Exhibit 4.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
on this 5 day of December 2004, by and between, Teleknowledge Group Ltd., an
Israeli Company ("Parent") and Teleknowledge, Inc. (the "Subsidiary", and
together with Parent, the "Seller") and MER Telemanagement Solutions Ltd.
("Buyer"), an Israeli company.
WHEREAS Seller is engaged in the research, design, development,
engineering, manufacture, marketing, distribution, sale and licensing of
adaptive billing software products and services; and
WHEREAS Buyer desires to purchase from Seller and Seller desires to sell
to Buyer certain of the assets, properties, rights and claims of Seller and to
assume certain liabilities of the Seller related to the assets acquired thereby,
on the terms and conditions set forth herein; and
NOW, THEREFORE, the Parties agree as follows:
1. INTERPRETATION
1.1 Certain Definitions. For purposes of this Agreement (including any and
all Schedules, Exhibits and amendments made to or incorporated herein now or in
the future), the following capitalized terms shall have the following meaning:.
1.1.1. "Affiliate" shall mean with respect to any Person (i) a Person
directly or indirectly controlling, controlled by or under common control with
such Person; (ii) in the case of a limited or general partnership, any partner,
affiliated partnerships managed by the same management company or managing
(general) partner or by an entity which controls, is controlled by, or is under
common control with, such management company or managing (general) partner;
(iii) a Person owning or controlling 50% or more of the outstanding voting
securities of such Person. For these purposes, control means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
1.1.2. "Assumed Liabilities" shall mean the following liabilities of the
Seller: (a) subject to Section 2.4.11 below, all unpaid or unperformed
obligations and liabilities of the Seller under the Contracts assigned to Buyer
hereunder, provided that the discharge of such liabilities or the performance of
such obligations is due after the Closing Date; (b) subject to Section 2.4.11
below, all unpaid or unperformed obligations and liabilities of the Seller under
licenses and permits assigned to Buyer hereunder, provided that the discharge of
such liabilities or the performance of such obligations is due after the Closing
Date; (c) all accounts payable of the Seller, for goods and services furnished
by a third party in connection with the Purchased Assets and deferred revenues,
provided in both cases that such liabilities are reflected in the Closing
Balance Sheet; (d) the performance of all warranty, maintenance and support
work, relating to products of the Seller manufactured and sold by the Seller,
provided that all such obligations are reflected in the Contracts assigned to
the Buyer hereunder; (e) liabilities in connection with the Contracts assigned
hereunder, for repair of products or to refund the purchase price therefor as a
result of defects in materials or workmanship provided that no notice of such
defects or damage shall have been given to the Seller prior to the Closing; and
(f) the Chief Scientist's Rights for the period after the Closing Date.
1.1.3. "Authority" shall mean any governmental, regulatory or
administrative body, agency or authority, any court of judicial authority, any
arbitrator or any public, private or industry regulatory authority, whether
Israeli, international, national, United States federal, state or local.
1.1.4. "Balance Sheet" shall mean the balance sheet contained in the
Financial Statements.
1.1.5. "Balance Sheet Date" shall mean December 31, 2003.
t 6 0 1.1.6. "Business" shall mean Seller's strategic adaptive billing
solutions, including the billing and customer care platform known as Total-e,
and multiple applications built on top of it.
1.1.7. "Chief Scientist" - has the meaning set forth in the Encouragement
of Industrial Research and Development Law, 5744-1984.
1.1.8. "Chief Scientist's Rights" - means all the rights, powers and
privileges of the Ministry of Industry and Trade's Industrial Research and
Development Administration by virtue of an instrument of approval which the
Chief Scientist, by virtue of his power under Section 17(c) of the Encouragement
of Industrial Research and Development Law, 5744-1984, awarded to Seller on
28.7.98, 5.9.99 and 1.8.2000 by virtue of the undertaking and notice of the
commencement of an approved research and development scheme, which Seller gave
to the Industrial Research and Development Administration, including
restrictions on certain of the Seller Intellectual Property and the rights to
receive royalty payments from Seller, which are being assumed by Buyer
hereunder.
1.1.9. "Closing" shall mean the consummation of the transactions
contemplated in this Agreement.
1.1.10. "Closing Date" shall mean the date upon which the Closing occurs.
1.1.11. "Confidentiality Agreement" shall mean the agreement entered
between Seller and Buyer dated February 25 2004.
1.1.12. "Contracts" have the meaning set forth in Section 4.8 hereof.
1.1.13. "Distribution" shall have the meaning set forth in Section 10.3.
1.1.14. "Encumbrance" shall mean any lien, pledge, mortgage, security
interest, lease, charge, attachment or any other third party right, other than
the Chief Scientist Rights.
1.1.15. "Escrow Agent" shall mean M. Zeligman Trust Holding Co. (1991)
Ltd. who is the person mutually chosen by the Buyer and the Seller to act as the
escrow agent under the Escrow Agreement, or any successor thereof.
1.1.16. "Escrow Agreement" as defined in Section 3.2.3.
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1.1.17. "Excluded Assets" shall mean (a) the corporate charter, taxpayer
and other identification numbers, seals, minute books, stock transfer books,
blank stock certificates, and other documents relating to the organization,
maintenance, and existence of the Parent and the Subsidiary as corporations; (b)
tax refunds and tax losses attributed to periods prior to Closing Date; (c) all
cash and cash equivalents or any investments, including any interest thereon,
and all equity securities held by Seller; (d) any security deposits related to
facilities or equipment; (e) all claims, causes of action, rights of recovery
and rights of set-off of any kind with respect to events prior to the Closing
Date; (f) all personnel records and other records which the Company is required
by law to retain in its possession, provided that a copy thereof is furnished to
Buyer and (g) all cash collected by Buyer or Seller after the Closing Date,
provided that such cash is derived solely from the collection of accounts
receivable, duly recorded by Seller as of the Closing Date, which shall have not
been reflected in the Closing Balance Sheet and (h) any real property owned or
leased by Seller.
1.1.18. "Excluded Liabilities" shall have the meaning set forth in Section
2.4.
1.1.19. "Financial Statements" shall mean the audited balance sheets of
Seller as of December 31, 2002 and as of December 31, 2003 and the related
statements of operations, accumulated deficits and cash flows for the periods
then ended, audited by Seller's independent certified public accountant, whose
reports thereon are included therewith, and the unaudited balance sheet of
Seller as of September 30, 2004, and the related statements of operations,
accumulated deficits and cash flows for the periods then ended. Seller shall
cause the unaudited statements as of September 30, 2004 to be reviewed promptly,
but not more than 14 days from the date hereof, by the Seller's independent
certified public accountant, whose reports thereon shall be attached to such
audit and delivered to Buyer. The Financial Statements are and will be, as the
case may be, attached hereto as Exhibit D.
1.1.20. "GAAP" shall mean US generally accepted accounting principles.
1.1.21. "Law" shall mean any applicable law, statute, regulation,
ordinance, requirement, announcement or other binding action or requirement of
an Authority.
1.1.22. "Losses" shall mean all damages, awards, judgments and other
losses, including reasonable attorney's fees.
1.1.23. "Material Adverse Change" or "Material Adverse Effect" or other
similar phrases including the word "material" with respect to the financial
condition, assets, liabilities, obligations, business, operations or prospects
of the respective Party shall mean any matter which would have a material
adverse effect on the Party's financial condition, assets, liabilities,
obligations, business, operations, or ability to consummate the transactions
contemplated hereby, or a material adverse effect on the value of the Purchased
Assets.
1.1.24. "Order" shall mean any decree, order, judgment, writ, award,
injunction, rule or consent of or by an Authority.
1.1.25. "Person" shall mean any entity, corporation, company, association,
limited liability company, joint venture, joint stock company, partnership,
trust, organization, individual (including personal representatives, executors
and heirs of a deceased individual), nation, state, government (including
agencies, departments, bureaus, boards, divisions and instrumentalities
thereof), trustee, receiver or liquidator.
1.1.26. "Preferred Shareholders" shall mean the holders of Seller's Series
A Preferred Shares, as listed in Exhibit A.
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1.1.27. "Purchase Consideration" shall have the meaning specified in
Section 2.5 hereof.
1.1.28. "Purchased Assets" shall have the meaning specified in Section
2.2.
1.1.29. "Seller Disclosure Schedule" shall have the meaning set forth in
Section 4, and is attached hereto as Exhibit B.
1.1.30. "Seller Intellectual Property" shall mean all intangible
properties owned by Seller or in which Seller has any interest. The Seller
Intellectual Property shall include (i) the name "Teleknowledge" and all other
registered and unregistered trademarks, service marks, trade names, domain names
and slogans, all applications therefor, and all associated goodwill; (ii) all
registered copyrights, all applications therefor and all associated goodwill;
(iii) all patents and patent applications, all associated technical information,
know-how, trade secrets, processes, operating, maintenance and other manuals,
drawings and specifications, process flow diagrams and related data, and all
associated goodwill; (iv) all software and documentation thereof (including all
electronic data processing systems and program specifications, source codes,
input data and report layouts and format, record file layouts, diagrams,
functional specifications, narrative descriptions and flow charts); (v) all
other inventions, discoveries, improvements, processes, formulae (secret or
otherwise), data, drawings, specifications, trade secrets, proprietary rights,
know-how and ideas (including those in the possession of third parties, but
which are the property of Seller), and all drawings, records, books or other
tangible media embodying the foregoing; (vi) confidential technology (including
know-how and show-how), manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information, (vii) copies and tangible
embodiments of all the foregoing, in whatever form or medium, and (viii) all
rights to obtain and rights to apply for patents, and to register trademarks and
copyrights.
