FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the Month of January 2005 (January 4, 2004)
TECNOMATIX TECHNOLOGIES LTD.
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(Name of Registrant)
Delta House, 16 Abba Eban Avenue, Herzliya 46120, Israel
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F:
Form 20-F X Form 40-F
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Indicate by a check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): ______
Indicate by a check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): ______
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934:
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): Not Applicable
The information included in the form 6-K is incorporated by reference to the
Registrant's Registration Statement on form F-3/A, registration number
333-115214.
On January 4, 2004, Tecnomatix Technologies Ltd. (the "Company") announced
that it entered into an Agreement of Merger, dated January 3, 2005 (the
"Merger Agreement") with UGS Corp. ("UGS") and a newly formed subsidiary of
UGS ("Merger Sub"), pursuant to which, on the terms and subject to the
conditions of the Merger Agreement, UGS has agreed to acquire the Company. The
acquisition will be accomplished through the merger (the "Merger") of Merger
Sub with and into the Company, with the Company as the surviving corporation.
Upon the effectiveness of the Merger, the shareholders of the Company will
receive cash in the amount of $17.00 per share and the Company will become a
wholly owned subsidiary of UGS. Completion of the merger is subject to certain
closing conditions, including the approval of the Company's shareholders. A
copy of the press release of the Company announcing the entering into of the
Merger Agreement is attached hereto as Exhibit A and a copy of the Merger
Agreement is attached hereto as Exhibit B.
SIGNATURES
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, thereunto duly authorized.
TECNOMATIX TECHNOLOGIES LTD.
Date: January 4, 2005 By: /s/ Jaron Lotan
----------------------------
Name: Jaron Lotan
Title: President and Chief
Executive Officer
EXHIBIT INDEX
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Exhibit
- -------
A. Press release issued by the Company on January 4, 2005 announcing the
execution of the Merger Agreement
B. Agreement of Merger, dated as of January 3, 2005, by and among the
Company, UGS and Merger Sub
EXHIBIT A
---------
Company Contact: Company Investor Contact: Investor Contact:
Tecnomatix Technologies Ltd. Tecnomatix Technologies Ltd. The Ruth Group
Jaron Lotan Oren Steinberg David Pasquale
+972-9-9594891 +972-9-9594891 +1-646-536-7006
jaron.lotan@tecnomatix.com osteinberg@tecnomatix.com dpasquale@theruthgroup.com
TECNOMATIX AGREES TO BE ACQUIRED BY UGS FOR $228
MILLION OR $17 PER SHARE
INDUSTRY LEADERS COME TOGETHER TO OFFER THE BEST PLM/MPM
SOLUTION TO CUSTOMERS
Herzlia, Israel, January 4, 2005 - Tecnomatix Technologies Ltd.
(NASDAQ-TCNO), a leader in Manufacturing Process Management (MPM), today
announced that it has entered into a definitive agreement for all of its
outstanding equity to be acquired by Plano, Texas-based UGS, a leading global
provider of product lifecycle management (PLM) software and services.
Under the agreement, and subject to the satisfaction of certain customary
conditions, including approval by Tecnomatix shareholders and regulatory
authorities, shareholders will receive $17.00 per share in cash for each
Tecnomatix share they own. This represents a premium of 39% to Tecnomatix's
average closing price over the last 60 trading days. The transaction implies a
total equity value of $227.7 million (based on 12.2 million shares outstanding
and assuming exercise of 2.9 million options).
Tecnomatix's founders and other significant shareholders owning approximately
13% of the outstanding shares have irrevocably committed to vote in favor of
the acquisition. The transaction has received the unanimous support of
Tecnomatix's Board of Directors and, subject to the receipt of required
regulatory approvals, is expected to be completed by the end of the first
quarter 2005.
"This agreement with UGS offers an attractive price to our shareholders. This
price validates the business value of MPM solutions to leading manufacturing
enterprises, as well as the contribution that Tecnomatix and its employees
made in developing this marketplace. From an innovative vision only five years
ago to over 300 productive enterprise deployments today, the Tecnomatix MPM
offering has become the chosen path to manufacturing excellence at the world's
leading automotive, aerospace and electronics manufacturers," said Harel
Beit-On, chairman of Tecnomatix. "Through this marriage of best-in-class MPM
solutions and UGS' leading enterprise PLM expertise, Tecnomatix customers and
manufacturers around the world will realize even greater business value and
product introduction success."
Jaron Lotan, president and CEO of Tecnomatix said: "UGS is uniquely positioned
to acquire Tecnomatix after two years of close collaboration. Joining UGS will
enable Tecnomatix to benefit from the vast technical resources, as well as the
broader market coverage of this leading enterprise solution provider. This
combination will offer customers an integrated IT solution combining UGS'
enterprise capabilities with Tecnomatix's industry leading digital
manufacturing products and services. Tecnomatix employees can look forward to
personal growth as part of UGS."
Commenting from UGS, Tony Affuso, chairman, CEO and president of UGS, stated,
"After having worked closely with Tecnomatix for a number of years, we are
excited that we will be able to further capitalize on the strengths of both
organizations. Given the recent successes of our joint sales initiatives and
ongoing product integration efforts, this agreement marks an important
extension of our efforts to offer customers comprehensive solutions to their
most complicated planning and production issues.
Tecnomatix solutions will provide UGS with expanded offerings in the PLM space
for existing UGS customers, as well as new customers in selected industries
currently being served by Tecnomatix. We look forward to Tecnomatix employees,
with their in-depth knowledge and experience, becoming part of our
organization. Following the acquisition, it is UGS' intention to continue to
support all existing Tecnomatix customers and solutions."
Tecnomatix is being advised by Morgan Stanley on this transaction.
Note to Investors
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Tecnomatix plans to mail to its stockholders a Proxy Statement in connection
with the transaction. The Proxy Statement will contain important information
about Tecnomatix, the transaction and related matters. Investors and security
holders are urged to read the Proxy Statement carefully when it is available.
Investors and security holders will be able to obtain free copies of the Proxy
Statement, when available, from Tecnomatix by contacting The Ruth Group. In
addition, investors and security holders will be able to obtain free copies of
other documents filed with the Securities and Exchange Commission (SEC) by
Tecnomatix through the web site maintained by the SEC at www.sec.gov or from
Tecnomatix.
Information about Tecnomatix
- ----------------------------
Tecnomatix Technologies Ltd. provides the world's leading Manufacturing
Process Management (MPM) solutions for the automotive, electronics, aerospace
and other manufacturing and processing industries. Tecnomatix eMPower
solutions for MPM enable the design, simulation, and execution of production
processes, and provide real-time control and visibility throughout shop-floor
operations. More than 5,000 companies worldwide are using eMPower solutions to
reduce operating costs, accelerate product introductions, and shorten
time-to-volume -- while maintaining high levels of product and process
quality. With offices in over 20 countries, Tecnomatix supports such global
leaders as BMW, Boeing, Comau, Ford, GM, Mazda, Philips, Schneider Electric
and Volkswagen. For more information, visit www.tecnomatix.com.
Information about UGS
- ---------------------
UGS is a leading global provider of product lifecycle management (PLM)
software and services with more than 3.3 million licensed seats and 42,000
clients worldwide. Headquartered in Plano, Texas, the company promotes
openness and standardization and works collaboratively with its clients in
creating enterprise solutions enabling them to transform their process of
innovation and thus begin to capture the value of PLM.
This press release includes forward-looking statements, within the meaning of
the Private Securities Litigation Reform Act of 1995, which are subject to
risks and uncertainties that could cause actual results to differ materially
from those anticipated. Such statements may relate to the Company's plans,
objectives and expected financial and operating results. The risks and
uncertainties that may affect forward-looking statements include, but are not
limited to: currency fluctuations, global economic and political conditions,
market demand for Tecnomatix products and services, long sales cycles, new
product developments, assimilating future acquisitions, maintaining
relationships with customers and partners, and increased competition. For more
details about the risks and uncertainties of the business, refer to the
Company's filings with the Securities and Exchange Commission. Tecnomatix
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
EXHIBIT B
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AGREEMENT OF MERGER
dated as of January 3, 2005
by and among
UGS CORP.,
TREASURE ACQUISITION SUB LTD.
and
TECNOMATIX TECHNOLOGIES LTD.
Table of Contents
Page
ARTICLE I
THE MERGER
1.1 The Merger.....................................................................................2
1.2 Effective Time; Closing Date...................................................................2
1.3 Effect on Capital Stock........................................................................2
1.4 Adjustments to Merger Consideration............................................................3
1.5 Stock Options..................................................................................3
1.6 Warrants.......................................................................................4
1.7 Articles of Association........................................................................4
1.8 Directors and Officers.........................................................................5
1.9 Surrender of Certificates......................................................................5
1.10 Company's Transfer Books Closed; No Further Ownership Rights in Company Shares.................6
1.11 Lost, Stolen or Destroyed Certificates.........................................................7
1.12 Termination of Exchange Fund...................................................................7
1.13 Further Assurances.............................................................................7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization and Qualification; Subsidiaries...................................................7
2.2 Capitalization.................................................................................9
2.3 Authority Relative to this Agreement; Required Vote; Board Approval...........................10
2.4 No Conflict; Required Filings and Consents....................................................11
2.5 Compliance; Permits...........................................................................12
2.6 Company Documents; Financial Statements.......................................................13
2.7 No Undisclosed Liabilities....................................................................14
2.8 Absence of Certain Changes or Events..........................................................14
2.9 Absence of Litigation.........................................................................14
2.10 Employee Matters and Benefit Plans............................................................14
2.11 Title to Property; Leased Property............................................................18
2.12 Taxes.........................................................................................18
2.13 Intellectual Property.........................................................................21
2.14 Contracts.....................................................................................26
2.15 Product Warranties............................................................................28
2.16 Insurance.....................................................................................28
2.17 Customers.....................................................................................28
2.18 Relationships with Affiliates.................................................................28
2.19 Grants, Incentives and Subsidies..............................................................29
2.20 Information Supplied by Company...............................................................30
2.21 Inapplicability of Certain Statutes...........................................................30
2.22 Opinion of Financial Advisor..................................................................30
2.23 Environmental Matters.........................................................................30
2.24 Illegal Payments, etc.........................................................................30
2.25 Encryption and Other Restricted Technology....................................................31
2.26 Brokers.......................................................................................31
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
3.1 Organization and Qualification; Subsidiaries..................................................31
3.2 Authority Relative to this Agreement; No Buyer Vote Required; Board Approval..................32
3.3 No Conflict; Required Filings and Consents....................................................32
3.4 Absence of Litigation.........................................................................33
3.5 Inapplicability of Certain Statutes...........................................................33
3.6 Ownership and Operations of Merger Subsidiary.................................................33
3.7 Information Supplied by Buyer and Merger Sub..................................................34
3.8 Financing.....................................................................................34
3.9 Financial Resources and Operations after Closing..............................................34
3.10 Brokers.......................................................................................34
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING DATE
4.1 Conduct of Business by the Company............................................................34
4.2 Conduct of Business by Buyer..................................................................38
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement; Shareholder Meetings; Merger Notice..........................................38
5.2 Merger Proposal...............................................................................40
5.3 Merger Sub General Meeting....................................................................41
5.4 Notification..................................................................................41
5.5 Governmental Approvals; Reasonable Best Efforts...............................................42
5.6 Confidentiality; Access to Information........................................................44
5.7 No Solicitation...............................................................................44
5.8 Public Disclosure.............................................................................47
5.9 Indemnification...............................................................................47
5.10 Employee Matters..............................................................................48
5.11 Repayment of Bank Hapoalim Loan...............................................................48
5.12 No Affiliate Agreements.......................................................................49
5.13 Israeli Tax Rulings...........................................................................49
5.14 Certain Structure Matters.....................................................................50
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger..................................50
6.2 Additional Conditions to Obligations of the Company...........................................50
6.3 Additional Conditions to the Obligations of Buyer and Merger Sub..............................51
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination...................................................................................52
7.2 Effect of Termination.........................................................................53
7.3 Fees and Expenses.............................................................................53
7.4 Amendment.....................................................................................54
7.5 Extension; Waiver.............................................................................55
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties................................................55
8.2 Notices.......................................................................................55
8.3 Construction..................................................................................56
8.4 Counterparts..................................................................................57
8.5 Entire Agreement; Third Party Beneficiaries...................................................57
8.6 Severability..................................................................................58
8.7 Other Remedies; Specific Performance..........................................................58
8.8 Applicable Law................................................................................58
8.9 Rules of Construction.........................................................................58
8.10 Assignment....................................................................................58
8.11 Personal Liability............................................................................58
8.12 Consent to Jurisdiction and Service of Process................................................59
8.13 WAIVER OF JURY TRIAL..........................................................................59
EXHIBITS
Exhibit A - Form of Merger Proposal
Exhibit B - Form of Indemnification Undertaking
INDEX OF DEFINED TERMS
Page
2003 Option Plan..............................................................3
Acquisition Proposal.........................................................49
affiliate....................................................................60
Agreement.....................................................................1
Antitrust Laws...............................................................45
Buyer.........................................................................1
Buyer Charter Documents......................................................33
Buyer Disclosure Schedule....................................................33
Certificates..................................................................5
Closing.......................................................................2
Closing Date..................................................................2
Commercially Available Software..............................................23
Companies Registrar...........................................................2
Company.......................................................................1
Company 2003 Unvested Option..................................................4
Company Benefit Plan.........................................................15
Company Cash-Out Option.......................................................3
Company Charter Documents.....................................................9
Company Contract.............................................................28
Company Disclosure Schedule...................................................8
Company ERISA Affiliate......................................................16
Company Financial Statements.................................................14
Company Form 20-F............................................................30
Company Intellectual Property................................................22
Company Leases...............................................................19
Company Option Plans..........................................................4
Company Permits..............................................................13
Company Recommendation.......................................................41
Company Reports..............................................................14
Company Shareholder Approval.................................................11
Company Shareholders Meeting.................................................31
Company Shares................................................................2
Company Software.............................................................23
Company Source Code..........................................................26
Company Subsidiaries..........................................................9
Company Subsidiary............................................................9
Confidentiality Agreement....................................................46
Content......................................................................23
Contract.....................................................................28
Copyrights...................................................................22
Domain Names.................................................................22
Effective Time................................................................2
Environmental Laws...........................................................32
ERISA........................................................................16
Escrow Agreements............................................................27
Exchange Act.................................................................12
Exchange Fund.................................................................5
Governmental Entity..........................................................12
Grants.......................................................................30
Hazardous Substance..........................................................32
Indemnification Undertakings.................................................50
Indemnified Party............................................................50
Insurance Policies...........................................................29
Intellectual Property........................................................22
Investment Center............................................................12
IRC..........................................................................16
Israeli Companies Law.........................................................1
Israeli Company Employee.....................................................19
Israeli Company Employees....................................................18
Israeli Option Tax Ruling....................................................52
Israeli Withholding Tax Ruling...............................................52
Knowledge....................................................................60
Law..........................................................................13
Liens.........................................................................9
Loan.........................................................................51
Loan Agreement...............................................................51
Material Adverse Effect.......................................................8
Maximum Premium..............................................................50
Merger........................................................................1
Merger Consideration..........................................................2
Merger Notice................................................................42
Merger Proposal..............................................................42
Merger Sub....................................................................1
Nasdaq.......................................................................12
Notice.......................................................................41
OCS..........................................................................12
Ordinance.....................................................................6
Outside Date.................................................................55
Patent Rights................................................................22
Paying Agent..................................................................5
Payment Date..................................................................4
Permits......................................................................13
Permitted Liens..............................................................19
Person.......................................................................60
Post-Merger Employees........................................................51
Primary IP...................................................................24
Principal Shareholders........................................................1
Proxy Statement..............................................................31
Registered Intellectual Property.............................................24
Registered Intellectual Property Rights......................................22
Representatives..............................................................47
SEC..........................................................................13
Securities Act...............................................................14
Software.....................................................................23
subsidiary...................................................................60
Subsidiary Charter Documents..................................................9
Superior Proposal............................................................49
Surviving Corporation.........................................................2
Tax..........................................................................19
Tax Returns..................................................................20
Taxes........................................................................19
Termination Fee..............................................................56
Trade Practices Act..........................................................12
Trade Secrets................................................................22
Trademarks...................................................................22
U Warrant.....................................................................5
U.S. GAAP....................................................................14
Unaudited Financial Statements...............................................14
Unvested Option Consideration.................................................4
Website......................................................................23
AGREEMENT OF MERGER
This AGREEMENT OF MERGER (this "Agreement") is made and entered into as of
January 3, 2005, by and among UGS Corp., a Delaware corporation ("Buyer"),
Treasure Acquisition Sub Ltd., an Israeli company and a wholly owned
subsidiary of Buyer ("Merger Sub"), and Tecnomatix Technologies Ltd., an
Israeli company (the "Company").
WHEREAS, Buyer, Merger Sub and the Company intend to effect a merger
of Merger Sub with and into the Company (the "Merger") in accordance with this
Agreement and the Israeli Companies Law-5759-1999 (together with the rules and
regulations promulgated thereunder, the "Israeli Companies Law") pursuant to
which Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Buyer;
WHEREAS, the Board of Directors of the Company has: (i) determined
that the Merger is fair to, and in the best interests of, the Company and its
shareholders, and that, considering the financial position of the merging
companies, no reasonable concern exists that the Surviving Corporation (as
defined herein) will be unable to fulfill the obligations of the Company to
its creditors; (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement; and (iii) determined to recommend
that the shareholders of the Company approve this Agreement, the Merger and
the other transactions contemplated by this Agreement;
WHEREAS, (i) the Board of Directors of Merger Sub has determined (A)
that the Merger is fair to, and in the best interests of, Merger Sub and its
shareholder, and that, considering the financial position of the merging
companies, no reasonable concern exists that the Surviving Corporation will be
unable to fulfill the obligations of Merger Sub to its creditors, and (B) to
recommend that Buyer, as the sole shareholder of Merger Sub, approve this
Agreement, the Merger and the other transactions contemplated by this
Agreement; and (ii) the Boards of Directors of each of Buyer and Merger Sub
have each approved this Agreement, the Merger and the other transactions
contemplated by this Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement, as a condition and inducement to Buyer's willingness to enter into
this Agreement, certain shareholders of the Company (the "Principal
Shareholders") are executing an undertaking and proxy pursuant to which, among
other things, each Principal Shareholder agrees, subject to the terms and
conditions therein, to vote all shares owned by such Person in favor of
approval of the Merger, this Agreement and the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants, promises and representations set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Israeli Companies Law, at
the Effective Time (as defined herein), Merger Sub (as the target company
("Chevrat Yaad", as such term is used in the Israeli Companies Law) in the
Merger) shall be merged with and into the Company (as the absorbing company
("Chevra Koletet", as such term is used in the Israeli Companies Law) in the
Merger). As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the Surviving Corporation
(the "Surviving Corporation") and shall (a) become a wholly owned subsidiary
of Buyer, (b) be governed by the Laws of the State of Israel, (c) maintain a
registered office in the State of Israel and (d) succeed to and assume all of
the rights, properties and obligations of Merger Sub and the Company in
accordance with the Israeli Companies Law.
