any Acquired Company, or any of the assets owned or used
by any Acquired Company, is or has been subject.
3.16 Absence of Certain Changes and Events. Except as set
forth in Part 3.16 of the Disclosure Letter, since the date of the Interim
Balance Sheet, the Acquired Companies have conducted their businesses only in
the Ordinary Course of Business and there has not been any:
(a) change in any Acquired Company's authorized
or issued capital stock; grant of any stock option or right to purchase shares
of capital stock of any Acquired Company; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by any Acquired Company of any
shares of any such capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of
any Acquired Company;
(c) payment or increase by any Acquired Company
of any bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of any Acquired Company;
(e) damage to or destruction or loss of any asset
or property of any Acquired Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of
notice of termination of (i) any license (other than the entry into
commercially available licenses in the ordinary course of business),
distributorship, dealer, sales representative, joint venture, credit, or
similar agreement, or (ii) any
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<PAGE> 25
Contract or transaction involving a total remaining commitment by or to any
Acquired Company of at least $20,000;
(g) sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of any asset or
property of any Acquired Company or mortgage, pledge, or imposition of any lien
or other encumbrance on any material asset or property of any Acquired Company,
including the sale, lease, or other disposition of any of the Intellectual
Property Assets;
(h) cancellation or waiver of any claims or
rights with a value to any Acquired Company in excess of $25,000;
(i) material change in the accounting methods
used by any Acquired Company; or
(j) agreement, whether oral or written, by any
Acquired Company to do any of the foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Disclosure Letter
contains a complete and accurate list, and the Company has delivered to Buyer
true and complete copies, of:
(i) each Applicable Contract that
involves performance of services or delivery of goods or materials by one or
more Acquired Companies of an amount or value in excess of $50,000;
(ii) each Applicable Contract that
involves performance of services or delivery of goods or materials to one or
more Acquired Companies of an amount or value in excess of $50,000;
(iii) each Applicable Contract that was
not entered into in the Ordinary Course of Business and that involves
expenditures or receipts of one or more Acquired Companies in excess of
$50,000;
(iv) each lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of, title to, use of,
or any leasehold or other interest in, any real or personal property (except
personal property leases and installment and conditional sales agreements
having a value per item or aggregate payments of less than $25,000 and with
terms of less than one year);
(v) each licensing agreement or other
Applicable Contract with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the non-disclosure
of any of the Intellectual Property Assets;
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<PAGE> 26
(vi) each collective bargaining agreement
and other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and
other Applicable Contract (however named) involving a sharing of profits,
losses, costs, or liabilities by any Acquired Company with any other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of any
Acquired Company or any Affiliate of an Acquired Company or limit the freedom
of any Acquired Company or any Affiliate of an Acquired Company to engage in
any line of business or to compete with any Person;
(ix) each Applicable Contract providing
for payments to or by any Person based on sales, purchases, or profits, other
than direct payments for goods;
(x) each power of attorney that is
currently effective and outstanding;
(xi) each Applicable Contract entered
into other than in the Ordinary Course of Business that contains or provides
for an express undertaking by any Acquired Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $50,000;
(xiii) each written warranty, guaranty, and
or other similar undertaking with respect to contractual performance extended
by any Acquired Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and
modification in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Letter, neither Seller (and no Related Person of either Seller) has
or may acquire any rights under, and neither Seller has or may become subject
to any obligation or liability under, any Contract that relates to the business
of, or any of the assets owned or used by, any Acquired Company.
(c) Except as set forth in Part 3.17(c) of the
Disclosure Letter, each Contract identified or required to be identified in
Part 3.17(a) of the Disclosure Letter is in full force and effect and is valid
and enforceable against the Acquired Companies and, to the Knowledge of Seller
and the Acquired Companies, each other party thereto, in accordance with its
terms.
(d) Except as set forth in Part 3.17(d) of the
Disclosure Letter:
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<PAGE> 27
(i) each Acquired Company is, and at all
times since its inception has been, in material compliance with all applicable
terms and requirements of each Contract under which such Acquired Company has
or had any obligation or liability or by which such Acquired Company or any of
the assets owned or used by such Acquired Company is or was bound;
(ii) to the Knowledge of Seller and the
Acquired Companies, each other Person that has or had any obligation or
liability under any Contract under which an Acquired Company has or had any
rights is, and at all times since its inception has been, in material
compliance with all applicable terms and requirements of such Contract;
(iii) to the Knowledge of Seller and the
Acquired Companies, no event has occurred or circumstance exists that (with or
without notice or lapse of time) is reasonably likely to contravene, conflict
with, or result in a violation or breach of, or give any Acquired Company or
other Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract; and
(iv) no Acquired Company has given to or
received from any other Person, at any time since inception, any notice or
other communication (whether written or, to the Knowledge of Seller and the
Acquired Companies, oral) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, to the
Knowledge of Seller and the Acquired Companies attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to any
Acquired Company under current or completed Contracts with any Person and no
such Person has made written demand to Sellers or any Acquired Company for such
renegotiation.
3.18 Insurance.
(a) The Company has delivered to Buyer:
(i) true and complete copies of all
policies of insurance to which any Acquired Company is a party or under which
any Acquired Company, or any director of any Acquired Company, is or has been
covered at any time within the two years preceding the date of this Agreement;
and
(ii) true and complete copies of all
pending applications for policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter
describes:
(i) any self-insurance arrangement by or
affecting any Acquired Company, including any reserves established thereunder;
and
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<PAGE> 28
(ii) all obligations of the Acquired
Companies to third parties with respect to insurance (including such
obligations under leases and service agreements) and identifies the policy
under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets
forth, by year, for the current policy year and each of the two preceding
policy years:
(i) a summary of the loss experience
under each policy;
(ii) a statement describing each claim
under an insurance policy for an amount in excess of $10,000, which sets
forth:
(A) the name of the claimant;
(B) a description of the policy by
insurer, type of insurance, and period of coverage; and
(C) the amount and a brief
description of the claim; and
(iii) a statement describing the loss
experience for all claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Letter:
(i) All policies to which any Acquired
Company is a party or that provide coverage to any Seller, any Acquired
Company, or any director or officer of an Acquired Company:
(A) to the best knowledge of the
Acquired Companies are valid, outstanding, and enforceable;
(B) are sufficient for compliance
with all Legal Requirements and Contracts to which any Acquired Company is a
party or by which any of them is bound;
(C) will continue in full force and
effect following the consummation of the Contemplated Transactions; and
(D) do not provide for any
retrospective premium adjustment or other experienced-based liability on the
part of any Acquired Company.
(ii) No Seller or Acquired Company has
received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will
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<PAGE> 29
not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(iii) The Acquired Companies have paid all
premiums due, and have otherwise performed all of their respective obligations,
under each policy to which any Acquired Company is a party or that provides
coverage to any Acquired Company or director thereof.
(iv) The Acquired Companies have given
notice to the insurer of all claims that may be insured thereby.
3.19 Environmental and Product Matters. Except as set
forth in part 3.19 of the Disclosure Letter:
(a) There are no claims, actions, suits, permit
revocations, requests for information, investigations, orders or other
proceedings asserted by third parties or governmental agencies ("Claim")
involving the Acquired Companies which arise under any Israeli, U.S. or foreign
laws, rules, regulations, ordinances or policies relating to the protection of
the environment or human health, safety and welfare or reproductive capacity
("Environmental Laws"). Neither the Acquired Companies nor Seller have
received any notice of any pending Claim against the Acquired Companies
relating to violations of Environmental Laws by the Acquired Companies.
Neither the Acquired Companies nor Seller have any knowledge of any fact or
circumstance that it is reasonably foreseeable that would give rise to a Claim,
or of any intent to commence any other or additional investigations or
proceedings against the Acquired Companies regarding violations or alleged
violations of Environmental Laws.
(b) To the Knowledge of Seller and the Acquired
Companies, the Acquired Companies have not transported, used, stored,
manufactured, released, disposed of or exposed employees who have worked at the
Acquired Companies to any material which is regulated by any governmental
authority because it is toxic, radioactive or otherwise a danger to health and
the environment in violation of any Environmental Laws.
(c) There are and have been no citations or
decisions by any governmental or regulatory body in the United States or Israel
or, to the Knowledge of Seller and the Acquired Companies, any other
jurisdiction that any product manufactured, marketed or distributed at any time
by the Acquired Companies ("Product") is defective or fails to meet any
standards promulgated by any such governmental or regulatory body. Neither the
Acquired Companies nor any of the Sellers are aware of any proceeding now
pending or Threatened which is reasonably likely to result in such citation or
decision. There are no existing or Threatened claims against the Acquired
Companies for services or merchandise which are defective or fail to meet any
service or product warranties or any defects or problems which, if discovered
by a third party, would support such a claim. No claim has been asserted
against the Acquired Companies for renegotiation or price redetermination of
any business transaction, and other than concessions in the ordinary course of
business, there are no facts upon which any such claim could be based. To the
Knowledge of Seller and the Acquired Companies, there is no fact relating to
any Product that may impose upon the Acquired Companies a
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<PAGE> 30
duty to warn customers of a defect in any Product, or latent or overt defect in
any Product which has been or is being distributed by the Acquired Companies,
which is likely to result in claims for breach of warranty with respect to such
Products in excess of the warranty reserve reflected in the Financial
Statements or to be reflected in the Balance Sheet. For purposes of the
foregoing, with respect to a software product, a "defect" shall include,
without limitation, any characteristic of the product which may, when the
product is used with the computer and operating system with which the product
is used, result in material undesired errors in processing or output, cessation
of system function, or loss of or damage to data, whether during the operation
of the product or during the operation of another program as a result of
effects caused by the product.