1.1.31. "Technology" means the technology owned by Seller as such is
described in Section 4.12.3 of the Seller Disclosure Schedule.
1.1.32. "Transferred Employees" shall have the meaning set forth in
Section 6.6.2.
1.2 Construction of Certain References. In this Agreement: (i) words in
the singular include the plural and in the plural include the singular; (ii) the
word "or" is not exclusive; (iii) the word "including" shall mean including,
without limitation; and (iv) any reference to any Law is deemed to refer to all
applicable and relevant laws (including case law), statutes, codes or ordinances
and all rules and regulations promulgated thereunder, unless the context
otherwise requires.
1.3 Headings. The Section and other headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
1.4 Incorporation of Exhibits and Schedules. Any references to Sections,
Schedules and Exhibits are to Sections of, and Schedules and Exhibits to, this
Agreement unless otherwise indicated. The Exhibits and Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof.
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2. THE TRANSACTION
2.1 Purchase and Sale of Assets. Subject to the terms and conditions set
forth in this Agreement and in reliance upon the representations and warranties
of Seller and Buyer herein set forth, at the Closing, Seller shall sell,
transfer, convey, assign and deliver to Buyer, by appropriate deeds, bills of
sale, assignments and other instruments reasonably satisfactory to Buyer and its
counsel the Purchased Assets (other than the Excluded Assets) free and clear of
any Encumbrance, and Buyer shall purchase from Seller, all of the Seller's
right, title and interest, as of the Closing Date, in and to the Purchased
Assets (other than the Excluded Assets).
2.2 Definition of Purchased Assets. For all purposes of and under this
Agreement, the term "Purchased Assets" shall mean, refer to and include all the
Business, goodwill, assets, properties and rights of every nature, kind and
description, whether tangible or intangible, real, personal or mixed, wherever
located and whether or not carried or reflected on the books and records of
Seller, which are owned by Seller or in which Seller has any interest (including
the right to use), as of the date hereof, or arising from or on account of the
conduct of the Business prior to the Closing, but excluding (i) the Excluded
Assets, and (ii) any of the Purchased Assets sold prior to the Closing Date in
the ordinary course of business, consistent with past practices. The Purchased
Assets shall include, but not be limited to, the following (except to the extent
any item below or aspect thereof is defined as an Excluded Asset):
2.2.1. all Seller Intellectual Property and Technology, and the goodwill
associated therewith, licenses and sublicenses granted and obtained with respect
thereto, rights thereunder, remedies against infringements thereof, and rights
to protection of interests therein under the applicable laws of all
jurisdictions;
2.2.2. all tangible property, including without limitation, furniture,
office equipment and computers, inventory, work in progress and software
licenses, to the extent listed in Section 4.14(a) of the Seller Disclosure
Schedule;
2.2.3. all rights, title or interest in or to the Contracts related to the
Purchased Assets or the Business.
2.2.4. originals or true copies of all books, records, ledgers, files,
documents, correspondence, customer, supplier, advertiser- circulation and other
lists (including subscribers), invoices and sales data, creative, advertising
and other promotional materials, studies, reports, and other printed or written
materials or data;
2.2.5. Subject to the provision of Section 2.5.3(e), all cash collected by
Seller or Buyer after the Closing Date, provided such cash shall have been
reflected in the Closing Balance Sheet as accounts receivables, and for the
avoidance of doubt, all cash deriving from recognized revenues recorded by
Buyer, in accordance with GAAP, after the Closing Date, even if paid by any
customer directly to Seller;
2.2.6. all claims, actions, deposits, prepayments, warranties, refunds,
causes of action, rights of recovery, rights of set off, and rights of
recoupment of any kind or character.
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2.2.7. all permits, certificates, licenses, orders, approvals and other
authorizations of all Authorities necessary for the ownership, maintenance and
operation of the Business, to the extent the same may be transferred by Seller.
2.3 Assumption of Liabilities. As part of the Consideration for the
purchase and sale of the Purchased Assets, Buyer shall, from and after the
Closing Date, assume, perform, discharge and pay all the Assumed Liabilities and
will pay, perform and discharge all such liabilities as they become due.
2.4 Exclusion of Certain Liabilities. Notwithstanding anything to the
contrary contained above or elsewhere in this Agreement, the debts, liabilities
and obligations assumed by Buyer hereunder shall not include any of the debts,
liabilities and obligations not specifically assumed by the Buyer in accordance
with Section 2.3 above, without regard to whether they are known or unknown,
contingent or otherwise and whether they arose before or after the date hereof
(the "Excluded Liabilities"), and all such liabilities, obligations and debts
shall remain the sole obligation of the Seller. For the avoidance of doubt, the
following liabilities shall be deemed Excluded Liabilities:
2.4.1. Any liability or obligation in respect of the Excluded Assets;
2.4.2. All debts, obligations and liabilities of Seller to its Affiliates,
including without limitation, accounts payable and accrued expenses, and all
interest expense and indebtedness for borrowed money or guaranties thereof or
agreements to be responsible therefor (whether with or towards an Affiliate of
Seller or any other third party);
2.4.3. Income taxes and any amounts owing under any tax sharing agreement
between Seller and any of its Affiliates;
2.4.4. All liabilities, if any, in connection with the past and present
employees of the Seller arising prior to the Closing Date, including all
liabilities in connection with the Transferred Employees that have accrued (and
not otherwise transferred to such Employee by Seller) through the Closing Date
including, without limitation, salaries, benefits, retention bonus(es), vacation
pay, payments to managers' insurance policies, employer's social security
matching funds, workman's compensation payments, education funds, pension funds,
provident funds, severance pay funds, and any other funds to which any of the
Transferred Employees would be entitled until the Closing Date (by applicable
law, custom or agreement);
2.4.5. Any liability with respect to the Seller's share option plans;
2.4.6. All liabilities and obligations of Seller under this Agreement and
any agreement executed pursuant hereto or contemplated hereby;
2.4.7. All legal, accounting, brokerage, finder's fees, if any, taxes or
other expenses incurred by Seller in connection with this Agreement or the
consummation of the transactions contemplated hereby;
2.4.8. Debts, liabilities or obligations of Seller of any nature to any
past or present shareholder of Seller, including any liability or obligation of
Seller or the Seller's shareholders arising or incurred in connection with the
negotiation, preparation and execution of this Agreement and the transactions
contemplated hereby, including fees and expenses of counsel, accountants and
other experts;
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2.4.9. Any Israeli or U.S. federal, state, local, foreign and other taxes,
assessments, or other governmental charges, including, without limitation,
income, estimated income, business, occupation, franchise, property, sales, use,
employment or withholding taxes, including interest, penalties and additions in
connection therewith ("Taxes") for periods prior to the Closing;
2.4.10. Any liabilities and obligations of the Seller under any contracts,
agreements, commitments, arrangements or other undertakings which are not
Contracts;
2.4.11. Any liability resulting from the breach of any of the obligations
of Seller under any Contract, occurring prior to the Closing Date;
2.4.12. Other than as provided in Section 1.1.2(e) above (regarding the
repair of products or the refund of the purchase price therefor as a result of
defects in materials or workmanship), any claim, suit or proceeding, relating to
or arising from any event occurring prior to the Closing, whether or not known,
asserted, threatened or pending prior to the Closing.
2.4.13. Any liability arising from accidents, events, occurrences,
misconduct, breach of fiduciary duty or action taken or omitted to be taken at
or prior to the Closing, by the Seller or any of its employees, directors,
officers or representatives, regardless of whether or not it is covered by
insurance.
2.4.14. the Chief Scientist's Rights for the period prior to the Closing
Date.
2.4.15. All other contingent liabilities of Seller, to the extent not
included in the Assumed Liabilities.
2.5 Consideration for the Sale and Transfer.
2.5.1. Purchase Consideration. The consideration to be paid by Buyer to
Seller for the Purchased Assets (the "Purchase Consideration") shall be
comprised of the following (a) the assumption by Buyer of the Assumed
Liabilities and (b) payment at Closing of the aggregate amount of three million
United States dollars (US$ 3,000,000) (the "Initial Consideration") of which two
million three hundred thousand United States dollars (US$ 2,300,000) will be
delivered to Seller and seven hundred thousand United States dollars (US$
700,000) (the "Escrow Funds") will be delivered to the Escrow Agent to be held
by the Escrow Agent in accordance with the Escrow Agreement (as defined below)
for a period of Twelve (12) months following the Closing Date. Value Added Tax,
as required by law, will be added to the Purchase Consideration and paid by
Buyer at the Closing by the delivery of a check post dated to the next coming
payment due date of the Value Added Tax, against the issuance of an applicable
tax receipt, unless Buyer shall provide Seller with a valid exemption with
respect to the payment of such Value Added Tax.
2.5.2. Adjustment of the Purchase Consideration. The Parties agree that if
Seller's reviewed but unaudited statement of income, as provided in accordance
with Section 1.1.19 above, shows recognized revenues (recorded in accordance
with GAAP, as consistently applied by Seller in the 24 months prior to the date
hereof) for the first 3 quarters of 2004, of less than US$ 1,500,000, then the
Initial Consideration shall be reduced and recalculated in accordance with the
following formula (the "Reduced Initial Consideration"):
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RIC = ARR x 3,000,000
---------------
1,500,000
RIC = Reduced Initial Consideration
ARR = Actual Recognized Revenues during the first 3 quarters of 2004
If the Parties shall be in dispute as to whether or not the recognized
revenues reflected in the reviewed Financial Statements for the first 3
quarters of 2004 are correctly recorded in accordance with GAAP, then they
shall refer the dispute to such partner of Deloitte & Touche Israel as
shall be designated by the managing partner thereof (the "Independent
Auditor") for the purpose of its resolution. The Independent Auditor shall
review this Agreement and each of the Party's arguments supporting
evidence and shall render, as promptly as possible, a decision with
respect to the dispute. The determination of the Independent Auditor shall
be final and binding on both parties. Each of the Parties shall bear its
own costs and expenses in connection with the resolution of the said
dispute and the Parties shall pay the fees of the Independent Auditor in
equal parts, unless the Independent Auditor shall determine otherwise.