1.2 Effective Time; Closing Date. The closing of the Merger and the
other transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times
Square, New York, NY 10036, at a time and on a date to be designated by the
parties (the time and date upon which the Closing actually occurs is referred
to herein as the "Closing Date"), which shall be no later than the later to
occur of: (a) the second business day after the satisfaction or waiver of the
conditions set forth in Article VI (other than those conditions which by their
terms are to be satisfied or waived as of the Closing); and (b) the 71st day
after the delivery of the Merger Proposal (as defined herein) to the office of
the Companies Registrar of the State of Israel (the "Companies Registrar"), or
at such other time, date and location as the parties hereto shall mutually
agree. The Merger shall become effective upon the issuance by the Companies
Registrar of a certificate evidencing the completion of the Merger in
accordance with section 323(5) of the Israeli Companies Law. The time at which
the Merger becomes effective is referred to herein as the "Effective Time".
1.3 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Buyer, Merger Sub, the Company or
the holders of any of the following securities, the following shall occur:
(a) Conversion of Company Shares. Subject to Section 1.3(b)
hereof, each Ordinary Share, NIS 0.01 par value per share, of the Company
(collectively, the "Company Shares") issued and outstanding immediately prior
to the Effective Time shall automatically be converted into and represent
solely the right to receive US $17.00 in cash, without interest thereon (the
"Merger Consideration") for each such Company Share, upon surrender, in the
manner provided in Section 1.9, of the certificate that formerly evidenced
such Company Share.
(b) Buyer-Owned Shares and Shares Owned by the Company. Each
Company Share held by the Company or owned by Buyer or any direct or indirect
wholly owned subsidiary of the Company or of Buyer immediately prior to the
Effective Time shall remain outstanding, and no consideration shall be
delivered in exchange therefor.
(c) Capital Stock of Merger Sub. Each Ordinary Share, NIS
0.01 par value per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and nonassessable Ordinary Share, NIS 0.01 par value per share, of the
Surviving Corporation. Each certificate evidencing ownership of such shares of
Merger Sub immediately prior to the Effective Time shall, as of the Effective
Time, evidence ownership of such shares of the Surviving Corporation.
1.4 Adjustments to Merger Consideration. The Merger Consideration
shall be adjusted to reflect appropriately the effect of any stock split or
reverse stock split, stock dividend (including any dividend or distribution of
securities exercisable or exchangeable for or convertible into Company
Shares), stock issuance or sale, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with
respect to Company Shares occurring on or after the date hereof and prior to
the Effective Time.
1.5 Stock Options.
(a) The Company shall use its reasonable best efforts to
take any and all actions necessary such that (i) each option to purchase
Company Shares outstanding immediately prior to the Effective Time under the
Company's 1994 Stock Option Plan, 1996 Stock Option Plan, Performance Based
Option Plan, 1996 Directors Stock Option Plan, and the Robcad Technologies
(1980) Ltd. Stock Option Plan, whether or not vested and exercisable
immediately prior to the Effective Time and (ii) that portion of each option
to purchase Company Shares under the 2003 Global Share Option Plan (the "2003
Option Plan") that is vested and exercisable immediately prior to the
Effective Time or shall, in accordance with its terms, become vested and
exercisable as of the Effective Time (each such stock option or portion
thereof, collectively, a "Company Cash-Out Option"), shall by virtue of the
Merger and without any further action on the part of any holder thereof be
cancelled immediately prior to the Effective Time and in consideration for
such cancellation the holder shall have the right to receive, as soon as
practicable following the Effective Time, promptly upon the surrender to the
Company of such Company Cash-Out Option, an amount in cash (less any
withholding taxes) equal to the product of (A) the number of Company Shares
subject to such Company Cash-Out Option immediately prior to the Effective
Time and (B) the amount, if any, by which the Merger Consideration exceeds the
exercise price per Company Share subject to such Company Cash-Out Option. The
Company's 1994 Stock Option Plan, 1996 Stock Option Plan, Performance Based
Option Plan, 1996 Directors Stock Option Plan, the Robcad Technologies (1980)
Ltd. Stock Option Plan, and the 2003 Option Plan are referred to herein
collectively as the "Company Option Plans." Prior to the Effective Time, the
Company shall take any and all actions necessary to terminate the Company
Option Plans effective as of the Effective Time.
(b) The Company shall take any and all actions necessary
such that the portion of each option to purchase Company Shares outstanding
immediately prior to the Effective Time under the Company's 2003 Global Share
Option Plan that is not vested and exercisable immediately prior to the
Effective Time and that shall not have become vested and exercisable as of the
Effective Time (each such unvested and unexercisable stock option or portion
thereof, a "Company 2003 Unvested Option") shall by virtue of the Merger and
without any further action on the part of any holder thereof be cancelled as
of the Effective Time and in consideration for such cancellation the holder
shall have the right to receive, subject to the terms of this Section 1.5(b),
an amount in cash equal to the product of (i) the number of Company Shares
subject to such Company 2003 Unvested Option and (ii) the amount, if any, by
which the Merger Consideration exceeds the exercise price per Company Share
subject to such Company 2003 Unvested Option (such amount, the "Unvested
Option Consideration"). The Unvested Option Consideration shall be paid to the
Company Option holder, as soon as practicable following such dates (each a
"Payment Date") and in such proportions as the Company 2003 Unvested Option
would have become vested and exercisable absent cancellation of such Company
2003 Unvested Option but, subject to the final sentence of this Section
1.5(b), only if the holder thereof remains employed by, or in the service of,
the Surviving Corporation or its Subsidiaries on the applicable Payment Date,
such payments to be made without interest and less applicable withholding at
the time of payment. The Surviving Corporation shall be responsible for
causing such payments to be made when due. Notwithstanding anything in this
Agreement to the contrary, in the event that the employment of an individual
employed by the Company or a Company Subsidiary otherwise entitled to receive
Unvested Option Consideration is, as of a date on or within six months
following the Effective Time, terminated by such individual's employer without
"Cause" (as defined in the 2003 Option Plan), such individual will be entitled
to receive as soon as practicable on or following the effective date of such
termination that portion of the Unvested Option Consideration that would have
been payable on the next Payment Date following the effective date of such
termination; provided that to the extent required to comply with Section 409A
of the Code, such payment following termination of employment or service shall
be made as of the date which is six months following the effective date of
such termination.
(c) Buyer shall take appropriate steps to ensure that the
Surviving Corporation has sufficient resources to make the payments
contemplated by this Section 1.5.
1.6 Warrants. Unless otherwise agreed between Buyer and the holder of
the U Warrant (as defined below), Buyer and the Company shall take all actions
necessary to terminate the Warrant, issued and effective as of July 12, 2002,
between the Company and Buyer (the "U Warrant"), and any rights to purchase
Company shares thereunder.
1.7 Articles of Association. At the Effective Time, the Articles of
Association of the Company shall continue to be the Articles of Association of
the Surviving Corporation until thereafter amended in accordance with the
Israeli Companies Law and such Articles of Association.
1.8 Directors and Officers.
(a) Prior to the Effective Time, each director of the
Company shall tender his or her resignation and such resignation shall become
effective as of the Effective Date;
(b) From and after the Effective Time, until successors are
duly elected or appointed and qualified in accordance with applicable Law, the
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation.
1.9 Surrender of Certificates.
(a) Paying Agent. Prior to the Effective Time, Buyer shall
appoint a bank or trust company reasonably acceptable to the Company to act as
paying agent (the "Paying Agent") for the payment of the Merger Consideration
upon surrender of certificates that immediately prior to the Effective Time
represented issued and outstanding Company Shares that were converted into the
right to receive Merger Consideration pursuant to Section 1.3 (the
"Certificates").
(b) Buyer to Provide Merger Consideration. At the Effective
Time, Buyer shall deposit with the Paying Agent, for exchange in accordance
with this Article I, the Merger Consideration (collectively, the "Exchange
Fund"). In the event the cash in the Exchange Fund shall be insufficient to
fully satisfy all of the payment obligations to be made by the Paying Agent
hereunder, Buyer shall promptly make available to the Paying Agent the amounts
so required to satisfy such payment obligations in full. The Paying Agent
shall deliver the Merger Consideration out of the Exchange Fund in accordance
with Section 1.9(c) below. Except as contemplated by this Section 1.9, the
Exchange Fund shall not be used for any other purpose.
(c) Exchange Procedures. As soon as reasonably practicable
after the Effective Time (but no later than three business days thereafter),
Buyer shall cause the Paying Agent to mail to each holder of record as of the
Effective Time of a Certificate (i) a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificate shall pass, only upon delivery of the Certificate to
the Paying Agent), that shall also be in such form and have such other
provisions as Buyer and the Company may reasonably specify, and (ii)
instructions for use in effecting the surrender of the Certificate in exchange
for the Merger Consideration. Upon surrender of Certificates for cancellation
to the Paying Agent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holders
of such Certificates shall be entitled to receive in exchange therefor the
Merger Consideration and the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, outstanding Certificates will be deemed from
and after the Effective Time to evidence only the right to receive, upon
surrender and without interest, the Merger Consideration into which the
Company Shares theretofore represented by such Certificates shall have been
converted pursuant to Section 1.3. The exchange procedures shall comply with
such procedures as may be required by the Israeli Withholding Tax Ruling, if
obtained, and shall permit Buyer (after consultation with the Company) to
require holders to provide any information as is reasonably needed to comply
with the Israeli Withholding Tax Ruling, if obtained.
(d) Transfers of Ownership. If any portion of the Merger
Consideration is to be paid to a Person other than the Person in whose name
the Certificates surrendered in exchange therefor are registered, it will be a
condition of the payment thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
Persons requesting such payment will have paid to Buyer or any agent
(including the Paying Agent) designated by it any Taxes (as defined herein)
required by reason of such payment to a Person other than the registered
holder of the Certificates surrendered, or established to the satisfaction of
Buyer or any agent (including the Paying Agent) designated by it that such Tax
has been paid or is not payable.
(e) Withholding. Each of the Paying Agent, Buyer and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement, to
any holder or former holder of Company Shares or options to purchase Company
Shares, such amounts as Buyer in good faith determines may be required to be
deducted or withheld therefrom under the applicable U.S. Federal backup
withholding provisions of the Code, the Income Tax Ordinance of Israel [New
Version], 1961, as amended (the "Ordinance"), or under any provision of state,
local, Israeli or other foreign law or any other applicable requirement;
provided, that with respect to any withholding under the laws or regulations
of the State of Israel, the Paying Agent, Buyer and the Surviving Corporation
shall act in accordance with the Israeli Withholding Tax Ruling, if obtained.
To the extent such amounts are so deducted or withheld, such amounts shall be
treated for all purposes under this Agreement as having been paid to the
person to whom such amounts would otherwise have been paid.
(f) No Liability. Notwithstanding anything to the contrary
in this Section 1.9, neither the Paying Agent, Buyer nor any party hereto
shall be liable to a holder of Company Shares for any amount properly paid to
a public official pursuant to any applicable abandoned property, escheat or
similar Law (as defined herein).
1.10 Company's Transfer Books Closed; No Further Ownership Rights in
Company Shares. At the Effective Time: (a) the share transfer books of the
Company shall be deemed closed, and no transfer of any certificates
theretofore representing Company Shares shall thereafter be made or
consummated; and (b) all holders of Certificates shall cease to have any
rights as shareholders of the Company except for any right to receive the
Merger Consideration. No further transfer of any such Company Shares shall be
made on such share transfer books after the Effective Time. If, after the
Effective Time, a valid Certificate is presented to the Paying Agent or to the
Surviving Corporation or Buyer, such Certificate shall be canceled and shall
be exchanged as provided in Section 1.9.
1.11 Lost, Stolen or Destroyed Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by Buyer or the Paying Agent, the executing of a customary
indemnification undertaking or the posting by such Person of a bond in such
reasonable amount as Buyer or the Paying Agent may direct as indemnity against
any claim that may be made against them with respect to such Certificate, the
Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration into which the Company Shares represented
by such Certificate immediately prior to the Effective Time shall have been
converted pursuant to Section 1.3.
1.12 Termination of Exchange Fund. Promptly following the date that
is 120 days after the Closing Date, the Surviving Corporation shall be
entitled to require the Paying Agent to deliver to Buyer any portion of the
Exchange Fund which has not been disbursed to holders of Company Shares
(including all interest and other income received by the Paying Agent in
respect of the Exchange Fund), and thereafter each holder of a Certificate may
only surrender such Certificate to Buyer and (subject to abandoned property,
escheat and other similar Laws) receive in consideration therefor the Merger
Consideration into which the Company Shares represented by such Certificate
immediately prior to the Effective Time shall have been converted pursuant to
Section 1.3, without interest.
1.13 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company or Merger Sub,
as the case may be, any deeds, bills of sale, assignments, assurances or other
documents, or instruments, and to take any other actions and do any other
things, in the name and on behalf of the Company or Merger Sub, reasonably
necessary to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger and to
otherwise accomplish the purpose and intent of this Agreement and the
transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth or referred to in that certain
schedule, dated as of the date of this Agreement, from the Company to Buyer
and Merger Sub (the "Company Disclosure Schedule"), the Company represents and
warrants to Buyer and Merger Sub as follows:
2.1 Organization and Qualification; Subsidiaries.
(a) Each of the Company and the Company Subsidiaries (as
defined herein) is a corporation duly organized and validly existing under the
Laws of its jurisdiction of incorporation and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted, and is duly qualified or
licensed as a foreign corporation to do business, and, where such concept is
applicable, is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except where the failure to
be so duly qualified or licensed and in good standing has not had or would not
reasonably be expected to have a Material Adverse Effect (as defined below) on
the Company. For the purposes of this Agreement, "Material Adverse Effect"
means, with respect to any party hereto, any event, change, circumstance or
state of facts which individually or in the aggregate, when taken together
with all other events, changes, circumstances or states of facts occurring or
existing at or about the same time, (A) has a material adverse effect on the
business, assets, properties, operations, condition (financial or otherwise)
or results of operations of such party and its subsidiaries, taken as a whole,
(B) materially adversely affects the ability of such party to perform its
obligations hereunder or (C) prevents or materially delays the ability of such
party to consummate the Merger and the other transactions contemplated hereby;
provided, however, that the term "Material Adverse Effect" shall exclude
events, changes, circumstances and states of facts that result or arise from
or relate to: (i) the industry in which such party operates or the economy in
any of the countries in which such party operates, but only to the extent that
such events, changes, circumstances or states of facts do not have a
materially disproportionate effect on such party relative to other similarly
situated companies, (ii) an outbreak or escalation of war, armed hostilities,
acts of terrorism or political instability, or any governmental or other
response to any of the foregoing; provided, however, that such situations do
not directly adversely affect a party's operations in a materially
disproportionate manner relative to other similarly situated companies, (iii)
the announcement of the transactions contemplated hereby (including the
identity of Buyer), including any potential or actual disruption of customer
demand or purchase orders, or relationships with employees, customers,
business partners, suppliers and other constituencies caused by such
announcement, and the effects thereof, (iv) any change in applicable
accounting requirements or principles, or applicable Laws, rules or
regulations; or (v) compliance with the terms of, or the taking of any action
required by, this Agreement prior to the Effective Time; and provided,
further, that any change in the Company's stock price or trading volume shall
not, in and of itself, be deemed to constitute a Material Adverse Effect.
(b) Section 2.1(b) of the Company Disclosure Schedule lists
each of the Company's subsidiaries (each, a "Company Subsidiary" and,
collectively, the "Company Subsidiaries"), the jurisdiction of incorporation
of each Company Subsidiary and the Company's equity interest therein, and, if
not directly or indirectly wholly owned by the Company, the identity and
ownership interest of each of the other owners of such Company Subsidiary.
Other than as set forth on Section 2.1(b) of the Company Disclosure Schedule,
the Company, directly or indirectly, owns 100% of the outstanding equity
interests of each of the Company Subsidiaries. As of the date hereof neither
the Company nor any Company Subsidiary has agreed, is obligated to make or is
bound (or has bound its property) by any written agreement or contract under
which it is legally obligated to make any future investment (in the form of a
loan, capital contribution or otherwise) in any other entity (other than the
Company or a wholly owned Company Subsidiary) in excess of $300,000 in the
aggregate for all such obligations. Other than the Company's interests in the
Company Subsidiaries, neither the Company nor any Company Subsidiary directly
or indirectly owns any equity, partnership or similar interest in any Person.
All of the issued and outstanding shares of capital stock of or other equity
interests in each Company Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable and all such shares or interests
owned by the Company or any Company Subsidiary are owned free and clear of all
pledges, hypothecations, claims, liens, charges, mortgages, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
(c) The Company has delivered to Buyer a complete and
correct copy of the Memorandum of Association and Articles of Association, the
By-Laws and all other organization documents of the Company as of the date of
this Agreement (together, the "Company Charter Documents"). Such Company
Charter Documents and the similar organizational documents of the Company
Subsidiaries (the "Subsidiary Charter Documents") are in full force and
effect. The Company and all Company Subsidiaries are not in violation in any
material respect of any of the provisions of the Company Charter Documents or
Subsidiary Charter Documents, as applicable. The Company has heretofore
delivered or shall, no later than two weeks following the date hereof, deliver
to Buyer a complete and correct copy of all Subsidiary Charter Documents.
2.2 Capitalization.
(a) The registered (authorized) share capital of the Company
consists of 20,000,000 Company Shares, NIS 0.01 par value per share. As of
December 31, 2004: (i) 12,201,685 Company Shares were issued and outstanding;
(ii) no Company Shares were held by the Company and 1,956,853 Company Shares
were held by a Company Subsidiary; (iii) 3,981,501 Company Shares were
reserved for issuance upon the exercise of outstanding Company Options; and
(iv) up to 1,592,502 Company Shares were reserved for issuance upon the
exercise of the U Warrant. Except as set forth above and for shares issued
upon the exercise of outstanding Company Options since December 31, 2004, as
of the date of this Agreement, no shares of capital stock of, or other equity
or voting interests in, the Company, or options, warrants or other rights to
acquire any such stock or securities were issued, reserved for issuance or
outstanding by the Company.
(b) All issued and outstanding Company Shares are and each
Company Share which may be issued pursuant to a Company Option will be duly
authorized, validly issued, fully paid and nonassessable and are not subject
to preemptive rights. There are no bonds, debentures, notes or other
indebtedness of the Company issued and outstanding having the right to vote
(or convertible or exercisable or exchangeable for securities having the right
to vote) on any matters on which shareholders of the Company may vote.
(c) Section 2.2(c) of the Company Disclosure Schedule sets
forth, as of December 15, 2004, the following information with respect to each
Company Option outstanding as of such date: (i) the name of the optionee; (ii)
the stock option plan under which the Company Option was granted; (iii) the
number of Company Shares subject to such Company Option; (iv) the number of
shares currently vested and exercisable under such Company Option; (v) the
vesting schedule for each Company Option subject to the 2003 Option Plan; (vi)
whether any such Company Option subject to the 2003 Option Plan shall vest and
become exercisable as a result of the consummation of the Merger; and (vii)
the exercise price of such Company Option.
(d) Except as set forth in Sections 2.1, 2.2(a) and 2.2(c),
as of the date of this Agreement, there are no subscriptions, options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Company or any Company Subsidiary is
a party or by which it is bound obligating the Company or any Company
Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership
interests or similar ownership interests of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to grant,
extend, or enter into any such subscription, option, warrant, equity security,
call, right, commitment or agreement.