3.20 Intellectual Property.
(a) Intellectual Property Assets--The term
"Intellectual Property Assets" includes:
(i) the name "New Media Communication,"
trade names, registered and unregistered trademarks, service marks, and
applications owned, used, or licensed by any Acquired Company as licensee or
licensor (collectively, "Marks");
(ii) all patents, patent applications,
and inventions that may be patentable owned, used, or licensed by any Acquired
Company as licensee or licensor (collectively, "Patents");
(iii) all copyrights in both published
works and unpublished works owned, used, or licensed by any Acquired Company as
licensee or licensor (collectively, "Copyrights");
(iv) all rights in mask works owned,
used, or licensed by any Acquired Company as licensee or licensor
(collectively, "Rights in Mask Works"); and
(v) all know-how, trade secrets,
confidential information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints owned, used, or
licensed by any Acquired Company as licensee or licensor (collectively, "Trade
Secrets").
(b) Agreements--Part 3.20(b) of the Disclosure
Letter contains a complete and accurate list and summary description, including
any royalties paid or received by the Acquired Companies, of all Contracts
relating to the Intellectual Property Assets to which any Acquired Company is a
party or by which any Acquired Company is bound, except for any license implied
by the sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $5,000 under which an Acquired
Company is the licensee. There are no outstanding and, to Sellers' and the
Acquired Companies' Knowledge, no Threatened disputes or disagreements with
respect to any such agreement.
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<PAGE> 31
(c) Know-How Necessary for the Business.
(i) The Intellectual Property Assets are
all those necessary for the operation of the Acquired Companies' businesses as
they are currently conducted or as reflected in the business plan given to
Buyer. One or more of the Acquired Companies is the owner of all right, title,
and interest in and to each of the Intellectual Property Assets, free and clear
of all liens, security interests, charges, encumbrances, equities, and other
adverse claims, or has the right to use, subject to payment to third parties
(which payments are set forth in Part 3.20(b) of the Disclosure Letter), all of
the Intellectual Property Assets.
(ii) Except as set forth in Part 3.20(c)
of the Disclosure Letter, all former and current employees of each Acquired
Company have executed written Contracts with one or more of the Acquired
Companies that assign to one or more of the Acquired Companies all rights to
any inventions, improvements, discoveries, or information relating to the
business of any Acquired Company. No employee of any Acquired Company has
entered into any Contract that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to anyone other
than one or more of the Acquired Companies.
(d) Patents.
(i) Part 3.20(d) of the Disclosure
Letter contains a complete and accurate list and summary description of all
Patents. Except as set forth in Part 3.20(d) of the Disclosure Letter, one or
more of the Acquired Companies is the owner of all rights, titles, and interest
in and to each of the Patents, free and clear of all liens, security interests,
charges, encumbrances, entities, and other adverse claims.
(ii) No Patent has been or is now
involved in any interference, reissue, reexamination, or opposition proceeding.
To Sellers' and the Acquired Companies' Knowledge, there is no potentially
interfering patent or patent application of any third party.
(iii) To the Knowledge of Seller and the
Acquired Companies, except as set forth in Part 3.20(d) of the Disclosure
Letter, no Patent is infringed or has been challenged or threatened in any way.
To the Knowledge of Seller and the Acquired Companies, except as set forth in
Part 3.20(d) of the Disclosure Letter, none of the products manufactured and
sold, nor any process or know- how used, by any Acquired Company infringes or
is alleged to infringe any patent or other proprietary right of any other
Person.
(iv) All products made, used, or sold
under the Patents have been marked with the proper patent notice.
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(e) Trademarks.
(i) Part 3.20(e) of Disclosure Letter
contains a complete and accurate list and summary description of all Marks. One
or more of the Acquired Companies is the owner of all right, title, and
interest in and to each of the Marks, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims.
(ii) To the Knowledge of Seller and the
Acquired Companies, all Marks that have been registered with the relevant
Israeli or United States Patent and Trademark Office are currently in
compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days after the
Closing Date.
(iii) Except as set forth in Part 3.20(e)
of the Disclosure Letter, no Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Sellers' and the Acquired
Companies' Knowledge, no such action is Threatened with the respect to any of
the Marks.
(iv) Except as set forth in Part 3.20(e)
of the Disclosure Letter, to the Knowledge of Seller and the Acquired
Companies, there is no potentially interfering trademark or trademark
application of any third party.
(v) Except as set forth in Part 3.20(e)
of the Disclosure Letter, to the Knowledge of Seller and the Acquired
Companies, no Mark is infringed or has been challenged or Threatened in any
way. Except as set forth in Part 3.20(e) of the Disclosure Letter, to the
Knowledge of Seller and the Acquired Companies, none of the Marks used by any
Acquired Company infringes or is alleged to infringe any trade name, trademark,
or service mark of any third party.
(f) Copyrights.
(i) Part 3.20(f) of the Disclosure
Letter contains a complete and accurate list and summary description of all
Copyrights. One or more of the Acquired Companies is the owner of all right,
title, and interest in and to each of the Copyrights, free and clear of all
liens, security interests, charges, encumbrances, equities, and other adverse
claims.
(ii) Except as set forth in Part 3.20(f)
of the Disclosure Letter, to the Knowledge of Seller and the Acquired
Companies, all the Copyrights are currently in compliance with formal Legal
Requirements, are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the date of
Closing.
(iii) Except as set forth in Part 3.20(f)
of the Disclosure Letter, to the Knowledge of Seller and the Acquired
Companies, no Copyright is infringed or has been
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<PAGE> 33
challenged or threatened in any way. Except as set forth in Part 3.20(f) of
the Disclosure Letter, to the Knowledge of Seller and the Acquired Companies,
none of the subject matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any third party or is a derivative work based on the
work of a third party.
(g) Trade Secrets.
(i) Sellers and the Acquired Companies
have taken all reasonable precautions to protect the secrecy, confidentiality,
and value of their Trade Secrets.
(ii) One or more of the Acquired
Companies has good title and an absolute (but not necessarily exclusive) right
to use the Trade Secrets. The Trade Secrets are not part of the public
knowledge or literature, and, to the Knowledge of Seller and the Acquired
Companies, have not been used, divulged, or appropriated either for the benefit
of any Person (other than one or more of the Acquired Companies) or to the
detriment of the Acquired Companies. Except as set forth in Part 3.20(g) of the
Disclosure Letter, no Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
(h) Special Representations for Section 10.5(b).
(i) Except as set forth in Part 3.20(d)
of the Disclosure Letter, no Patent is infringed. Except as set forth in Part
3.20(d) of the Disclosure Letter, none of the products manufactured and sold,
nor any process or know-how used, by any Acquired Company infringes or is
alleged to infringe any patent or other proprietary right of any other Person.
(ii) Except as set forth in Part 3.20(e)
of the Disclosure Letter, no Mark is infringed. Except as set forth in Part
3.20(e) of the Disclosure Letter, none of the Marks used by any Acquired
Company infringes or is alleged to infringe any trade name, trademark, or
service mark of any third party.
(iii) Except as set forth in Part 3.20(f)
of the Disclosure Letter, all the Copyrights have been registered and are
currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the date of Closing.
(iv) Except as set forth in Part 3.20(f)
of the Disclosure Letter, no Copyright is infringed. Except as set forth in
Part 3.20(f) of the Disclosure Letter, none of the subject matter of any of the
Copyrights infringes or is alleged to infringe any copyright of any third party
or is a derivative work based on the work of a third party.
3.21 Certain Payments. Since its inception, no Acquired
Company or director, officer, agent, or employee of any Acquired Company, or
any other Person associated with or acting for or on behalf of any Acquired
Company, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public,
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regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (iv) in violation of any Legal
Requirement, (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Acquired Companies.
3.22 Disclosure.
(a) The representations and warranties of the
Company or Sellers in this Agreement and the statements in the Disclosure
Letter, when such representations, warranties and statements are considered as
a whole, do not omit to state a material fact necessary to make the statements
herein or therein, in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 5.5 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
3.23 Relationships with Related Persons. Except as set
forth in Part 3.23 of the Disclosure Letter, no Seller or any Related Person of
Sellers or of any Acquired Company has, or since inception has had, any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Acquired Companies' businesses. No
Seller or any Related Person of Sellers or of any Acquired Company is, or since
inception has owned (of record or as a beneficial owner) an equity interest or
any other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with any Acquired
Company, or (ii) engaged in competition with any Acquired Company with respect
to any line of the products or services of such Acquired Company (a "Competing
Business") in any market presently served by such Acquired Company. Except as
set forth in Part 3.23 of the Disclosure Letter, no Seller or any Related
Person of Sellers or of any Acquired Company is a party to any Contract with,
or has any claim or right against, any Acquired Company.
3.24 Brokers or Finders. Sellers and their agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement.
3.25 Customers. Part 3.25 of the Disclosure Letter lists
all the customers, distributors and agents, from inception until the date of
this Agreement, of the products manufactured and services performed by or for
the Acquired Companies.
3.26 Authenticity and Entirety of Documents. True and
complete copies of all documents referred to in the Agreement (including
without limitation this section) have been furnished to Buyer by the Company,
the Sellers or the Acquired Companies.
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3A. Hart-Scott-Rodino Representations. In addition to the
representations and warranties set forth in Section 3 and Section 3B hereof,
the Company and NME jointly and severally represent and warrant to Buyer that
(a) Mr. Effi Atad holds more than fifty percent (50%) of the outstanding voting
securities of NME, (b) neither NME nor Mr. Effi Atad had, as of July 31, 1997,
total assets of $10,000,000 or more or, for the twelve-month period ended
December 31, 1996, total revenues of $10,000,000 or more, (c) Mr. Effi Atad's
nationality and principal residence is the State of Israel and (d) neither the
Company nor NME had, as of July 31, 1997, total assets of $15,000,000 or more
located in the United States or, for the twelve-month period ended December 31,
1996, total revenues of $25,000,000 or more from sales to customers located in
the United States.