If the Initial Purchase Consideration shall be reduced in accordance
with the above formula, then the amount of the Escrow Funds shall not be
reduced.
2.5.3. Additional Adjustment of the Initial Consideration. The Initial
Consideration or the Reduced Initial Consideration, as the case may be, shall be
adjusted by the payment of an additional amount in cash by Buyer to Seller or
the deduction of such amount from the Initial Consideration or the Reduced
Initial Consideration, as the case may be, payable to Seller (the "Cash
Adjustment"), which shall be calculated in accordance with the following
provisions:
(a) Prior to the Closing Date, Seller and Buyer shall cooperate in
the preparation of a pro-forma Closing Date balance sheet for
the Purchased Assets and Assumed Liabilities, to be prepared
in accordance with GAAP, except as contemplated by this
Section 2.5.2, and reviewed by the Seller's auditors (the
"Closing Balance Sheet").
(b) The Closing Balance Sheet shall be prepared as of a date which
is one (1) business day prior to the Closing Date, and shall
include only the following items: (i) all accounts receivable;
(ii) all accounts payable; and (iii) all deferred revenues
arising in respect of work in progress or products delivered
by Seller in connection with any Contract with Seller's
customers; provided, however, that the value of the deferred
revenues shall be calculated in accordance with GAAP; and that
no accounts receivable shall be included in the Closing
Balance Sheet if such accounts are older than 180 days or
reflect doubtful debts, pursuant to GAAP.
(c) In the event that there is a positive difference between the
aggregate value of the accounts receivable (in this Section
2.5.3, the "assets") minus the aggregate value of the accounts
payable and the deferred revenues (in this Section 2.5.2, the
"liabilities"), then at the Closing, Buyer shall pay Seller an
additional amount in cash, equal to such positive difference;
if the difference between the assets and liabilities is
negative, then at the Closing, Buyer shall deduct from the
Initial Consideration or the Reduced Initial Consideration an
amount in cash equal to such negative difference.
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(d) In the event that the Parties are unable to agree in good
faith on any of the items or amounts to be included in the
Closing Balance Sheet, three (3) business days prior to the
Closing Date, then as of the Closing, Buyer shall pay Seller
or vice versa, an amount equal to the average between the
amount payable in accordance with Seller's calculation and the
amount payable in accordance with Buyer's calculation. In such
a case, the Parties agree that within fourteen (14) days after
the Closing Date, they shall refer the dispute to the
Independent Auditor, who shall review this Agreement, the
disputed calculations and each of the Party's arguments and
shall render, as promptly as possible, a decision with respect
to the dispute. The determination of the Independent Auditor
shall be final and binding on both parties, and the Parties
shall pay or refund any amount due and payable in accordance
with such determination, plus interest at a rate of 5% per
annum, calculated from the Closing Date until the date of
payment. Each of the Parties shall bear its own costs and
expenses in connection with the resolution of the said dispute
and the Parties shall pay the fees of the Independent Auditor
in equal parts, unless the Independent Auditor shall determine
otherwise.
(e) Notwithstanding Subsection 2.5.3(c) above, should Buyer fail,
following good faith reasonable commercial efforts, to collect
any of the accounts receivable reflected in the Closing
Balance Sheet, within 120 days of the Closing Date, Seller
shall pay Buyer such uncollected amount, and Buyer shall
assign to Seller the rights to collect such funds from the
applicable customers.
2.5.4. Additional Contingent Consideration. In addition to the Initial
Consideration or the Reduced Initial Consideration, as adjusted in accordance
with Section 2.5.3 above, Buyer will pay Seller an additional contingent
consideration of (a) twenty percent (20%) of all Teleknowledge Revenues (other
than Renewal Maintenance Fees) for a period of three (3) years following the
Closing Date and (b) ten percent (10%) of all Renewal Maintenance Fees for a
period of three (3) years following the Closing Date (the "Additional Contingent
Consideration"), up to a maximum aggregate amount of three million United States
dollars (US$ 3,000,000) plus the difference, if any, between the Initial
Consideration amount and the Reduced Initial Consideration amount, plus Value
Added Tax. "Teleknowledge Revenues" means all of Buyer's recognized revenues,
with respect to the sale, transfer, assignment, license or conveyance of (i) the
Seller Intellectual Property or (ii) any product or service which contains any
elements or components of the Seller Technology or a billing solution, including
all service, customization, set-up, license and maintenance fees. "Renewal
Maintenance Fees" means (a) with respect to customers of Seller as of the
Closing Date, all maintenance fees received after the maintenance term valid as
of the closing date, (b) with respect to other customers, all maintenance fees
received after the first maintenance term. The Additional Contingent
Consideration will be paid on a quarterly basis, within forty five (45) days of
the end of the quarter, based on proceeds actually collected by Buyer from the
applicable customers in each quarter, even if received after three (3) years
following the Closing Date.
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2.6 Allocation of the Consideration. The Initial Consideration, as
adjusted pursuant to Section 2.5 and the Additional Contingent Consideration,
shall be allocated, no later than 30 days from the date hereof by the Buyer,
among the types of assets (e.g. tangible assets, intangible assets, know-how,
goodwill and non-competition agreements) and among the Parent and the
Subsidiary. Once such allocation is performed it shall be attached hereto as
Schedule 2.6. The Seller agrees to prepare and file its federal, state, local
and foreign income Tax returns and other filings reflecting the transactions
contemplated by this Agreement on a basis consistent with such allocation.
3. THE CLOSING
3.1 Time and Place. Subject to the provisions of Section 9 hereof , the
Closing shall take place at the offices of Yigal Arnon & Co., 1 Azrieli Center,
46th Floor, Round Tower, Tel Aviv, Israel, at 10:00 a.m. local time, on the
seventh (7) business day after all the conditions set forth in Section 7 have
been satisfied or waived, provided, however, that the Closing shall not occur
later than forty-five (45) days from the date hereof, or at such other time and
place as Buyer and Seller mutually agree in writing, such transactions to be
effective as of the Closing Date.
3.2 Deliveries and Transactions at the Closing. At the Closing, the
following transactions shall occur simultaneously and the following documents
will be delivered (no transaction shall be deemed to have been completed or any
document delivered until all such transactions have been completed and all
required documents delivered):
3.2.1. Delivery By Buyer. At or prior to the Closing, Buyer shall deliver
to Seller:
(a) Board Approval. Buyer shall deliver to Seller a duly certified
copy of Buyer's board of directors resolution, in the form
attached hereto as Schedule (a).
(b) Payment of the Initial Consideration. Buyer shall pay the
Initial Consideration, as adjusted pursuant to Section 2.5,
plus applicable VAT, by wire transfer, banker's check, or such
other form of payment as is mutually agreed by Buyer and
Seller.
(c) Certification. A certificate as contemplated by Section 7.3.4,
duly executed by the Chief Executive Officer of Buyer and
dated as of the Closing Date.
(d) Opinion. An opinion of Danziger, Klagsbald, Rosen & Co.,
counsel to Buyer, in the form attached hereto as Schedule
3.2.1(d), dated as of the Closing Date.
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(e) General. Any and all other instruments, certificates and
agreements contemplated by Section 6 or otherwise required in
order to effectuate the transactions contemplated by this
Agreement.
3.2.2. Delivery By Seller. At or prior to the Closing Seller shall deliver
to Buyer:
(a) Board and Shareholders Approval. A duly certified copy of the
resolutions of Sellers' boards of directors in the form
attached hereto as Schedule 3.2.2(a)(1) and extraordinary
resolutions of the shareholders in the form attached hereto as
Schedule 3.2.2(a)(2).
(b) IP Assignment. Patent and Trademark Assignment in the form
attached hereto as Schedule 3.22(b1), accompanied by a letter
of Sanford C.T. Colb & Co., as to the status of the patent and
the process for its assignment and from Eitan, Pearl, Latzer &
Cohen-Zedek, as to the status of the trademarks in the form to
be attached hereto as Schedule 3.22(b2).
(c) Assignment of Other Purchased Assets. A general Bill of Sale
and Assignment & Assumption of Liabilities relating to the
Purchased Assets, the Business and the Assumed Liabilities,
substantially in the form attached hereto as Schedule (c).
(d) General Assignment. Any and all other instruments,
certificates and agreements contemplated by Section 6.
(e) Certification. A certificate as contemplated by Section 7.3.4,
duly executed by the Chief Executive Officer of Parent and
dated as of the Closing Date.
(f) Legal Opinion. An opinion of Yigal Arnon & Co., counsel to
Seller, substantially in the form attached hereto as Schedule
3.2.2(f) dated as of the Closing Date
(g) Reviewed Financial Statements. the reviewed balance sheet of
Seller as of September 30, 2004, and the related statements of
operations, accumulated deficits and cash flows for the
periods then ended, reviewed by the Seller's independent
certified public accountant, whose reports thereon are
included therewith.