2.3 Authority Relative to this Agreement; Required Vote; Board
Approval.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and, subject to (i) obtaining
the Company Shareholder Approval (as defined below), (ii) receipt of required
regulatory, administrative and governmental approvals and consents set forth
in Section 2.4(b) and (iii) delivery of the documents to the Companies
Registrar as described in Sections 5.1 and 5.2, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Subject to
the foregoing, the execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Buyer and
Merger Sub, constitutes a valid, legal and binding obligation of the Company,
enforceable against the Company in accordance with the terms hereof, except to
the extent that such enforcement may be subject to (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws, now or hereafter
in effect, affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether enforcement is considered in a proceeding at
law or equity).
(b) Subject to the provisions of Section 320(c) of the
Israeli Companies Law, the affirmative vote of 75% (seventy-five percent) of
the voting shares of the Company present and voting at the Company
Shareholders Meeting at which a quorum is present is the only vote required of
the holders of any Company Shares necessary to approve the Merger (the
"Company Shareholder Approval"). Those shareholders holding collectively at
least 33?% (thirty-three and one-third percent) of the issued share capital of
the Company (present in person or by proxy) shall constitute the quorum
required for the purposes of the Company Shareholders Meeting. Except as
provided for in this Section 2.3(b) or in Section 2.4, no vote of: (i) any
creditor of the Company, (ii) any holder of any option or warrant granted by
the Company (other than obtaining the consent of any such holders as may be
required under the Company Option Plans to implement the provisions of Section
1.5); or (iii) any shareholder of any Company Subsidiary is necessary in order
to approve this Agreement, or to approve or permit the consummation of the
Merger and the other transactions contemplated by this Agreement.
(c) The Board of Directors of the Company, at a meeting duly
called and held in compliance with the requirements of the Israeli Companies
Law and the Company's Articles of Association, has (i) determined that the
Merger is fair to, and in the best interests of, the Company and the Company's
shareholders and that, considering the financial position of the merging
companies, no reasonable concern exists that the Surviving Corporation will be
unable to fulfill the obligations of the Company to its creditors, (ii)
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) resolved to recommend that the Company's shareholders
vote for the approval of this Agreement, the Merger and the other transactions
contemplated by this Agreement.
2.4 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company shall
not, (i) conflict with or violate the Company Charter Documents or the
equivalent organizational documents of any Company Subsidiary, except that
consummation of the Merger is subject to obtaining the Company Shareholder
Approval, (ii) subject to (x) obtaining the Company Shareholder Approval, (y)
receipt of required regulatory, administrative and governmental approvals and
consents set forth in Section 2.4(b), and (z) delivery of the documents to the
Companies Registrar as described in Sections 5.1 and 5.2, conflict with or
violate any Law, rule, regulation, order, judgment or decree applicable to the
Company or any Company Subsidiary or by which the Company's or any Company
Subsidiary's property is bound, or (iii) conflict with, result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, require any notice or consent pursuant to,
or give rise to any rights of termination, amendment, acceleration or
cancellation of, or rights to payment under, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise,
concession or other instrument or obligation to which the Company or any
Company Subsidiary is a party or by which the Company or any Company
Subsidiary or the Company's or any Company Subsidiary's property is bound
except to the extent such conflict, violation, breach, failure to give notice
or obtain consent, default, losses or other effect would not, in the case of
clauses (ii) or (iii), reasonably be expected to have a Material Adverse
Effect on the Company.
(b) Other than with respect to procedures under the Israeli
Companies Law, the execution and delivery of this Agreement by the Company
does not and the consummation of the transactions contemplated hereby do not,
and the performance of this Agreement and the transactions contemplated hereby
by the Company shall not, require any action, consent, approval, authorization
or permit of, or filing with or notification to, any court, administrative
agency, commission or governmental or regulatory authority, U.S. or non-U.S.
(a "Governmental Entity"), except (i) for applicable requirements, if any, of
(A) the Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder (the "Exchange Act"), (B) the requirements of any
Governmental Entity under applicable competition, antitrust or foreign
investment or trade regulatory Laws, (C) the approval of the Israeli
Investment Center of the Israeli Ministry of Trade, Industry and Labor (the
"Investment Center"), (D) the approval of the Office of the Chief Scientist of
the Israeli Ministry of Trade, Industry and Labor ("OCS"), (E) the approval,
if applicable, of the Israeli Commissioner of Restrictive Trade Practices to
the extent required pursuant to the Restrictive Trade Practices Act, 1988 (the
"Trade Practices Act"), (F) the required approvals of this Agreement by the
Company's shareholders pursuant to Israeli Law, (G) delivery of the required
notices described in Sections 5.1 and 5.2, (H) the rules and regulations of
the Nasdaq Stock Market ("Nasdaq") and (I) such other filings, notices,
permits, authorizations, consents or approvals as may be required by reason of
the status of Buyer, Merger Sub or their affiliates and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not reasonably be expected to have a Material
Adverse Effect on the Company.
2.5 Compliance; Permits.
(a) Excluding labor and employee benefits matters which are
exclusively covered in Section 2.10, tax matters which are exclusively covered
in Section 2.12, and matters as to Israeli grants, incentives and subsidies
which are exclusively covered in Section 2.19, neither the Company nor any
Company Subsidiary is in conflict with, or in default or violation of, any
law, statute, code, rule, regulation (including regulations or requirements of
any stock exchange), order, ordinance, judgment or decree or other
pronouncement having the effect of law in the United States, Israel, or any
foreign country or any state, county, city or other subdivision of any
Governmental Entity (collectively, "Law") applicable to the Company or any
Company Subsidiary or by which its or any of their respective properties is
bound, except for any such conflicts, defaults or violations that, would not
reasonably be expected to have a Material Adverse Effect on the Company.
(b) Excluding labor and employee benefits matters which are
exclusively covered in Section 2.10, tax matters which are exclusively covered
in Section 2.12, and matters as to Israeli grants, incentives and subsidies
which are exclusively covered in Section 2.19, the Company and the Company
Subsidiaries hold all material franchises, grants, permits, easements,
licenses, variances, exemptions, certificates, consents, product listings,
establishment registrations, orders and approvals and other authorizations
from Governmental Entities to test, manufacture, market, sell or distribute
their respective products, to own, lease and operate their respective
properties and assets, or carry on their respective businesses as they are now
being conducted ("Permits") which are required for the operation of the
business of the Company and the Company Subsidiaries taken as a whole
(collectively, the "Company Permits"). All such Company Permits are in full
force and effect, and as of the date of this Agreement, none of the Company
Permits has, during the past three years, been withdrawn, revoked, suspended
or cancelled nor is any such withdrawal, revocation, suspension or
cancellation pending or, to the Knowledge of Company, threatened in writing.
The Company and each Company Subsidiary have been, during the past two years,
and are in compliance in all material respects with the terms of the Company
Permits and any conditions placed thereon.
2.6 Company Documents; Financial Statements.
(a) Since January 1, 2001, the Company has filed all
reports, schedules, forms, registration statements and other documents
required to be filed by Company with the U.S. Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended, (the
"Securities Act"), the Exchange Act and applicable rules and regulations of
the SEC thereunder (such filings, the "Company Reports").
(b) As of their respective filing dates, the Company Reports
complied, in all material respects, with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and applicable rules
and regulations of the SEC thereunder, and, did not contain any 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. As of the date
hereof, the Company is a "foreign private issuer" as such term is defined in
Rule 3b-4(c) under the Exchange Act.
(c) The Company has delivered to Buyer true and correct
copies of (i) the audited consolidated financial statements (including any
related notes thereto) of the Company and the Company Subsidiaries as of, and
for the periods ended, December 31, 2003 and 2002, including audited
consolidated balance sheets of the Company and the Company Subsidiaries as of
December 31, 2003 and 2002 and audited consolidated statements of operations
and cash flows for the years ended December 31, 2003 and 2002, together with a
signed report of the Company's independent auditors attached thereto
(collectively, the "Company Financial Statements") and (ii) the unaudited
consolidated financial statements of the Company and the Company Subsidiaries
as of, and for the period ended, September 30, 2004, including an unaudited
consolidated balance sheet of the Company and the Company Subsidiaries as of
September 30, 2004 and an unaudited consolidated statement of operations (but
not cash flows) for the period ended September 30, 2004 (the "Unaudited
Financial Statements"). The Company Financial Statements were prepared in
accordance with the published regulations of the SEC (including regulations
relating to the preparation of audited annual financial statements for
inclusion in annual reports filed with the SEC) and in accordance with United
States generally accepted accounting principles ("U.S. GAAP") applied on a
consistent basis during the periods involved and fairly present, in all
material respects, the consolidated financial position for the Company and the
Company Subsidiaries as of the date thereof and the consolidated results of
their operations, cash flows and changes in financial position for the periods
then ended. The Unaudited Financial Statements were prepared in accordance
with U.S. GAAP applied on a consistent basis during the periods involved and
fairly present, in all material respects, the consolidated financial position
for the Company and the Company Subsidiaries as of the date thereof and the
consolidated results of their operations (but not cash flows) and changes in
financial position for the periods then ended (subject to the absence of
footnotes, statements of cash flows and year-end audit adjustments, which
adjustments, individually and in the aggregate, are not material).
(d) Based on information available to the Company as of the
date of this Agreement, the Company expects that its fourth quarter 2004
revenues will not be materially lower than the estimates provided by the
Company to the Buyer in a letter from the Company to the Buyer dated as of the
date hereof.
2.7 No Undisclosed Liabilities. Neither the Company nor any Company
Subsidiary has any liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed in a Company Report or on a consolidated
balance sheet or in the related notes to consolidated financial statements
prepared in accordance with U.S. GAAP and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder which are, individually or in
the aggregate, material to the business, results of operations, assets or
financial condition of the Company and the Company Subsidiaries taken as a
whole, except (i) liabilities provided for in the Company's balance sheet as
of December 31, 2003 or September 30, 2004 set forth in Company Reports (or in
the notes thereto); (ii) liabilities incurred since September 30, 2004 in the
ordinary course of business that the Company would have been permitted to
incur under Section 4.1; (iii) liabilities permitted to be incurred under this
Agreement in accordance with Section 4.1; and (iv) liabilities and obligations
under this Agreement and the fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby.
2.8 Absence of Certain Changes or Events. Except for the transactions
contemplated hereby, since September 30, 2004, (i) the Company and the Company
Subsidiaries have conducted their business in all material respects in the
ordinary course consistent with past practice and there has not been any event
or occurrence which has had or is reasonably likely to have a Material Adverse
Effect on the Company and (ii) the Company and the Company Subsidiaries have
not taken any of the actions listed in clauses (a) through (u) of Section 4.1.
2.9 Absence of Litigation. There are not currently any, and since
January 1, 2003 there have been no material claims, actions, suits,
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against the Company or any Company Subsidiary, by or before any
Governmental Entity. Neither the Company nor any Company Subsidiary is subject
to any outstanding material order, writ, injunction or decree. Since January
1, 2003, there has not been, nor are there currently, any internal
investigations or inquiries being conducted by the Company, its Board of
Directors (or any committee thereof) or any third party at the request of any
of the foregoing concerning fraudulent or deceptive conduct or any material
financial, accounting, tax, conflict of interest, self-dealing or other
misfeasance or malfeasance issues.
2.10 Employee Matters and Benefit Plans.
(a) For purposes of this Agreement, "Company Benefit Plan"
means each material deferred compensation and each material bonus or other
incentive compensation, stock purchase, stock option and other material equity
compensation plan, program, agreement or broad-based arrangement; each
material severance or termination pay, medical, surgical, hospitalization,
life insurance and other material "welfare" plan, fund or program (within the
meaning of section 3(1) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not subject to ERISA); each
profit-sharing, stock bonus or other "pension" plan, fund or program (within
the meaning of section 3(2) of ERISA, whether or not subject to ERISA); each
material employment, termination or severance agreement; and each other
material employee benefit plan, fund, program, agreement or broad-based
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to or entered into by the Company or by any trade
or business, whether or not incorporated ("Company ERISA Affiliate"), that
together with the Company would be deemed a "single employer" within the
meaning of section 4001(b) of ERISA, or to which the Company or a Company
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of the Company or any Company Subsidiary. The
Company has heretofore delivered or shall, no later than two weeks following
the date hereof, deliver to Buyer a complete and correct copy of each Company
Benefit Plan of the Company and each Company Subsidiary.
(b) With respect to each Company Benefit Plan that is a
pension or retirement plan that is not mandated by applicable Law, the Company
has heretofore delivered or shall, no later than two weeks following the date
hereof, deliver to Buyer true and complete copies of each of the following
documents, as applicable: (i) a copy of the Company Benefit Plan and any
amendments thereto (or if not a written plan, a description thereof); (ii) a
copy of the two most recent annual reports and actuarial reports, if required
under ERISA or other applicable Law, and the most recent report prepared with
respect thereto in accordance with Statement of Financial Accounting Standards
No. 87; (iii) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto; (iv) if the Company Benefit Plan is funded
through a trust or any third party funding vehicle, a copy of the trust or
other funding agreement and the latest financial statements thereof; and (v)
the most recent determination letter received from the Internal Revenue
Service with respect to each Plan intended to qualify under section 401 of the
United States Internal Revenue Code of 1986, as amended (the "IRC").
(c) No Company Benefit Plan is subject to Title IV or
section 302 of ERISA. No liability under Title IV or section 302 of ERISA has
been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to
the Company or any ERISA Affiliate of incurring any such liability, other than
liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due), except as would not reasonably be expected
to have a Material Adverse Effect on the Company.
(d) Each Company Benefit Plan has been operated and
administered in all material respects in accordance with its terms and
applicable Law, except as would not reasonably be expected to have a Material
Adverse Effect on the Company.
(e) Each Company Benefit Plan intended to be "qualified"
within the meaning of section 401(a) of the IRC or registered under an
analogous provision of non-U.S. Law is so qualified or registered, except as
would not reasonably be expected to have a Material Adverse Effect on the
Company. To the Knowledge of the Company, no condition exists that would
reasonably be expected to adversely affect such qualification or registration,
except as would not reasonably be expected to have a Material Adverse Effect
on the Company.
(f) No Company Benefit Plan provides material medical,
surgical, hospitalization, death or similar benefits (whether or not insured)
for employees or former employees of the Company or any Company subsidiary for
periods extending beyond their retirement or other termination of service,
other than (i) coverage mandated by applicable Law, (ii) death benefits under
any "pension plan," or (iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
(g) The consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with another event
(other than, in the case of clauses (i) and (ii) below, the termination of
employment of an employee or officer following the Effective Time), (i)
entitle any current or former employee, officer or director of the Company or
any Company Subsidiary to severance pay, unemployment compensation or any
other payment, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee, officer or director, except, in
the case of clauses (i) and (ii) above, (x) as required by applicable Law, (y)
as set forth in Section 2.10(g) of the Company Disclosure Schedule or (z) the
acceleration of vesting with respect to Company Options as contemplated by
Section 1.5 hereof or (iii) result in the payment of any "excess parachute
payment" within the meaning of Section 280G of the IRC (or any corresponding
provision of U.S. state or local Law). Other than the foregoing, there are no
obligations of the Company or any Company Subsidiary to make severance
payments in amounts which are materially greater than the amounts prescribed
by applicable Law.
(h) There are no pending, threatened or anticipated claims
by or on behalf of any Company Benefit Plan, by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Company Benefit
Plan (other than routine claims for benefits), except as would not reasonably
be expected to have a Material Adverse Effect on the Company.
(i) Except with respect to Israeli Company Employees (which
employees are addressed in Section 2.10(k) below) the Company and the Company
Subsidiaries: (i) are in compliance in all material respects with all
applicable federal, state and local Laws, rules and regulations (including
without limitation the National Labor Relations Act) respecting employment,
employment practices, terms and conditions of employment, wages and hours and
workplace safety and are not engaged in any unfair labor practices; and (ii)
within the past three years there have not been nor are there any pending
administrative charges, arbitration proceedings, or lawsuits brought by or on
behalf of any current or former employee or group of current or former
employees against the Company or any of the Company Subsidiaries except, in
the case of clauses (i) and (ii), as would not reasonably be expected to have
a Material Adverse Effect on the Company. Neither the Company or any Company
Subsidiary is now, nor during the last three years has been, the subject of
any material complaint, charge, investigation, audit, suit or other legal
process with respect to any of its/their employees, independent contractors or
consultants by a Governmental Entity. None of the employees of the Company or
any Company Subsidiary (in their capacities as such) is, or within the last
three years has been, the subject of a representation petition before the
National Labor Relations Board or any other Governmental Entity.
(j) Within the past five years, except with respect to
Israeli Company Employees (which employees are addressed in Section 2.10(k)
below), (i) no material work stoppage or labor strike against the Company or
any Company Subsidiary has occurred, is pending or, to the Knowledge of the
Company, threatened; (ii) neither the Company nor any Company Subsidiary has
had Knowledge of any activities or proceedings of any labor union to organize
any employees of the Company or any Company Subsidiary; and (iii) neither the
Company nor any Company Subsidiary has been or is a party to, or bound by, any
collective bargaining agreement or union contract and no collective bargaining
agreement is being negotiated by the Company or any Company Subsidiary.
(k) With respect to employees of the Company or any Company
Subsidiary who reside in Israel (the "Israeli Company Employees"): (i) neither
the Company nor any Company Subsidiary is a party to any collective bargaining
contract, collective labor agreement or other contract or arrangement with a
labor union, trade union or other organization or body involving any of its
Israeli Company Employees, and neither the Company nor any Company Subsidiary
has recognized or received a demand for recognition from any collective
bargaining representative with respect to any of its Israeli Company
Employees; (ii) the Company and the Company Subsidiaries are in compliance in
all material respects with all applicable legal requirements and contracts
relating to employment, employment practices, wages, bonuses, withholding
requirements and other matters relating to compensation and terms and
conditions of employment with respect to their respective Israeli Company
Employees; (iii) all of the Israeli Company Employees are "at will" employees
subject to termination upon up to thirty (30) days prior written notice under
the termination notice provisions included in employment agreements or
applicable law; (iv) Company's and the Company Subsidiaries' obligations to
provide statutory severance pay to its Israeli Company Employees pursuant to
the Severance Pay Law (5723-1963) are fully funded or accrued on the Company's
financial statements and (v) there are no pending administrative charges,
arbitration proceedings, or lawsuits brought by or on behalf of any current or
former Israeli Company Employee or group of current or former Israeli Company
Employees against the Company or any of the Company Subsidiaries except, in
the case of clauses (ii), (iii), (iv) and (v), as would not reasonably be
expected to have a Material Adverse Effect on the Company.
Other than as set forth on Section 2.10(k) of the Company Disclosure
Schedule, (i) the Company does not engage any Israeli employees whose
employment would require special licenses or permits and (ii) there are no
unwritten Company policies or customs that, by extension, could entitle
Israeli Company Employees to benefits in addition to what they are entitled by
Law or under the terms of employment agreements (including, by way of example
but without limitation, unwritten customs or practices concerning the payment
of statutory severance pay when it is not legally required). For purposes of
this Agreement, the term "Israeli Company Employee" shall be construed to
include consultants and freelancers who devote a majority of their working
time in Israel to the business of the Company or a Company Subsidiary (each of
whom are identified in Section 2.10(k) of the Company Disclosure Schedule).