3B. Representations and Warranties of Each Seller. In addition to
the representations and warranties set forth in Section 3 (if applicable) and
Section 3A (if applicable) hereof, each Seller severally represents and
warrants to Buyer as follows:
3B.1 Authority. This Agreement constitutes the legal,
valid, and binding obligation of such Seller, enforceable against such Seller
in accordance with its terms. Upon the execution and delivery by such Seller
of the Escrow Agreement, the Employment Agreement with respect to such Seller
(if applicable), the Sellers' Release and the Registration Rights Agreement
(the "Sellers' Closing Documents"), the Sellers' Closing Documents will
constitute the legal, valid and binding obligations of such Seller, enforceable
against such Seller in accordance with their respective terms. Seller has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement and the Sellers' Closing Documents and to perform his or
its obligations under this Agreement and the Sellers' Closing Documents.
3B.2 Securities Law Compliance. Such Seller is acquiring
the Acquisition Shares for his or its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act. Such
Seller is an "accredited investor" as such term is defined in Rule 501(a) under
the Securities Act.
3B.3 Title to Shares. Such Seller, as of the Closing,
will own the number of Shares as is set forth opposite the name of such Seller
on the Schedule of Sellers. Such Seller has (or will have, as of the Closing)
good and valid title to such Shares. Such Shares are subject to no
Encumbrance, and are freely transferable to Buyer by such Seller. Upon the
transfer of such Shares to Buyer in accordance with Section 2 hereof, Buyer
will be the owner of such Shares, free and clear of any Encumbrance.
3B.4 No Conflict. None of (x) the execution and delivery
of this Agreement or any of the Sellers' Closing Documents by such Seller, (y)
the transfer by such Seller of the Shares to be transferred by such Seller to
Buyer pursuant to Section 2 or (z) the performance by such Seller of its
obligations pursuant to this Agreement or any of the Sellers' Closing Documents
will, directly or indirectly (with or without notice or lapse of time):
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<PAGE> 36
(i) contravene, conflict with, or result
in a violation of (A) any provision of the Organizational Documents of such
Seller or (B) any resolution adopted by the board of directors, the
stockholders or the partners of such Seller;
(ii) contravene, conflict with, or result
in a violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which such
Seller, or any of the assets owned or used by such Seller, may be subject.
Such Seller will not be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the Sellers' Closing Documents by such Seller or the performance
by such Seller of its obligations pursuant to this Agreement or the Sellers'
Closing Documents.
4. Representations and Warranties of Buyer. Buyer represents and
warrants to the Company and Sellers as follows:
4.1 Organization and Good Standing. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid,
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms. Upon the execution and delivery by Buyer of the Escrow Agreement and
the Registration Rights Agreement (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid,
and binding obligations of Buyer, enforceable against Buyer in accordance with
their respective terms. Buyer has the absolute and unrestricted right, power,
and authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents. Buyer is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
(b) Except as set forth in Schedule 4.2, neither
the execution and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's
Organizational Documents;
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<PAGE> 37
(ii) any resolution adopted by the board
of directors or the stockholders of Buyer;
(iii) any Legal Requirement or Order to
which Buyer may be subject; or
(iv) any Contract to which Buyer is a
party or by which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
(c) Neither the execution and delivery of this
Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will contravene, conflict with, or result in
the violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which Buyer, or
any of the assets owned or used by Buyer, may be subject.
4.3 Investment Intent. Buyer is acquiring the Shares for
its own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
4.4 Capitalization. The authorized capital stock of
Buyer consists of 50,000,000 shares of Buyer Common Stock and 5,000,000 shares
of Preferred Stock, $0.001 par value per share ("Buyer Preferred Stock"). At
the close of business on June 27, 1997, 10,335,400 shares of Buyer Common Stock
were outstanding, and 2,060,366 shares of Buyer Common Stock were issuable upon
the exercise of outstanding stock options and warrants. No shares of Buyer
Common Stock were held by Buyer in its treasury, and no shares of Buyer
Preferred Stock were outstanding. Between June 27, 1997 and the date of this
Agreement, Buyer has not issued any shares of its Preferred Stock or Common
Stock, except pursuant to the Company's stock option and stock purchase plans.
All the outstanding shares of Buyer Common Stock are validly issued, fully
paid, nonassessable and free of preemptive rights. The Acquisition Shares,
when issued and delivered in accordance with the terms of this Agreement, will
have been duly authorized and validly issued, fully paid and nonassessable.
Assuming the accuracy of the representations and warranties of Sellers set
forth in Section 3.2, the issuance of the Acquisition Shares will be exempt
from the registration requirements of the Securities Act. Except as disclosed
above or in the Buyer SEC Documents or as otherwise contemplated by this
Agreement, as of June 27, 1997, there were no outstanding subscriptions,
options, calls, contracts, debentures, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement and also including any rights plan or other anti-takeover agreement,
obligating Buyer or any subsidiary thereof to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of the capital stock of
Buyer, or obligating or any subsidiary of Buyer to grant, extend or enter into
any such agreement or commitment. Except as otherwise set forth in the Buyer
SEC Documents, there
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<PAGE> 38
are no voting trusts, proxies or other agreements or understandings to which
Buyer or any subsidiary of Buyer is a party or by which Buyer or any subsidiary
of Buyer is bound with respect to the voting of any shares of capital stock of
Buyer.
4.5 Certain Proceedings.
(a) There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
(b) Schedule 4.5 lists all Proceedings pending
against Buyer. To Buyer's Knowledge, no Proceeding has been Threatened against
Buyer alleging that Buyer has violated (i) United States federal or state
securities laws or (ii) any Environmental Laws.
4.6 SEC Documents. Buyer has furnished the Company with
a true and complete copy of each form, statement, annual, quarterly and other
report, registration statement (including exhibits and amendments) and
definitive proxy statement filed by Buyer with the U.S. Securities and Exchange
Commission ("SEC") since December 31, 1996 (the "Buyer SEC Documents"), which
are all the documents (other than preliminary material) that Buyer was required
to file with the SEC since such date. As of their respective filing dates, the
Buyer SEC Documents complied in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder, and none of the
Buyer SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading. Since the filing of the most recent Quarterly
Report on Form 10-Q included in the Buyer SEC Documents, (a) none of Buyer's
organizational documents has been amended or modified and (b) Buyer has entered
into no Contract (other than this Agreement and the Buyer's Closing Documents,
if applicable) that would be required to be filed as an exhibit to Buyer's
Annual Report on Form 10-K (if such report were required to be filed on the
date hereto).
4.7 Taxes. Buyer has paid, or made provision for the
payment of, all Taxes that have or may have become due except such Taxes as are
being contested in good faith and as to which adequate reserves (determined in
accordance with United States GAAP) have been provided in the financial
statements of Buyer included in the Buyer SEC Documents.
4.8 Employee Benefit Plans. Buyer has established,
maintained and administered its stock option and stock purchase plans in
material compliance with their respective terms and conditions and with the
requirements prescribed by any and all statutory and regulatory laws that are
applicable to such plans.
4.9 Brokers or Finders. Except as set forth in Schedule
4.2, Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
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indemnify and hold Sellers harmless from any such payment alleged to be due by
or through Buyer as a result of the action of Buyer or its officers or agents.
5. Covenants of the Company and Sellers Prior to Closing Date.
5.1 Access and Investigation. Between the date of this
Agreement and the Closing Date, the Company and Sellers will, and will cause
each Acquired Company and its Representatives to, (a) afford Buyer and its
Representatives full and free access to each Acquired Company's personnel,
properties (including subsurface testing), contracts, books and records, and
other documents and data, (b) furnish Buyer and its Representatives with copies
of all such contracts, books and records, and other existing documents and data
as Buyer may reasonably request, and (c) furnish Buyer and its Representatives
with such additional financial, operating, and other data and information as
Buyer may reasonably request.
5.2 Operation of the Businesses of the Acquired
Companies. Between the date of this Agreement and the Closing Date, the
Company and Sellers will, and will cause each Acquired Company to:
(a) conduct the business of such Acquired Company
only in the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the
current business organization of such Acquired Company, keep available the
services of the current officers, employees, and agents of such Acquired
Company, and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with such Acquired Company;
(c) confer with Buyer concerning operational
matters of a material nature; and
(d) otherwise report periodically to Buyer
concerning the status of the business, operations, and finances of such
Acquired Company.
5.3 Negative Covenant. Except as otherwise expressly
permitted by this Agreement, between the date of this Agreement and the Closing
Date, the Company and Sellers will not, and will cause each Acquired Company
not to, without the prior consent of Buyer, take any affirmative action, or
fail to take any reasonable action within their or its control, as a result of
which any of the changes or events listed in Section 3.16 is likely to occur.
5.4 Required Approvals. As promptly as practicable after
the date of this Agreement, the Company and Sellers will, and will cause each
Acquired Company to, make all filings required by Legal Requirements to be made
by them in order to consummate the Contemplated Transactions (including all
filings under the Israeli Restrictive Trade Practices Act. Between the date of
this Agreement and the Closing Date, the Company and Sellers will, and will
cause each Acquired
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Company to, (a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 4.2 (including taking all actions requested by
Buyer to cause early termination of any applicable waiting period under the
Israeli Restrictive Trade Practices Act.
