Asset Purchase Agreement - Midbar Tech (1998) Ltd. and Macrovision Europe Ltd.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MIDBAR TECH (1998) LTD.
AND
MACROVISION EUROPE LTD.
NOVEMBER 4, 2002
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CONFIDENTIAL
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
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1 PURCHASE AND SALE OF ASSETS...............................................1
1.1 ASSETS TO BE TRANSFERRED............................................1
1.2 EXCLUDED ASSETS.....................................................3
2 ASSUMPTION OF LIABILITIES.................................................4
2.1 LIABILITIES TO BE ASSUMED...........................................4
2.2 LIABILITIES NOT TO BE ASSUMED.......................................5
3 PURCHASE PRICE - PAYMENT..................................................6
3.1 PURCHASE PRICE......................................................6
3.2 PAYMENT OF PURCHASE PRICE...........................................7
3.3 SALE OF THE AUDIO BUSINESS..........................................8
4 REPRESENTATIONS AND WARRANTIES OF SELLER..................................9
4.1 CORPORATE...........................................................10
4.2 AUTHORITY...........................................................10
4.3 NO VIOLATION........................................................10
4.4 FINANCIAL STATEMENTS................................................11
4.5 TAX MATTERS.........................................................11
4.6 ABSENCE OF CERTAIN CHANGES..........................................13
4.7 ABSENCE OF UNDISCLOSED LIABILITIES..................................14
4.8 NO LITIGATION.......................................................14
4.9 COMPLIANCE WITH LAWS AND ORDERS.....................................14
4.10 TITLE TO AND CONDITION OF PROPERTIES................................15
4.11 INSURANCE...........................................................16
4.13 LABOR MATTERS.......................................................18
4.14 EMPLOYEE BENEFIT AND STOCK OPTION PLANS.............................19
4.15 EMPLOYMENT COMPENSATION.............................................19
4.16 TRADE RIGHTS........................................................20
4.17 MAJOR CUSTOMERS AND SUPPLIERS.......................................21
4.18 PRODUCT WARRANTY AND PRODUCT LIABILITY..............................22
4.19 AFFILIATES' RELATIONSHIPS TO SELLER.................................22
4.20 SHAREHOLDER LIST....................................................22
4.21 ASSETS NECESSARY TO BUSINESS........................................22
4.22 NO BROKERS OR FINDERS...............................................23
4.23 DISCLOSURE..........................................................23
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5 REPRESENTATIONS AND WARRANTIES OF BUYER...................................23
5.1 CORPORATE..........................................................23
5.2 AUTHORITY..........................................................23
5.3 NO BROKERS OR FINDERS..............................................24
5.4 LITIGATION.........................................................24
5.5 DISCLOSURE.........................................................24
6 OTHER MATTERS.............................................................24
6.1 ESCROW AGREEMENT...................................................24
6.2 CONFIDENTIAL INFORMATION...........................................24
6.3 USE OF SELLER'S NAME...............................................25
6.4 SALES TAX MATTERS..................................................25
6.5 NON-COMPETITION....................................................25
6.6 ...................................................................25
COVENANTS OF BUYER........................................................25
7 FURTHER COVENANTS OF SELLER...............................................26
7.1 ACCESS TO INFORMATION AND RECORDS..................................26
7.2 CONDUCT OF BUSINESS PENDING THE CLOSING............................26
7.3 CHANGE OF CORPORATE NAME...........................................27
7.4 EMPLOYEES..........................................................27
7.5 CONSENTS...........................................................28
7.7 OTHER ACTION.......................................................29
7.8 DISCLOSURE.........................................................29
7.9 USE OF PROCEEDS....................................................29
8 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS...............................29
8.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE............29
8.2 COMPLIANCE WITH AGREEMENT..........................................30
8.3 ABSENCE OF LITIGATION..............................................30
8.4 CONSENTS AND APPROVALS.............................................30
9 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS..............................31
9.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE............31
9.2 COMPLIANCE WITH AGREEMENT..........................................31
9.3 ABSENCE OF LITIGATION..............................................31
9.4 TAX RULING
10 INDEMNIFICATION...........................................................31
10.1 BY SELLER..........................................................31
10.2 BY BUYER...........................................................32
10.3 INDEMNIFICATION OF THIRD-PARTY CLAIMS..............................32
10.4 INDEMNIFICATION FOR REIMBURSEMENT THAT DOES NOT INVOLVE A
THIRD PARTY CLAIM..................................................33
10.5 PROCEDURE FOR INDEMNIFICATION......................................34
10.6 NO WAIVER..........................................................34
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11 CLOSING...................................................................34
11.1 ITEMS TO BE DELIVERED BY SELLER....................................34
11.2 ITEMS TO BE DELIVERED BY BUYER.....................................36
12 TERMINATION...............................................................38
12.1 RIGHT OF TERMINATION WITHOUT BREACH................................38
12.2 TERMINATION FOR BREACH.............................................38
13 MISCELLANEOUS.............................................................39
13.1 DISCLOSURE SCHEDULE................................................39
13.2 FURTHER ASSURANCE..................................................39
13.3 DISCLOSURES AND ANNOUNCEMENTS......................................39
13.4 ASSIGNMENT; PARTIES IN INTEREST....................................39
13.5 EQUITABLE RELIEF...................................................40
13.6 LAW GOVERNING AGREEMENT............................................40
13.7 AMENDMENT AND MODIFICATION.........................................40
13.8 NOTICE.............................................................40
13.9 EXPENSES...........................................................41
13.10 SEVERABILITY.......................................................42
13.11 FORCE MAJEURE......................................................42
13.12 ENTIRE AGREEMENT...................................................42
13.13 COUNTERPARTS.......................................................43
13.14 HEADINGS...........................................................43