2.11 Title to Property; Leased Property. (a) The Company and each
Company Subsidiary has good title to, or in the case of leased properties and
assets, valid leasehold interests in, all of their material properties and
material assets, free and clear of all Liens, except for: (i) Liens reflected
in the balance sheet of the Company, dated as of December 31, 2003, included
in the Company Financial Statements, (ii) Liens imposed by Law, such as
carriers', warehouseman's, mechanics', materialmen's, landlords', laborers',
suppliers', construction and vendors' liens, incurred in good faith in the
ordinary course of business and securing obligations which are not yet due or
which are being contested in good faith by appropriate proceedings as to which
the Company has, to the extent required by U.S. GAAP, set aside on its books
adequate reserves; (iii) Liens for Taxes either not yet due and payable or
which are being contested in good faith by appropriate legal or administrative
proceedings; (iv) with respect to leasehold interests, liens incurred,
created, assumed or permitted to exist and arising by, through or under a
landlord or owner of the leased property, with or without consent of the
lessee, none of which materially impairs the use of any parcel of property
material to the operation of the business of the Company or the value of such
property for the purpose of such business; and (v) any minor imperfections of
title and Liens which do not materially interfere with the present use of the
property affected thereby (collectively, "Permitted Liens"), and (b) all
leases pursuant to which the Company or any Company Subsidiary leases from
others material real or personal property (collectively, the "Company Leases")
are valid, binding and enforceable in accordance with their respective terms
on the Company or Company Subsidiary party thereto and in full force and
effect, no amounts (other than immaterial amounts the failure of which to pay
would not be material) payable under any Company Lease is past due, and there
is not, under any of such leases, any existing default or event of default of
the Company or any Company Subsidiary or, to the Knowledge of the Company, any
other party, except for such failures to be valid, binding or effective and
for such defaults or events of default which would not reasonably be expected
to have a Material Adverse Effect on the Company. Neither the Company nor any
Company Subsidiary owns any real property. To the Knowledge of the Company,
there is no condemnation, expiration or other proceeding in eminent domain
pending or threatened, affecting any parcel of real estate covered by the
Company Leases or any portion thereof or interest thereon.
2.12 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes" means any and all United States, Israeli,
federal, provincial, state, local and foreign taxes, assessments and other
governmental charges, duties, customs, fees, levies and impositions,
including, but not limited to, taxes based upon or measured by gross receipts,
gross or net income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
social security, excise, alternative or add-on minimum, estimated and property
taxes, together with all interest, inflation linkages, penalties, additions to
tax and additional amounts imposed with respect to such amounts.
(b) Tax Returns and Audits. Except as set forth in Section
2.12(b) of the Company Disclosure Schedule:
(i) the Company and each Company Subsidiary have
timely (after taking into account all extensions) (A) to the Knowledge of the
Company, filed all returns and all material estimates, declarations,
information statements and reports (including any schedules or attachments
thereto) relating to Taxes required to be filed with any governmental taxing
authority by the Company and each Company Subsidiary (the foregoing, together
with any amendments thereof, "Tax Returns") and such Tax Returns are true and
correct and complete in all material respects and (B) paid all Taxes (other
than such Taxes as are being contested in good faith by appropriate
proceedings) shown as due on such Tax Returns.
(ii) no penalty, interest or other charge is due or
has been asserted in writing but not yet paid as of the date hereof, with
respect to the late filing of any Tax Return or late payment of any Tax.
Neither the Company nor any Company Subsidiary (i) is the beneficiary of any
extension to file any Tax Return which has not yet been filed or (ii) has
agreed to any waiver of any statute of limitations on or extensions of the
period for the assessment or collection of any Tax.
(iii) To the Knowledge of the Company, no audit or
other administrative or judicial proceeding of any material Tax Return of the
Company or any Company Subsidiary is in progress, nor, to the Knowledge of the
Company, has the Company or any Company Subsidiary been notified (including by
the Investment Center with respect to the Company's status as an "Approved
Enterprise" under Israel's Law for the Encouragement of Capital Investment,
1959) of any request for such an audit or other administrative or judicial
proceeding. As of the date hereof, to the Knowledge of the Company, no
material claim for assessment or collection of Taxes is presently being
asserted against the Company or any Company Subsidiary and neither the Company
nor any Company Subsidiary is a party to any pending material action,
proceeding or investigation by any governmental taxing authority relating to
Taxes.
(iv) to the Knowledge of the Company, no material
claim by a Governmental Entity in a jurisdiction in which the Company or any
Company Subsidiary does not file Tax Returns that the Company or any Company
Subsidiary may be subject to income taxation by such jurisdiction has been
proposed by any Governmental Entity to the Company or any Company Subsidiary
or any representative thereof.
(v) neither the Company nor any Company Subsidiary
has any liability for any unpaid Taxes which is, individually or in the
aggregate, material to the Company, or which has not been accrued for or
reserved on the Company's balance sheet dated September 30, 2004, in
accordance with U.S. GAAP, other than any liability for unpaid Taxes that may
have accrued since September 30, 2004 in connection with the operation of the
business of the Company and the Company Subsidiaries in the ordinary course
and for which an appropriate reserve has been established.
(vi) there are no liens on the assets of the
Company or any Company Subsidiary that arose in connection with the failure to
pay Taxes, other than liens for Taxes not yet due and payable and liens for
Taxes that are being contested in good faith by appropriate proceedings.
(vii) neither the Company nor any Company
Subsidiary (x) is a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding and does not owe any amount under any such
agreement or (y) is liable for the Taxes of any other Person under United
States Treasury Regulation Section 1.1502-6 (or any similar provision of Law),
as a transferee or successor, by contract or otherwise.
(viii) Section 2.12(b)(viii) of the Company
Disclosure Schedule lists each material tax incentive granted to the Company
and the Company Subsidiaries under the Laws of the State of Israel (other than
incentives generally applicable by way of Law) and currently outstanding, the
period for which such tax incentive applies, and the nature of such tax
incentive. The Company and each Company Subsidiary have complied with all
material requirements of Israeli Law to be entitled to claim all such
incentives.
(ix) no consent or approval of any Governmental
Entity is required prior to the consummation of the Merger in order to
preserve the entitlement of the Company or any Company Subsidiary to any such
material tax incentive, subject to the receipt of the approval by the
Investment Center of the Merger and the other transactions contemplated hereby
and assuming the compliance by the Company and the Company Subsidiaries, after
Closing, with all applicable regulations and no change in the operation of the
Company's or any Company Subsidiary's business by Buyer in a manner which is
material to the continued entitlement to such tax incentives.
(x) The Company believes that it qualifies as an
"Industrial Holding Company" and that Tecnomatix Ltd. qualifies as an
"Industrial Company" according to the meaning of those terms provided in the
Law for the Encouragement of Industry (Taxes), 1969. The Company believes
that, as of the date of this Agreement, in excess of 25% of the issued and
outstanding Company Shares were owned by non-Israeli residents for purposes of
the period of tax benefits as an "approved enterprise" under the Law for the
Encouragement of Industry (Taxes), 1969. The Company believes that since
January 1, 2003, the Company has been a "Foreign Investors' Company", as
defined in the Law for the Encouragement of Capital Investments, 1959. The
Company has not received any written or, to the Knowledge of the Company, oral
indication from the Investment Center or any other Governmental Entity that
the Company does not qualify as an "Industrial Holding Company" or "Foreign
Investors' Company" or that Tecnomatix Ltd. does not qualify as an "Industrial
Company" or that the consummation of the Merger will cause such qualification
as an "Industrial Holding Company" or an "Industrial Company", as the case may
be, to expire, subject to the receipt of the approval by the Investment Center
of the Merger and the other transactions contemplated by this Agreement and
assuming no material change in the operation of the Company's or any Company
Subsidiary's business by Buyer.
2.13 Intellectual Property.
(a) Definitions. As used herein:
(i) "Intellectual Property" means all U.S. and
foreign (A) trademarks, service marks, logos, trade dress, trade names or
other source or brand identifying designations or devices ("Trademarks") and
Internet domain names ("Domain Names"), together with goodwill, registrations
and applications relating to the foregoing; (B) patents and patent
applications, including divisions, continuations, continuations-in-part,
reissues, reexaminations, and any extensions thereof, and any patent
disclosures, ("Patent Rights"); (C) copyrights, including copyrights in
computer software programs, and works of authorship whether registered or
unregistered, and mask works, and any pending applications to register the
same ("Copyrights"); (D) confidential ideas, trade secrets, computer software,
including source code, know-how, works-in-progress, concepts, methods,
processes, inventions, invention disclosures, formulae, reports, data,
customer lists, mailing lists, business plans, or other confidential and
proprietary information ("Trade Secrets"); (E) all rights of privacy and
publicity; (F) all "moral" rights of authors and inventors, however
denominated throughout the world; and (G) any similar, corresponding or
equivalent rights to any of the foregoing;
(ii) "Company Intellectual Property" means any
Intellectual Property, including Registered Intellectual Property Rights,
owned by or licensed to the Company or any Company Subsidiary which the
Company or any Company Subsidiary licenses, sells, offers for sale, markets,
manufactures, or otherwise makes commercially available as a product,
technology, or service (including products, technology, or services currently
under development).
(iii) "Registered Intellectual Property Rights"
means all United States, international and foreign registrations and
applications for: (A) Patent Rights; (B) Trademarks, including intent-to-use
applications; (C) Copyrights; and (D) any other Intellectual Property Right
that is the subject of an application, certificate, filing, registration or
other similar document issued by, filed with, or recorded by, any state,
government or other public legal authority at any time.
(iv) "Commercially Available Software" means that
third party Software set forth in Section 2.13(a) of the Company's Disclosure
Schedule, which Software is readily available and readily licensable on
commercial terms from third parties.
(v) "Company Software" means Software, excluding
any Commercially Available Software, which the Company or any Company
Subsidiary licenses, sells, offers for sale, markets, manufactures, or
otherwise makes commercially available as a product, technology, or service
(including products, technology, or services currently under development).
(vi) "Software" means all computer software
programs and software systems and subsequent versions thereof developed for or
used in Company's business, including all databases, compilations, tool sets,
compilers, higher level or proprietary languages, executable or binary code,
objects, comments, screens, user interfaces, report formats, templates, menus,
buttons and icons, related files, data, materials, manuals, design notes and
other items and documentation, whether in source code, object code or human
readable form; and
(vii) "Website" means, excluding any Commercially
Available Software: (A) the website currently located at the URL
http://www.tecnomatix.com, (B) all other websites owned or controlled by the
Company or any Company Subsidiary, and all Content and pages contained within
each of those websites, hosted anywhere in the world, and (C) all website user
information and data collected by the Company or any Company Subsidiary,
including but not limited to, email addresses, website logs, clickstream data
and cookies, but, in each case, excluding freely available graphic or text
content, such as clip art or graphic images licensed from commercial media
vendors. For each Website, the Content and pages shall include all computer
files and documentation for the current version of the Website and all
archived Content and pages in the Company's possession or control. As used
herein, the term "Content" means any literary, audio, video, and other
information, including editorial content, data, animation, graphics,
photographs and artwork, and combinations of any or all of the foregoing, in
any tangible or digital formats.
(b) The Company and the Company Subsidiaries own or have the
right to use all Intellectual Property used in the ordinary course of their
business as presently conducted.
(c) Section 2.13(c) of the Company Disclosure Schedule sets
forth: all Patent Rights and Domain Names owned by the Company or Company
Subsidiaries; all registrations or pending applications to register Trademarks
or Copyrights owned by the Company or Company Subsidiaries; all Trademarks
owned by the Company or Company Subsidiaries that have been used extensively
as a trademark or brand in communications with customers of the Company or
Company Subsidiaries; and a list of the material Trade Secrets owned by the
Company or a Company Subsidiary representing the Company Software and the
technology used by the Company.
For all Intellectual Property listed on Section 2.13(c) of the
Company Disclosure Schedule, the Schedule identifies the Company or Company
Subsidiary that is the owner.
(d) Section 2.13(d) of the Company Disclosure Schedule
describes the Company Software currently used in and necessary to the conduct
of the business of the Company. To the Knowledge of the Company, other than as
set forth in Section 2.13(d) of the Company Disclosure Schedules, the Company
Software does not include any open source, shareware, freeware code or other
freely available software that is subject to restrictions on use. The Company
and all Company Subsidiaries are in full compliance with all open source
licenses to which any of the Company Software is subject, which licenses are
identified in Section 2.13(d) of the Company Disclosure Schedule and copies of
which have been provided to the Buyer.
(e) Company or one or more of Company's Subsidiaries have
the right to use, pursuant to valid licenses, all software development tools,
library functions, compilers and all other third-party software that are
material to the operation of the business of the Company as currently
conducted or that are required to create, modify, compile, operate or support
any software that is or is incorporated into any Company Intellectual Property
or any Company Software.
(f) The Company or a Company Subsidiary either (i) owns all
right, title and interest in and to or (ii) has all rights to use in the
manner and to the extent used by the Company or Company Subsidiaries in the
ordinary course of business: all Intellectual Property identified on Section
2.13(c) of the Company Disclosure Schedule, all Company Intellectual Property,
all Company Software, and the Website (collectively the "Primary IP") and,
except as disclosed in Section 2.13(f) of the Company Disclosure Schedules,
free and clear of any liens or similar encumbrances.
(g) Except as set forth on Section 2.13(g) of the Company
Disclosure Schedule and Section 2.13(d) of the Company Disclosure Schedule,
the Company has to its Knowledge taken, or will take prior to the Closing,
reasonable actions to protect the Primary IP. Section 2.13(c) of the Company
Disclosure Schedule contains a complete list of all registered Intellectual
Property and applications to register Intellectual Property, which are owned
in whole or in part by the Company (collectively, the "Registered Intellectual
Property"). Except as disclosed in Section 2.13(g) of the Company Disclosure
Schedule: (i) the Registered Intellectual Property has not been sold, assigned
or transferred to a third party, or abandoned or permitted to lapse, and is
not the subject of any pending opposition proceedings, pending cancellation
proceedings, pending interference proceedings, pending lawsuit naming the
Company or any Company Subsidiary as a party or other pending challenges or
proceedings of which the Company has Knowledge; (ii) all fees to maintain
registrations for Intellectual Property identified as being owned by the
Company or any Company Subsidiary have been paid; and (iii) except with regard
to third-party Intellectual Property, the Company or a Company Subsidiary has
the sole and exclusive right to bring actions for infringement or unauthorized
use of the Company Intellectual Property, the Company Software or the Website,
and to the Knowledge of the Company, there is no basis for any such action.
(h) Except as disclosed in Section 2.13(h) of the Company
Disclosure Schedule, the transactions contemplated by this Agreement shall
have no effect on the validity and enforceability of any of the Primary IP,
and the right, title and interest thereto of the Surviving Corporation
immediately after the Effective Time shall be identical to that of the
Company's immediately prior to the Effective Time, without the Buyer taking
any action, paying any fees, or obtaining any consent.
(i) Each of the employees, agents, consultants, contractors
or others who have, on behalf of the Company or any Company Subsidiary,
contributed to or participated in the discovery, creation or development of
any Company Intellectual Property, the Company Software or the Website has
assigned, by operation of law or in an express written agreement in favor of
the Company, all right, title and interest in such Company Intellectual
Property, the Company Software, and the Website, or is a party to a valid
"work-for-hire" agreement or subject to a "work-for-hire" relationship under
which the Company is deemed to be the original owner/author of all property
rights therein. To the Company's Knowledge, none of the Company's officers or
employees has entered into any agreement relating to the prohibition or
restriction of competition or solicitation of customers, or any other similar
restrictive agreement or covenant, whether written or oral, with any Person
which would materially inhibit the performance of their duties in connection
with the Company's business.
(j) Except as set forth in Section 2.19 of the Company
Disclosure Schedule, no government funding, facilities of a university,
college, other educational institution or research center or funding from
third parties was used in the development of any Company Intellectual Property
including Company Software in each case that is owned by the Company or a
Company Subsidiary. To the Knowledge of Company, no current or former
employee, consultant or independent contractor of Company, who was involved
in, or who contributed to, the creation or development of any Company
Intellectual Property including Company Software in each case that is owned by
the Company or a Company Subsidiary has performed services for the government,
university, college, or other educational institution or research center
during a period of time during which such employee, consultant or independent
contractor was also performing services for Company.
(k) Section 2.13(k) of the Company Disclosure Schedule lists
all items of Company Intellectual Property or Company Software, in each case
that is owned by the Company or a Company Subsidiary, as of the date hereof
which were developed with funding provided by or are subject to restriction,
constraint, control, supervision, or limitation imposed by any Governmental
Entity or quasi-Governmental Entity. Except as set forth in Section 2.13(k) of
the Company Disclosure Schedule, (i) other than restrictions generally imposed
by any Governmental Entity or quasi-Governmental Entity on software companies
subject to the applicable jurisdiction, all Company Intellectual Property and
Company Software in each case that is owned by the Company or a Company
Subsidiary is freely transferable, conveyable, and/or assignable by Company
and/or Buyer to any entity located in any jurisdiction in the world without
any restriction, constraint, control, supervision, or limitation that could be
imposed by the OCS (or any other Governmental Entity or quasi-Governmental
entity) and (ii) other than restrictions generally imposed by any Governmental
Entity or quasi-Governmental Entity on software companies subject to the
applicable jurisdiction, no restriction, constraint, control, supervision, or
limitation whatsoever is currently imposed by the OCS (or any other
Governmental Entity or quasi-Governmental Entity) on the place, method and
scope of exploitation of any Company Intellectual Property owned by the
Company or a Company Subsidiary (including the operation of the business of
Company as it is currently conducted, including, without limitation, the
design, development, use, import, branding, advertising, promotion, marketing,
manufacture and sale of Company Software and any products, technology a
services currently under development by Company or any Company Subsidiary).
(l) Except as set forth in Section 2.13(k) or disclosed in
Section 2.13(l) of the Company Disclosure Schedule: (i) the Company Software,
and all material Software owned by the Company or any Company Subsidiary in
the ordinary course of business, is not subject to any transfer or assignment
restrictions nor is the Company Software subject to any site, equipment or
other operational limitations that would have a Material Adverse Effect; (ii)
to the Company's Knowledge, the Company Software has not intentionally been
contributed to open source development or intentionally forfeited to the
public domain; and (iii) the Company has copies of all releases or separate
versions of the Company Software currently in use by the Company or any
Company Subsidiary.
(m) Except as disclosed in Section 2.13(m) of the Company
Disclosure Schedule: (i) to the Company's Knowledge, neither the Company, any
Company Subsidiary, nor the Company Software or the development or operation
thereof has infringed any Intellectual Property right of any third Person,
(ii) no claim of any such infringement has been made or asserted against any
of the Company or any Company Subsidiary; (iii) the Company and Company
Subsidiaries have not had written notice of any such claim or, to the
Company's Knowledge, oral notice of any such material claim; and (iv) to the
Knowledge of the Company, no basis for such a claim exists in connection with
the operations, products (including software, equipment, machinery or other
devices), processes, methods or activities of the Company or any Company
Subsidiary.
(n) Except as disclosed in Section 2.13(n) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has taken
any of the following actions: (i) disclosing or providing access to the
Company Source Code (as defined below), other than pursuant to those source
code escrow agreements listed in Section 2.13(p) of the Company Disclosure
Schedule, or to employees and consultants of the Company or Company
Subsidiaries while bound by confidentiality obligations to the Company; (ii)
disclosing any of Company's trade secrets to a third party without an
appropriate non-disclosure agreement; (iii) providing access to the Company
Software to a third party without restrictions on unauthorized copying,
unauthorized sale or transfer, recompilation, disassembly or
reverse-engineering and other industry-standard restrictions on use; or (iv)
embedding, incorporating or modifying third-party software or other material
without adequate permission. "Company Source Code" means, collectively, any
software or any material portion or aspect of the software source code, or any
material proprietary information or algorithm contained in or relating to any
software source code, of any Company Software or any product or technology
currently under development by Company or any or any Company Subsidiary.