5.5 Notification. Between the date of this Agreement and
the Closing Date, each of the Company and Seller will promptly notify Buyer in
writing if the Company, such Seller or any Acquired Company becomes aware of
any fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if the
Company, such Seller or any Acquired Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made
as of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any
such fact or condition, the Company and Sellers will promptly deliver to Buyer
a supplement to the Disclosure Letter specifying such change. During the same
period, the Company and each Seller will promptly notify Buyer of the
occurrence of any Breach of any covenant of the Company or Sellers in this
Section 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.6 No Negotiation. Until such time, if any, as this
Agreement is terminated pursuant to Section 9, Sellers will not, and will cause
each Acquired Company and each of their Representatives not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Buyer) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of any Acquired Company,
or any of the capital stock of any Acquired Company, or any merger,
consolidation, business combination, or similar transaction involving any
Acquired Company.
5.7 Best Efforts. Between the date of this Agreement and
the Closing Date, the Company and Sellers will use their Best Efforts to cause
the conditions in Sections 7 and 8 to be satisfied.
5.8 Israeli Tax Approval. The Company and the Sellers
will use their Best Efforts to obtain the approval of the purchase of the
Shares by Buyer by the Israel Investment Center.
5.9 Financial Statements. The Company will use its Best
Efforts to provide Buyer with an unaudited consolidated balance sheet of the
Acquired Companies as at August 31, 1997 and the related unaudited consolidated
statements of income for the eight month period then ended, in each case
without the notes thereto and without comparison to the comparable balance
sheet and statements of income in 1996. Such financial statements will fairly
present the financial condition and the results of the Acquired Companies as at
August 31, 1997 and for the eight month period then ended, all in accordance
with GAAP, subject to normal recurring year-end adjustments (the effect of
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which will not, individually or in the aggregate, be materially adverse) and
the absence of notes (that, if presented, would not differ materially from
those included in the Balance Sheet).
6. Covenants of Buyer Prior to Closing Date.
6.1 Approvals of Governmental Bodies. As promptly as
practicable after the date of this Agreement, Buyer will, and will cause each
of its Related Persons to, make all filings required by Legal Requirements to
be made by them to consummate the Contemplated Transactions (including all
filings under Israeli Restrictive Trade Practices Act. Between the date of
this Agreement and the Closing Date, Buyer will, and will cause each Related
Person to, cooperate with Sellers with respect to all filings that Sellers are
required by Legal Requirements to make in connection with the Contemplated
Transactions, and (ii) cooperate with Sellers in obtaining all consents
identified in Part 3.2 of the Disclosure Letter; provided that this Agreement
will not require Buyer to dispose of or make any change in any portion of its
business or to incur any other burden to obtain a Governmental Authorization.
6.2 Best Efforts. Except as set forth in the proviso to
Section 6.1, between the date of this Agreement and the Closing Date, Buyer
will use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
6.3 SEC Filings. Buyer will, within five (5) business
days of the filing thereof, deliver to the Company a true and correct copy of
all forms, statements, annual, quarterly and other reports, registration
statements and definitive proxy statements filed by Buyer with the SEC after
the date of this Agreement and prior to the Closing Date.
6.4 Negative Covenant. Except as otherwise expressly
permitted by this Agreement, between the date of this Agreement and the Closing
Date, Buyer will not, without the prior consent of the Company, (a) amend or
repeal any of its Organizational Documents or (b) declare or pay any dividend
or make any other distribution or payment in respect of its capital stock.
7. Conditions Precedent to Buyer's Obligation to Close. Buyer's
obligation to purchase the Shares and to take the other actions required to be
taken by Buyer at the Closing is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions (any of which may be waived by
Buyer, in whole or in part):
7.1 Accuracy of Representations.
(a) All of the Company's and Sellers'
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing Date as if made
on the Closing Date, without giving effect to any supplement to the Disclosure
Letter.
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(b) Each of the Company's and Sellers'
representations and warranties in Sections 3.3, 3.4, 3.12, and 3.22 must have
been accurate in all respects as of the date of this Agreement, and must be
accurate in all respects as of the Closing Date as if made on the Closing Date,
without giving effect to any supplement to the Disclosure Letter.
7.2 The Company's and Sellers' Performance.
(a) All of the covenants and obligations that the
Company and Sellers are required to perform or to comply with pursuant to
Sections 2, 5, 11.2, 11.3 and 11.6 of this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered
pursuant to Sections 2.4 and 2.6 must have been delivered, and each of the
other covenants and obligations in Sections 5.4 and 5.7 must have been
performed and complied with in all respects.
7.3 Consents. Each of the Consents identified in Part
3.2 of the Disclosure Letter, and each Consent identified in Schedule 4.2
(other than the Consent identified in Item 2 of Schedule 4.2), must have been
obtained and must be in full force and effect.
7.4 Additional Documents. Each of the following
documents must have been delivered to Buyer an opinion of Shenhav, Elrom,
Konforti & Shavit, dated the Closing Date, in the form of Exhibit 7.4(a).
7.5 No Proceedings. Since the date of this Agreement,
there must not have been pending or Threatened against Buyer, or against any
Person affiliated with Buyer, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions
which, in the reasonable opinion of Buyer, would make it inadvisable for Buyer
to proceed with any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds.
There must not have been pending or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of the Acquired Companies,
or (b) is entitled to all or any portion of the Purchase Price payable for the
Shares.
7.7 No Prohibition. Neither the consummation nor the
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time), materially contravene, or
conflict with, or result in a material violation of, or cause Buyer or any
Person affiliated with Buyer to suffer any material adverse consequence under,
(a) any applicable Legal Requirement or Order effected after the date of this
Agreement, or (b) any Legal Requirement
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or Order that has been published, introduced, or otherwise formally proposed by
or before any Governmental Body after the date of this Agreement.
7.8 Termination of Certain Agreements.
(a) All Options held by Persons other than those
identified on Schedule A to the Option Exchange Agreement shall have been
terminated in their entirety.
(b) All rights held by NME (or any Related Person
of NME) with respect to (i) the agreement dated April 28, 1996 between N.M. New
Media Technologies (1996) Ltd. ("NMT") and IBM Israel Ltd. (together with all
amendments and supplements thereto, the "IBM Agreement") and (ii) the User
Interface referred to in the IBM Agreement shall have been assigned to the
Company or NMT.
8. Conditions Precedent to Sellers' Obligation to Close.
Sellers' obligation to sell the Shares and to take the other actions required
to be taken by Sellers at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by Sellers, in whole or in part):
8.1 Accuracy of Representations. All of Buyer's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement
and must be accurate in all material respects as of the Closing Date as if made
on the Closing Date.
8.2 Buyer's Performance.
(a) All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyer must have delivered each of the
documents required to be delivered by Buyer pursuant to Sections 2.4 and 2.5.
8.3 Consents. Each of the Consents identified in
Schedule 4.2 (other than the Consent identified in Item 2 of Schedule 4.2) must
have been obtained and must be in full force and effect.
8.4 Additional Documents. Buyer must have caused the
following documents to be delivered to Sellers:
(a) an opinion of Wilson Sonsini Goodrich &
Rosati, Professional Corporation, dated the Closing Date, in the form of
Exhibit 8.4(a); and
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(b) such other documents as Sellers may
reasonably request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer, (iii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (ii) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
8.5 No Injunction. There must not be in effect any Legal
Requirement or any injunction or other Order that (a) prohibits the sale of the
Shares by Sellers to Buyer, and (b) has been adopted or issued, or has
otherwise become effective, since the date of this Agreement.
8.6 NME Tax Status. Either (a) NME shall have received a
favorable ruling from the Israeli tax authorities with respect to the prior
ruling application previously filed by NME or (b) Buyer shall have agreed to
loan (or arrange for a loan) to NME of funds adequate to pay NME's Israeli
income tax obligations associated with the issuance of the Acquisition Shares
to NME, upon terms and conditions reasonably satisfactory to NME and Buyer.
9. Termination.
9.1 Termination Events. This Agreement may, by notice
given prior to or at the Closing, be terminated:
(a) by either Buyer, on the one hand, or the
Company and/or all Sellers, on the other, if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived;
(b) by Buyer if any of the conditions in Section
7 has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; or (ii) by the Company and/or all
Sellers, if any of the conditions in Section 8 has not been satisfied as of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of the Company or Sellers to comply with their
obligations under this Agreement) and the Company and/or all Sellers have not
waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer, the Company and all Sellers; or
(d) by any of Buyer, the Company or all Sellers
if the Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before November 30, 1997, or such later date as the
parties may agree upon.
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9.2 Effect of Termination. Each party's right of
termination under Section 9.1 is in addition to any other rights it may have
under this Agreement or otherwise, and the exercise of a right of termination
will not be an election of remedies. If this Agreement is terminated pursuant
to Section 9.1, all further obligations of the parties under this Agreement
will terminate, except that the obligations in Sections 11.1 and 11.3 will
survive; provided, however, that if this Agreement is terminated by a party
because of the Breach of the Agreement by the other party or because one or
more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
10. Indemnification; Remedies.
10.1 Survival; Right to Indemnification Not Affected by
Knowledge. All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.4(a)(v), and any other certificate
or document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 Indemnification and Payment of Damages by Seller.