13.15 GLOSSARY OF TERMS..................................................43
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DISCLOSURE SCHEDULE
Schedule 1.1(a) - Leased Real Property
Schedule 1.1(b) - Personal Property
Schedule 1.1(d) - Personal Property Leases
Schedule 1.1(f) - Assumed Contracts
Schedule 3.2(d) - Allocation of Purchase Price
Schedule 4.1(b) - Officers and Directors
Schedule 4.1(c) - Foreign Corporation Qualification
Schedule 4.1(d) - Subsidiaries
Schedule 4.3(b) - Government Consent
Schedule 4.3(c) - Violation, Conflict, Default
Schedule 4.4 - Financial Statements
Schedule 4.6(c) - Increases in Compensation
Schedule 4.6(e) - Commitments Other than in the Ordinary Course
Schedule 4.6(h) - Indebtedness
Schedule 4.6(j) - Contract Amendments
Schedule 4.6(k) - Loans and Advances
Schedule 4.6(n) - Unusual Events
Schedule 4.7 - Off-Balance Sheet Liabilities
Schedule 4.8 - Litigation Matters
Schedule 4.9(a) - Orders
Schedule 4.9(b) - Licenses and Permits
Schedule 4.9(c) - Investment Center Approvals
Schedule 4.10(a) - Marketable Title
Schedule 4.10(b) - Condition of Properties
Schedule 4.10(c) - Condemnation and Expropriation
Schedule 4.11(a) - Insurance Policies
Schedule 4.11(b) - Insurance Claims
Schedule 4.12(a) - Real Property Leases
Schedule 4.12(b) - Personal Property Leases
Schedule 4.12(e) - Contracts for Services
Schedule 4.12(f) - Power of Attorney
Schedule 4.12(g) - Collective Bargaining Agreement
Schedule 4.12(h) - Loan Agreements
Schedule 4.12(i) - Guarantees
Schedule 4.12(k) - Burdensome or Restrictive Agreements
Schedule 4.12(l) - Material Contracts
Schedule 4.12(m) - Defaults
Schedule 4.13 - Labor Matters
Schedule 4.14(a) - Employee Equity and Options
Schedule 4.15 - Employment Compensation
Schedule 4.16(a) - Trade Rights List
Schedule 4.16(b)(i) - Proprietary Information and Confidentiality Agreement
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Schedule 4.16(b)(ii) - Non-Disclosure Agreement
Schedule 4.16(c) - Interest in Trade Rights
Schedule 4.16(d) - Infringement
Schedule 4.16(e) - Licenses, Assignments and Third Party Compensation
Schedule 4.16(g) - Governmental Entity Grant
Schedule 4.17(a) - Major Customers
Schedule 4.17(b) - Dealers and Distributors
Schedule 4.18(a) - Product Warranty
Schedule 4.18(b) - Liability Claims
Schedule 4.19(a) - Contracts with Affiliates
Schedule 4.19(c) - Obligations of and to Affiliates
Schedule 4.20 - Shareholder List
Schedule 4.22 - Brokers or Finders
Schedule 7.4(a) - Transferred Employees
Exhibit A - Escrow Agreement
Exhibit B - Seller Non-Competition Agreement
Exhibit C - Opinion of Counsel of Seller
Exhibit D - Joint Defense Agreement
Exhibit E - Employee Waiver and Consent
Exhibit F - Bills of Sale
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the 4th day of
November, 2002 (the "Effective Date"), by and between MACROVISION EUROPE LTD., a
corporation organized under the laws of the United Kingdom ("Buyer"), having its
principal place of business at Woodley House, Crockhamwell Road, Woodley,
Reading, Berkshire, United Kingdom RG5 3JP, telephone number +44-118961111,
facsimile number +44-1189691161, and MIDBAR TECH (1998) LTD., an Israeli
corporation ("Seller"), having its principal place of business at 34 Kibbutz
Galuyot Street, Tel Aviv, Israel 66550, telephone number +972-3-518-6666, fax
number +972-3-518-6677.
RECITALS
A. Seller designs, develops, markets and licenses technological
solutions that protect copyright material from unauthorized and illegal
duplication and copyright infringement ("Seller's Business").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller substantially all of the assets related to Seller's Business on the terms
set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
1 PURCHASE AND SALE OF ASSETS
1.1 ASSETS TO BE TRANSFERRED.
Subject to the terms and conditions of this Agreement, on the Closing Date (as
defined in Section 11 hereof) Seller shall sell, transfer, convey, assign, and
deliver to Buyer, and Buyer shall purchase and accept from Seller, free and
clear of any Liens (as defined in Section 4.10 hereof), all of the assets used
to conduct the Seller's Business, including, without limitation, the property
identified in Schedule 1.1 hereto, other than the Excluded Assets (as defined in
Section 1.2 hereof) (collectively the "Purchased Assets"). The Purchased Assets
shall include, but not be limited to, the following:
(a) LEASED REAL PROPERTY. All of the leases of real property with respect to
real property leased by Seller, including the leases (the "Real Property
Leases") described on SCHEDULE 1.1(a) with respect to the real property
described thereon (the "Leased Real Property").
(b) PERSONAL PROPERTY. All machinery, equipment, vehicles, tools, supplies,
spare parts, furniture and all other personal property (other than
personal property leased pursuant to Personal Property Leases
as hereinafter defined) owned, utilized or held for use by Seller on the
Closing Date as set forth in SCHEDULE 1.1(b).
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(c) INVENTORY. All inventories of raw materials, work-in-process and finished
goods (including all such in transit), and service and repair parts,
supplies and components held for resale by Seller on the Closing Date,
together with related packaging materials (collectively the "Inventory").
(d) PERSONAL PROPERTY Leases. All leases of machinery, equipment, vehicles,
furniture and other personal property leased by Seller, including all such
leases (the "Personal Property Leases") described in SCHEDULE 1.1(d).
(e) TRADE RIGHTS. All Seller's interest in any Trade Rights used in the
Seller's Business, including, without limitation, those identified in
Schedule 4.16(a). As used herein, the term "Trade Rights" shall mean and
include: (i) all trademark rights, business identifiers, trade dress,
service marks, trade names (including without limitation the trade names
"Cactus Data Shield", "CDS" and "BurnShield"), brand names, and domain
names; (ii) all copyrights and all other rights associated therewith and
the underlying works of authorship; (iii) all patents and all proprietary
rights associated therewith; (iv) all contracts or agreements granting any
right, title, license or privilege under the intellectual property rights
of any third party; (v) all inventions, mask works and mask work
registrations, know-how, discoveries, improvements, designs, trade
secrets, shop and royalty rights, employee covenants and agreements
respecting intellectual property and non-competition and all other types
of intellectual property; (vi) all ideas and concepts conceived of or
first reduced to practice by Employees of Seller; and (vii) all
registrations of any of the foregoing, all applications therefor, all
goodwill associated with any of the foregoing, and all claims for
infringement or breach thereof. To the extent that the term "Trade Rights"
includes patents, the term "Trade Rights" shall include any patents,
patent applications, provisional patents, divisions, substitutions,
continuations, continuations-in-part, modifications or improvements, or
reissue applications, renewals, extensions, re-examinations or refilings
of the application for said patents whether related thereto directly or
through one or more intervening applications and to any patentable
apparatus, method or design encompassed within the scope of the drawings
or the claims of such patents. Without limiting the generality of the
foregoing, the term "Trade Rights" includes the Midbar patents set out in
SCHEDULE 4.16(a).