3.2.3. Escrow Agreement. At the Closing, Buyer, Seller and the Escrow
Agent shall enter into, execute and deliver the escrow agreement in the form
attached hereto as Exhibit C (the "Escrow Agreement").
3.3 Nontransferable Assets. To the extent that any Contract to be
conveyed, assigned or transferred, to Buyer pursuant hereto, or any claim, right
or benefit arising thereunder or resulting therefrom, is not capable of being
conveyed, assigned or transferred without the approval, consent or waiver of the
other Party thereto or if such conveyance, assignment or transfer or attempted
conveyance, assignment or transfer would constitute a breach or termination
right thereof or a violation of any law, decree, order, regulation or other
governmental edict, then except as expressly otherwise provided herein (and
without derogating from the provisions of Section 7.2.3 below), this Agreement
shall not constitute a conveyance, assignment or transfer thereof, or an
attempted sale, conveyance, assignment or transfer thereof absent such
approvals, consents or waivers; provided, however, that Seller shall use its
best efforts to obtain all such approval, consents or waivers. From and after
the Closing, Seller shall promptly pay to Buyer when received all monies
received by Seller following the Closing Date, which are connected to or arising
from the Purchased Assets and Seller shall promptly pay to Buyer when received
all monies received by Buyer following the Closing Date which are connected to
or arising from the Excluded Assets.
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4. REPRESENTATIONS AND WARRANTIES OF SELLER. Parent and the Subsidiary
jointly and severally represent and warrant to Buyer that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement, except as set forth in the Seller disclosure schedule accompanying
this Agreement (the "Seller Disclosure Schedule"). The Seller Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
4.1 Organization and Qualification. Parent is a private company duly
organized and validly existing under the laws of the State of Israel. The
Subsidiary is duly organized and validly existing under the laws of the State of
Delaware. Each of Parent and the Subsidiary has all requisite corporate power
and authority to carry on the Business as now conducted and to own and operate
the Purchased Assets, is duly qualified to do business as a foreign company and
is in good standing in each jurisdiction where the character of the Purchased
Assets or the nature of the Business makes such qualifications necessary.
4.2 Subsidiaries. (a) All of Parent's current or former subsidiaries are
listed in Section 4.2(a) of the Seller Disclosure Schedule, which specifies the
percentage of Parent's equity interest in each subsidiary and the jurisdiction
of such subsidiary. Except as set forth in Section 4.2(a) of the Seller
Disclosure Schedule, Parent and the Subsidiary do not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity, nor are they, either directly or indirectly, a
participant in any joint venture, partnership, or similar arrangement. Except as
the context otherwise dictates, all references to Seller in the representations
and warranties set forth in this Section 4 refer to each of Parent and the
Subsidiary.
(b) Other than as set forth in Section 4.2(b) of the Seller
Disclosure Schedule, none of the current or former subsidiaries of Parent listed
on Section 4.2(a) of the Seller Disclosure Schedule (i) have conducted any
activity since September 2003, (ii) own or are otherwise in possession of any of
the Technology or any other assets relating to the Business, or assets which may
compete in any way with the Business, (iii) disposed any assets relating to the
Business or any Technology at any time in the past (other than in the ordinary
course of business, pursuant to license agreements with customers, through the
entering into agreements substantially in the form previously presented to
Buyer), which disposal may result in the ability of third parties to develop and
market competing billing solutions products, and (iv) are parties to any
contract or agreement with any third party the performance of which has not yet
been completed thereby.
4.3 Authorization. All corporate action on the part of Seller, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement and the performance of all obligations of Seller
hereunder has been taken, and this Agreement and any obligations contemplated
herein constitute and will constitute as of the Closing valid and legally
binding obligations of Seller, enforceable in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
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4.4 Adequacy and Sufficiency of Purchased Assets. The instruments and
documents to be delivered by Seller to Buyer at or immediately following the
Closing shall be adequate and sufficient to vest in Buyer all of Seller's
rights, titles and interests in or to the Purchased Assets, which rights, titles
and interests shall be free and clear of any Encumbrances.
4.5 Financial Statements. The Financial Statements previously furnished to
Buyer have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated and with each other. The Financial Statements
fairly present in all material respects the financial condition and operating
results of Seller or any material part of the Purchased Assets as of the dates,
and for the periods, indicated therein.
4.6 Absence of Certain Changes. Except as set forth in Section 4.6 of the
Seller Disclosure Schedule, to Seller's best knowledge, after due investigation,
since the Balance Sheet Date, there has not occurred: (i) any change, event or
condition that has resulted or is reasonably likely to result in a Material
Adverse Effect on Seller; (ii) any acquisition, sale or transfer of any material
asset of Seller or any material part of the Purchased Assets (except as
contemplated by this Agreement); (iii) any change in accounting methods or
practices by Seller or any revaluation by Seller of any of its assets or
properties; (iv) any material contract entered into by Seller, or any material
amendment of, or default under, any contract to which Seller is a Party or by
which it is bound; (v) any amendment or change to Parent's or the Subsidiary's
Articles of Association or other incorporation documents; (vi) any increase in
or modification of the compensation or benefits payable or to become payable by
Seller to any of its directors or employees; (vii) any material damage,
destruction or other casualty loss (whether or not covered by insurance)
affecting the Business or any Purchased Asset; (viii) any capital expenditure,
or commitment for a capital expenditure, for additions or improvements to
property, plant and equipment not consistent with prior practice; (ix) the
incurrence of any debt, liability or obligation, whether direct or indirect,
accrued, absolute, contingent or otherwise, other than in the ordinary course of
business consistent with past practice; (x) a waiver or release of any rights of
material value, or a cancellation, compromise, release or assignment of any
indebtedness owed to it or any claims held by it, other than in the ordinary
course of business, consistent with past practice; or (xi) a sale, transfer or
disposition of any of the Seller Intellectual Property, other than grant of
licenses in the ordinary course of business to customers of the Seller.
4.7 Absence of Undisclosed Liabilities. Except as set forth in Section 4.7
of the Seller Disclosure Schedule, Seller has no liabilities (whether known,
unknown, absolute, accrued, contingent or otherwise) relating to or arising with
respect to the Business, other than (i) those liabilities set forth or
adequately provided for in the Balance Sheet; (ii) those liabilities not
required to be set forth in the Balance Sheet under GAAP; (iii) those
liabilities incurred in the ordinary course of business and in a manner
consistent with past practice since the Balance Sheet Date which have not had,
and are not likely to have (alone or in aggregate) a Material Adverse Effect;
(iv) those liabilities incurred in connection with the execution and delivery of
this Agreement.
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4.8 Contracts.
4.8.1. Section 4.8.1 of the Seller Disclosure Schedule sets forth a
complete and accurate list of all material contracts, agreements, arrangements
or understandings, whether written or oral, to which Seller is a party, which
relate to or arise from the Business or by which any of the Purchased Assets or
any part thereof may be bound (the "Contracts"). Section 4.8.1 of the Seller
Disclosure Schedule also contains a summary of all material rights and
obligations of Seller under any oral Contract.
4.8.2. Each Contract is valid and binding and is in full force and effect.
No event has occurred which is or, after the giving of notice or passage of
time, or both, would constitute a material default under or a material breach of
any Contract by Seller or, to Seller's knowledge, after due investigation, by
any other party thereto.
4.8.3. Other than as listed in Section 4.8.3 of the Seller Disclosure
Schedule, all of the Contracts are assignable to Buyer, in accordance with the
terms of this Agreement, without the need to obtain the consent of the other
party to the Contract with respect to such assignment, and such assignment shall
not effect the validity, enforceability or any of the Seller's rights under each
such Contract.
4.9 Compliance with Other Instruments.
4.9.1. Parent and each Subsidiary are not in violation or default of any
provision of their respective Memorandum of Association or Articles of
Association, or any similar organizational document or, to the best of Seller's
knowledge, any provision of any statute, rule or regulation known by Seller to
be applicable to Seller or the Business which could have a Material Adverse
Effect or could result in the imposition of any fine or penalty on Seller.
4.9.2. Seller has all permits, certificates, licenses, orders, approvals
and other authorizations of all Authorities that are required for the ownership,
maintenance or operation of the Purchased Assets and the conduct of the
Business, all of which are included in Section 4.9.2 of the Seller Disclosure
Schedule, except where the absence thereof would not have a Material Adverse
Effect. Seller is not aware of any action, pending or threatened, to cancel,
modify or refuse to renew any such permits, certificates, licenses, orders,
approvals and other authorizations as a result of the transactions contemplated
by this Agreement or otherwise.
4.9.3. The execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, Order or Contract or an event that results in the creation of any
Encumbrance upon any assets of Seller or the suspension, revocation, impairment,
forfeiture, or non-renewal of any material permit, license, authorization, or
approval applicable to Seller or the Business, or the operations or any of its
assets or properties (including the Purchased Assets), other than as
contemplated by Sections 3.3 and 7.2.3, or as would not have a Material Adverse
Effect.
4.10 Governmental Consents. Except as set forth in Section 4.10 of the
Seller Disclosure Schedule, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Authority on the part of Seller is required in connection with the fulfillment
of the obligations of Seller under this Agreement or any of the Exhibits hereof
or the consummation of the transactions contemplated hereby or thereby.