(o) Neither this Agreement nor the Merger will result in:
(i) Buyer granting to any third party any additional right to or with respect
to any Owned IP; (ii) Buyer's being bound by, or subject to, any additional
non-compete or other restriction on the operation or scope of its businesses;
or (iii) Buyer's being contractually obligated to pay any royalties or other
amounts to any third party in excess of those payable by Company or a Company
Subsidiary prior to the Closing Date.
(p) Except as set forth in Section 2.13(p) of the Company
Disclosure Schedule, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to, result in the disclosure or delivery by Company or
any Company Subsidiary or any other party acting on Company's or any Company
Subsidiary's behalf to any third party of any Company Source Code, except
disclosure to escrow agents pursuant to escrow agent agreements listed in
Section 2.13(p) of the Company Disclosure Schedule. The Company shall, within
two weeks of the date hereof, include on Section 2.13(p) of the Company
Disclosure Schedule each contract, agreement and instrument by and between
Company, or any Company Subsidiary, and any escrow agents pursuant to which
Company or any Company Subsidiary has deposited, or is or may be required to
deposit, with an escrow holder or any other party, any Company Source Code
("Escrow Agreements"). The execution of this Agreement and the consummation of
the Merger or any of the other transactions contemplated by this Agreement, in
and of itself, will not result in the release from escrow of any Company
Source Code. The Company and the Company Subsidiaries are not currently in
breach of any Agreement that would give rise to a third party having the right
to release the Company Source Code from escrow. Neither the Company nor any
Company Subsidiary is in breach of, nor have either failed to perform under,
any Escrow Agreement. To the Company's Knowledge, no other party to any such
Escrow Agreement is in breach thereof or has failed to perform thereunder.
(q) Except as disclosed in Section 2.13(q) of the Company
Disclosure Schedule, to the Company's Knowledge, there have been no material
breaches of the Company's security procedures since January 1, 2003.
(r) It is the Company's practice to scan, with commercially
available virus scan software, the Software currently in use by the Company,
the Company Software, the Website and Company's other assets that are capable
of being scanned for viruses. To the Company's Knowledge, except as set forth
in Section 2.13(r) of the Company Disclosure Schedules, neither the Software
currently in use by the Company, the Website or any of the other Company's
assets contain "viruses." For the purposes of this Agreement, "virus" means
any computer code intentionally designed to disrupt, disable or harm in any
manner the operation of any software or hardware. None of the foregoing
assets, including the Company Software and the Website, contains any worm,
bomb, backdoor, clock, timer, or other disabling device code, design or
routine which causes the software to be erased, inoperable, or otherwise
incapable of being used, either automatically or upon command by any party.
2.14 Contracts. Section 2.14 of the Company Disclosure Schedule sets
forth a true and correct list, as of the date of this Agreement, of each of
the following contracts, commitments, licenses, obligations, indentures, deeds
of trust or other instruments or agreements (each, a "Contract") to which
either the Company or any Company Subsidiary is a party or is bound (each, a
"Company Contract"):
(a) any Contract to license (i) to any third party the right
to manufacture or reproduce any product, service or technology involving
amounts in excess of $300,000 per annum or which is otherwise material, or
(ii) from any third party the right to use any material Intellectual Property;
(b) (i) any dealer, distributor, or joint marketing
agreement currently in force under which the Company or any Company Subsidiary
has continuing material obligations to jointly market or distribute any
product, technology or service, in each case involving amounts in excess of
$300,000 per annum or which is otherwise material, and (ii) any material
agreement pursuant to which the Company or any Company Subsidiary has
continuing material obligations to jointly develop any Intellectual Property
that will not be owned, in whole or in part, by the Company or any of its
Company Subsidiary;
(c) any Contract currently in force to provide source code
to any third party (other than the agreements with escrow agents in the
ordinary course of business) for any product or technology that is material to
the Company and the Company Subsidiaries, taken as a whole;
(d) any Contract containing material indemnification or
guaranty of obligations of the Company or any Company Subsidiary, other than
any Contract of indemnification or guarantee of obligations entered into in
the ordinary course of business;
(e) any Contract containing any covenant limiting in any
material respect the right of the Company or any Company Subsidiary to engage
in any line of business or to compete with any Person;
(f) any Contract currently in force relating to the
disposition or acquisition by the Company or any Company Subsidiary after the
date of this Agreement of a material amount of assets not in the ordinary
course of business or pursuant to which the Company or any Company Subsidiary
has any material ownership interest in any Person (other than the Company
Subsidiaries);
(g) any material mortgages, indentures, guarantees, loans or
credit agreements, security agreements or other agreements or instruments
relating to the borrowing of money or extension of credit other than trade
payables incurred and extensions of credit to customers granted in the
ordinary course of business; or
(h) any Contract not otherwise disclosed pursuant to one of
the other clauses of this Section 2.14 involving in excess of $300,000 being
paid by or to the Company or any Company Subsidiary in any 12-month period
other than purchase orders entered into in the ordinary course of business.
Each Company Contract is valid and binding on the Company or a
Company Subsidiary party thereto and, to the Knowledge of the Company, each
other party thereto, and is in full force and effect, except as would not
reasonably be expected to have a Material Adverse Effect on the Company.
Neither the Company nor any Company Subsidiary has any Knowledge of, or has
received notice of, any violation or default under (or any condition which
with the passage of time or the giving of notice would cause such a violation
or default under) any Company Contract or any other Contract to which it is a
party or by which it or any of its properties or assets is bound, except for
violations or defaults that would not reasonably be expected to have a
Material Adverse Effect on the Company.
2.15 Product Warranties. Except as would not reasonably be expected
to have a Material Adverse Effect on the Company: (a) each product, including
software, manufactured, sold, licensed, leased, or delivered by the Company or
the Company Subsidiaries has been in conformity with all applicable
contractual commitments and all express and implied warranties with respect to
such products, (b) none of the Company or the Company Subsidiaries has any
liability for replacement or repair thereof or other damages in connection
therewith, and (c) no product manufactured, sold, licensed, leased, or
delivered by the Company or the Company Subsidiaries is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale, license, or lease or beyond that implied or imposed by
applicable Law. Copies of the standard terms and conditions of sale, license,
or lease for the material products of the Company and the Company Subsidiaries
have been delivered to Buyer.
2.16 Insurance. The Company maintains insurance policies covering the
assets, business, equipment, properties, operations, employees, officers and
directors of the Company and the Company Subsidiaries (collectively,
"Insurance Policies") which the Company reasonably believes are of the type
and in amounts customarily carried by Persons conducting businesses similar to
those of the Company and the Company Subsidiaries. There is no material claim
by the Company or any Company Subsidiary pending under any of the Insurance
Policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies. Neither the Company nor any Company Subsidiary
has received any written notice of, or, to the Knowledge of the Company,
threats of cancellation or non-renewal of, or, since January 1, 2004 and prior
to the date hereof, any material increase of premiums with respect to, any
Insurance Policy. Except as set forth in Schedule 2.16 of the Company
Disclosure Schedule, no policy will terminate as a result of the transactions
described herein.
2.17 Customers. Set forth in Section 2.17 of the Company Disclosure
Schedule is a complete and correct list of the names and addresses of the 25
most significant customers and distributors based on dollar sales volumes of
the Company during the twelve (12) month period ended September 30, 2004 and
the amounts for which each such customer or distributor was invoiced during
such period. As of the date of this Agreement, neither the Company nor any
Company Subsidiary has received any written notice that any such customer or
distributor has ceased or materially reduced the use or distribution of such
products, equipment, goods or services of the Company.
2.18 Relationships with Affiliates. Except as set forth in Section
2.18 of the Company Disclosure Schedule or the Company's Report on Form 20-F
for the year ended December 31, 2003 as filed with the SEC on March 31, 2004
and as amended by Amendment No. 1 dated June 21, 2004 (the "Company Form
20-F") (and identified in the Company Form 20-F as a transaction with a
director, officer or affiliate): (i) there are no Contracts or other
transactions between the Company or any Company Subsidiary, on the one hand,
and any director or executive officer of the Company or any of their
respective Affiliates, on the other hand; (ii) no affiliate (as defined in
Section 8.3(b)) of the Company or any Company Subsidiary (other than the
Company or any Company Subsidiary) is a distributor, supplier, vendor,
customer, client, lessor, licensor, debtor, creditor, competitor or service
provider to the Company or any Company Subsidiary, (iii) no director or
executive officer of the Company or any of their respective Affiliates has any
interest in any of the material assets or properties of the Company or any
Company Subsidiary, and (iv) there are no other Contracts, transactions,
arrangements or agreements of the type listed in Section 270 of the Israeli
Companies Law to which the Company or any Company Subsidiary is a party, other
than, in any instance, in respect of compensation paid to officers or
directors of the Company or any Company Subsidiary. For purposes hereof, the
term "Affiliate" means (a) each other member of such individual's Family; and
(b) any Person or entity that is directly or indirectly controlled by such
individual or any one or more members of such individual's Family. For
purposes of this definition, the "Family" of an individual includes (i) such
individual, (ii) the individual's spouse, siblings, or ancestors, (iii) any
lineal descendent of such individual, or their siblings, or ancestors or (iv)
a trust for the benefit of any of the foregoing. For the purposes hereof, the
term "control" means the ownership, directly or indirectly, of 25% or more of
the capital stock or other equity interests of such Person or entity.
2.19 Grants, Incentives and Subsidies. Section 2.19 of the Company
Disclosure Schedule provides a complete list as of December 31, 2004 of all
outstanding grants, incentives and subsidies (collectively, "Grants") from the
Government of the State of Israel or any agency thereof, or from any foreign
governmental or administrative agency, granted to the Company or any Company
Subsidiary, including, without limitation, (i) "approved enterprise status"
from the Investment Center and (ii) grants from the OCS. The Company has
delivered to Buyer, prior to the date hereof, correct copies of all letters of
approval (and other correspondence that evidences changes to the terms of such
letters of approval) under which such Grants were granted to the Company or
any Company Subsidiary. Section 2.19 of the Company Disclosure Schedule
details all material undertakings of the Company or any Company Subsidiary
given in connection with the Grants. Without limiting the generality of the
foregoing, Section 2.19 of the Company Disclosure Schedule includes the
aggregate amounts of each Grant, and the aggregate outstanding obligations
thereunder of the Company or any Company Subsidiary with respect to royalties,
or the outstanding amounts to be paid by the OCS to the Company or any Company
Subsidiary, in each case as of December 31, 2004. The Company and the Company
Subsidiaries are in compliance, in all material respects, with the terms and
conditions of their respective Grants and, except as disclosed in Section 2.19
of the Company Disclosure Schedule hereto, have duly fulfilled, in all
material respects, all the undertakings relating thereto required to be
fulfilled prior to the date hereof. The Company does not have Knowledge of any
intention by the OCS to revoke or materially modify any of the Grants or that
the OCS believes that the Company is not in compliance, in any material
respect, with the terms of any Grant.
2.20 Information Supplied by Company. None of the information or data
(including any financial statements) concerning the Company which will be
included in a proxy statement (the "Proxy Statement") to be sent to the
shareholders of the Company in connection with the general meeting of the
shareholders of the Company held for the purposes of seeking the Company
Shareholder Approval (such meeting, the "Company Shareholders Meeting") in
accordance with applicable Israeli Law will, at the time the Proxy Statement
is mailed to the shareholders of the Company or at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading and the Proxy Statement will comply with
applicable Law in all material respects.
2.21 Inapplicability of Certain Statutes. Other than the Israeli
Companies Law, the rules and regulations of the Nasdaq and Antitrust Laws, the
Company is not subject to any Law regarding corporate procedures in business
combinations that would apply to the Merger or any other transaction
contemplated by this Agreement.
2.22 Opinion of Financial Advisor. The Board of Directors of the
Company has received the written opinion of Morgan Stanley, dated as of the
date hereof, to the effect that, as of such date, the Merger Consideration was
fair, from a financial point of view, to the holders of Company Shares, and
the Company will provide a copy of such written opinion to Buyer promptly and
in any event within two business days following the date hereof, such opinion
to be substantially consistent with the draft provided to Buyer prior to the
execution of this Agreement.
2.23 Environmental Matters.
(a) Except as would not reasonably be expected to have a
Material Adverse Effect on the Company: (i) the Company and the Company
Subsidiaries are in compliance with all Environmental Laws: (ii) to the
Knowledge of the Company, there has been no release of any pollutant,
petroleum or any fraction thereof, contaminant or toxic or hazardous material
(including toxic mold), substance or waste (each a "Hazardous Substance") on,
upon, into or from any site currently or heretofore owned or leased by the
Company and the Company Subsidiaries that is reasonably likely to require
remediation pursuant to applicable Environmental Laws and (iii) to the
Knowledge of the Company, the Company has delivered to Buyer copies of all
Phase I or Phase II environmental assessments in the Company's possession,
with respect to currently or formerly owned and operated properties, that have
been prepared within the last five years.
(b) For purposes of this Section 2.23, "Environmental Laws"
means any Law relating to (i) releases or threatened releases of Hazardous
Substances or (ii) pollution or protection of public health or the environment
or worker safety or health.
2.24 Illegal Payments, etc. In the conduct of their business, neither
Company nor any Company Subsidiary nor any of their respective directors,
officers, employees or agents, has (a) directly or indirectly, given, or
agreed to give, any illegal gift, contribution, payment or similar benefit to
any supplier, customer, governmental official or employee or other person who
was, is or may be in a position to help or hinder the Company or any Company
Subsidiaries (or assist in connection with any actual or proposed transaction)
or made, or agreed to make, any illegal contribution, or reimbursed any
illegal political gift or contribution made by any other person, to any
candidate for federal, state, local or foreign public office or (b)
established or maintained any unrecorded fund or asset or made any false
entries on any books or records for any purpose.
2.25 Encryption and Other Restricted Technology. Except as set forth
in Section 2.25 of the Company Disclosure Schedule, the Company's business as
currently conducted does not require the Company to obtain a license from the
Israeli Ministry of Defense or an authorized body thereof pursuant to Section
2(a) of the Control of Products and Services Declaration (Engagement in
Encryption), 1974, as amended.
2.26 Brokers. Except for Morgan Stanley, the fees and expenses of
which are described in the engagement letters between the Company and such
party, true and complete copies of which have been previously provided to
Buyer, no agent, broker, finder, investment banker, financial advisor or other
Person will be entitled to any broker's, finder's or similar fee or commission
from the Company or any affiliate thereof in connection with any of the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Except as expressly set forth or referred to in that certain
schedule, dated as of the date of this Agreement, from the Buyer and Merger
Sub to the (the "Buyer Disclosure Schedule"), each of Buyer and Merger Sub
represents and warrants to the Company as follows:
3.1 Organization and Qualification; Subsidiaries.
(a) Each of Buyer and Merger Sub is a corporation duly
organized, validly existing under the Laws of their respective jurisdictions
of organization and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted, and is duly qualified or licensed as a foreign
corporation to do business, and, where such concept is applicable, is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not reasonably be expected to
have a Material Adverse Effect on Buyer.
(b) Certificate of Incorporation and Bylaws. Each of Buyer
and Merger Sub has previously furnished to the Company complete and correct
copies of its certificate of incorporation, bylaws or similar organizational
documents as amended to the date of this Agreement (together, the "Buyer
Charter Documents"). Such Buyer Charter Documents are in full force and
effect. Neither Buyer nor Merger Sub is in violation of any of the provisions
of the Buyer Charter Documents.
3.2 Authority Relative to this Agreement; No Buyer Vote Required;
Board Approval.
(a) Each of Buyer and Merger Sub has all necessary corporate
power and authority to execute and deliver this Agreement and, subject to (i)
the receipt of required regulatory, administrative and governmental approvals
and consents set forth in Section 3.3(b) and (ii) delivery of the documents to
the Companies Registrar as described in Sections 5.1 and 5.2, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Subject to the foregoing, the execution and delivery of this Agreement by
Buyer and Merger Sub and the consummation by Buyer and Merger Sub of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of Buyer and Merger Sub. This Agreement has been
duly and validly executed and delivered by Buyer and, assuming the due
authorization, execution and delivery by the Company, constitutes a valid,
legal and binding obligation of Buyer and Merger Sub, enforceable against
Buyer and Merger Sub in accordance with the terms hereof, except to the extent
that such enforcement may be subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws, now or hereafter in effect,
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or
equity).
(b) Other than as set forth herein regarding the approval by
the shareholder of Merger Sub, no further vote or other action of the
shareholders of Buyer is required by applicable Law, the certificate of
incorporation of Buyer, the bylaws of Buyer or otherwise in order for Buyer
and Merger Sub to consummate the Merger and the transactions contemplated
hereby.
(c) The Board of Directors of Merger Sub has (i) determined
(A) that the Merger is fair to, and in the best interests of Merger Sub and
its shareholders, and that, considering the financial position of the merging
companies, no reasonable concern exists that the Surviving Corporation will be
unable to fulfill the obligations of Merger Sub to its creditors, and (B) to
recommend that Buyer, as the sole shareholder of Merger Sub, approve this
Agreement, the Merger and the other transactions contemplated by this
Agreement. The Boards of Directors of each of Buyer and Merger Sub have each
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement.
3.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of
Buyer and Merger Sub does not, and the performance of this Agreement by each
of Buyer and Merger Sub shall not, (i) conflict with or violate the Buyer
Charter Documents or equivalent organizational documents of any of Buyer's
subsidiaries, (ii) subject to (x) receipt of required regulatory,
administrative and governmental approvals set forth in Section 3.3(b) and (y)
delivery of the documents the Companies Registrar as described in Sections 5.1
and 5.2, conflict with or violate any Law applicable to Buyer, Merger Sub or
any of their subsidiaries or by which it or their respective properties are
bound, or (iii) conflict with, result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, require any notice or consent pursuant to, or give rise to any rights
of termination, amendment, acceleration or cancellation of, or rights to
payment under, any material Contract to which Buyer, Merger Sub or any of
their subsidiaries is a party or by which Buyer, Merger Sub or any of their
subsidiaries or their or any of their respective properties are bound, except
to the extent such conflict, violation, breach, failure to give notice or
obtain consent, default, impairment rights, losses or Liens or other effect
would not, in the case of clauses (ii) or (iii), reasonably be expected to
have a Material Adverse Effect on Buyer.
(b) The execution and delivery of this Agreement by each of
Buyer and Merger Sub does not, and the performance of this Agreement and the
transactions contemplated hereby by each of Buyer and Merger Sub shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity except (i) for applicable
requirements, if any, of (A) the Exchange Act, (B) the requirements of any
Governmental Entity under applicable competition, antitrust, foreign
investment laws or trade regulations, (C) the approval of the Investment
Center, (D) the approval of the OCS, (E) the approval, if applicable, of the
Israeli Commissioner of Restrictive Trade Practices pursuant to the Trade
Practices Act, (F) any securities Laws obligations with respect to the Assumed
Options; (G) delivery of the required notices described in Sections 5.1 and
5.2 and (H) such other filings, permits, authority, consents or approvals as
may be required by reason of the status of the Company and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not reasonably be expected to have a
Material Adverse Effect on Buyer.