(f) ASSUMED CONTRACTS. All Seller's rights in, to and under all contracts
(including sales contracts), purchase orders and sales orders (hereinafter
"Contracts") of Seller as set forth in SCHEDULE 1.1(f), but no other
Contracts. To the extent that any Contract for which assignment to Buyer
is provided herein is not assignable without the consent of another party,
this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would
constitute a breach thereof. Seller and Buyer agree to use their
reasonable best efforts (without any requirement on the part of Buyer to
pay any money or agree to any material change in the terms of any such
Contract) to obtain the consent of such other party to the assignment of
any such Contract to Buyer in all cases in which such consent is or may be
required for such assignment. If any such consent shall not be obtained,
Seller agrees to cooperate with Buyer in any reasonable arrangement
designed to provide for Buyer the benefits intended to be assigned to
Buyer under the relevant Contract, including enforcement at the cost and
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for the account of Buyer of any and all rights of Seller against the
other party thereto arising out of the breach or cancellation thereof
by such other party or otherwise, and Buyer undertakes to cooperate
with Seller to allow the fulfillment of the Seller's Liabilities under
any such Contract, as if such Contract had been assigned to Buyer,
until such time as Seller completes its liquidation proceedings (which it
intends to commence following the Closing), provided, however, that Buyer
shall not bear any liability in excess of the liability that Buyer would
have borne had Buyer assumed and taken assignment of such Contracts. If
and to the extent that such arrangement cannot be made, any such Contract
shall not be deemed to be a Purchased Asset hereunder.
(g) COMPUTER SOFTWARE. All computer Source Codes, programs and other software
of Seller, including all machine-readable code, printed listings of code,
documentation and related property and information of Seller. The term
"Source Codes" means the form of software that is intelligible to trained
programmers and is capable of being translated into object code form by
means of a compiler. The term "object code" means the executable,
machine-readable form of software.
(h) LITERATURE. All sales literature, promotional literature, catalogs and
similar materials of Seller.
(i) RECORDS AND FILES. All existing records and files of Seller pertaining to
the Seller's Business of every kind including, without limitation,
invoices, customer and vendor lists and contracts, blueprints,
specifications, designs, drawings, and operating and marketing plans, and
all other documents, tapes, discs, programs or other embodiments of
information of Seller.
(j) LICENSES; PERMITS. All licenses, permits, approvals, certifications and
listings of Seller necessary to operate Seller's Business.
(k) CORPORATE NAME. The names "Midbar," "Midbar Tech Ltd.," "Midbar Tech
(1998) Ltd." or any derivatives thereof and all rights to use or allow
others to use such names.
(l) GENERAL INTANGIBLES. All prepaid items, all causes of action arising out
of occurrences before or after the Closing, and other intangible rights
and assets, including title to the goodwill of Seller's Business.
(m) EMPLOYMENT AGREEMENTS. Seller's employment agreements with Transferred
Employees, as defined and set forth in Section 7.4(a).
(n) ACCOUNTS RECEIVABLE. Seller's accounts receivable attributable (in
accordance with GAAP) to the period after the Closing Date with respect to
the Purchased Assets. For the avoidance of doubt, any payments made to
Seller that, in whole or in part, represent an advance payment with
respect to the Purchased Assets attributabe (in accordance with GAAP) in
whole or in part to the period after the Closing Date, shall be pro rated
as of the Closing; and Seller shall account to Buyer for such pro rated
amount at Closing.
1.2 EXCLUDED ASSETS.
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The provisions of Section 1.1 notwithstanding, Seller shall not sell, transfer,
assign, convey or deliver to Buyer, and Buyer will not purchase or accept, the
following assets of Seller (collectively the "Excluded Assets"):
(a) CASH AND CASH EQUIVALENTS. All cash, cash equivalents, accounts receivable
in respect of the Seller's Business prior to the Closing Date and other
current assets determined in accordance with U.S. generally accepted
accounting principles ("U.S. GAAP"). Any amounts attributable to such
accounts receivable that are collected by the Buyer following the Closing
Date, shall be delivered by Buyer to the Seller promptly following their
collection.
(b) CONSIDERATION. The consideration delivered by Buyer to Seller pursuant to
this Agreement.
(c) EMPLOYMENT AGREEMENTS. Seller's employment agreements with any and all
Employees who are not Transferred Employees under Section 7.4(a).
(d) Tax Credits and Records. Income credits and tax refund claims and
associated returns and records for the period ending on the Closing Date.
Buyer shall have reasonable access to returns and records attributable to
the Purchased Assets or Assumed Liabilities and may make excerpts
therefrom and copies thereof.
(e) CORPORATE FRANCHISE. Seller's franchise to be a corporation, its
certificate of incorporation, corporate seal, stock books, minute books
and other corporate records. Buyer shall have reasonable access to such
books and records and may make excerpts therefrom and copies thereof.
(f) OBLIGATIONS OF AFFILIATES. Notes, drafts, accounts receivable or other
obligations for the payment of money, made or owed by any Affiliate of
Seller. For purposes of this Agreement, an "Affiliate" of a specified
person or entity shall mean a person or entity that directly, or
indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with, the person or entity specified. For
this purpose, "control" shall mean the possession of the direct or
indirect power to direct or cause the direction of the management and
policies of a person or entity, whether through the ownership of voting
securities, by contract or otherwise.
(g) EMPLOYEE LOANS. All outstanding monetary loans between any existing or
former employees of Seller and Seller.
(h) ENTERPRISE STATUS. The benefit of Seller's "approved enterprise" status
with the Investment Center of the Israeli Ministry of Industry and Trade.
2 ASSUMPTION OF LIABILITIES
2.1 LIABILITIES TO BE ASSUMED.
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As used in this Agreement, the term "Liability" shall mean and include any
direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known
or unknown, asserted or unasserted, liquidated or unliquidated, secured or
unsecured. Subject to the terms and conditions of this Agreement, on the Closing
Date, Buyer shall assume and agree to perform and discharge the following, and
only the following Liabilities of Seller (collectively the "Assumed
Liabilities"):
(a) CONTRACTUAL LIABILITIES. Seller's Liabilities arising or required to be
performed from and after the Closing Date under and pursuant to all
Contracts assumed by Buyer and described in any of SCHEDULES 1.1(a),
1.1(d), 1.1(f) or 1.1(m).