Sellers (other than the Minority Sellers), jointly and severally, will
indemnify and hold harmless Buyer, the Acquired Companies, and their respective
officers, directors and employees (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss,
liability, claim, damage (including incidental and consequential damages paid
by an Indemnified Person to a third party), expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
incurred, directly or indirectly, in connection with:
(a) any material Breach of any representation or
warranty made by the Company or Sellers in this Agreement (without giving
effect to any supplement to the Disclosure Letter), the Disclosure Letter, the
supplements to the Disclosure Letter, or any other certificate or document
delivered by Sellers pursuant to this Agreement;
(b) any Breach of any representation or warranty
made by the Company or Sellers in this Agreement as if such representation or
warranty were made on and as of the Closing Date without giving effect to any
supplement to the Disclosure Letter, other than any such Breach that is
disclosed in a supplement to the Disclosure Letter and is expressly identified
in the certificate
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delivered pursuant to Section 2.4(a)(v) as having caused the condition
specified in Section 7.1 not to be satisfied;
(c) any Breach by the Company or any Seller of
any covenant or obligation of the Company or such Seller in this Agreement; or
(d) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with the Company or
any Seller or any Acquired Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other
Indemnified Persons. The Minority Sellers will have no liability to the
Indemnified Persons for a breach of the representations and warranties set
forth in Section 3 (except with respect to Section 3B) or for any breach by the
Company or the other Sellers of their respective obligations pursuant to this
Agreement (provided, however, that nothing herein shall relieve a Minority
Seller from its obligations pursuant to Sections 2, 11.2, 11.3 and 11.6
hereof).
10.3 Indemnification and Payment of Damages by Buyer.
Buyer will indemnify and hold harmless Sellers and their respective officers,
directors and employees (the "Seller Indemnified Parties"), and will pay to the
Seller Indemnified Parties the amount of any Damages incurred, directly or
indirectly, from or in connection with (a) any Breach of any representation or
warranty made by Buyer in this Agreement or in any certificate delivered by
Buyer pursuant to this Agreement, (b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement, or (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection with any of the Contemplated
Transactions.
10.4 Time Limitations.
(a) If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise pursuant to this Agreement)
pursuant to Section 10.2(a) above. If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise pursuant to this Agreement, or for
claims of negligence in connection with the Contemplated Transactions) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to or as of the Closing Date, other than
those in Sections 3.3, 3.11, and 3.13, unless on or before March 31, 1999 Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer; a claim with respect to
Section 3.3, 3.11, or 3.13, or a claim for indemnification or reimbursement not
based upon any representation or warranty or any covenant or obligation to be
performed and complied with prior to or as of the Closing Date, may be made at
any time. If the Closing does not occur, Sellers will have no liability (for
indemnification or otherwise, or for claims of negligence in connection with
the Contemplated Transactions) with respect to any representation or warranty,
or covenant or obligation unless on or
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before September 30, 1998 Buyer notifies Sellers of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Buyer.
(b) If the Closing occurs, Buyer will have no
liability (for indemnification or otherwise pursuant to this Agreement, or for
claims of negligence in connection with the Contemplated Transactions) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, unless on or before
March 31, 1999 Sellers notify Buyer of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Sellers. If the
Closing does not occur, Buyer will have no liability (for indemnification or
otherwise, or for claims of negligence in connection with the Contemplated
Transactions) with respect to any representation or warranty, or covenant or
obligation unless on or before September 30, 1998 Sellers notify Buyer of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Sellers.
10.5 Limitations on Amount -- Sellers.
(a) Sellers will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a), clause (b) or, to the extent relating to any failure to perform or comply
prior to the Closing Date, clause (c) of Section 10.2, other than with respect
to a claim brought pursuant to clause (a) or clause (b) of Section 10.2 solely
as a result of a Breach of a representation or warranty set forth in Section
3.20(h), until the total of all Damages with respect to all such matters in the
aggregate exceeds $190,000, and then only for the amount by which such Damages
exceed $190,000. However, this Section 10.5 will not apply to any Breach of
any of Sellers' representations and warranties of which the Company or any
Seller had Knowledge at any time prior to the date on which such representation
and warranty is made or any intentional Breach by any Seller of any covenant or
obligation, and Sellers will be jointly and severally liable for all Damages
with respect to such Breaches. The maximum liability (for indemnification or
otherwise, or for claims of negligence in connection with the Contemplated
Transactions) of each Seller with respect to the matters set forth in Section
10.2, other than with respect to a claim brought pursuant to clause (a) or
clause (b) of Section 10.2 solely as a result of a Breach of a representation
or warranty set forth in Section 3.20(h), shall be as set forth on the Schedule
of Sellers.
(b) Sellers will have no liability (for
indemnification or otherwise) with respect to a claim brought pursuant to
clause (a) or clause (b) of Section 10.2 solely as a result of a Breach of a
representation or warranty set forth in Section 3.20(h) until the total of all
Damages with respect to all such matters in the aggregate exceeds $25,000 and
then only for the amount by which such Damages exceed $25,000. The maximum
liability (for indemnification or otherwise) of Sellers with respect to a claim
brought pursuant to clause (a) or clause (b) of Section 10.2 solely as a result
of a Breach of a representation or warranty set forth in Section 3.20(h) shall
be as set forth on the Schedule of Sellers.
10.6 Limitations on Amount -- Buyer. Buyer will have no
liability (for indemnification or otherwise) with respect to the matters
described in clause (a) or (b) of Section 10.3 until the total of all Damages
with respect to all such matters in the aggregate exceeds $190,000, and
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then only for the amount by which such Damages exceed $190,000. However, this
Section 10.6 will not apply to any Breach of any of Buyer's representations and
warranties of which Buyer had Knowledge at any time prior to the date on which
such representation and warranty is made or any intentional Breach by Buyer of
any covenant or obligation, and Buyer will be liable for all Damages with
respect to such Breaches.
10.7 Escrow; Right of Set-Off. Upon notice to Sellers
specifying in reasonable detail the basis for such set-off, Buyer may give
notice of a Claim in such amount under the Escrow Agreement. Neither the
exercise of nor the failure to give a notice of a Claim under the Escrow
Agreement will constitute an election of remedies or limit Buyer in any manner
in the enforcement of any other remedies that may be available to it.
10.8 Procedure for Indemnification -- Third Party Claims.
(a) Promptly after receipt by an indemnified
party under Section 10.2 or Section 10.3 of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is prejudiced
by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section
10.8(a) is brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the indemnifying
party will, unless the claim involves Taxes, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense of such
Proceeding with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in that Proceeding are within the scope
of and subject to indemnification; (ii) no compromise or settlement of such
claims may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no effect
on any other claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no liability with
respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an
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indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within twenty-five (25) days after the indemnified party's
notice is given, give notice to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or settlement effected
by the indemnified party.
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on Sellers with respect
to such a claim anywhere in the world.
10.9 Procedure for Indemnification -- Other Claims. A
claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
11. General Provisions.
11.1 Expenses.
(a) Except as otherwise expressly provided in
this Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Buyer will pay one-half and
the Company will pay one-half of the Israeli Restrictive Trade Practices Act
filing fee. The Company and Sellers will cause the Acquired Companies not to
incur any out-of-pocket expenses in connection with this Agreement except for
professional fees not in excess of $175,000, and Sellers will pay any
out-of-pocket expenses incurred by the Acquired Companies in excess of such
amount.
(b) In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party. In addition, (i) in the event of a termination of this Agreement by
Buyer pursuant to Section 9.1(a) or Section 9.1(b)(i) (other than a termination
of this Agreement by Buyer pursuant to Section 9.1(b)(i) solely as a result of
the failure to satisfy the condition specified in Section 7.5 or Section 7.7),
the Company shall promptly, but in any event within three (3) days of such
termination, pay Buyer the amount of $500,000 as reimbursement for expenses
incurred by
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Buyer in connection with the Contemplated Transactions and (ii) in the event
of a termination of this Agreement by Sellers pursuant to Section 9.1(a) or
Section 9.1(b)(ii) (other than a termination of this Agreement by Seller
pursuant to Section 9.1(b)(ii) solely as a result of the failure to satisfy the
condition specified in Section 8.5), Buyer shall promptly, but in any event
within three (3) days of such termination, pay the Company the amount of
$500,000 (which payment may be by means of cancellation of indebtedness) as
reimbursement for expenses incurred by the Company and Sellers in connection
with the Contemplated Transactions.
11.2 Public Announcements. Any public announcement or
similar publicity with respect to this Agreement or the Contemplated
Transactions which is not made as a result of Legal Requirements will be
issued, if at all, at such time and in such manner as Buyer determines. Unless
consented to by Buyer in advance or required by Legal Requirements, prior to
the Closing the Company and Sellers shall, and shall cause the Acquired
Companies to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. The Company, Sellers and Buyer
will consult with each other concerning (a) any public announcement made as a
result of Legal Requirements and (b) the means by which the Acquired Companies'
employees, customers, and suppliers and others having dealings with the
Acquired Companies will be informed of the Contemplated Transactions, and Buyer
will have the right to be present for any such communication.
11.3 Confidentiality. Between the date of this Agreement
and the Closing Date, Buyer, the Company and Sellers will maintain in
confidence, and will cause the directors, officers, employees, agents, and
advisors of Buyer and the Acquired Companies to maintain in confidence, any
written information furnished by another party or an Acquired Company in
connection with this Agreement or the Contemplated Transactions, unless (a)
such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions, or (c) the furnishing or
use of such information is required by or necessary or appropriate in
connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
11.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the other
parties):
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The Company
and Sellers: N.M. New Media Communication Ltd.
10 Beit Shamai Street
Tel Aviv, Israel 67018
Attention: Mr. Efraim Atad
Facsimile No.: 972-3-623-6244
with a copy to: Shenhav, Elrom, Konforti & Shavit
Shalom Tower, 4th Floor
P.O. Box 29671
Tel Aviv, Israel 61296
Attention: Amos Konforti, Adv.
Facsimile No.: 972-3-516-0068
Buyer: Harmonic Lightwaves, Inc.