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4.11 Litigation. Except as set forth in Section 4.11 of the Seller
Disclosure Schedule, there is no legal action, suit, claim or other proceeding
in any court of law pending, or to the knowledge of Seller after due
investigation threatened in writing against Seller and no notice in any such
respect has been submitted to Seller, that questions the validity of this
Agreement, or the right of Seller to enter into this Agreement, or to consummate
the transactions contemplated hereby, or that might result, either individually
or in the aggregate, in any Material Adverse Effect on Seller or any change in
the current equity ownership of Seller or affect any of the Purchased Assets or
any of the Assumed Liabilities. Seller is not a Party to nor is it subject to
the provisions of any Order of any court, Authority or instrumentality. There is
no action, suit, proceeding or investigation initiated by Seller, currently
pending or that Seller intends to initiate.
4.12 Seller Intellectual Property and Technology.
4.12.1. Section 4.12.1 of the Seller Disclosure Schedule sets forth all
patents, patent applications, service marks, product registrations, trademarks,
trademark applications, trade names, trade rights, and copyrights, whether or
not registered, that relate to or arise from or are used in connection with or
held by the Business or any Contracts pursuant to which Seller had authorized
any person to use any of the Seller Intellectual Property. Section 4.12.1 of the
Seller Disclosure Schedule also includes any Contracts, material agreements or
understandings pursuant to which Seller is authorized or licensed by others to
use any of the Seller Intellectual Property. Except as otherwise indicated in
Section 4.12.1 of the Seller Disclosure Schedule, Seller is the sole and
exclusive owner of the Seller Intellectual Property and Technology and has the
sole and exclusive right, except to the extent indicated therein, to the use
thereof. At the Closing or as promptly thereafter as possible, Seller will
deliver original certificates of registration with respect to the Seller
Intellectual Property included within the Purchased Assets, the entire interest
in which is being transferred to Buyer.
4.12.2. Other than as set forth in Section 4.12.1 of the Seller Disclosure
Schedule, the Seller Intellectual Property does not infringe the rights of
others. To the extent that the above relates to any standard software and/or
hardware, there is no known reason denying Seller the use of these in the course
of its activities. Seller has not received any communications alleging that
Seller has violated or, by conducting its business as proposed, would violate
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity.
4.12.3. The Technology installed by the Seller prior to the Closing Date
conforms to the specifications and operational requirements set forth in Section
4.12.3 of the Seller Disclosure Schedule and to its user documentation and
related materials, and is free from material defects, errors, and faulty
workmanship in accordance with customary industry practices.
4.13 Manufacturing and Marketing Rights. Except for agreements entered
into by Seller within the normal course of business as set out in Section 4.8.1
of the Seller Disclosure Schedule, Seller has not granted rights to manufacture,
produce, assemble, license, market, or sell its products to any other person and
is not bound by any agreement that affects Seller's exclusive right to develop,
manufacture, assemble, distribute, market, license or sell its products.
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4.14 Title to Property & Assets. Seller has good and marketable title to,
or a valid leasehold interest in, all personal property included in the
Purchased Assets, free and clear of any Encumbrances. Section 4.14 of the Seller
Disclosure Schedule contains a list of Seller's material tangible property. To
the best of Seller's knowledge, its shareholders do not own, hold or possess, in
their individual, corporate or any other capacity, property, which is material
to the financial condition and operations of Seller or the conduct of the
Business.
4.15 Labor Agreements and Actions; Employee Compensation.
4.15.1. Section 4.15.1 of the Seller Disclosure Schedule contains a
complete list of the Seller's employees. Except as set forth in Section 4.15.1
of the Seller Disclosure Schedule, Seller is not a Party to or bound by any
currently effective employment contract, deferred compensation agreement, bonus
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement. The employment of each officer and employee of Seller is terminable
at the will of Seller, subject to any provisions which are to apply upon
termination of their employment and which are listed in Section 4.15.1 of the
Seller Disclosure Schedule.
4.15.2. Seller is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any contract, commitment or arrangement
with any labor union, other than collective agreements and Orders of general
application, and no labor union has requested or has sought to represent any of
the employees, representatives or agents of Seller. There is no strike or other
labor dispute involving Seller, pending or threatened, that could have a
Material Adverse Effect on Seller, nor is Seller aware of any labor organization
activity involving its employees. Each of Seller's employees is a Party to a
written employment agreement with Seller.
4.15.3. Seller has timely paid or as of the Closing Date shall have paid
all salaries, severance payments and other social benefits due and payable to
all of its current employees for the period prior to the Closing Date, in
accordance with (i) their respective employment agreements and (ii) all
applicable labor Laws, including but not limited to, salaries, benefits,
retention bonus(es), vacation pay, payments to managers' insurance policies,
employer's social security matching funds, workman's compensation payments,
education funds, pension funds, provident funds, severance pay funds, and any
other funds.
4.16 Books and Records; Accounting Controls. The books and accounts to be
transferred to Buyer pursuant hereto are complete and correct, are maintained in
accordance with good business practice and accurately present and reflect in all
material respects all of the transactions therein described.
4.17 Powers of Attorney. Neither Parent nor any Subsidiary has any powers
of attorney outstanding in connection with the Purchased Assets or the Business
or operations of the Business which would be or will become binding on Buyer.
4.18 Obligations to the Chief Scientist. Except as set forth in Section
4.18 of the Seller Disclosure Schedule, Seller is in full compliance with all of
its obligations and undertakings to the Chief Scientist in accordance with the
Chief Scientist's Rights and has paid the Chief Scientist all royalties due and
payable thereto as of the date hereof. Prior to the Closing Date Seller shall
have paid all royalties due and payable to the Chief Scientist as of the
Closing, including, for the avoidance of doubt, the amounts referred to in
Section 4.18 of the Seller Disclosure Schedule, including all fines, penalties
and/or interest payable to the Chief Scientist with respect thereto.
16
4.19 Taxes Paid. Except as set forth in Section 4.19 of the Seller
Disclosure Schedule, all taxes, duties and assessments payable or incurred by
Seller prior to the Closing Date that might result in an Encumbrance upon any of
the Purchased Assets have been or will timely be paid by Seller.
4.20 Insurance and Insurance Requirements
4.20.1. All physical Purchased Assets material to the Business are covered
by insurance as set forth in Subsection 4.20.1of the Seller Disclosure Schedule.
4.20.2. All insurance policies in effect on the date hereof which relate
to product liability are listed in Subsection 4.20.2 of the Seller Disclosure
Schedule.
4.20.3. All insurance referred to in Subsection 4.20.1 and 4.20.2 above
will be in effect until at least 12:01 A.M. on the fifth day following the
Closing Date and Seller shall have timely paid all premiums due prior to the
Closing Date with respect to such policies. Seller has delivered to Buyer true
and correct copies of all insurance policies currently in effect.
4.21 Brokers. Seller has no contract, arrangement or understanding with
any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
5. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to Seller that the statements contained in this Section 5 are correct and
complete as of the date of this Agreement.
5.1 Due Incorporation. Buyer is a duly organized and validly existing
company under the Laws of the State of Israel and has all requisite power and
authority to own, lease and operate its assets, properties and business and to
carry on its business as now conducted.
5.2 Authority to Execute and Perform Agreements. Buyer has all requisite
power, authority and approval required to enter into, execute and deliver this
Agreement and to perform fully Buyer's obligations hereunder.
5.3 Due Authorization. Buyer has taken all actions necessary to authorize
it to enter into and perform its obligations under this Agreement and to
consummate the transactions contemplated herein and therein. This Agreement is,
and as of the Closing Date will be, the legal, valid and binding obligations of
Buyer, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
5.4 No Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated herein and therein will (a)
violate any provision of the memorandum or articles of association of Buyer; (b)
violate, conflict with, or constitute a default under any contract or other
agreement or other instrument to which Buyer is a Party or by which it or its
property is bound; (c) require the consent of any Party to any material contract
or other agreement to which Buyer is a Party by which it or its property is
bound; or (d) violate any Laws or Orders to which Buyer or its property is
subject, in each case, other than such violation, conflict with or default
under, which would not affect the Buyer's ability to consummate the transactions
contemplated hereby.
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5.5 Governmental Consents. Except as set forth in Schedule 5.5 or as
otherwise contemplated by this Agreement, Buyer has obtained all consents,
approvals, authorizations and other requirements prescribed by any Law or Order
which must be obtained or satisfied by Buyer and which are necessary for the
execution and delivery by Buyer of this Agreement and the consummation of the
transactions contemplated in this Agreement.
5.6 No Broker. No broker, finder, agent or similar intermediary has acted
for or on behalf of the Buyer in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with the Buyer.
6. ADDITIONAL AGREEMENTS
6.1 General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the Closing conditions set forth in
Section 7 below). If, at any time, including after the Closing Date, any further
action is necessary or desirable for any Party to carry out the purposes of this
Agreement, including the filing of this Agreement or any of the Exhibits or the
Schedules attached thereto with any Authority, or to vest Buyer with full right,
title and possession to the Purchased Assets, or to operate the Business as was
operated prior to the consummation of the transaction contemplated herein, Buyer
and Seller shall hereby agree to the taking of such action by the other party
and shall take all reasonable action to assist the other party in accomplishing
the foregoing.
6.2 Business Examinations and Physical Investigations of Purchased Assets.
Prior to the Closing Date (or the termination of this Agreement pursuant to
Section 9), the Buyer shall be entitled, through its employees and
representatives, to make such investigations and examinations of the Seller as
it may reasonably request. Any such investigations and examinations shall be
conducted at reasonable times and under reasonable circumstances.
Notwithstanding the foregoing, Buyer shall not have any access to personnel
records of Seller relating to medical histories or other information, the
disclosure of which would subject the Seller to a material risk of liability.
All information furnished to or obtained by Buyer and its representatives
pursuant to this Section 6.2 shall be subject to the Confidentiality Agreement
and shall be held in confidence in accordance therewith.