(b) LIABILITIES UNDER PERMITS AND LICENSES. Seller's Liabilities arising from
and after the Closing Date under any permits or licenses assigned to Buyer
at the Closing pursuant to Section 1.1(j).
(c) ACCOUNTS PAYABLE. Seller's accounts payable due from and after the Closing
Date with respect to the Purchased Assets.
(d) PRODUCT WARRANTY. The Seller's existing product warranty obligations
arising out of any assumed Contract.
2.2 LIABILITIES NOT TO BE ASSUMED.
Except as and to the extent specifically set forth in Section 2.1, Buyer is not
assuming any Liabilities of Seller and all such Liabilities shall be and remain
the responsibility of Seller (the "Retained Liabilities"). Without limiting the
generality of the foregoing, Buyer is not assuming and Seller shall not be
deemed to have transferred to Buyer the following Retained Liabilities of
Seller:
(a) TAXES ARISING FROM TRANSACTION. Any taxes applicable to, imposed upon or
arising out of the sale or transfer of the Purchased Assets to Buyer and
the other transactions contemplated by this Agreement, including but not
limited to any income, transfer, sales, use, gross receipts or documentary
stamp taxes.
(b) INCOME TAXES. Any Liability of Seller for income taxes or profit taxes
(and any penalties or interest due on account thereof).
(c) INSURED CLAIMS. Any Liability of Seller insured against, to the extent
such Liability is or will be paid by an insurer.
(d) PRODUCT LIABILITY. Any Liability of Seller arising out of or in any way
relating to or resulting from any product sold prior to the Closing Date
(including any Liability of Seller for claims made for damage to property
or other damage, whether made in product liability, tort, breach of
warranty or otherwise) other than Liabilities assumed by the Buyer
pursuant to Section 2.1(a) and 2.1(d).
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(e) LITIGATION MATTERS. Any Liability with respect to any action, suit,
proceeding, arbitration, investigation or inquiry, whether civil, criminal
or administrative ("Litigation") relating solely to the period prior to
the Closing Date, whether or not described in Schedule 4.8.
(f) INFRINGEMENTS. Any Liability to a third party for infringement of such
third party's Trade Rights.
(g) TRANSACTION EXPENSES. All Liabilities incurred by Seller in connection
with this Agreement and the transactions contemplated herein.
(h) LIABILITY FOR BREACH. Liabilities of Seller for any breach or failure to
perform any of Seller's covenants and agreements contained in, or made
pursuant to, this Agreement, or, prior to the Closing, any other contract,
whether or not assumed hereunder, including breach arising from assignment
of contracts hereunder without consent of third parties and breach arising
from the Buyer's performance of the undertaking to cooperate with Seller
to allow the fulfillment of Seller's Liabilities under certain Contracts
under Section 1.1(f) without the consent of third parties to such
Contracts. (i) Liabilities to Affiliates. Liabilities of Seller to its
present or former Affiliates.
(j) VIOLATION OF LAWS OR ORDERS. Liabilities of Seller for any violation of or
failure to comply with any statute, law, ordinance, rule or regulation
(collectively, "Laws") or any order, writ, injunction, judgment, plan or
decree (collectively, "Orders") of any court, arbitrator, department,
commission, board, bureau, agency, authority, instrumentality or other
body, whether U.S., Israeli or other (collectively, "Government Entities")
relating solely to the period prior to the Closing Date.
(k) EMPLOYEE LIABILITIES. Liabilities with respect to Seller's current or
former Employees, whether hereinafter terminated or not, at any time
prior, during or following the Closing Date, excluding any Liabilities
arising immediately following the Closing Date with respect to Transferred
Employees, as more fully set forth in Section 7.4(d) (taking into account
Seller's obligation to transfer all Benefits and Liabilities concerning
all Transferred Employee that have accrued through the Closing, pursuant
to Section 7.4(b)).
(l) COLLECTIVE BARGAINING AGREEMENT. The rights, obligations, benefits and
burden of all collective bargaining agreements in place between Seller's
employees and Seller, if any, including, without limitation, the
Collective Bargaining Agreement for the Metal, Electricity, Electronics
and Software Sectors.
(m) CERTAIN CONTRACTS. The liabilities of Seller under and pursuant to those
Contracts not referenced in Section 2.1(a).
3 PURCHASE PRICE - PAYMENT
3.1 PURCHASE PRICE.
The purchase price (the "Purchase Price") for the Purchased Assets shall be:
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(a) MINIMUM PAYMENT. A minimum payment of seventeen million U.S. dollars
($17,000,000.00) plus value added tax ("VAT"), to the extent applicable
(the "Minimum Payment"); plus
(b) ADDITIONAL CONTINGENT PAYMENTS. Additional contingent payments (the
"Additional CONTINGENT Payments") totaling a maximum of eight million U.S.
dollars ($8,000,000.00) plus VAT, to the extent applicable, payable in
performance installments calculated as a percentage of Performance Revenue
recognized during the respective installment periods identified in the
table below (the "Installment Periods"). "Performance Revenue" shall mean
[*] percent ([*]%) of Buyer's Net Revenue from Buyer's audio copy
protection and audio digital rights management business (the "Audio
Business") included in Buyer's published financial statements reported in
accordance with U.S. GAAP from the period beginning on the Closing Date
and ending the earlier of (1) the date of cumulative payment of eight
million U.S. dollars ($8,000,000.00) plus VAT, to the extent applicable,
in Additional Contingent Payments or (2) [*] (the "Performance Period").
Buyer shall have no further obligation to make Additional Contingent
Payments with respect to all or any portion of the Performance Revenue
that has not been earned during the Performance Period. The Additional
Contingent Payments shall be calculated as follows:
------------------------------- ----------------------------------
Installment Periods % of Performance Revenue
------------------------------- ----------------------------------
Closing Date through [*] [*]%
------------------------------- ----------------------------------
[*] through [*] [*]%
------------------------------- ----------------------------------
[*] through [*] [*]%
------------------------------- ----------------------------------
[*] through [*] [*]%
------------------------------- ----------------------------------
[*] through [*] [*]%
------------------------------- ----------------------------------
For the purpose of assisting Seller with determining net revenue from the Audio
Business, Buyer, during the Performance Period, will not bundle, solely in its
internal management accounting records, the revenues obtained from the Audio
Business with any other revenues earned by Buyer. In addition, for purposes
hereof, any change in Buyer accounting methods, practices or reporting shall not
apply.