3.4 Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the Knowledge of Buyer or Merger
Sub, threatened against Buyer or Merger Sub or any property or rights of Buyer
or Merger Sub or any of their subsidiaries, by or before any Governmental
Entity, except for those claims, actions, suits or proceedings which would not
reasonably be expected to materially adversely affect the ability of Buyer or
Merger Sub to perform their obligations hereunder.
3.5 Inapplicability of Certain Statutes . Neither Buyer nor Merger
Sub is subject to any Law regarding corporate procedures in business
combinations that would apply to the Merger or any other transaction
contemplated by this Agreement other than Antitrust Laws, and other than the
Israeli Companies Law, which applies to Merger Sub.
3.6 Ownership and Operations of Merger Subsidiary. Buyer, directly or
indirectly, owns of record and beneficially owns all outstanding shares of
Merger Sub. Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, and has engaged in no other business or
other activities or incurred any liabilities (other than liabilities to Buyer
or its controlled affiliates which are subordinated to liabilities to third
parties), other than as contemplated herein.
3.7 Information Supplied by Buyer and Merger Sub. None of the
information or data (including any financial statements) concerning Buyer and
Merger Sub which will be included the Proxy Statement will, at the time the
Proxy Statement is mailed to the shareholders of Company or at the time of the
Company Shareholders Meeting to be held to obtain the Company Shareholder
Approval, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading and the Proxy Statement will comply with applicable Law
in all material respects.
3.8 Financing. Buyer has and will have, immediately prior to, from
and after the Effective Time, sufficient cash on-hand and available through
existing liquidity facilities (without restrictions on drawdown that would
delay payment of the Merger Consideration in accordance with Article I hereof)
to make payment of the Merger Consideration and any other amounts payable
hereunder and to consummate the transactions contemplated hereby.
3.9 Financial Resources and Operations after Closing. The Surviving
Corporation will have, immediately following the Closing, sufficient financial
and other resources such that the Surviving Corporation will be able to
fulfill the obligations of the Company and the Company Subsidiaries to their
respective creditors for the foreseeable future following the Closing.
3.10 Brokers. Except for fees and expenses which will be paid by
Buyer, no agent, broker, finder, investment banker, financial advisor or other
Person will be entitled to any broker's, finder's or similar fee or commission
from the Buyer or affiliate thereof in connection with any of the transactions
contemplated by this Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING DATE
4.1 Conduct of Business by the Company. Except as set forth in
Section 4.1 of the Company Disclosure Schedule, as contemplated by this
Agreement or consented to by Buyer in writing (which consent shall not be
unreasonably withheld or delayed), during the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant to
its terms and the Effective Time, the Company shall, and shall cause each
Company Subsidiary to, carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and
in material compliance with all applicable Laws, and use its reasonable best
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and management level employees and (iii) preserve its relationships
with material customers, suppliers, distributors, licensors, licensees,
brokers, agents, creditors and others with which it has material business
dealings (including using reasonable best efforts to have the Company's
Chairman assist in the preservation of relationships with material customers
following the Effective Time). Without limiting the generality of the
foregoing, except as set forth in Section 4.1 of the Company Disclosure
Schedule or as contemplated by this Agreement, during the period from the date
hereof and continuing until the earlier of the termination of this Agreement
pursuant to its terms and the Effective Time, without the prior written
consent of Buyer (which consent shall not be unreasonably withheld or
delayed), the Company shall not and shall not permit any Company Subsidiary to
(unless required by Law or the regulations or requirements of any stock
exchange or regulatory organization applicable to the Company and any Company
Subsidiary, in each case after consultation with counsel and, to the extent
reasonably feasible, prior written notification of at least five (5) days to
Buyer) do any of the following:
(a) accelerate (except in accordance with the terms
thereof), amend or change the period of exercisability of options or
restricted stock, or reprise options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans;
(b) transfer or license exclusively to any Person or entity
or otherwise extend, amend or modify any rights to the material Intellectual
Property, or enter into any agreements or make other commitments or
arrangements to grant, transfer or license to any Person future rights to any
material Intellectual Property, in each case other than entering into,
amending or modifying licenses in the ordinary course of business consistent
with past practices;
(c) declare, set aside or pay any dividends on (except
dividends declared or paid by a wholly owned subsidiary of the Company to the
Company or another wholly owned subsidiary of the Company) or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine, reclassify or reorganize,
recapitalize, or effect any other like change of any capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(d) purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of the Company or any Company
Subsidiary;
(e) issue, deliver, sell (including the sale by any Company
Subsidiary of Company Shares and the sale by the Company of any Company Shares
held by the Company), authorize, pledge or otherwise encumber or propose any
of the foregoing with respect to any shares of stock of the Company or any
Company Subsidiary or any securities convertible into or exercisable or
exchangeable for shares of stock of the Company or any Company Subsidiary, or
subscriptions, rights, warrants or options to acquire any such shares or any
securities convertible into or exercisable or exchangeable for such shares, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance,
delivery or sale of shares of Company Shares pursuant to the exercise of stock
options and warrants outstanding as of the date of this Agreement;
(f) cause, permit or propose any amendments to the Company
Charter Documents (or similar governing instruments of any Company
Subsidiary);
(g) (i) acquire or agree to acquire any equity interest in
or a portion of the assets or property of any Person or division thereof, (ii)
otherwise acquire or agree to acquire all or substantially all of the assets
of any of the foregoing, or enter into any joint ventures, strategic
partnerships or alliances, or (iii) invest in any third party, other than for
transactions which in the aggregate do not exceed $250,000;
(h) make any capital expenditure, except for capital
expenditures which, on a quarterly basis, are not in excess of the average
quarterly capital expenditures over the last three quarters of 2004;
(i) except in the ordinary course of business consistent
with past practice, (i) sell, lease, mortgage, pledge, license, encumber,
convey, assign, sublicense or otherwise dispose of or transfer any properties
or assets, other than the sale, lease, licensing, encumbrance, conveyance,
assignment, sublicensing or disposition of property or assets in any single
transaction or series of related transactions having a fair market value not
in excess of an aggregate amount of $250,000, (ii) materially modify, amend or
terminate any existing material lease, license or Contract affecting the use,
possession or operation of any such properties or assets, or (iii) grant or
otherwise create or consent to the creation of any material easement,
covenant, restriction, assessment or charge affecting any owned real property
or leased real property or any material part thereof;
(j) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of the
Company, in each case other than in connection with (A) the financing of
ordinary course trade payables, (B) borrowings under the Company's existing
credit facility or (C) the collection of accounts receivable, notes or
commercial paper, in the ordinary course of business consistent with past
practice;
(k) (i) except pursuant to Company Benefit Plans in
existence prior to the date hereof, adopt or amend any material Company
Benefit Plan or enter into any employment contract (other than offer letters
and agreements that are entered into in the ordinary course of business
consistent with past practice with employees who are terminable "at will" with
no longer than 60 day termination notice, and who are not officers of the
Company); (ii) increase the salaries or wage rates or fringe benefits
(including granting or increasing rights to severance or indemnification)
(other than increases in the ordinary course of business consistent with past
practice or as required by any existing employment agreement or collective
bargaining agreements) of its directors, officers, employees or consultants
except, in each case, as may be required by Law or any existing Company
Benefit Plan; (iii) layoff any manager with the title of Vice President or
higher of the Company or any Company Subsidiary (except for termination for
"cause") or effect any reduction (which is material with respect to the
Company's operations in a particular country) in workforce; or (iv) enter
into, or perform, any transaction (other than an immaterial transaction) with
or for the benefit of any officer, director or other affiliate of the Company
or any Company Subsidiary (other than in the ordinary course of business or
pursuant to the agreements set forth in Section 2.18 of the Company Disclosure
Schedule).
(l) modify, amend or terminate, in any material respect, any
Company Contract or waive, delay the exercise of, release or assign any
material rights or material claims thereunder, in each case, except in the
ordinary course of business consistent with past practice;
(m) except as required by Law or by U.S. GAAP, revalue any
of its assets or make any material change in accounting methods, principles or
practices;
(n) enter into, renew or modify any Contracts that, had they
been executed on or as of the date hereof, would have been required to be
listed in Section 2.14 of the Company Disclosure Schedule, in each case other
than Contracts, agreements or arrangements entered into in the ordinary course
of business consistent with past practice or that can be terminated or
cancelled by the Company without penalty or further payment and without more
than 60 days' notice;
(o) (i) except as required by Law or by any Governmental
Entity and except for elections made in the ordinary course of business, make
any material Tax election or Tax accounting method change, or (ii) consent to
any extension or waiver of any limitation period with respect to Taxes or
(iii) other than in consultation in good faith with Buyer or as explicitly
provided herein, engage in any discussions with any Tax authority relating to
any Tax ruling, whether or not initiated prior to the execution of this
Agreement;
(p) (i) enter into any agreement providing for the
employment or consultancy of any person on a full-time, part-time, consulting
or other basis or otherwise providing compensation or other benefits to any
officer, director, employee or consultant, if the compensation to be paid and
payable on an annualized basis to such person (x) will exceed $100,000 or (y)
together with the compensation to be paid and payable on an annualized basis
to all other such persons hired on or after the date hereof, will increase the
Company's annual payroll as compared to its annual payroll as of the date of
this Agreement by more than $1,000,000 or (ii) grant rights to severance other
than (x) as required by applicable Law or (y) in a manner consistent with the
Company's standard practice (so long as, in the case of clause (y), the amount
of severance does not exceed that required by applicable Law if the employee
were terminated by the Company);
(q) pay, discharge, compromise, satisfy, cancel or forgive
any debts or claims or rights (or series of rights, debts or claims)
involving, individually or in the aggregate, consideration in excess of
$100,000 except in the ordinary course of business consistent with past
practice and except for regularly scheduled repayments under existing
indebtedness;
(r) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to the transactions
contemplated hereby;
(s) apply for or accept any grants or other funding from the
OCS or any other Governmental Entity, other than under currently outstanding
applications disclosed on Section 2.19 of the Company Disclosure Schedule, or
take any action or fail to take any action in material violation of, or that
would adversely affect the terms and conditions of any grants or benefits
received or receivable from any Governmental Entity, including without
limitation the OCS and the Investment Center;
(t) take any of the actions described in Section 4.1(t) of
the Company Disclosure Schedule; or
(u) agree or commit to take any of the actions described in
Section 4.1(a) through (t).
Subject to compliance with applicable Law, from the date of
this Agreement until the earlier of the termination of this Agreement in
accordance with its terms or the Effective Time, the Company shall confer on a
regular basis with one or more representatives of Buyer to report on
operational matters that are material and other matters reasonably requested
by Buyer. The Company shall promptly provide the Buyer with all filings made
with any Governmental Entity in connection with this Agreement, the Merger and
the transactions contemplated hereby.
4.2 Conduct of Business by Buyer. Except as set forth in Section 4.2
of the Buyer Disclosure Schedule, as contemplated by this Agreement or
consented to by the Company in writing (which consent shall not be
unreasonably withheld or delayed), during the period from the date hereof and
continuing until the earlier of the termination of this Agreement pursuant to
its terms and the Effective Time, Buyer shall, and shall cause each Merger Sub
to, carry on its business in all material respects in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and
in material compliance with all applicable Laws, and use its commercially
reasonable efforts consistent with past practices and policies to preserve its
relationships with material customers, suppliers, distributors, licensors and
others with which it has material business dealings. Buyer shall use its
commercially reasonable efforts to conduct its business dealings with the
Company in a manner substantially consistent with past practice.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement; Shareholder Meetings; Merger Notice.
(a) As promptly as practicable after the execution and
delivery of this Agreement, each of Buyer and the Company shall cooperate (and
shall cause their respective counsel, auditors, agents and representatives to
cooperate) in the preparation of the Proxy Statement, which shall comply in
all material respects with all requirements of applicable Law. The Proxy
Statement shall include the recommendation of the Board of Directors to the
Company's shareholders that they approve this Agreement, the Merger, and the
other transactions contemplated by this Agreement at the Company Shareholders
Meeting (the "Company Recommendation"), except to the extent that the Board of
Directors of the Company shall have withdrawn or modified its approval or
recommendation of this Agreement or the Merger as permitted by and determined
in accordance with the last sentence of Section 5.7(b).
(b) Subject to the terms and conditions set forth in this
Agreement, the Company shall take any and all action necessary under the
requirements of applicable Law and the Company Charter Documents to, as
promptly as practicable, call, give notice (the "Notice") of and hold the
Company Shareholders Meeting (and Merger Sub shall call a general meeting of
Merger Sub's shareholder) and shall use its reasonable best efforts to cause
the Proxy Statement to be mailed to the Company's shareholders as promptly as
practicable after the date of this Agreement, whether or not at any time
subsequent to the date hereof the Board of Directors of the Company determines
in compliance with Section 5.7(b) below that it can no longer recommend to the
Company's shareholders the Company Recommendation, unless the Company shall
have terminated this Agreement pursuant to and in accordance with Section 7.1
hereof. Subject to the notice requirements of the Israeli Companies Law and
the regulations thereunder and the Company Charter Documents, the Company
Shareholders Meeting shall be held as promptly as practicable after the date
hereof (on a date selected by the Company and consented to by Buyer (such
consent not to be unreasonably withheld or delayed)). The Company shall use
its reasonable best efforts to solicit from its shareholders proxies in favor
of the adoption and approval of this Agreement and the approval of the Merger
and the other transactions contemplated by this Agreement. The Company shall
call, notice, convene, hold, conduct and solicit all proxies in connection
with the Company Shareholder Meeting in compliance with all applicable Laws,
including the Israeli Companies Law, the Company Charter Documents, and the
rules of Nasdaq. Without the prior written consent of Buyer, the Company may
adjourn or postpone the Company Shareholder Meeting only: (i) if and to the
extent necessary to provide any supplement or amendment to the Proxy Statement
to Company's shareholders in advance of a vote on this Agreement as
contemplated by Section 5.1(c), the Merger and the other transactions
contemplated by this Agreement; (ii) if, as of the time for which the Company
Shareholder Meeting is originally scheduled (as set forth in the Proxy
Statement), there are insufficient Company Shares represented (either in
person or by proxy) to constitute a quorum necessary to conduct the business
of the Company Shareholder Meeting; or (iii) as may otherwise be required
specifically by applicable Law. Except as specifically provided in the
preceding sentence, the Company's obligation to call, give notice of, convene
and hold the Company Shareholder Meeting in accordance with this Section
5.1(b) shall not be limited to or otherwise affected by the commencement,
disclosure, announcement or submission to the Company of any Acquisition
Proposal, so long as this Agreement has not been terminated.
(c) Each of Buyer and the Company shall cause all documents
under this Section 5.1 (and all information that it supplies for inclusion in
such filing by the other party) to comply as to form and substance in all
material respects with the applicable requirements of Law and the rules and
regulations promulgated thereunder, including, as applicable, the Exchange Act
and the rules and regulations of Nasdaq, and shall make such filings of such
documents with such Governmental Entities as may be required thereby. Whenever
any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement or any other filing, the Company or Buyer,
as the case may be, shall promptly inform the other of such occurrence and
cooperate in making any necessary filing or mailing to the shareholders such
amendment or supplement, as applicable. The Company shall not mail any Proxy
Statement, or any amendment or supplement thereto without first providing to
Buyer a reasonable opportunity to comment thereon and incorporating any
comments as may be reasonably requested in a timely manner by Buyer.
(d) At the Company General Meeting, Buyer and Merger Sub
shall cause any Company Shares then owned by them and their subsidiaries, if
any, to be voted in favor of approval of this Agreement, the Merger and the
other transactions contemplated by this Agreement.
(e) Promptly following receipt of Company Shareholder
Approval, but in no event later than three days after receipt, the Company
shall deliver a notice in accordance with the Israeli Companies Law (the
"Merger Notice") to the Companies Registrar informing the Companies Registrar
of the decision of the Company Shareholders Meeting in accordance with Section
317(b) of the Companies Law.
(f) The Company shall notify Buyer promptly of the receipt
by the Company of any comments from any Governmental Entity and of any request
by any Governmental Entity for amendments or supplements to the Proxy
Statement or for additional information and shall consult with Buyer regarding
and supply Buyer with copies of all correspondence between the Company or any
of its representatives, on the one hand, and a Governmental Entity, on the
other hand, with respect to the Proxy Statement.
5.2 Merger Proposal.
(a) Promptly following the execution and delivery of this
Agreement, but in no event later than three days after the date hereof, the
Company and Merger Sub shall call the Company Shareholder Meeting and the
Merger Sub shareholder meeting, respectively, and cause a merger proposal (in
the Hebrew language) in the form of Exhibit A (the "Merger Proposal") to be
executed in accordance with Section 316 of the Israeli Companies Law and each
of the Company and Merger Sub shall deliver the Merger Proposal to the
Companies Registrar. The Company and Merger Sub shall cause a copy of the
Merger Proposal to be delivered to each of their respective secured creditors,
if any, no later than three (3) days after the date on which the Merger
Proposal is delivered to the Companies Registrar and shall promptly inform
their respective non-secured creditors of the Merger Proposal and its contents
in accordance with Section 318 of the Israeli Companies Law and the
regulations promulgated thereunder.
(b) In addition to the foregoing, each of the Company and
Merger Sub, shall: (i) publish, on or about the date on which the Merger
Proposal is submitted to the Companies Registrar, a notice to its creditors,
stating that a Merger Proposal was submitted to the Companies Registrar and
that the creditors may review the Merger Proposal at the office of the
Companies Registrar, the Company's registered office or Merger Sub's
registered offices, as applicable, and at such other locations as the Company
or Merger Sub, as applicable, may determine, in (A) two daily Hebrew
newspapers, on the day that the Merger Proposal is submitted to the Companies
Registrar, and (B) in a popular newspaper in the United States; (ii) within
four business days from the date of submitting the Merger Proposal to the
Companies Registrar, send a notice by registered mail to all of the "Material
Creditors" (as such term is defined in the regulations promulgated under the
Israeli Companies Law), if any, that the Company or Merger Sub, as applicable,
is aware of, in which it shall state that a Merger Proposal was submitted to
the Companies Registrar and that the creditors may review the Merger Proposal
at such additional locations, if such locations were determined in the notice
referred to in the immediately preceding clause (i); and (iii) if required,
display in a prominent place at the Company's or Merger Sub's working place, a
copy of the notice published in a daily Hebrew newspaper (as referred to in
clause (i)(A) of this Section 5.2), no later than three business days
following the day on which the Merger Proposal was submitted to the Companies
Registrar. Promptly after the Company and Merger Sub shall have complied with
Section 5.2(a) and clauses (i) and (ii) of this Section 5.2(b), but in any
event no later than three business days following the date on which notices to
the secured creditors and the notice in clause (i) above were given to the
creditors, the Company and Merger Sub shall inform the Companies Registrar, in
accordance with Section 317(b) of the Israeli Companies Law and in the form
prescribed by the regulations promulgated under the Israeli Companies Law,
that notice was given to their respective creditors under Section 318(a) of
the Israeli Companies Law and the regulations promulgated under the Israeli
Companies Law.