6.3 Conduct of Business. From the date hereof through the Closing Date (or
the termination of this Agreement pursuant to Section 9), Seller shall use its
best efforts to conduct the Business in such a manner that the representations
and warranties contained in Section 4 shall continue to be true and correct in
all material respects as of the Closing Date as if made at and as of the Closing
Date. Without the prior written consent of Buyer, Seller shall not undertake or
fail to take any action if such action or failure would render any of said
warranties and representations untrue as of the Closing Date in any material
respect. Notwithstanding the generality of the foregoing, Seller shall: (i)
conduct its business only in the ordinary course of business consistent with
past practice, (ii) refrain from taking any of the actions listed in Section 4.6
above, (iii) use its best efforts to preserve any beneficial business
relationship with all customers, suppliers, and others having business dealings
with the Business; (iv) keep available the services of the Transferred
Employees; (v) maintain all of the Purchased Assets in good condition and
repair, ordinary wear and tear excepted, (vi) keep Buyer informed as to the
Purchased Assets and the Business and consult with Buyer on all important
matters pertaining to such Business; and (vii) advise the Buyer promptly in
writing of any fact which, if existing or known on the date of this Agreement,
would have been required to be set forth in this Agreement or disclosed pursuant
to it. All information furnished to or obtained by Buyer and its representatives
pursuant to this Section 6.3 shall be subject to the Confidentiality Agreement
and shall be held in confidence in accordance therewith.
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6.4 Notices. From the date hereof through the Closing Date (or the
termination of this Agreement pursuant to Section 9), each Party shall give the
other Party prompt written notice of the occurrence or existence of any event,
condition or circumstance which would constitute a violation or breach of this
Agreement by such Party or which would render inaccurate in any material respect
any of such Party's representations or warranties contained herein; and Seller
shall give Buyer notice of any lawsuits, claims, proceedings or investigations
which after the date hereof are threatened or commenced against such party, or
any officer, director, employee, consultant, agent or shareholder, in their
capacities as such.
6.5 Consents; Cooperation. The Parties shall promptly apply for or
otherwise seek, and use their commercially reasonable efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
transactions contemplated hereby.
6.6 Employees.
6.6.1. From the date hereof through and prior to the Closing, Buyer will
use its best commercial efforts to offer, subject to Closing, employment to
certain of Seller's employees, as determined by Buyer, on terms of employment
relating to base salary, automobile, social benefits, and commissions as set
forth on Schedule 6.6.1(a), but not including annual bonuses, early termination
notice periods, and the level of options granted to such employee at Seller.
Prior to the Closing, Buyer shall allocate to each such employee offered
employment pursuant to the prior sentence an allocation of options pursuant to
Buyer's share option plan in the amounts which shall be set forth on Schedule
6.6.1(b), and in the aggregate 130,000 options (including, for the avoidance of
doubt, those allocated to the Chief Executive Officer of Seller) to purchase
Buyer's ordinary shares. No later than 5 business days prior to the Closing
Date, Buyer shall deliver to Seller a list of all the employees who shall have
accepted the offer of employment.
6.6.2. Immediately prior to the Closing, (i) the employment of all the
Transferred Employees (as defined below) will be terminated by Seller; and (ii)
Seller shall pay or transfer to each of the Transferred Employees any and all
sums due and payable to such employees in connection with (A) the employment of
the Transferred Employees up to and including the Closing Date and (B) the
termination of their employment, including, without limitation, salaries,
benefits, retention bonus(es), vacation pay, advance notice of termination,
managers' insurance policies, employer's social security matching funds,
workman's compensation payments, education funds, pension funds, provident
funds, severance pay funds, and any other funds to which any of the Transferred
Employees is entitled until the Closing Date, in accordance with any Law, custom
or the personal employment contract. Each individual who accepts Buyer's offer
of employment and executes and delivers (i) an employment agreement with Buyer
in the form of Schedule 6.6.2(a) or any other form acceptable to Buyer; and (ii)
a release and waiver addressed to both the Seller and the Buyer of any rights he
or she may have under any agreement with Seller, agreeing to the termination
thereof and confirming the receipt of all funds due and payable to them for the
period of employment preceding the Closing Date and in connection with his or
her termination, in the form of Schedule 6.6.2(b), shall be referred to herein
as a "Transferred Employee".
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6.6.3. Without derogating from the generality of Section 6.6.2 above,
Buyer has offered employment to Mr. Eilon Ginsburg, Chief Executive Officer of
Seller, in accordance with the terms that have been disclosed to Seller.
6.6.4. Notwithstanding any confidentiality, non-compete or intellectual
property ownership obligations of any Transferred Employee to Seller, or any
Affiliate thereof, the Transferred Employees shall be permitted to engage in the
Business on behalf of Buyer.
6.6.5. At the Closing, Seller shall deposit with the Escrow Agent, in
escrow, US$ 150,000 (the "Retention Amount"), which shall be allocated among
those employees who are Transferred Employee, pursuant to the terms of the
Escrow Agreement. All sums remaining after the payment of the Retention Amount
to the Transferred Employees, as provided in the previous sentence, shall be
returned to Seller.
6.7 Trademarks; Trade Names and Name Change. As soon as practicable after
the Closing but not later than fourteen (14) days thereafter, Seller shall
eliminate the use of all of the trademarks, trade names, service marks and
service names used in the Business, in any of their forms or spellings, on all
advertising, stationery, business cards, web sites, checks, purchase orders and
acknowledgments, customer agreements and other contracts and business documents.
As soon as practicable, but no later than thirty (30) days after the Closing,
Parent and each Subsidiary shall change their corporate names so as to bear no
resemblance to their current names in order to enable full use of such name by
Buyer.
6.8 Report and Audit. Buyer shall provide Seller with the following
reports with respect to the calculation of the Teleknowledge Revenues and the
payments actually paid to Buyer: (a) as soon as practicable, but in any event
within thirty (30) days after the end of each quarter, a quarterly report, which
shall include details of all said Buyer revenues, and (b) as soon as
practicable, but in any event within ninety (90) days of the end of each fiscal
year, an annual report which shall include details of all the said Buyer
revenue, which report shall be accompanied by a certification issued by Buyer's
independent public accountants, which reports shall be provided by Buyer until
Seller has received all the Additional Contingent Consideration to which it is
entitled pursuant to Section 2.5.4. Seller shall have the right, upon thirty
(30) days notice, during the four (4) years commencing on the Closing, to have
an inspection and audit, no more frequently than twice a year, of all the
relevant records, agreements and accounting and sales books of Buyer (the
"Audit"), conducted by an independent certified public accountant selected by
Seller and acceptable to Buyer, which shall be conducted during regular business
hours at Buyer's offices and in such manner as not to unreasonably interfere
with Buyer's normal business activities. In the event an Audit reveals a default
in payment of the Additional Contingent Consideration, Buyer will immediately
pay any amount owed to Seller plus interest of 5% per annum, and if the default
is of more than 10% of the amount paid to Seller, Buyer shall reimburse Seller
for the reasonable costs of the Audit, which shall otherwise be borne by Seller.
Should Seller and Buyer disagree as to the results of any Audit, they shall
appoint the Independent Auditor to resolve the dispute. The Independent Auditor
shall review the claims of each Party and the supporting documents presented by
it and shall render a final and binging determination.
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6.9 Non-Competition. Without the written consent of Buyer, Seller shall
not (i) for a period of two (2) years from the date hereof, directly or
indirectly compete with the Business; and (ii) for a period of one (1) year from
the date hereof, employ or solicit the employment of any person employed by
Seller, at any time during the six months prior to the date hereof with a view
to inducing that person to leave such employment and to act for another
employer. The parties agree that the duration and geographic scope of the
non-competition provision set forth in this Section 6.9 are reasonable. In the
event that any court of competent jurisdiction shall determine that the duration
or the geographic scope, or both, are unreasonable and that such provision is to
that extent unenforceable, the parties agree that the non-competition provision
shall remain in full force and effect for the greatest time period and in the
greatest area that would not render it unenforceable, and in that event Seller
hereby consents that such provision may be judicially modified accordingly in
any proceeding brought to enforce the provisions of this Section 6.9. Seller
hereby agrees that a breach of its obligations under this Section may cause the
Buyer irreparable damage and therefore agrees in advance that the Buyer should
be entitled and deserves to obtain an injunction order in order to keep and
reserve its rights. It is hereby clarified that the provisions of this Section
shall not apply to (a)_Seller's shareholders, even in the event that a
Distribution was consummated and (b) in the event of sale of Seller to a third
party, provided that prior to such sale Seller shall cause the termination of
all Contracts not assigned to Buyer hereunder.
6.10 Removal of Pledges. No later than 30 days from the date hereof,
Seller will obtain consent of all third parties who have pledges on assets of
Parent that are registered with the Registrar of Companies (except to the extent
such asset is an Excluded Asset, as agreed in advance by Buyer) to either the
removal of such pledges or the consummation of the transactions contemplated
hereunder.
7. CONDITIONS TO OBLIGATION TO CLOSE
7.1 Conditions to Obligations of Buyer and Seller. The respective
obligations of each Party to this Agreement to consummate and effect the
transactions contemplated hereby shall be subject to obtaining the consent of
the Chief Scientist, the Investment Center of the Ministry of Industry and
Trade, and all other approvals, waivers and consents from any other Authority,
if any, necessary for consummation of, or in connection with, the transactions
contemplated hereby.
7.2 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
7.2.1. Accurate Representations and Warranties. The representations and
warranties set forth in Section 4 above shall be true and correct in all
material respects when made and on the Closing Date (as if made on and as of the
Closing Date).