Notwithstanding anything to the contrary herein, Buyer may, at its sole
discretion, substitute other products for Seller's products subsequent to the
Closing Date, without any effect on Buyer's obligation to make the Additional
Contingent Payments set forth above.
3.2 PAYMENT OF PURCHASE PRICE.
The Purchase Price shall be paid by Buyer as follows:
(a) Cash to Escrow Agent. At the Closing, Buyer shall deliver to Wells Fargo
Bank, National Association, a national banking association, having a place
of business at 555 Montgomery Street, 10th Floor, San Francisco,
California 94111, telephone number (415) 396-0135, facsimile number (415)
395-9064 (the "Escrow Agent"), under the terms of the attached escrow
agreement set out in Exhibit A, to be entered into by and among the
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Escrow Agent, Buyer and Seller on the Closing Date (the "Escrow
Agreement"), the sum of [*] U.S. dollars ($[*]) out of the Minimum Payment
(the "Initial Escrow Amount"), which Initial Escrow Amount, together with
the Additional Escrow Amount (defined below), shall be available to secure
the indemnification obligations of Seller as provided in Section 10. In
addition, at the time of each Additional Contingent Payment, Buyer shall
withhold from such payment to Seller and deliver to the Escrow Agent, to be
held in accordance with the terms of the Escrow Agreement, an amount equal
to [*] percent ([*]%) of the Additional Contingent Payments due in respect
of the [*] through [*] Installment Periods, and [*] percent ([*]%) of the
Additional Contingent Payments due in respect of the [*] through [*]
Installment Periods (collectively, the "Additional Escrow Amount" and,
together with the Initial Escrow Amount, the "Escrow Account")), which
shall be available to secure the indemnification obligations of the Seller
as provided in Section 10. The Escrow Account shall be the sole and
exclusive remedy of Buyer with respect to any claims it may have against
Seller under or in connection with this Agreement, other than in the case
of fraud, and shall be held by the Escrow Agent until the termination of
the Applicable Escrow Period (as such term is defined in the Escrow
Agreement).
(b) CASH TO SELLER AT CLOSING. At Closing, Buyer shall deliver to Seller the
Minimum Payment in immediately available funds, less the Initial Escrow
Amount delivered to the Escrow Agent under the terms of the Escrow
Agreement, to a bank account of Seller as shall be designated by Seller in
writing at least seven (7) days prior to Closing.
(c) ADDITIONAL CONTINGENT PAYMENTS. Additional Contingent Payments shall be due
sixty (60) days after the last day of each respective Installment Period
based on the amount of revenue billed during such Installment Period from
the Audio Business; provided that (i) the Additional Contingent Payments
due in respect of each Installment Period shall be adjusted in the
following Installment Periods for amounts paid to Seller with respect to
preceding Installment Periods that have not been collected, and (ii) the
Additional Contingent Payment due with respect to the last Installment
Period shall be paid based on amounts actually collected and any such
amounts not collected within 60 days following the last installment period
shall be paid within 10 days of collection thereof (whenever collected). No
further Additional Contingent Payments will be due thereafter.
(d) Allocation of Purchase Price. The aggregate consideration shall be
allocated among the tangible and intangible Purchased Assets sold
hereunder, as shall be determined by Buyer (with the consent of Seller,
which shall not be unreasonably withheld), and set forth in Schedule 3.2(d)
hereto at Closing or promptly after the Closing.
3.3 SALE OF THE AUDIO BUSINESS.
In the event Buyer sells the Audio Business prior to [*] to a third party which
is not an Affiliate of Buyer, then Buyer, at its option, either:
(a) will pay the Seller an amount (the "Final Payment") equal to the lesser of:
(1) twenty-five million U.S. dollars ($25,000,000.00) and (2) a cash or
cash equivalent (on the basis of
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the fair market value of non-cash consideration received) amount equal to
[*]% of the total consideration received for the sale of the Audio
Business, minus
(i) the total of the Minimum Payment and the cumulative Additional
Contingent Payments paid as of the date of the same, minus
(ii) [*] percent ([*]%) of any escrow amount retained by the buyer of such
Audio Business (the "New Escrow"), reduced by the total amounts held
in the Escrow Account that have not been released to Seller as of such
date (the "Seller Portion of New Escrow); provided, however, that such
Seller Portion of New Escrow shall be paid to the Seller as and when
(if at all) such New Escrow is released from escrow to Buyer;
provided, however, that, in any event, such Final Payment shall not exceed
the sum equal to $8,000,000 less the cumulative Additional Contingent
Payments paid to Seller as of the date of the sale; or
(b) will require such third party, as a condition of such sale, to assume the
obligations to make payments of the Additional Contingent Payments required
above (subject to their terms).
All the above amounts shall be supplemented by VAT, to the extent
applicable.
By way of example, if as of the date of sale, Buyer paid a total of $[*]
million from the Minimum Payment and any Additional Contingent Payments
paid by Buyer, and Buyer sold the Audio Business for $[*] million subject
to a $[*] million New Escrow Account with a $[*] balance on the original
Escrow Account, Seller would receive a partial Final Payment of $[*] on the
date of sale and additional Final Payments totaling $[*] upon the release
of the New Escrow, when and if released, in accordance with the pro rata
share of the aggregate amount released from the New Escrow (and, for the
avoidance of doubt, the $[*] remaining in the Escrow Account and already
paid by Buyer as part of the Minimum Payment and Additional Contingent
Payments, when and if released under the terms of the Escrow Agreement. If
the sales price after the deduction of the New Escrow Account was greater
than $[*] million, Seller would receive a Final Payment of $[*] million
less the unreleased portion of the Escrow Account. If the sales price in
this example was equal to or less than $[*] million before the deduction of
the New Escrow Account, Seller would not receive a Final Payment and the
Buyer will continue to hold the unreleased portion of the Escrow Account.
4 REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyer, each of
which is true and correct on the date hereof and as of the Closing Date, and
shall survive the Closing of the
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transactions provided for herein. The representations of Seller set forth below
are subject only to the exceptions set forth in Sellers' Disclosure Schedule and
should be read in conjunction therewith.
4.1 Corporate.
(a) ORGANIZATION. Seller is a corporation duly organized and validly existing
under the laws of the state of Israel.