5.3 Merger Sub General Meeting.
(a) Upon the satisfaction or waiver of all other conditions
for Closing (other than those conditions which by their terms are to be
satisfied or waived at the Closing), Merger Sub shall hold its general
meeting, and Buyer (as the sole shareholder of Merger Sub) shall adopt and
approve this Agreement and approve the Merger and the other transactions
contemplated by this Agreement at such general meeting.
(b) No later than three (3) days after the adoption and
approval of this Agreement and approval of the Merger and the other
transactions contemplated by this Agreement by Buyer, as the sole shareholder
of Merger Sub, at the Merger Sub general meeting, Merger Sub shall (in
accordance with Section 317(b) of the Israeli Companies Law and the
regulations thereunder) inform the Companies Registrar of the decision of
Merger Sub's general meeting with respect to the Merger
5.4 Notification.
(a) The Company shall give prompt notice to Buyer upon
becoming aware that any representation or warranty made by it contained in
this Agreement has become or is reasonably likely to become untrue or
inaccurate in any material respect, or of any failure of the Company to comply
with or satisfy in any material respect any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement; provided,
however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement. In addition, the Company
shall give prompt notice to the Buyer of any change or event having, or which
could reasonably be expected to have, a Material Adverse Effect on the Company
or any Company Subsidiary or otherwise affect adversely the ability for the
conditions set forth in Article VI to be satisfied.
(b) Each of Buyer and Merger Sub shall give prompt notice to
the Company upon becoming aware that any representation or warranty made by it
contained in this Agreement has become untrue or inaccurate in any material
respect, or of any failure of Buyer or Merger Sub to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. In addition, each of Buyer and Merger Sub shall give
prompt notice to the Company of any change or event having, or which could
reasonably be expected to materially adversely affect the ability of either
Buyer or Merger Sub to perform their obligations hereunder.
5.5 Governmental Approvals; Reasonable Best Efforts.
(a) Israeli Approvals. Each party hereto shall use its
reasonable best efforts to deliver and file, as promptly as practicable after
the date hereof, each notice, report or other document required to be
delivered by such party to or filed by such party with any Israeli
Governmental Entity with respect to the Merger. Without limiting the
generality of the foregoing: (i) as promptly as practicable after the date of
this Agreement, the Company and Buyer shall prepare and file any notifications
that may be required under the Trade Practices Act in connection with the
Merger; (ii) if applicable, the Company and Buyer shall respond as promptly as
practicable to any inquiries or requests received from the Israeli Restrictive
Trade Practices Commissioner for additional information or documentation;
(iii) Buyer and the Company shall use all reasonable efforts to obtain, as
promptly as practicable after the date hereof, (A) approval of the OCS, (B)
approval of the Investment Center, (C) the Israeli Option Tax Ruling and the
Israeli Tax Withholding Ruling, and (D) any other consents that may be
required by any Israeli Governmental Entity in connection with the Merger; and
(iv) Buyer shall provide to OCS, the Investment Center and the Israeli
Restrictive Trade Practices Commissioner any information requested by such
authorities and shall execute any undertaking in customary form to comply with
the OCS Laws or as may be required to obtain OCS approval in connection with
the Merger and confirm to the OCS and the Investment Center that the Company
shall continue after the Effective Time to maintain a viable research and
development center in Israel and operate in a manner consistent with its
previous undertakings to the OCS and the Investment Center.
(b) Reasonable Best Efforts. Subject to the terms and
conditions set forth in this Agreement, each of the parties hereto shall use
all reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things under such party's control or which such party is required
to do under this Agreement to consummate and make effective, as soon as
reasonably practicable, the Merger and the other transactions contemplated
hereby. Without limiting the generality of the foregoing, the Company and its
Board of Directors shall, if any takeover statute or similar statute or
regulation is or becomes applicable to the Merger, this Agreement or any of
the transactions hereby, use all reasonable best efforts to ensure that the
Merger and the other transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise to
minimize the effect of such statute or regulation on the Merger, this
Agreement and the transactions contemplated hereby. In addition, Buyer shall
not acquire or agree to acquire any other Person to the extent that such
acquisition would reasonably be expected to materially delay the satisfaction
of, or prevent the satisfaction by the Outside Date of, the conditions set
forth in Sections 6.1(a) and (b).
(c) Antitrust Filings. Each of the parties hereto shall, as
promptly as practicable and before the expiration of any legal deadline, file
with any applicable Governmental Entity, any filings, reports, information and
documentation required for the transactions contemplated hereby pursuant to
any antitrust, competition, foreign investment or trade regulatory Law of any
Governmental Entity (collectively, "Antitrust Laws"). Each of the parties
hereto shall furnish to each other's counsel such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submission that is necessary under the Antitrust
Laws.
(d) Antitrust Approvals. Each of the parties hereto shall
use its reasonable best efforts to obtain promptly any clearance required
under the Antitrust Laws for the consummation of the Merger and the other
transactions contemplated hereby and shall keep each other apprised of the
status of any communications with, and any inquiries or requests for
additional information from, any Governmental Entity and shall comply promptly
with any such inquiry or request. Each of the parties hereto shall promptly
and timely respond to a request for additional information from any
Governmental Entity. For the avoidance of doubt and notwithstanding anything
to the contrary contained in this Agreement, Buyer and its subsidiaries shall
commit to any divestitures, licenses or hold separate or similar arrangements
with respect to their assets or conduct of business arrangements as a
condition to obtaining any and all approvals from any Governmental Entity for
any reason in order to consummate and make effective, as promptly as
practicable, but in no event later than the Outside Date, the Merger,
including taking any and all actions necessary in order to ensure that (x) no
requirement for non-action, a waiver, consent or approval of any authority
enforcing applicable Antitrust Laws or other Governmental Entity, (y) no
decree, judgment, injunction, temporary restraining order or any other order
in any suit or proceeding, and (z) no other matter relating to any Antitrust
Laws, would preclude consummation of the Merger by the Outside Date.
(e) Cooperation. Each of the parties hereto commits to
instruct its counsel to cooperate with each other and use reasonable best
efforts to facilitate and expedite the identification and resolution of any
such anti-trust issues and, consequently, the expiration of the applicable
waiting periods under any other Antitrust Laws at the earliest practicable
dates. Such reasonable best efforts and cooperation include, without
limitation, counsel's undertaking (i) to keep each other appropriately
informed of communications from and to personnel of the reviewing antitrust
authority, and (ii) to confer with each other regarding appropriate contacts
with and response to personnel of such antitrust authority.
(f) Notification. Each party hereto shall (i) give the other
parties prompt notice of the commencement of any legal or other proceeding by
or before any Governmental Entity (including the Israeli Restrictive Trade
Practices Commissioner, the OCS, the Investment Center, the Companies
Registrar and the SEC) with respect to the Merger or any of the other
transactions contemplated by this Agreement, (ii) promptly inform the other
parties of any communication with any Governmental Entity regarding the Merger
or any of the other transactions contemplated by this Agreement and (iii) keep
the other parties informed as to the status of any such proceeding or
communication. The parties to this Agreement will consult and cooperate with
one another in connection with any analysis, appearance, discussion,
presentation, memorandum, brief, argument, opinion or proposal made or
submitted in connection with any proceeding or communication relating to the
Merger or any of the other transactions contemplated by this Agreement. In
addition, except as may be prohibited by any Governmental Entity or by any
legal requirement, in connection with any such proceeding relating to any such
Governmental Entity, each party hereto will permit authorized representatives
of the other party to be present at each meeting or conference or telephone
call relating to any such proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Governmental Entity in connection with any such proceeding.
5.6 Confidentiality; Access to Information. The parties acknowledge
that the Company and Buyer have previously executed a Confidentiality
Agreement, dated as of June 10, 2004 and as modified by the agreement dated
November 30, 2004 (the "Confidentiality Agreement"), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms
except as otherwise provided herein, and Buyer shall cause Merger Sub to
comply with the terms thereof. The Company will afford Buyer and Buyer's
officers, employees, financial advisers, financing sources, consultants,
accountants, counsel and other representatives reasonable access during normal
business hours, upon reasonable notice, to its properties, books, records,
contracts, financial and operating data and personnel during the period prior
to the Effective Time to obtain all information concerning its business, as
Buyer may reasonably request and subject to applicable Law. Buyer will hold,
and will cause its accountants, counsel, financing sources and other
representatives to hold, in confidence all documents and information furnished
to it by or on behalf of the Company in connection with the transactions
contemplated by this Agreement pursuant to the terms of the Confidentiality
Agreement. No information or knowledge obtained by Buyer in any investigation
pursuant to this Section 5.6 will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.7 No Solicitation.
(a) The Company shall not, nor shall it authorize or permit
any Company Subsidiary to, and shall use its reasonable best efforts to cause
any officer, director or employee of, or any investment banker, attorney or
other advisor or representative (collectively, "Representatives") of, the
Company or any Company Subsidiary to, directly or indirectly, (i) solicit,
initiate or encourage the submission of, any Acquisition Proposal, (ii) enter
into any agreement (other than a confidentiality agreement entered into in
accordance with the provisions hereof) with respect to or approve or recommend
any Acquisition Proposal or (iii) other than informing Persons of the
existence of the provisions contained in this Section 5.7, participate in any
discussions or negotiations regarding, or furnish to any Person any
information with respect to the Company in connection with, or take any other
action to cooperate in any way with respect to or facilitate any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal; provided, however, that prior to the
receipt of Company Shareholder Approval, the Company may, in response to an
unsolicited bona fide Acquisition Proposal which did not result from a breach
of this Section 5.7(a) and which the Board of Directors of the Company
determines, in good faith, after consultation with appropriate outside
counsel, and financial advisors of internationally recognized reputation is
reasonably likely to lead to a Superior Proposal, and subject to compliance
with Section 5.7(c), (x) furnish information with respect to the Company to
the Person making such Acquisition Proposal and its Representatives pursuant
to a customary confidentiality agreement requiring such party to keep such
information confidential on terms which are substantially equivalent to those
contained in the Confidentiality Agreement and (y) participate in discussions
or negotiations with such Person and its Representatives regarding any
Acquisition Proposal. The Company shall, and shall cause the Company
Subsidiaries to, use reasonable best efforts to cause the Company's and the
Company Subsidiaries' respective Representatives to, immediately cease and
terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any third party conducted heretofore by the
Company, any Company Subsidiary or their respective Representatives with
respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in this Section
5.7(a) by any officer, director or employee of the Company, whether or not
acting on behalf of the Company, shall be deemed to be a breach of this
Section 5.7 by the Company.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify in a manner adverse to Buyer or
Merger Sub, or propose to withdraw or modify in a manner adverse to Buyer or
Merger Sub, the approval or recommendation by the Board of Directors of the
Company of this Agreement, the Merger or the other transactions contemplated
by this Agreement, (ii) approve any letter of intent, agreement in principle,
acquisition agreement or similar agreement relating to any Acquisition
Proposal or (iii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal. Notwithstanding the foregoing provisions of Section
5.7(a) and this Section 5.7(b), if, prior to the receipt of Company
Shareholder Approval, (u) a Superior Proposal has been made and has not been
withdrawn, (v) the Company Shareholders Approval has not thereafter been
obtained, (w) the Board of Directors of the Company believes in good faith,
after consultation with appropriate outside counsel, that any such action is
required for the purpose of fulfilling its fiduciary duties under applicable
Law, (x) the Board of Directors of the Company has notified Buyer in writing
of the belief described in clause (w) above, (y) at least four business days
following receipt by Buyer of the notice received in clause (x) above, and
taking into account any revised proposal made by Buyer since receipt of the
notice referred to in clause (x) above, the Board of Directors of the Company
maintains its belief described in clause (w) above, and (z) the Company is in
compliance with this Section 5.7, the Board of Directors of the Company may
(A) withdraw or modify its approval or recommendation of this Agreement, the
Merger and the other transactions contemplated by this Agreement and/or (B)
upon termination of this Agreement in accordance with Section 7.1(f) and
concurrent payment of the Termination Fee in accordance with Section 7.3(b),
approve and enter into an agreement relating to an Acquisition Proposal that
constitutes a Superior Proposal.
(c) The Company shall as promptly as practicable (but in any
event within one business day) advise Buyer of any Acquisition Proposal, the
identity of the Person making any such Acquisition Proposal or inquiry
regarding the making of an Acquisition Proposal and the material terms of any
such Acquisition Proposal or inquiry. The Company shall (i) keep Buyer
informed promptly of the status (including any change to the terms thereof) of
any such Acquisition Proposal and (ii) provide to Buyer as soon as practicable
after receipt or delivery thereof with copies of the Acquisition Proposal
(including any amendments or supplements thereto) and all such other material
information provided in writing to the Company by the party making such
Acquisition Proposal.
(d) Nothing contained in this Section 5.7 shall prohibit the
Company from taking and disclosing to its shareholders a position contemplated
by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or from
making any required disclosure to the Company's shareholders if, in the good
faith judgment of the Board of Directors of the Company, after consultation
with appropriate outside counsel, failure so to disclose would be inconsistent
with the fulfillment of its fiduciary duties or any other obligations under
applicable Law.
(e) For the purposes of this Agreement:
(i) "Acquisition Proposal" shall mean (A) any
proposal or offer for a merger, consolidation, dissolution,
recapitalization or other business combination involving the Company
or any Significant Subsidiary (as defined in Rule 1-02 of Regulation
S-X, but substituting "20%" for the references to "10%" therein), (B)
any proposal for the issuance by the Company of over 20% of its
equity securities, (C) any proposal or offer to acquire in any
manner, directly or indirectly, over 20% of the equity securities or
consolidated total assets of the Company, or (D) any combination of
the foregoing, in each case other than the Merger.
(ii) "Superior Proposal" shall mean any bona fide
written proposal made by a third party to acquire substantially all
the equity securities or assets of the Company, pursuant to a tender
or exchange offer, a merger, a consolidation, a liquidation or
dissolution, a recapitalization, a sale of all or substantially all
its assets or otherwise, on terms which the Board of Directors of the
Company determines in good faith, after consultation with the
Company's outside legal counsel and financial advisors, (i) to be
more favorable taking into account all the terms and conditions of
such proposal and this Agreement (including any proposal by Buyer to
amend the terms of the transactions contemplated hereby) to the
shareholders of the Company than the Merger, taking into account all
the terms and conditions of such proposal and this Agreement
(including any proposal by Buyer to amend the terms of the Merger),
(ii) for which the financing to the extent required, is then
committed and (iii) is reasonably likely to be consummated taking
into account all regulatory, legal and other aspects of such
proposal.
5.8 Public Disclosure. Except for the joint announcement of the
execution and delivery of this Agreement, the timing and content of which have
been mutually agreed by the parties hereto, no party hereto shall issue any
press release or otherwise make any public announcement with respect to this
Agreement, the Merger or the other transactions contemplated hereby or an
Acquisition Proposal without first consulting with the other parties and
providing the other parties with reasonable opportunity to review and comment
upon such press release or public announcement. Notwithstanding the foregoing,
if such an announcement is required by applicable Law or any listing agreement
with a national securities exchange or quotation system (including Nasdaq) the
party required to make such announcement shall provide notice to and a copy of
such as promptly as practicable in advance of such announcement and, will use
all reasonable efforts to consult with the other party and take the views of
the other party in respect of such announcement into account prior to making
such announcement.
5.9 Indemnification.
(a) Buyer shall (i) following the Effective Time cause the
Surviving Corporation to undertake the indemnification obligations contained
in the indemnification undertakings in the form attached hereto as Exhibit B
(the "Indemnification Undertakings") and (ii) on the Closing Date, execute and
deliver the Indemnification Undertakings, effective as of the Effective Time,
to such persons as are set forth on Section 5.9 of the Company Disclosure
Schedule (each, an "Indemnified Party"). In the event that any approval by
shareholders of the Surviving Corporation is required to give full legal
effect to the undertaking in this Section 5.9, Buyer irrevocably undertakes to
approve (as the sole shareholder of the Surviving Corporation following the
Merger), as soon as practicable following the Effective Time, such undertaking
subject to and in accordance with applicable Law. Buyer shall ensure that the
provisions in the Articles of Association of the Surviving Company, at any
time following the Effective Date, allowing for indemnification and insurance
shall not be amended in a manner that would limit the scope of such
indemnification and insurance.
(b) For a period of seven (7) years after the Effective
Time, Buyer shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company
(provided that Buyer may substitute therefor "tail" or other policies with
reputable and financially sound carriers of at least the same coverage and
amounts containing terms and conditions that are no less advantageous in the
aggregate) with respect to claims arising from or related to facts or events
that occurred at or before the Effective Time; provided, however, that Buyer
shall not be obligated to make annual premium payments for such insurance to
the extent such premiums exceed 150% of the annual premiums paid as of the
date hereof by the Company for such insurance (such 150% amount, the "Maximum
Premium"). If such insurance coverage can only be obtained at an annual
premium in excess of the Maximum Premium, Buyer shall obtain and maintain one
or more policies with the greatest coverage available for an annual premium
equal to the Maximum Premium.
(c) The provisions of this Section 5.9 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party and
each party entitled to insurance coverage under Section 5.9(b), respectively,
and his or her heirs and legal representatives, and shall be in addition to,
and shall not impair, any other rights an Indemnified Party may have under the
Company Charter Documents or the Subsidiary Charter Documents, as applicable,
or the comparable organization documents of the Surviving Corporation or any
of its Subsidiaries, under applicable Law or otherwise. Buyer shall ensure
that the Surviving Corporation complies with all of its obligations under this
Section 5.9.
(d) In the event that Buyer or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other Person and is not the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all its properties and assets to any Person, Buyer shall cause
proper provisions to be made so that the successors and assigns of Buyer or
the Surviving Corporation assume the obligations set forth in this Section 5.9
and under the Indemnification Undertakings. The obligations of Buyer and the
Surviving Corporation under this Section 5.9 shall not be terminated or
modified in such a manner as to adversely affect any indemnitee to whom this
Section 5.9 applies without the express written consent of such affected
indemnitee (it being expressly agreed that the indemnitees to whom this
Section 5.9 applies shall be third party beneficiaries of this Section 5.9).
(e) Buyer's obligations pursuant to Sections 5.9(a) and (b)
are subject to obtaining such approvals, if any, as are required by applicable
Law to be obtained prior to Closing (which approvals the Company is permitted
to obtain).
5.10 Employee Matters. It is Buyer's intent to cause the Surviving
Corporation to provide individuals who are employed by the Company and the
Company Subsidiaries immediately prior to the Effective Time (the "Post-Merger
Employees") with compensation and benefits that are no less favorable in the
aggregate than those provided either (i) to such Post-Merger Employees
immediately prior to the Effective Time or (ii) by Buyer to similarly situated
employees of Buyer.
5.11 Repayment of Bank Hapoalim Loan. Buyer shall take all such
actions as are necessary in order to prepay in its entirety, to Bank Hapoalim
B.M., the loan (the "Loan"), made pursuant to the Letter of Intent to Provide
Credit Line, dated April 27, 2003, and related documentation (collectively,
the "Loan Agreement") either at Closing or after Closing on any interest
roll-over date referenced in the Loan Agreement, as consented to in the letter
from Bank Hapoalim B.M. to the Company dated January 3, 2005.
5.12 No Affiliate Agreements. The Company shall cause all outstanding
loans to its Affiliates to be paid in full prior to the Effective Time and
shall terminate, or cause the termination of, all contracts or other
agreements of the Company set forth on Section 5.12 of the Company's
Disclosure Schedule.