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7.2.2. Compliance with Covenants. Seller shall have performed and complied
with all of its covenants hereunder in all material respects through the
Closing.
7.2.3. Consents. Seller shall have procured the third party consents set
forth in Schedule 7.2.3.
7.2.4. No Action. No action, suit, or proceeding shall be threatened in
writing against Seller or Buyer or pending before any court or quasi-judicial or
administrative agency of any state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge could (i) prevent consummation of any of the transactions contemplated
by this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) adversely affect the
right of Buyer to own the Purchased Assets, to operate the former Businesses of
Seller or (iv) subject Buyer to pay monetary Losses as a result of the
consummation of the transaction contemplated hereby (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect).
7.2.5. Compliance Certificate. Parent shall have delivered to Buyer a
certificate executed by its Chief Executive Officer to the effect that each of
the conditions specified above in this Section 7.2 are satisfied, in the form
attached hereto as Schedule 7.2.5.
7.2.6. Delivery of Documents. All actions to be taken by Seller in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to Buyer.
7.2.7. Key Employees. The employees listed on Schedule 7.2.7 (the "Key
Employees") shall be included among the Transferred Employees.
Buyer may waive any condition specified in this Section 7.2 if it executes
a writing so stating at or prior to the Closing.
7.3 Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
7.3.1. Accurate Representations and Warranties. The representations and
warranties set forth in Section 5 shall be true and correct in all material
respects when made and on the Closing Date (as if made on and as of the Closing
Date).
7.3.2. Compliance with Covenants. Buyer shall have performed and complied
with all of its covenants hereunder in all material respects through the
Closing;
7.3.3. No Action. No action, suit, or proceeding shall be threatened in
writing against Seller or Buyer or pending before any court or quasi-judicial or
administrative agency of any state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge could (i) prevent consummation of any of the transactions contemplated
by this Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
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7.3.4. Compliance Certificate. Buyer shall have delivered to Seller a
certificate executed by its Chief Executive Officer to the effect that each of
the conditions specified above in this Section 7.3 are satisfied, in the form
attached hereto as Schedule 7.3.4.
7.3.5. Employment Agreement. Buyer and the Chief Executive Officer of
Parent shall have executed and delivered an employment agreement.
7.3.6. Delivery of Documents. All actions to be taken by Buyer in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance to
Seller.
Seller may waive any condition specified in this Section 7.3 if it
executes a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT
8.1 Survival of Representations and Warranties. All of the representations
and warranties of the Parties contained in this Agreement and any document,
certificate, instrument or agreement contemplated hereunder shall survive the
Closing hereunder and continue in full force and effect for eighteen (18) months
following the Closing. For the avoidance of doubt, if a written notice of a
claim for indemnification, shall be delivered prior to the expiration of the
term of the representations and warranties, then the relevant representations
and warranties shall survive as to such claim, until such claim shall be finally
resolved.
8.2 Indemnification by Seller. From and after the Closing Date, Seller
shall indemnify, defend and hold harmless the Buyer and its directors, officers,
agents and representatives (the "Buyer Indemnified Persons") from and against
any and all Losses which may be incurred or suffered by any Buyer Indemnified
Person and which may arise out of or result from the following:
8.2.1. Any breach or inaccuracy of any representation or warranty of
Seller contained in this Agreement, provided that Buyer's written notice with
respect to any claim is delivered to Seller within the time period specified in
Section 8.1 and subject to the provisions of this Section 8, and any breach of
covenant or agreement of Seller contained in this Agreement;
8.2.2. Any obligations or liability of Seller with respect to, arising
from or in connection with the Excluded Assets and the Excluded Liabilities;
8.2.3. Any liability of Seller with respect to any tax of any nature
whatsoever attributable to the ownership or operations of the Business or the
Purchased Assets prior to the Closing Date;
8.2.4. Any liability and/or Losses which may result from any claim by any
shareholder of Seller or Affiliate thereof, regarding the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated thereby;
8.2.5. Any claim, suit or proceeding filed by any employee of Seller,
relating to or arising out of the employment of such employee by Seller prior to
the Closing Date, the termination thereof, and any funds payable to any such
employee in connection with such employment or such termination;
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8.2.6. Any liability to the Chief Scientist with respect to the payment of
royalties or any other funds payable to the Chief Scientist in connection with
the running of the Business prior to the Closing Date, including the payment of
any royalties on account of sale transactions performed by Seller, or revenues
received in connection with any such sales, prior to the Closing Date.
Notwithstanding the foregoing, Seller shall be required to indemnify the Buyer
Indemnified Persons for Losses covered by Section 8.2.1 above, only if the
aggregate amount of Losses for all claims for which indemnification is sought
exceeds one hundred thousand US dollars (US$ 100,000) but if and when the
aggregate Losses so exceed one hundred thousand US dollars (US$ 100,000), all of
the Losses shall be subject to indemnification. Anything else in this Agreement
notwithstanding, with respect to Losses covered by Section 8.2.1, Buyer shall
not be entitled to recover any Losses other than up to an aggregate amount of
US$ 700,000 (it being understood that during the effective term of the Escrow
Agreement, the Escrow Funds shall be the first to be used in accordance with the
terms of the Escrow Agreement, and that the balance shall only be claimed after
the depletion thereof) ; provided, however, that (i) there shall be no cap on
Seller's liability for any intentional breach of the representations contained
in Section 4 of this Agreement; (ii) with respect to Losses relating to a breach
of section 4.12 (an "IP Indemnification Claim"), Buyer shall be entitled to
recover an additional amount of Losses up to an aggregate of US$ 300,000 (it
being understood that during the effective term of the Escrow Agreement, the
Escrow Funds shall be the first to be used in accordance with the terms of the
Escrow Agreement, and that the balance shall only be claimed after the depletion
thereof. For the avoidance of doubt it is clarified that any IP Indemnification
Claim in an amount up to US$ 300,000 shall not affect the Buyer Indemnified
Persons' right to claim additional indemnification of up to US$ 700,000 for any
Losses covered by Section 8.2.1., even if such claim has caused the partial
depletion of the Escrow Funds. If any IP Indemnification Claim is for more than
US$ 300,000 then the Buyer Indemnified Persons shall have the right to claim
additional indemnification up to an aggregate amount of US$ 1,000,000 for all
Losses covered by Section 8.2.1. (including the IP Indemnification Claim));
(iii) with respect to any claim made as to Losses not claimed through the Escrow
Agreement (whether during the effective term of the Escrow Agreement or
thereafter), Seller's indemnification liability shall be subject to the
commencement of legal proceedings against Seller within 90 days of delivery of
written notice of any such claim. Buyer's right to recover Losses covered by
Sections 8.2.2 through 8.2.6 shall not be limited by any minimum or maximum
amount and (iv) there shall be no limitation whatsoever (including any
limitation contained in Section 10.11 below on Buyer's set-off right) on Buyer's
right to indemnity in the event of breach of Seller's covenant contained in
Section 2.5.3(e) to reimburse Buyer for any accounts receivable reflected in the
Closing Balance Sheet and not collected by Buyer within 120 days of the Closing
Date.
For the avoidance of doubt, neither the period of survival nor the
liability of Seller with respect to the Seller's representations and warranties
shall be reduced by any investigation made at any time by or on behalf of Buyer.
The Parties further agree that in the event a Distribution shall occur,
Buyer shall have the right to receive the indemnification with respect to
Seller's indemnification obligations under Section 8.2 (and subject to any
limitation included therein) from each of Seller's shareholders receiving any
portion of the consideration paid by Buyer hereunder (including, for the
avoidance of doubt, the Initial Consideration (or Reduced Initial Consideration,
as the case may be) and any Additional Contingent Consideration) as a result of
a Distribution (solely on a pro-rata basis based on the allocation to the
shareholders in the Distribution), and Seller undertakes to deliver to Buyer,
prior to and as a condition to the performance of any Distribution, a letter of
indemnity duly executed by each such shareholder, in the form attached hereto as
Schedule 8.2.6.
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8.3 Indemnification by Buyer. Provided Seller's written notice with
respect to any claim is delivered by Buyer within the time period specified in
Section 8.1 above and subject to the provisions of this Section 8, Buyer shall
indemnify, defend and hold harmless Seller, its directors, officers, agents,
representatives and the Seller's shareholders in the event of a Distribution
(the "Seller Indemnified Persons") from and against any Losses arising out of or
due to a breach of any representation, warranty, covenant or agreement of Buyer
contained in this Agreement.
Notwithstanding the foregoing, Buyer shall be required to indemnify Seller
only if the aggregate amount of Losses for all claims for which indemnification
is sought exceeds one hundred thousand US dollars (US$ 100,000), but if and when
the aggregate Losses so exceed one hundred thousand US dollars (US$ 100,000),
all of the Losses shall be subject to indemnification hereunder; provided,
however, that any right to indemnification pursuant to this Section 8.3 shall
not be subject to any minimum or maximum amount with respect to liabilities and
obligations assumed by Buyer pursuant to Section 2.3, payment of the Purchase
Consideration or other payments to be made by Buyer pursuant to this Agreement.
Anything else in this Agreement notwithstanding, Seller shall not be entitled to
recover any Losses in connection with a breach of any representation or warranty
in excess of $3,000,000 less any actual Additional Contingent Consideration made
by Buyer to Seller pursuant to Section 2.5.2.
For the avoidance of doubt, neither the period of survival not the
liability of Buyer with respect to the Buyer's representations and warranties
shall be reduced by any investigation made at any time or on behalf of Seller.