(b) CORPORATE POWER. Seller has all requisite corporate power and authority to
own, operate and lease its properties, to carry on its business as and
where such is now being conducted, to enter into this Agreement and the
other documents and instruments to be executed and delivered by Seller
pursuant hereto and to carry out the transactions contemplated hereby and
thereby. SCHEDULE 4.1(b) accurately sets forth (i) the names of the members
of Seller's board of directors, (ii) the names of the members of each
committee of Seller's board of directors, and (iii) the names and titles of
Seller's officers.
(c) QUALIFICATION. Seller is duly licensed or qualified to do business as a
foreign corporation, and is in good standing, in each jurisdiction wherein
the character of the properties owned or leased by it, or the nature of its
business, makes such licensing or qualification necessary. The
jurisdictions in which Seller is licensed or qualified to do business are
listed in SCHEDULE 4.1(c). Seller has not conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious
name, assumed name, trade name or the like, other than its own name.
(d) NO SUBSIDIARIES. Except as set forth in SCHEDULE 4.1(d), Seller does not
now nor has it ever owned any interest, beneficially or otherwise, in any
corporation, partnership or other entity. Seller has not agreed and is not
obligated to make any future investment in or capital contribution to any
such entities.
4.2 AUTHORITY.
The execution and delivery of this Agreement and the other documents and
instruments to be executed and delivered by Seller pursuant hereto and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors and the requisite vote of the shareholders
of Seller. No other or further corporate act or proceeding on the part of Seller
is necessary to authorize this Agreement or the other documents and instruments
to be executed and delivered by Seller pursuant hereto or the consummation of
the transactions contemplated hereby and thereby. This Agreement constitutes,
and when executed and delivered, the other documents and instruments to be
executed and delivered by Seller pursuant hereto will constitute, valid binding
agreements of Seller, enforceable in accordance with their respective terms.
4.3 NO VIOLATION.
Neither the execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Seller pursuant hereto, nor the
consummation by Seller of the
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transactions contemplated hereby and thereby (a) will violate or conflict with
any applicable Law or Order, (b) except as set forth in Schedule 4.3(b), will
require any authorization, consent, approval, exemption or other action by or
notice to any Government Entities (including, without limitation, under any
"plant-closing" or similar law), or (c) subject to obtaining the consents
described in Schedule 4.3(c), will violate or conflict with, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in or give rise to the termination
of, or accelerate the performance required by, or result in the creation of any
Lien (as defined in Section 4.10(a)) upon any of the Purchased Assets under, any
term or provision of the Memorandum of Association or Articles of Association of
Seller or of any contract, indenture, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Seller is a party or
by which Seller or any of its assets or properties may be bound or affected.
4.4 FINANCIAL STATEMENTS.
Included as SCHEDULE 4.4 are true and complete copies of all audited and
unaudited financial statements for the last three fiscal years (including,
without limitation, the unaudited financial statement for the period ended
September 30, 2002) and interim reports as of the most recent quarter for which
such reports are available (including the notes and schedules contained therein
or annexed thereto) (the "Financial Statements"). All of such financial
statements (including all notes and schedules contained therein or annexed
thereto) are true, complete and accurate in accordance with U.S. GAAP (except,
in the case of unaudited statements, for the absence of footnote disclosure)
applied on a consistent basis, have been prepared in accordance with the books
and records of Seller, and fairly present, in accordance with U.S. GAAP, the
assets, liabilities and financial position, the results of operations and cash
flows of Seller as of the dates and for the years and periods indicated.
4.5 TAX MATTERS.
(a) Seller and any consolidated, combined, unitary or aggregate group for Tax
purposes of which Seller is or has been a member, have properly completed
and timely filed all Tax Returns required to be filed by them and have paid
all Taxes shown thereon to be due. The Financial Statements reflect any
unpaid Taxes of Seller for periods (or portions of periods) through
September 30, 2002 (the "Recent Balance Sheet"). Seller has no liability
for unpaid Taxes accruing after the Recent Balance Sheet except for Taxes
incurred in the ordinary course of business subsequent to the Recent
Balance Sheet. There is (i) no claim for Taxes that is a Lien against the
property of Seller or is being asserted against Seller and (ii) no audit of
any Tax Return of Seller is being conducted by a Tax Authority. Seller is
not a party to any Tax sharing or Tax allocation agreement nor does Seller
have any liability or potential liability to another party under any such
agreement. Seller has not filed any disclosures to prevent the imposition
of penalties with respect to any Tax reporting position taken on any Tax
Return. Seller has never been a member of a consolidated, combined, unitary
or aggregate group of which Seller was not the ultimate parent corporation.
Seller has in its possession receipts for any Taxes paid to foreign tax
authorities or governmental authorities.
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(b) Seller has withheld all amounts required to be withheld by Law, including
in connection to its Employees. Seller has timely paid to the appropriate
tax authorities or governmental entity all amounts so withheld or otherwise
due, including in connection with the employment by Seller of its
Employees, and has timely filed all requisite Tax Returns with the tax
authorities or Governmental Entities with respect to said Taxes. Seller is
not a party to any Tax proceedings with respect to the withholding of Taxes
from its Employees and/or payment to the tax authorities or Governmental
Entities of withholding Taxes or other amounts due with respect to their
employment with Seller. To the best Knowledge of Seller, no investigation
is being conducted against Seller by any tax authority or Governmental
Entities with respect to any of the above withholding, payment, filing or
any other obligations in connection with the above. Seller shall not
recover or attempt to recover from any of its Employees any Taxes asserted
against Seller and/or collected from it whether prior, upon or after the
Closing. For the purpose of this Section 4.5(b), (i) "Tax" shall include,
without limitation, income Taxes, levies, social security dues, compulsory
loans and any other compulsory payments with respect to the employment of
the Employees of Seller under the laws of Israel, and the term "tax
authority" shall be construed accordingly, and (ii) Seller shall also
include, where applicable, the trustee under Seller's stock option plan, if
any.
(c) Seller has had an opportunity to review with its own tax advisors the tax
consequences to it of the transactions contemplated hereunder and the other
transactions contemplated by this Agreement. Seller understands that it
must rely solely on its advisors and not on any statements or
representations by Buyer or any of its attorneys, investment advisors,
accountants or other agents with respect to tax matters.