5.13 Israeli Tax Rulings.
(a) As soon as reasonably practicable after the execution of
this Agreement, the Company shall instruct its Israeli counsel, advisors and
accountants to prepare and file with the Israeli Income Tax Commissioner an
application for a ruling confirming that the cancellation of the Company 2003
Unvested Options that are subject to Section 102 of the Ordinance in
consideration for the right to receive the Unvested Option Consideration
pursuant to Section 1.5(b) will not result in a taxable event with respect to
such Company Stock Options, unless and until the holders of such Company 2003
Unvested Options receive the Unvested Option Consideration in accordance with
the provisions of Section 1.5(b) (which ruling may be subject to customary
conditions regularly associated with such a ruling) (the "Israeli Option Tax
Ruling"). Each of the Company and Buyer shall cause their respective Israeli
counsel, advisors and accountants to coordinate all activities and to
cooperate with each other, with respect to the Company's preparation and
filing of such application and in the preparation of any written or oral
submissions that may be necessary, proper or advisable to obtain the Israeli
Option Tax Ruling. Subject to the terms and conditions hereof, the Company
shall use commercially reasonable efforts to promptly take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable Law to obtain the Israeli Option Tax Ruling, as
promptly as practicable.
(b) As soon as reasonably practicable after the execution of
this Agreement, Company shall instruct its Israeli counsel, advisors and
accountants to prepare and file with the Israeli Income Tax Commissioner an
application for a ruling either (x) exempting Buyer, Paying Agent and
Surviving Corporation from any obligation to withhold Israeli tax at source
from any consideration payable or otherwise deliverable pursuant to this
Agreement as part of the Merger Consideration, or clarifying that no such
obligation exists; or (y) clearly instructing Buyer, Paying Agent or Surviving
Corporation how such withholding at source is to be executed, and in
particular, with respect to the classes or categories of holders or former
holders of Company Shares or Company Stock Options from which tax is to be
withheld (if any), the rate or rates of withholding to be applied (the
"Israeli Withholding Tax Ruling"). Each of the Company and Buyer shall cause
their respective Israeli counsel, advisors and accountants to coordinate all
activities and to cooperate with each other with respect to the Company's
preparation and filing of such application and in the preparation of any
written or oral submissions that may be necessary, proper or advisable to
obtain the Israeli Withholding Tax Ruling. Subject to the terms and conditions
hereof, the Company shall use commercially reasonable efforts to promptly
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable Law to obtain the
Israeli Withholding Tax Ruling, as promptly as practicable.
5.14 Certain Structure Matters. The Company shall use commercially
reasonable efforts to cooperate with Buyer in implementing a structure for the
Company and the Company Subsidiaries that would be efficient from a Tax
perspective for the Buyer as of and after the Effective Time; provided,
however, that the Company shall not be required to take any actions prior to
Closing that the Company believes in good faith could reasonably be expected
to be adverse, in any material respect, to the interests of the Company or its
shareholders if the Merger is not consummated.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any of which may be waived, in writing, by mutual
agreement of Buyer and the Company:
(a) No Order; Antitrust Approvals. No Governmental Entity
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which has the
effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger. All material approvals and waiting periods under the Antitrust
Laws, if any, required to be obtained or to have expired, as the case may be,
prior to the Merger in connection with the transactions contemplated hereby
shall have been obtained or expired, as the case may be.
(b) Israeli Governmental Entity Approvals. All Israeli
Governmental Entity approvals required pursuant to Israeli legal requirements
for the consummation of the Merger (except for the Israeli Option Tax Ruling
and the Israeli Withholding Tax Ruling) shall have been obtained including,
without limitation, the approvals of the OCS, the Investment Center and, if
applicable, the Israeli Commissioner of Restrictive Trade Practices.
(c) Shareholder Approvals. The Company Shareholder Approval
shall have been obtained.
6.2 Additional Conditions to Obligations of the Company. The
obligation of the Company to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the
Company:
(a) Representations and Warranties. The representations and
warranties of Buyer and Merger Sub contained in this Agreement shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date other than those representations and warranties which
address matters only as of a particular date, which representations shall have
been true and correct as of such particular date, except where the failure of
such representations and warranties to be true and correct (without giving
effect to any materiality or Material Adverse Effect limitation) has not had
and would not reasonably be expected to have a Material Adverse Effect on
Buyer. The Company shall have received a certificate with respect to the
foregoing signed on behalf of each of Buyer and Merger Sub by an executive
officer of Buyer or Merger Sub, respectively.
(b) Agreements and Covenants. Each of Buyer and Merger Sub
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing Date, and the Company shall have received a
certificate to such effect signed on behalf of each of Buyer and Merger Sub by
an executive officer of Buyer or Merger Sub, respectively.
6.3 Additional Conditions to the Obligations of Buyer and Merger Sub.
The obligations of each of Buyer and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which may be waived, in writing,
exclusively by Buyer:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and
correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date (other than those representations and warranties
which address matters only as of a particular date, which representations
shall have been true and correct as of such particular date), except where the
failure of such representations and warranties to be true and correct (without
giving effect to any materiality or Material Adverse Effect limitation) has
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company. Each of Buyer and Merger Sub shall have received a certificate
with respect to the foregoing signed on behalf of the Company by an executive
officer of the Company.
(b) Agreements and Covenants. The Company shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it at
or prior to the Closing Date, and each of Buyer and Merger Sub shall have
received a certificate to such effect signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company.
(c) No Material Adverse Effect. Since the date hereof, there
shall have been no Material Adverse Effect with respect to the Company.
(d) Receipt of Director Resignations. Each of the directors
of the Company shall have tendered his or her resignation, effective at the
Effective Time.
(e) Delivery of Financial Statements. The Company shall have
delivered to Buyer a true and correct copy of the audited consolidated
financial statements (including any related notes thereto) of the Company and
the Company Subsidiaries as of, and for the period ended, December 31, 2004,
including an audited consolidated balance sheet of the Company and the Company
Subsidiaries as of December 31, 2004 and audited consolidated statements of
operations and cash flows for the year ended December 31, 2004, together with
a signed report of the Company's independent auditors attached thereto, which
report will be unqualified.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after receipt of the Company
Shareholder Approval:
(a) by mutual written consent duly authorized by the Boards
of Directors of Buyer and the Company;
(b) by written notice of either Buyer or the Company:
(i) if the Merger is not consummated on or before
July 31, 2005 (the "Outside Date"); provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement, has
been the cause of, or results in, the failure of the Merger to occur on or
before such date;
(ii) if any Governmental Entity issues an order,
decree or ruling or takes any other action permanently enjoining, restraining
or otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or
(iii) if, upon a vote at a duly held meeting (or at
any adjournment or postponement thereof) to obtain the Company Shareholder
Approval, the Company Shareholder Approval is not obtained.
(c) by written notice of Buyer, if the Company breaches or
fails to perform in any material respect any of its representations,
warranties or covenants contained in this Agreement, which breach or failure
to perform (i) would or would reasonably be expected to give rise to the
failure of a condition set forth in Section 6.1 or 6.3, and (ii) cannot be or
has not been cured within 60 days after the giving of written notice to the
Company of such breach;
(d) by written notice of the Company, if Buyer or Merger Sub
breaches or fails to perform in any material respect of any of its
representations, warranties or covenants contained in this Agreement, which
breach or failure to perform (i) would or would reasonably be expected to give
rise to the failure of a condition set forth in Section 6.1 or 6.2, and (ii)
cannot be or has not been cured within 60 days after the giving of written
notice to Buyer of such breach;
(e) by written notice of Buyer, if (i) the Board of
Directors of the Company shall have withdrawn or adversely modified, or shall
have resolved to withdraw or adversely modify, the Company Recommendation; or
(ii) the Board of Directors of the Company shall have approved or recommended,
shall have resolved to approve or recommend, to the stockholders of the
Company, an Acquisition Proposal (other than the Merger); and
(f) by the Company, if the Company (i) receives an
unsolicited Superior Proposal, (ii) resolves to accept such Superior Proposal,
(iii) shall have given Buyer three business days' prior written notice of its
intention to terminate pursuant to this provision, and (iv) such proposal
continues to constitute a Superior Proposal taking into account any revised
proposal made by Buyer during such three business day period; provided,
however, that such termination shall not be effective until such time as
payment of the Termination Fee required by Section 7.3(b) shall have been made
by the Company; provided, further, that the Company's right to terminate this
Agreement under this Section 7.1(f) shall not be available if the Company is
then in breach of Section 5.7.
7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Buyer as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any
Liability or obligation on the part of Buyer, Merger Sub or the Company, other
than the penultimate sentence of Section 5.6, this Section 7.2, Section 7.3
and Article VIII, which provisions shall survive such termination, and except
to the extent that such termination results from the willful and material
breach by a party of any representation, warranty or covenant set forth in
this Agreement.
7.3 Fees and Expenses.
(a) Except as provided below, all fees and expenses incurred
in connection with the Merger shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated, except that expenses
incurred in connection with filing, printing and mailing the Proxy Statement
shall be shared equally by Buyer and the Company whether or not the Merger is
consummated. In the event that any stamp duties are due to be paid in
connection with the execution or performance of this Agreement, such duties
shall be shared equally by Buyer and the Company, except that if the Merger is
not consummated as a result of the breach by a party of any of its
representations, warranties or covenants hereunder, such duties shall be paid
wholly by such party.
(b) In the event that (1) Buyer is not then in breach in any
material respect of any of its representations, warranties and covenants
contained in this Agreement, which breach would or would reasonably be
expected to give rise to the failure of a condition set forth in Section 6.1
or 6.2, and this Agreement is terminated pursuant to Section 7.1(b)(iii) or
Section 7.1(e) or (2) this Agreement is terminated pursuant to Section 7.1(f),
then the Company shall pay to Buyer concurrently with termination, by wire
transfer of same-day funds, a fee of $7,000,000 (the "Termination Fee");
provided, that if this Agreement is terminated pursuant to Section
7.1(b)(iii), then the Company shall pay to Buyer a Termination Fee only if an
Acquisition Proposal has been announced and not publicly withdrawn prior to
the date of the Company Shareholder Meeting.
(c) If (i) after the date of this Agreement, any Person
publicly announces an Acquisition Proposal which has not been publicly
withdrawn and (ii) this Agreement is terminated by Buyer pursuant to Section
7.1(c) and at the time of termination Buyer is not in breach in any material
respect of any of its representations, warranties and covenants contained in
this Agreement, which breach would or would reasonably be expected to give
rise to the failure of a condition set forth in Section 6.1 or 6.2, then the
Company shall pay to Buyer concurrently with termination, by wire transfer of
same-day funds a fee equal to 50% of the Termination Fee. If, within 12 months
after the date of this Agreement the Company enters into a definitive
agreement to consummate, or consummates, the transactions contemplated by such
Acquisition Proposal, then, if such Acquisition Proposal is consummated, the
Company shall pay to Buyer by wire transfer of same-day funds the remaining
50% of the Termination Fee on the date of consummation of such Acquisition
Proposal.
(d) If applicable, the Termination Fee shall not be payable
more than once pursuant to this Section 7.3.
(e) In the event that the Termination Fee is payable to
Buyer pursuant to Sections 7.3(b) or (c), the Company shall, in addition to
payment of the Termination Fee, reimburse Buyer for the out-of-pocket expenses
of Buyer and its financing sources, including, without limitation, the
reasonable fees and expenses payable to their legal, accounting, financial and
professional advisers, relating to the Merger or the transactions contemplated
by this Agreement, but, in no event, more than $1,000,000.
(f) Solely for the purposes of the last sentence of Section
7.3(c), the term "Acquisition Proposal" shall have the meaning assigned to
such term in Section 5.7(e), except that all references to "20%" shall be
changed to "50%".
(g) If the Company fails to promptly make any payment
required under this Section 7.3 and Buyer commences a suit to collect such
payment, then, to the extent that the Buyer prevails in any such action, the
Company shall indemnify Buyer for its fees and expenses (including reasonable
attorneys fees and expenses) incurred in connection with such suit and shall
pay interest on the amount of the payment at the prime rate of Citibank, N.A.
(or its successors or assigns) in effect on the date the payment was payable.
7.4 Amendment. Subject to applicable Law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Buyer, Merger Sub and the Company;
provided, however, that after the vote by the shareholders of the Company,
there shall not be made any amendment that by Law requires further approval by
such shareholders without the further approval of such shareholders.
7.5 Extension; Waiver. At any time prior to the Closing Date, any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto
and (iii) waive compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Delay in exercising any
right under this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The
representations and warranties of the Company, Buyer and Merger Sub contained
in this Agreement shall terminate and be of not further force and effect as of
the Closing, and only the covenants that by their terms contemplate
performance after the Closing shall survive the Closing.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at
the following addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like notice):
(a) if to Buyer, to:
UGS Corp.
5800 Granite Parkway
Suite 600
Plano, Texas 75024
Fax: 972-987-3385
Attn: Thomas Lemberg
Senior Vice President,
General Counsel & Secretary
with a copy to:
Ropes & Gray LLP
One International Place
Boston, MA 02110
Fax: 617-951-7050
Attention: David C. Chapin, Esq.
and to:
Yigal Arnon & Co.
22 Rivlin Street
Jerusalem 94263 Israel
Fax: 972-2-623-9236
Attention: Barry Levenfeld, Adv.
(b) if to the Company, to:
Tecnomatix Technologies Ltd.
Delta House, 16 Abba Eban Ave.
Herzlia 46120 Israel
Fax: 972-9-954-4402
Attn: Efrat Safran
General Counsel and Corporate Secretary
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Fax: 212-735-2000
Attention: David J. Friedman, Esq.
and to:
Meitar, Liquornik, Geva & Leshem Brandwein
16 Abba Hillel Silver Road
Ramat Gan 52506 Israel
Fax: 972-3-610-3111
Attention: Dan Shamgar, Adv.
8.3 Construction.
(a) For the purposes of this Agreement, except as otherwise
expressly provided herein or unless the context otherwise requires: (i) words
using the singular or plural number also include the plural or singular
number, respectively, and the use of any gender herein shall be deemed to
include the other genders; (ii) references herein to "Articles," "Sections,"
"subsections" and other subdivisions, and to Exhibits, Schedules, Annexes and
other attachments, without reference to a document are to the specified
Articles, Sections, subsections and other subdivisions of, and Exhibits,
Schedules, Annexes and other attachments to, this Agreement and each item
disclosed in the Company Disclosure Schedule or the Buyer Disclosure Schedule
is identified by reference to, or has been grouped under a heading referring
to, a specific individual section of this Agreement; (iii) a reference to a
subsection or other subdivision without further reference to a Section is a
reference to such subsection or subdivision as contained in the same Section
in which the reference appears; (iv) the words "herein," "hereof,"
"hereunder," "hereby" and other words of similar import refer to this
Agreement as a whole and not to any particular provision; (v) the words
"include," "includes" and "including" are deemed to be followed by the phrase
"without limitation"; (vi) all accounting terms used and not expressly defined
herein have the respective meanings given to them under U.S. GAAP, as
applicable; (vii) when an item is described as having been "delivered", it was
included in a "data room" located at the London offices of Skadden, Arps,
Meagher, Slate & Flom LLP or otherwise provided by the Company or its
Representatives to Buyer or its Representatives; and (viii) all references to
"dollars" or "$" are to United States dollars and all references to "NIS" are
to New Israeli shekels.
(b) For the purposes of this Agreement, the term "affiliate"
shall have the meaning set forth in Rule 12b-2 of the Exchange Act.
(c) For the purposes of this Agreement, the term "Knowledge"
means with respect to a party hereto, with respect to any matter in question,
(i) the actual knowledge of the directors and executive officers of such party
and (ii) the knowledge that any of such persons would be reasonably expected
to have after making reasonable inquiry of those persons employed by the
Company and its subsidiaries or Buyer and its subsidiaries, as the case may
be, and such party's outside advisors, in each case, who would reasonably be
expected to have actual knowledge of the fact or other matter in question.
(d) For the purposes of this Agreement, the term "Person"
means individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
Governmental Entity or other legal entity.
(e) For purposes of this Agreement, the term "subsidiary" of
any Person shall mean any Person of which such first Person (either alone or
through or together with one or more of it subsidiaries) owns, directly or
indirectly, 50% or more of the capital stock or other equity interests, the
holders of which are (i) generally entitled to vote for the election of the
board of directors or other governing body of such Person or (ii) generally
entitled to share in the profits or capital of such Person.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts (including counterparts executed and delivered by facsimile,
which shall be as counterparts executed and delivered manually), all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other party, it being understood that all parties need not sign the
same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and
the documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Confidentiality
Agreement, the Company Disclosure Schedule and the Buyer Disclosure Schedule:
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, it being understood that the Confidentiality Agreement shall continue
in full force and effect until the Closing and shall survive any termination
of this Agreement except as provided in Section 7.2 hereof; and (b) except as
set forth in Section 5.9, are not intended to confer upon any other Person any
rights or remedies hereunder.
8.6 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
provision had never comprised a part hereof, (c) the remaining provisions of
this Agreement will remain in full force and effect and will not be affected
by such provision or its severance herefrom and (d) in lieu of such provision,
there will be added automatically as a part of this Agreement a legal, valid
and enforceable provision as similar in terms to such provision as may be
possible.
8.7 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of
any one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any
provision of this Agreement were not performed in accordance with its specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to seek an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.8 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the Laws of the State of New York, without
giving effect to any choice of Law or conflict of Law provision or rule that
would cause the application of the Laws of any other jurisdiction; provided,
however, that (a) any matter involving the internal corporate affairs of the
Company or any party hereto shall be governed by the provisions of the
jurisdictions of its incorporation and (b) the form and content of the Merger
and consequences thereof shall be governed by the Israeli Companies Law.
8.9 Rules of Construction. The parties hereto agree that they have
jointly drafted and have been represented by counsel during the negotiation
and execution of this Agreement and, therefore, waive the application of any
Law, regulation, holding or rule of construction providing that ambiguities in
an agreement or other document will be construed against the party drafting
such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
8.11 Personal Liability. This Agreement shall not create or be deemed
to create or permit any personal liability or obligation on the part of any
direct or indirect shareholder of the Company or Buyer or any officer,
director, employee, agent, representative or investor of any party hereto.
8.12 Consent to Jurisdiction and Service of Process. EACH PARTY
HERETO CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL OR, TO THE EXTENT
NOT AVAILABLE, STATE COURT LOCATED WITHIN THE COUNTY OF NEW YORK IN THE STATE
OF NEW YORK AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE LITIGATED ONLY
IN SUCH COURTS. EACH PARTY HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
SUCH COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF SUCH COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED
OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT THE ADDRESS SPECIFIED IN
THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 15 CALENDAR DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF
EITHER PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS, NOTICES AND
DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
8.13 WAIVER OF JURY TRIAL. EACH OF BUYER, MERGER SUB AND THE COMPANY
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF BUYER, MERGER SUB OR THE
COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized respective officers as of the date first
written above.
TECNOMATIX TECHNOLOGIES LTD.
By: /s/ Harel Beit-On
-------------------------------
Name: Harel Beit-On
Title: Chairman
UGS CORP.
By: /s/ A. J. Affuso
-------------------------------
Name: A. J. Affuso
Title: Chairman, CEO and President
TREASURE ACQUISITION SUB LTD.
By: /s/ Barry Levenfeld
-------------------------------
Name: Barry Levenfeld
Title: Director