8.4 Notice to Indemnifying Party. If any Party (the "Indemnified Party")
receives notice of any claim or other commencement of any action or proceeding
with respect to which any other Party (or parties) (the "Indemnifying Party") is
obligated to provide indemnification pursuant to Sections 8.2 or 8.3, the
Indemnified Party shall promptly give the Indemnifying Party written notice
thereof which notice shall specify, if known, the amount or an estimate of the
amount of the liability arising therefrom. Such notice shall be a condition
precedent to any liability of the Indemnifying Party for indemnification
hereunder. The Indemnified Party shall not settle or compromise any claim by a
third party for which it is entitled to indemnification hereunder, without the
prior written consent of the Indemnifying Party (which shall not be unreasonably
withheld or delayed) unless suit shall have been instituted against it and the
Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Section 8.5. Failure by the Indemnified Party to give
notice promptly will not affect the indemnification obligations of the
Indemnifying Party except and to the extent the Indemnifying Party is prejudiced
thereby. Notwithstanding the generality of the foregoing and the limitations set
forth in Section 10.11 below, Buyer shall have the right to settle any claim or
demand made by the Chief Scientist for which Buyer is entitled to
indemnification under Section 8.2.6 above, provided that such claim or demand is
not settled by Seller within 120 days of delivery of notice to Seller with
respect thereto. In such event, without derogating from any other right of Buyer
hereunder, Buyer shall have the right to offset any such claim against any sums
of money or other consideration which may be due and payable to Seller or the
Preferred Shareholders.
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8.5 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding using counsel of
its choice (subject to the approval of the Indemnified Party, which approval may
not be unreasonably withheld or delayed). The Indemnified Party shall be
entitled to participate in the defense of any such action, with its counsel and
at its own expense; provided, however, that if the Indemnified Party, in its
sole discretion, determines that there exists a conflict of interests between
the Indemnifying Party (or any constituent party thereof) and the Indemnified
Party, the Indemnified Party (or such constituent party thereof) shall have the
right to engage separate counsel, the reasonable costs and expenses of which
shall be paid by the Indemnifying Party, but in no event shall the Indemnifying
Party be liable to pay for the costs and expenses of more than one such separate
counsel. If the Indemnifying Party does not assume the defense of any such claim
or litigation resulting therefrom, the Indemnified Party may defend against such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, the reasonable
costs and expenses of which shall be paid by the Indemnifying Party, and the
Indemnifying Party shall be entitled to participate in the defense of such
action, with its counsel and at its own expense. Notwithstanding the foregoing,
however, Buyer shall in all cases be entitled to control the defense of any such
action if it (i) may result in injunctions or other equitable remedies in
respect of Buyer or the Business; (ii) may result in liabilities which, taken
with other then-existing claims by Buyer under this Section 8, would not be
fully indemnified hereunder; (iii) may have an adverse impact on the Business or
the financial condition of Buyer (including an effect on the Tax liabilities,
earnings or ongoing business relationships of Buyer) even if Seller pays all
indemnification amounts in full or (iv) may result in the rescission of this
agreement.
8.6 Subrogation. Upon making any payment to an Indemnified Party for any
indemnification claim pursuant to this Section 8, the Indemnifying Party shall
be subrogated, to the extent of such payment, to any rights which the
Indemnified Party may have against any other parties with respect to the subject
matter underlying such indemnification claim.
8.7 Exclusive Remedy. The provisions of this Section 8 shall be the sole
and exclusive remedy in respect of any breach of a representation or warranty
contained herein.
9. TERMINATION
9.1 Termination of Agreement. Either of the Parties may terminate this
Agreement with the prior authorization of its board of directors as provided
below:
9.2 Mutual Consent. The Parties may terminate this Agreement by mutual
written consent at any time prior to the Closing.
9.2.1. Termination by Buyer. Buyer may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing: (i) in the event that
Seller has breached any representation, warranty, or covenant contained in this
Agreement in any material respect, provided that Buyer has notified Seller of
the breach, and the breach has continued without cure for a period of fourteen
(14) days after the notice of breach; or (ii) if the Closing shall not have
occurred on or before ninety (90) days following the date hereof, by reason of
the failure of any condition precedent under Section 7 hereof (unless the
failure results primarily from Buyer breaching any representation, warranty, or
covenant contained in this Agreement).
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9.2.2. Termination By Seller. Seller may terminate this Agreement by
giving written notice to Buyer at any time prior to the Closing: (i) in the
event Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, provided that Seller has
notified Buyer of the breach, and the breach has continued without cure for a
period of fourteen (14) days after the notice of breach; or (ii) if the Closing
shall not have occurred on or before ninety (90) days following the date hereof,
by reason of the failure of any condition precedent under Section 7 hereof
(unless the failure results primarily from Seller breaching any representation,
warranty, or covenant contained in this Agreement).
9.2.3. Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9.1, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to the other Party.
10. MISCELLANEOUS
10.1 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing, without the prior written approval of the
other Party; provided, however that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable commercial efforts to advise and
coordinate with the other Party prior to making the disclosure). Notwithstanding
the foregoing, the parties agree to publish the press release attached hereto as
Schedule 10.1, immediately after the execution of this Agreement
10.2 No Third-Party Beneficiaries. Except as otherwise provided, this
Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
10.3 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party. Notwithstanding the foregoing, Buyer hereby acknowledges and
agrees that Parent may enter liquidation following the Closing Date, in which
case all of Seller's rights and obligations hereunder, including without
limitation under Sections 2.5.2, 2.5.4, 6.6.5, 6.8 and 8 shall be automatically
assigned to the shareholders who shall have the right to receive any such part
of the distribution of the Parent's assets (the "Distribution"), in accordance
with the allocation set forth on Schedule 10.3.
10.4 Third Party Rights. Subject to the Closing, in the event a
Distribution was consummated, the provisions of Sections 2.5.2, 2.5.4, 6.8 and 8
are for the benefit of the Preferred Shareholders and such provisions shall be
enforceable by such shareholder against the Buyer, pursuant to Chapter 4 of the
Contract Law (General Part), 1973.
10.5 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
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if to Buyer, to:
MER Telemanagement Solutions Ltd.
22 Zarhin Street
Ra'anana 43662
Israel
Tel: +972 (0) 9 762-1777
Fax: +972 (0) 9 746-6597
Attention: Mr. Eytan Bar
With a copy to:
Danziger, Klagsbald, Rosen & Co., Law Offices
Gibor Sport Building - 24th floor
28 Bezalel Street
Ramat Gan 52521
Israel
Tel: +972-3-611-0700
Facsimile: +972-3-611-0707
Attention: Oren Shenkar, Adv.
if to Seller, to:
TeleKnowledge Group Ltd.
3 Ha'Tidhar St., P.O. Box 2375
Raanana 43665
Israel
Tel: +972-9-7614000
Fax: +972-9-7418866
Attention:
With a copy to:
Yigal Arnon & Co.
1 Azrieli Center
Tel Aviv, Israel 67021
Facsimile: 972-3-608-7714
Telephone: 972-3-608-7726
Attention: David H. Schapiro, Adv.
Any notice sent in accordance with this Section 10.5 shall be
effective (i) if mailed, seven (7) business days after mailing, (ii)
if sent by messenger, upon delivery, and (iii) if sent via fax or
electronic mail, upon transmission and electronic confirmation of
receipt or (if transmitted and received on a non-business day on the
first business day following transmission and electronic
confirmation of receipt). Any Party may change the address to which
notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
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10.6 Governing Law. This Agreement, including the validity,
interpretation, or performance of this Agreement and any of its terms or
provisions, and the rights and obligations of the Parties under this Agreement
shall be governed by, and construed and interpreted in and only in accordance
with, the domestic laws of the State of Israel without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any jurisdiction other than the State of Israel. The competent court
in Tel Aviv-Jaffa will have the sole jurisdiction over any dispute arising under
this Agreement.
10.7 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. No waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
10.8 Joint and Several Liability. Each of Parent and the Subsidiary shall
be liable jointly and severally with respect to any breach of any
representation, warranty, covenant or agreement contained herein.
10.9 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.10 Expenses. Each Party will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
10.11 Right of Setoff. Buyer shall have the right, to offset amounts in
respect of which Buyer is entitled to indemnification in accordance with
Sections 8.2.2 through 8.2.6 ("Set Off Sums") against any sums of money or other
consideration which may be due and payable to Seller or the Preferred
Shareholders in the event of a Distribution, pursuant to the terms hereof if
Buyer informs Seller, or the Preferred Shareholders in the event of a
Distribution, of its intention to set-off such amounts and commences a lawsuit
with respect to the subject matter of the Set Off Sums within ninety (90) days
of the date of such notice and the amount which may be Set Off, subject to the
outcome of such lawsuit, shall be no more than the amount specifically claimed
in such lawsuit.
10.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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10.13 Entire Agreement. This Agreement sets forth and constitutes the
entire agreement between the Parties hereto with respect to the subject matter
hereof, and supersedes any and all prior agreements, understandings, promises
and representations made by either Party to the other, written, electronic, or
oral, concerning the subject matter hereof and the terms applicable hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date
first above written.
MER Telemanagement Solutions Ltd. Teleknowledge Group Ltd.
By: _______________________________ By: ______________________________
Name: ____________________________ Name: ___________________________
Title: _________________________ Title: ________________________
Teleknowledge, Inc.
By: _______________________________
Name: ____________________________
Title: _________________________
[SIGNATURE PAGE OF ASSET PURCHASE AGREEMENT]
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