(d) "Tax", "Taxes" or "Taxable" means (i) any and all net income, alternative
or add-on minimum tax, gross income or adjusted gross income, gross
receipts, sales, use, real or VAT, ad valorem, transfer, franchise,
profits, or excess profits tax, license, withholding or back up
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, production, environmental or windfall profit tax, custom
duty, social security tax (national insurance), health insurance tax,
severance, prohibited transaction, intangibles or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together
with any interest or any penalty, addition to tax or additional amount
imposed by any governmental entity or responsible for the imposition of any
such tax (domestic or foreign), (ii) any and all liability for the payment
of any amounts of the type described in (i) as a result of being a member
of an affiliated, consolidated, combined, unitary or aggregate group for
any taxable period, and (iii) any and all liability for the payment of any
amounts of the type described in (i) or (ii) as a result of being a
transferee of or successor to any person or as a result of any express or
implied obligation to indemnify any other person. "Tax Returns" means all
returns, declarations, reports, estimates, forms, information returns and
statements or other information (including, without limitation, estimated
tax returns and reports, withholding tax returns and reports and
information returns and reports) required to be filed with respect to any
Tax.
4.6 ABSENCE OF CERTAIN CHANGES.
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Since the Recent Balance Sheet there has not been:
(a) NO ADVERSE CHANGE. Any material adverse change in the financial condition,
assets, Liabilities, business or operations of Seller;
(b) NO DAMAGE. Any loss, damage or destruction in excess of ten thousand
dollars ($10,000.00), whether covered by insurance or not, pertaining to
Seller's business or properties;
(c) NO INCREASE IN COMPENSATION. Except as set forth in Schedule 4.6(c), any
increase in the compensation, salaries or wages payable or to become
payable to any Employee or agent of Seller (including, without limitation,
any increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other employee
benefit declared, obligated, granted, made or accrued;
(d) NO LABOR DISPUTES. Any labor dispute or disturbance, other than routine
individual grievances which are not material to the business, financial
condition or results of operations of Seller;
(e) NO COMMITMENTS. Except as set forth in Schedule 4.6(e), any commitment or
transaction by Seller (including, without limitation, any borrowing or
capital expenditure) other than in the ordinary course of business
consistent with past practice;
(f) NO DIVIDENDS. Any declaration, setting aside, or payment of any dividend or
any other distribution in respect of Seller's capital stock; any
redemption, purchase or other acquisition by Seller of any capital stock of
Seller, or any security relating thereto; or any other payment to any
shareholder of Seller as such a shareholder;
(g) NO DISPOSITION OF PROPERTY. Any sale, lease or other transfer or
disposition of any properties or assets of Seller, except in the ordinary
course of business;
(h) NO INDEBTEDNESS. Except as set forth in Schedule 4.6(h), any indebtedness
for borrowed money incurred, assumed or guaranteed by Seller;
(i) NO LIENS. Any Lien made on any of the properties or assets of Seller;
(j) NO AMENDMENT OF CONTRACTS. Except as set forth in Schedule 4.6(j), any
entering into, amendment or termination by Seller of any contract, or any
waiver or release of material rights or claims thereunder including any
write-off or other compromise of any account receivable of Seller, related
to the Purchased Assets, other than in the ordinary course of business;
(k) LOANS AND ADVANCES. Except as set forth in Schedule 4.6(k), any loan or
advance (other than advances to Employees in the ordinary course of
business for travel and entertainment in accordance with past practice) to
any person including, but not limited to, any officers, directors or
Employees of Seller, or any shareholders or Affiliates;
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(l) CREDIT. Any grant of credit to any customer or distributor on terms or in
amounts more favorable than those which have been extended to such customer
or distributor in the past, any other change in the terms of any credit
heretofore extended, or any other change of Seller's policies or practices
with respect to the granting of credit;
(m) ACCOUNTING METHODS. Any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Seller;
(n) NO UNUSUAL EVENTS. Except as set forth in SCHEDULE 4.6(n), any other event
or condition not in the ordinary course of business of Seller; or
(o) MISCELLANEOUS. Any agreement (whether written or oral) to do any of the
things described in the preceding clauses.
4.7 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth in SCHEDULE 4.7, Seller does not have any Liabilities other
than in connection with the consummation of the transactions contemplated by
this Agreement and commercial liabilities and obligations incurred since the
date of the Recent Balance Sheet in the ordinary course of business and
consistent with past practice and none of which has or will have a material
adverse effect on the business, assets, financial condition or results of
operations of Seller. Except as and to the extent described in the Recent
Balance Sheet or in SCHEDULE 4.7, Seller has no Knowledge of any basis for the
assertion against Seller of any Liability and Seller has no Knowledge of any
circumstances, conditions, happenings, events or arrangements, contractual or
otherwise, which may give rise to Liabilities, except commercial liabilities and
obligations incurred in the ordinary course of Seller's business and consistent
with past practice. For the purposes of this Agreement, the term "Knowledge"
means (i) the actual knowledge of the party's President, CEO, VPs, Executive VPs
or Directors (collectively the "Executive Team") and (ii) the constructive
knowledge that a member of the Executive Team could reasonably be expected to
become aware of in the ordinary course of business regarding the accuracy of any
representation or warranty contained in this Agreement.
4.8 NO LITIGATION.
Except as set forth in SCHEDULE 4.8, there is no Litigation pending or
threatened against Seller, its directors (in such capacity), its business or any
of its assets. Seller does not have any Knowledge of any basis for any
Litigation. SCHEDULE 4.8 also identifies all Litigation to which Seller or any
of its directors (in their capacity as such) have been parties during the last
five years. Except as set forth in SCHEDULE 4.8, neither Seller nor its business
or assets is subject to any Order.
4.9 COMPLIANCE WITH LAWS AND ORDERS.
(a) COMPLIANCE. Except as set forth in SCHEDULE 4.9(a), seller (including each
and all of its operations, practices, properties and assets) is in
compliance with all applicable Laws and Orders, including, without
limitation, those applicable to discrimination in employment, occupational
safety and health, trade practices, competition and pricing, product
warranties, zoning, building and sanitation, employment, retirement and
labor relations,
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product advertising, encryption regulations and environmental laws. Seller
has not received notice of any violation or alleged violation of any Laws
or Orders. All reports and returns required to be filed by Seller with any
Government Entities have been filed in a timely manner, and were accurate
and complete in all material respects when filed. Without limiting the
generality of the foregoing, the operation of Seller's business as it is
now conducted does not, nor does any condition existing at any of the
Leased Real Property, in any manner constitute a nuisance or other
tortious interference with the rights of any person or persons in such a
manner as to give rise to or constitute the grounds for a suit, action,
claim or demand by any such person or persons seeking compensation or
damages or seeking to restrain, enjoin or otherwise prohibit any aspect of
the conduct of such business or the manner in which it is now conducted.