549 Baltic Way
Sunnyvale, California 94089
United States of America
Attention: Mr. Robin N. Dickson
Facsimile No.: (408) 542-2516
with a copy to: Wilson Sonsini Goodrich &
Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
United States of America
Attention: Patrick J. Schultheis, Esq.
Facsimile No.: (650) 493-6811
and a copy to: Goldfarb, Levy, Eran & Co.
Eliahu House
2 Ibn Gvirol Street
Tel Aviv, Israel 64077
Attention: Ronen Kantor, Adv.
Facsimile No.: 972-3-695-4344
11.5 Governing Law, Jurisdiction; Service of Process.
This Agreement will be governed by the laws of the State of Israel without
regard to conflicts of laws principles. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may only be brought against any of the parties by means of arbitration held in
New York, New York under the rules then in effect of the American Arbitration
Association, and each of the parties consents to the jurisdiction of the
American Arbitration Association in any such action or proceeding. Process in
any action or proceeding referred to in the preceding sentence may be served
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on any party anywhere in the world. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction.
11.6 Further Assurances. The parties agree (a) to furnish
upon request to each other such further information, (b) to execute and deliver
to each other such other documents, and (c) to do such other acts and things,
all as the other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
11.7 Waiver of Certain Rights. The Company and each
Seller agree that, effective as of the Closing:
(a) the Share Purchase Agreement dated November
6, 1996 among the Company and Sellers CRM Partners L.P. Ltd., CRM Retirement
Partners L.P. Ltd., CRM Madison Partners L.P. Ltd., CRM Eurcleia Partners L.P.
Ltd., CRM U.S. Value Fund Ltd. and Cramer Rosenthal McFlynn Inc. (collectively,
the "CRM Group"), including without limitation the Option granted in connection
therewith, is terminated in its entirety;
(b) the Investment Agreement dated March 12, 1996
among the Company, NME and Seller IES Electronics Industries Ltd. ("IES") is
terminated in its entirety;
(c) the Share Purchase Agreement dated May 18,
1997 between the Company and Seller Martina Schorr Neustadt, and the Option
granted on May 19, 1997 are terminated in their entirety;
(d) the Share Purchase Agreement dated May 18,
1997 between the Company and Seller Joelit Bachrach, and the Option granted on
May 19, 1997 are terminated in their entirety;
(e) the Agreement dated July 7, 1997 between NME
and Seller Cotex Enterprise Ltd. is terminated in its entirety; and
(f) the Shareholders Agreement dated November 6,
1996 and the Shareholders Agreement dated May 18, 1997 are terminated in their
entirety.
11.8 Waiver. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power,
or privilege. To the maximum extent permitted by applicable law, (a) no claim
or right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one
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party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
11.9 Entire Agreement and Modification. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter (other than the Loan Agreement dated August 28, 1997 between Buyer and
the Company (the "Loan Agreement")) and constitutes (along with the Loan
Agreement and the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.10 Disclosure Letter.
(a) The disclosures in the Disclosure Letter, and
those in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
11.11 Assignments, Successors, and No Third-Party Rights.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.12 Severability. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
11.13 Section Headings, Construction. The headings of
Sections in this Agreement are provided for convenience only and will not
affect its construction or interpretation. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
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<PAGE> 54
11.14 Time of Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
11.15 Counterparts. This Agreement may be executed in one
or more counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
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<PAGE> 55
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
HARMONIC LIGHTWAVES, INC. N.M. NEW MEDIA COMMUNICATION LTD.
By: By:
------------------------- -------------------------------------
Robin N. Dickson Efraim Atad
Chief Financial Officer President and Chief Executive Officer
"SELLERS"
N.M. NEW MEDIA ENTERTAINMENT LTD.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
I.E.S. ELECTRONICS INDUSTRIES LTD.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
[Signature page to Stock Purchase Agreement]
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<PAGE> 56
CRM PARTNERS L.P.
By:__________________________________
Gerald B. Cramer
Title: ______________
CRM RETIREMENT PARTNERS L.P.
By:__________________________________
Gerald B. Cramer
Title: ______________
CRM MADISON PARTNERS L.P.
By:__________________________________
Gerald B. Cramer
Title: ______________
CRM EURYCLAIM PARTNERS L.P.
By:__________________________________
Gerald B. Cramer
Title: ______________
CRM U.S. VALUE FUND LTD
By:__________________________________
Gerald B. Cramer
Title: ______________
CRAMER ROSENTHAL MCGLYNN INC.
By:__________________________________
Gerald B. Cramer
Title: ______________
[Signature page to Stock Purchase Agreement]
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<PAGE> 57
------------------------------------
Martina Neustadt
------------------------------------
Joelit Bachrach
COTEX ENTERPRISES LTD.
By:__________________________________
Name:________________________________
Title:_______________________________
[Signature page to Stock Purchase Agreement]
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<PAGE> 58
EXHIBIT 2.4(a)(iv)
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made as of
___________, 1997 by and among Harmonic Lightwaves, Inc., a Delaware
corporation (the "Company"), and the persons and entities listed on Schedule A
hereto (the "NMC Shareholders").
RECITALS
1. The Company, the NMC Shareholders and N.M. New Media
Communication Ltd., a corporation incorporated under the laws of Israel ("New
Media") have entered into that certain Stock Purchase Agreement dated as of
September 16, 1997 (the "Stock Purchase Agreement") concerning the acquisition
of all outstanding Ordinary Shares of New Media by the Company (the
"Acquisition") in consideration for shares of Common Stock of the Company
("Company Common Stock").
2. As a condition to the obligations of the NMC Shareholders to
transfer their shares of New Media to the Company, the Company must grant the
NMC Shareholders the registration rights set forth herein.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Definitions. As used in this Agreement:
a. "Exchange Act" means the United States Securities
Exchange Act of 1934, as amended.
b. "Securities Act" means the United States Securities
Act of 1933, as amended.
c. "Form S-3" means such form under the Securities Act
as is in effect on the date hereof or any registration form under the
Securities Act subsequently adopted by the SEC which similarly permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC (as defined below).
d. "Holder" means: (i) a NMC Shareholder for so long as
such holder continues to hold the registration rights contained herein or (ii)
a transferee of Registrable Securities by a Holder to whom registration rights
under this Agreement are assigned pursuant to Section 9 of this Agreement.
<PAGE> 59
e. "Registrable Securities" means the shares of Company
Common Stock issued pursuant to the Stock Purchase Agreement (including,
without limitation, shares deposited in escrow), together with all other shares
of Company Common Stock issued in respect thereof (by way of stock split,
dividend or otherwise). Registrable Securities shall not include any shares of
Company Common Stock transferred by a Holder for which registration rights are
not also assigned pursuant to Section 9 hereof.
f. "SEC" means the United States Securities and Exchange
Commission.
Capitalized terms not otherwise defined herein have the meanings given
to them in the Stock Purchase Agreement.
2. Registration.
a. The Company shall use its Best Efforts to cause (i)
all Registrable Securities held by each Holder to be registered under the
Securities Act, and (ii) a registration statement effecting such registration
to be declared effective by the SEC not later than _____________, 1997 [30
days after the date of closing] (it being understood that, in the event that
the SEC determines not to review the registration statement, the Company will
seek to have the registration statement declared effective within three (3)
business days following its receipt of notice that the SEC will not review the
registration statement), so as to permit the resale thereof on a continuous
basis, subject to Section 3 hereof. In connection therewith, the Company shall
prepare and file with the SEC promptly (but in any event within three (3)
business days) following the Closing, and shall use its Best Efforts to cause
to become effective as soon as practicable thereafter, a registration statement
on Form S-3 (or such other form as is appropriate to effect the registration of
the Registrable Securities); provided, however, that each Holder shall provide
all such information to the Company concerning the Holder and take all such
action as may be required (if any) in order to permit the Company to comply
with all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such registration statement. Such
provision of information is a condition precedent to the obligations of the
Company pursuant to this Agreement. The Company shall not be required to
effect more than one (1) registration pursuant to this Agreement; provided,
however, that if the Company becomes ineligible to use Form S-3 or the
registration statement originally filed is withdrawn or otherwise ceases to be
effective prior to the Termination Date (as defined below), the Company shall
use its Best Efforts to effect the registration of the Registrable Securities
on a new registration statement.
b. The Company shall use its Best Efforts to take all
such actions (including, without limitation, registering or qualifying the
Registrable Securities) as is reasonably required under state securities or
"blue sky" laws to enable the public sale of Registrable Securities by the
Holders within all jurisdictions of the United States of America.
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3. Obligations of the Company. Subject to the limitations of
Sections 4 and 11, the Company shall (i) keep the registration statement filed
in accordance with Section 2 hereof continuously effective until the earlier of
(a) two (2) years after the Closing or (b) such time as all Registrable
Securities have been disposed of either hereunder or otherwise in a manner that
results in such securities no longer being considered Registrable Securities
(such date being referred to herein as the "Termination Date"); (ii) prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities proposed to be registered in such
registration statement; (iii) furnish to each Holder such number of copies of
any prospectus (including any preliminary prospectus and any amended or
supplemented prospectus) in conformity with the requirements of the Securities
Act, and such other documents, as each Holder may reasonably request in order
to effect the offering and sale of the Registrable Securities to be offered and
sold, but only while the Company shall be required under the provisions hereof
to cause the registration statement to remain current.
4. Selling Procedures.
a. The Company shall notify each Holder or a
representative designated by such Holder (A) of any request by the SEC or any
other federal or state governmental authority during the period of
effectiveness of the registration statement for amendments or supplements to
the registration statement or related prospectus or for additional information
relating to the registration statement, (B) of the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the registration statement or the initiation of any
proceedings for that purpose, (C) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, or (D) of the happening of any event which makes any statement made in
the registration statement or related prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or which requires the making of any changes in the registration
statement or prospectus so that, in the case of the registration statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
In such event, the Company may suspend use of the prospectus by written notice
to each Holder, in which case each Holder shall not dispose of Registrable
Securities covered by the registration statement or prospectus until copies of
a supplemented or amended prospectus are distributed to the Holders or until
the Holders are advised in writing by the Company that the use of the
applicable prospectus may be resumed. Subject to Section 4(b) below, the
Company shall use its Best Efforts to ensure that the use of the prospectus may
be resumed as soon as practicable. The Company shall use its Best Efforts to
obtain the withdrawal of any order suspending the effectiveness of the
registration statement, or the lifting of
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<PAGE> 61
any suspension of the qualification (or exemption from qualification) of any of
the securities for sale in any jurisdiction, as soon as is practicable.
b. The Company shall, upon the occurrence of any event
contemplated by clause (D) of Section 4(a) above, prepare a supplement or
post-effective amendment to the registration statement or a supplement to the
related prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities being sold thereunder, such prospectus will not
contain 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, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, if the Company shall furnish to the Holders a
certificate signed by the chief executive officer or chief financial officer of
the Company stating that in the good faith judgment of the Board of Directors
of the Company it would be significantly disadvantageous to the Company and its
stockholders for any such registration statement to be amended or supplemented
because the Company would be required to disclose in such registration
statement, either directly or through incorporation by reference, material non-
public information that it would not otherwise be obligated to disclose at such
time, the disclosure of which at such time would have a material adverse effect
on the business or prospects of the Company, the Company may defer such
amending or supplementing of such registration statement until the earlier of
(i) ninety (90) days from the date of the certificate or (ii) the filing of a
report on Form 10-Q by the Company, and in such event, the Holders shall be
required to discontinue disposition of any Registrable Securities during such
period.
c. Each Holder hereby agrees that, during the period of
duration specified by the Company and an underwriter of Company Common Stock or
other securities of the Company, following the effective date of a registration
statement of the Company filed under the Securities Act, it shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees or transferees in a private placement who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Company Common Stock included in such registration; provided, however,
that:
i. all officers and directors of the Company enter into
similar agreements; and
ii. such market stand-off time period shall not exceed
ninety (90) days.
Each Holder agrees to provide to the underwriters of any public
offering such further agreement as such underwriter may reasonably require in
connection with this market stand-off agreement. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of each Holder (and the shares or
securities of every other person subject to the foregoing restriction), until
the end of such period.
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<PAGE> 62
d. The Company may not suspend the use of a prospectus,
or otherwise prevent the Holders from selling Registrable Securities, pursuant
to Section 4(a), 4(b) or 4(c) above, for a period of time exceeding ninety (90)
days in any twelve month period. In addition, the Company may not suspend the
use of a prospectus, or otherwise prevent the Holders from selling Registrable
Securities, pursuant to Section 4(a), 4(b) or 4(c) above, within sixty (60)
days of the effective date of the registration statement filed pursuant to
Section 2 above.
5. Availability of Form S-3. The Company represents that it is
currently eligible to utilize Form S-3 with respect to the registration of the
Registrable Securities.
6. Expenses. The Company shall pay all of the out-of-pocket
expenses incurred, other than underwriting or selling discounts and
commissions, in connection with the registration of Registrable Securities
pursuant to this Agreement, including, without limitation, all SEC and NASD
registration and filing fees, printing expenses, transfer agent's and
registrar's fees, and the reasonable fees and disbursements of the Company's
outside counsel and accountants. The Company shall not be obligated to pay the
fees and expenses of counsel to the Holders.
7. Indemnification. In the event of any offering registered
pursuant to this Agreement:
a. The Company will indemnify each Holder, each or its
officers and directors and each person controlling a Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, final prospectus, or any amendment or supplement thereto, incident
to any offering registered pursuant to this Agreement, or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances in which they are made, not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act or state
securities laws applicable to the Company in connection with any such
registration, and, subject to Section 7(c), will reimburse each such Holder,
director, officer, and person controlling such Holder, for any legal and any
other out-of-pocket expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability
or action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, or liability arises out of or is
based on (i) any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company for use in connection with the registration statement,
final prospectus or any amendment or supplement thereto by such Holder or
controlling person or (ii) any sale by a Holder in violation of Section 4
hereof.
b. Each Holder will indemnify the Company, each of its
directors and officers and its legal counsel and independent accountants, each
underwriter, if any, of the Company' securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other Holder and each
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<PAGE> 63
person controlling such other Holder, each of such other Holders, officers and
directors, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) or a material fact contained in any such registration
statement, final prospectus, or any amendment or supplement thereto, incident
to any offering registered pursuant to this Agreement or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and,
subject to Section 7(c), will reimburse the Company, such other Holders, such
directors, officers, legal counsel, independent accountants, underwriters or
control persons for any legal or any other expenses out-of-pocket reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement, final
prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with information furnished to the Company by such Holder in writing
for such purpose; provided, however, that the obligations of each Holder
hereunder shall be several and not joint and shall be limited to an amount
equal to the respective gross proceeds (before expenses and commissions) from
the sale of Registrable Securities by such Holder as contemplated herein.
c. Each party entitled to indemnification under this
Section 7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party receives written notice of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that the
Indemnified Party may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement, except to the extent, but only to the extent, that the
Indemnifying Party's ability to defend against such claim or litigation is
impaired as a result of such failure to give notice. Notwithstanding the
foregoing sentence, the Indemnified Party may retain its own counsel to conduct
the defense of any such claim or litigation, and shall be entitled to be
reimbursed by the Indemnifying Party for expenses incurred by the Indemnified
Party in defense of such claim or litigation, in the event that the
Indemnifying Party does not assume the defense of such claim or litigation
within thirty days after the Indemnifying Party receives notice thereof from
the Indemnified Party. Further, an Indemnifying Party shall be liable for
amounts paid in settlement of any such claim or litigation only if the
Indemnifying Party consents in writing to such settlement (which consent shall
not be unreasonably withheld). No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party a release from all liability with respect
to such claim or litigation.
d. If the indemnification provided for in this Section 7
from the Indemnifying Party is unavailable to an Indemnified Party hereunder in
respect of any claim, loss, damage or liability referred to herein, then the
Indemnifying Party, to the extent such indemnification is unavailable, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such
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<PAGE> 64
Indemnified Party as a result of such claims, losses, damages or liabilities in
such proportion as is appropriate to reflect the relative benefit to or fault
of the Indemnifying Party and indemnified parties in connection with the
actions that resulted in such claims, losses, damages and liabilities. The
relative benefit of such Indemnifying Party and indemnified parties shall be
determined by reference to, among other things, in the case of the Company, the
value of the entire issued ordinary share capital of Symphony received by the
Company, and, in the case of each Holder, the gross proceeds received by each
such Holder from the sale of Registrable Securities in the manner contemplated
hereby. The amount paid or payable by a party as a result of the claims,
losses, damages or liabilities referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding. The parties hereto agree that it would
not be just and equitable if contribution pursuant to this paragraph were
determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to above in this
paragraph. No party guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any party.
e. The obligations of the Company and each Holder under
this Section 7 shall survive the completion of any offering of stock in a
registration statement under this Agreement.
8. Reports Under Securities Exchange Act of 1934. The Company
agrees to:
a. use all reasonable efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
b. furnish to each Holder forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, or that it qualifies
as a registrant whose securities may be resold pursuant to Form S-3 (at any
time that it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and (iii) such other information as may be reasonably
requested in availing each Holder of any rule or regulation of the SEC which
permits the selling of any such securities pursuant to Form S-3; and
c. will use its Best Efforts to remain eligible to use
Form S-3 with respect to the sale of the Registrable Securities.
9. Assignment of Registration Rights. The rights of a Holder
pursuant to this Agreement may be assigned, in whole or in part, by such Holder
to a transferee of Registrable Securities only if: (a) the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee and a copy of a duly executed written instrument
in form reasonably satisfactory to the Company pursuant to which such
transferee agrees to be bound hereby and provides the Company with such
reasonable information as the Company may request to permit the transferee to
sell such Registrable Securities pursuant to the registration statement filed
in accordance with Section 2 hereof, and (b) immediately following such
transfer, the disposition of such Registrable Securities by the transferee is
restricted under the Securities Act.
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10. Amendment of Registration Rights. The Holders of a majority
of the Registrable Securities then outstanding may, with the consent of the
Company, amend the registration rights granted hereunder.
11. Shareholder Lock Up.
11.16 Notwithstanding anything in this Agreement to the
contrary, NMC Shareholder N.M. New Media Entertainment Ltd. ("NME") agrees
that, except with respect to 256,148 Registrable Securities, it will not,
directly or indirectly, sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or otherwise
transfer or dispose of: (a) any shares of Buyer Common Stock acquired pursuant
to the Stock Purchase Agreement for a period ending one (1) year following the
Closing Date and (b) more than an aggregate of 192,111 shares of Buyer Common
Stock acquired pursuant to the Stock Purchase Agreement for a period ending two
(2) years following the Closing date.
11.17 The Company agrees that, in the event that NME is
required to indemnify the Company pursuant to Section 10 of the Stock Purchase
Agreement, the Company will allow NME, notwithstanding Section 11(a) above, to
sell such number of Registrable Securities as is necessary for NME to satisfy
its indemnification obligation.
11.18 The Company agrees that, in the event that Mr. Efraim
Atad is terminated by the Company without just cause (as such term is defined
in the Employment Agreement between Mr. Atad and the Company), then the lock up
set forth in Section 11(a) shall terminate and have no further force and
effect.
12. Affiliate Registration. The Company agrees that, so long as a
Holder is considered an "affiliate" of the Company, in the event that the
Company registers for re-sale securities of the Company held by other
affiliates of the Company, the Company will afford such affiliate Holder the
opportunity to include any Registrable Securities then held by such Holder in
such registration statement upon substantially the same terms as the other
affiliates.
13. Termination. All obligations of the parties set forth in this
Agreement shall terminate upon the Termination Date. Notwithstanding the
foregoing, the obligations of the parties hereto pursuant to Section 6 and
Section 7 hereof shall survive the Termination Date, and the obligations of the
Company pursuant to Section 12 hereof shall survive the Termination Date for a
period of four (4) years.
14. Obligations of Holders. By exercising any rights hereunder,
each Holder shall be deemed to assume all obligations of a Holder hereunder as
though such Holder were a signatory hereto. The Company may require Holders to
execute an instrument whereby such Holders expressly assume all obligations of
Holders hereunder as a condition precedent to any obligations of the Company
hereunder.
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<PAGE> 66
15. Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the other
parties):
Sellers: as set forth on Schedule A
with a copy to: Shenhav, Elrom, Konforti & Shavit
Shalom Tower, 4th Floor
P.O. Box 29671
Tel-Aviv, 61290
Israel
Attention: Amos Konforti, Adv.
Facsimile No.: 972-3-516-0068
Buyer: Harmonic Lightwaves, Inc.
549 Baltic Way
Sunnyvale, California 94089
United States of America
Attention: Mr. Robin N. Dickson
Facsimile No.: (408)542-2516
with a copy to: Wilson Sonsini Goodrich & Rosati,
P.C.
650 Page Mill Road
Palo Alto, California 94304
United States of America
Attention: Patrick J. Schultheis, Esq.
Facsimile No.: (650) 493-6811
16. Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of California, County of Santa Clara, or, if it has or can acquire
jurisdiction, in the United States District Court for the Northern District of
California, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in
the world.
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17. Entire Agreement and Modification. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
18. Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
19. Section Headings, Construction. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
20. Governing Law. This Agreement will be governed by the laws of
the State of California without regard to conflicts of laws principles.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
22. Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
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<PAGE> 68
IN WITNESS WHEREOF, the parties have executed and delivered to this
Agreement as of the date first written above.
HARMONIC LIGHTWAVES, INC.
By:_____________________________
Robin N. Dickson
Chief Financial Officer
NMC SHAREHOLDERS
_______________________________
_______________________________
_______________________________
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<PAGE> 69
SCHEDULE A
Name and Address
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<PAGE> 1
EXHIBIT 20.1
HARMONIC LIGHTWAVES
FOR IMMEDIATE RELEASE
CONTACTS: Robin N. Dickson Michael Newman
Chief Financial Officer Investor Relations
Harmonic Lightwaves, Inc. Fi.Comm
(408) 542-2500 (408) 542-2760
HARMONIC LIGHTWAVES ANNOUNCES ACQUISITION OF
NEW MEDIA COMMUNICATION
Harmonic's Presence in Digital Arena Strengthened, Expanded with Addition of
New Media's High-Speed Data Technology
SUNNYVALE, CALIF. -- SEPTEMBER 16,1997 -- Harmonic Lightwaves, Inc. (Nasdaq:
HLIT) today announced that it has signed a definitive agreement to acquire New
Media Communication Ltd., a leader in broadband, high-speed data delivery
software and hardware technology.
Harmonic will pay approximately $19 million to the shareholders of New
Media through the issuance of 1,037,911 shares of Harmonic Lightwaves common
stock, and will assume all of New Media's outstanding stock options. The
acquisition of New Media will enable Harmonic, a leading supplier of fiber optic
transmission and digital headend products for the cable market, to offer a
comprehensive solution for delivering multi-media over all major broadband
networks, including cable, satellite and wireless.
"This acquisition is an important step in our growth strategy as a
provider of broadband communications systems, strengthening our position with
our current cable customers, as well as taking us into new markets," said Tony
Ley, president and CEO of Harmonic Lightwaves. "New Media's technology will
expand our product portfolio. We will enable cable, satellite and wireless
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HARMONIC LIGHTWAVES ANNOUNCES ACQUISITION OF NEW MEDIA
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operators to provide video, audio, high-speed Internet and other advanced
services over today's networks."
New Media provides advanced headend software for the management and
transmission of data. The software supports multicasting and unicasting over
traditional and broadband transmission media. Complementing its innovative
multi-media delivery software, New Media has developed a range of extremely
high-speed broadband network interface cards (B-NICs(TM)) that are compatible
with cable, satellite and LMDS/MMDS wireless transmission technologies.
New Media's products support Internet content delivery and data
broadcasting at speeds of up to 52 Mbps via cable and MMDS wireless, and up to
48 Mbps via satellite and LMDS. New Media is currently the only company offering
commercially-available, high-speed data solutions on all broadband platforms,
and was the first to deploy its technology in a commercial LMDS system.
"We are very pleased to be joining Harmonic Lightwaves. Our
complementary products enable the delivery of advanced digital services across a
variety of broadband platforms and promote the shared vision of both companies,"
said Effi Atad, president and CEO of New Media. "Combining our strengths in data
communications with Harmonic's broadband expertise and global market presence
should allow us to provide more competitive products and complete systems to the
expanding communications industry."
New Media's commercial customers include: KMS and Thyssen Telecom,
cable and satellite operators in Germany using New Media's products to deliver
multi-media, including high-speed Internet, to a potential market of 390,000
households in Munich; Cellular Vision Inc., the
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HARMONIC LIGHTWAVES ANNOUNCES ACQUISITION OF NEW MEDIA
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world's first LMDS operator, which is using New Media products to deliver video
and high-speed Internet services to customers in New York; and Helicon
Corporation, a cable operator in New Jersey which offers high-speed Internet
services to their 155,000 subscribers in nine U.S. states. In addition, New
Media's products are in operation worldwide in other commercial cable systems
and first-phase satellite deployments.
New Media's focus on wireless and satellite providers complements
Harmonic's worldwide customer base of cable operators. Both companies' products
are compliant with international Digital Video Broadcast (DVB) and Motion
Picture Expert Group (MPEG) standards. Harmonic is also active in Multi-Media
Cable Network System (MCNS) standards specification and product development to
further address the U.S. cable marketplace. The addition of New Media's software
and expertise to Harmonic's broad range of headend equipment is expected to
expand Harmonic's data transmission capabilities and to accelerate its
TRANsend(TM) digital program.
The acquisition will be accounted for under the purchase method of
accounting, and Harmonic expects to recognize a substantial portion of the
acquisition cost as a one-time charge for in-process technology in the quarter
in which the transaction is completed. Subject to certain conditions, including
Israeli regulatory approval, the companies expect the closing to occur in
October. Following completion of the transaction, New Media will continue to
operate out of its headquarters in Israel.
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HARMONIC LIGHTWAVES ANNOUNCES ACQUISITION OF NEW MEDIA
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ABOUT NEW MEDIA COMMUNICATION LTD.
New Media Communication Ltd., a leader in the development of broadband
data communications technologies, is currently the only company offering
commercially available, high-speed solutions on all broadband platforms. In
1996, the company began deployment of its systems in the United States, Europe,
Asia and the Middle East.
New Media's data-over-broadband network software solutions were jointly
developed with the IBM Science and Technology Development Center in Israel. Its
hardware products are manufactured by Rockwell Semiconductor Systems. New Media
is based in Tel-Aviv, Israel, maintains a sales office in New York. NY and has
16 employees.
ABOUT HARMONIC LIGHTWAVES, INC.
Harmonic Lightwaves, Inc. is a worldwide supplier of highly integrated
fiber optic transmission, digital headend and element management systems for the
delivery of interactive services over broadband networks. The company designs,
manufactures and markets optical transmitters, nodes, receivers, digital video
compression and modulation equipment and element management hardware and
software. These products are used by major communications providers, such as
cable television operators, in bi-directional networks.
Headquartered in Sunnyvale, CA., Harmonic Lightwaves sells its products
internationally and maintains sales and support centers in Philadelphia, PA and
the United Kingdom, and operates an R&D facility in Caesarea, Israel. The
company is ISO 9001-certified and employs over 240 people. For more information,
visit the company's web site at www.harmonic-lightwaves.com
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HARMONIC LIGHTWAVES ANNOUNCES ACQUISITION OF NEW MEDIA
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This press release contains forward-looking statements regarding the
acquisition, the potential benefits of the acquisition and the accounting
treatment of the acquisition that involve a number of risks and uncertainties.
These include, but are not limited to, difficulties in combining and integrating
the two companies' operations, product lines and research and development
efforts; the potential adverse effects of the acquisition on relationships with
customers, distributors, suppliers and other business partners of the two
companies; dependence on communications industry capital spending; New Media's
dependence on the evolution of wireless and satellite broadband services;
regulatory developments, rapid technological change; the highly competitive
nature of the telecommunications industry; the Company's ability to successfully
develop, manufacture and gain market acceptance of new products, in particular
its digital TRANsend(TM) products and the products of New Media; and other
factors more fully described in the Company's reports to the Securities and
Exchange Commission, including but not limited to, the report on Form 10-K for
the year ended December 31, 1996, and the reports on Form 10-Q filed during
1997. Actual results may differ materially.
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EDITORS NOTE: PRODUCT AND COMPANY NAMES USED HERE ARE TRADEMARKS OR REGISTERED
TRADEMARKS OF THEIR RESPECTIVE COMPANIES.
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