(b) LICENSES AND PERMITS. Seller has all licenses, permits, approvals,
authorizations and consents of all Government Entities and all
certification organizations required for the conduct of the business as
presently conducted and operation of the Leased Real Property. All such
licenses, permits, approvals, authorizations and consents are described in
SCHEDULE 4.9(b), are in full force and effect and are assignable to Buyer
in accordance with their respective terms. Except as set forth in SCHEDULE
4.9(b), Seller (including its operations, properties and assets) is and
has been in compliance with all such permits and licenses, approvals,
authorizations and consents.
(c) INVESTMENT CENTER. Correct copies of all applications submitted by Seller
to the Investment Center of the Ministry of Industry and Commerce for
receipt of a status of Approved Enterprise under the Law for the
Encouragement of Capital Investments, 1959, and all letters of approval,
and supplements thereto, granted by the Investment Center of the Ministry
of Industry and Commerce have been delivered to Buyer and are listed in
SCHEDULE 4.9(c). Seller is in compliance with all such letters of
approval, supplements thereto and with the Law for the Encouragement of
Capital Investments, 1959 and the regulations promulgated thereunder.
(d) FOREIGN CORRUPT PRACTICES ACT. Neither Seller nor, to Seller's best
Knowledge, any agent, Employee or other entity associated with or acting
on behalf of Seller, has, directly or indirectly, used any corporate funds
for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, made any unlawful payment to any
government official or Employee or to any political party or campaign from
corporate funds, violated any applicable provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate,
payoff, influence payment, kickback or other similar unlawful payment.
4.10 TITLE TO AND CONDITION OF PROPERTIES.
(a) MARKETABLE TITLE. Except as set forth in SCHEDULE 10.4(a), Seller has
good, valid and marketable title to or, in the case of leased properties
and assets, good, valid and marketable leasehold interests in, all the
Purchased Assets, free and clear of all mortgages, liens (statutory or
otherwise), security interests, pledges, licenses, equities, options,
conditional sales contracts, levies, charges or encumbrances of any nature
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whatsoever (collectively, "Liens"). Except as set forth in SCHEDULE
10.4(a), none of the Purchased Assets are subject to any restrictions with
respect to the transferability thereof. Seller has complete and
unrestricted power and right to sell, assign, convey and deliver the
Purchased Assets to Buyer as contemplated hereby, including with regard to
all relevant laws pertaining to the export of encryption technology.
Except as set forth in SCHEDULE 10.4(a), at Closing, Buyer will receive
good and marketable title to all the Purchased Assets, free and clear of
all Liens of any nature whatsoever.
(b) CONDITION. Excect as set forth in SCHEDULE 10.4(b), all tangible assets
constituting Purchased Assets hereunder are in good operating condition
and repair, free from any defects (except such defects as do not interfere
with the use thereof in the conduct of the normal operations of Seller),
have been maintained consistent with the standards generally followed in
the industry and are sufficient to carry on the business of Seller as
conducted during the preceding 12 months.
(c) NO CONDEMNATION OR EXPROPRIATION. Except as set forth in SCHEDULE 10.4(c),
neither the whole nor any portion of the property or any other assets of
Seller is subject to any Order to be sold or is being condemned,
expropriated or otherwise taken by any Government Entities with or without
payment of compensation therefor, nor to the best of Seller's Knowledge
has any such condemnation, expropriation or taking been proposed.
4.11 INSURANCE.
(a) INSURANCE POLICIES. Set forth in SCHEDULE 4.11(a) is a complete and
accurate list and description of all policies of fire, liability, product
liability, workers compensation, health and other forms of insurance
presently in effect with respect to the business and properties of Seller,
true and correct copies of which have heretofore been delivered to Buyer.
SCHEDULE 4.11(a) includes, without limitation, the carrier, the
description of coverage, the limits of coverage, retention or deductible
amounts, amount of annual premiums, date of expiration and the date
through which premiums have been paid with respect to each such policy,
and any pending claims. All such policies are valid, outstanding and
enforceable policies and provide insurance coverage for the properties,
assets and operations of Seller, of the kinds, in the amounts and against
the risks customarily maintained by organizations similarly situated; and
no such policy (nor any previous policy) provides for or is subject to any
currently enforceable retroactive rate or premium adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or
partially out of events arising prior to the date hereof. No notice of
cancellation or termination has been received with respect to any such
policy, and Seller has no Knowledge of any act or omission of Seller that
could result in cancellation of any such policy prior to its scheduled
expiration date. Seller has not been refused any insurance with respect to
any aspect of the operations of the business nor has its coverage been
limited by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the last three years. Seller
has duly and timely made all claims it has been entitled to make under
each policy of insurance. There is no claim by Seller pending under any
such policies as to which coverage has been questioned, denied or disputed
by the underwriters of such policies, and Seller does not know of any
basis for
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denial of any claim under any such policy. Seller has not received any
written notice from or on behalf of any insurance carrier issuing any such
policy that insurance rates therefor will hereafter be substantially
increased (except to the extent that insurance rates may be increased for
all similarly situated risks) or that there will hereafter be a
cancellation or an increase in a deductible (or an increase in premiums in
order to maintain an existing deductible) or nonrenewal of any such
policy. Such policies are sufficient in all material respects for
compliance by Seller with all requirements of law and with the
requirements of all material contracts to which Seller is a party.
(b) INSURANCE CLAIMS. Set forth in SCHEDULE 4.11(b) is a true and correct copy
of an extract from Seller's insurers setting forth all claims directed or
handled by the insurers of Seller in the last 3 years.
4.12 CONTRACTS AND COMMITMENTS.
(a) REAL PROPERTY LEASES. Except as set forth in SCHEDULE 4.12(a), Seller has
no leases of real property.
(b) PERSONAL PROPERTY LEASES. Except as set forth in SCHEDULE 4.12(d), Seller
has no leases of personal property.
(c) PURCHASE COMMITMENTS. Seller has no purchase commitments for inventory
items or supplies that, together with amounts on hand, constitute in
excess of three months normal usage, or which are at an excessive price.
(d) SALES COMMITMENTS. Seller has no sales contracts or commitments except
those made in the ordinary course of business, at arm's length, and no
such contracts or commitments are for a sales price that would result in
a loss to Seller.
(e) CONTRACTS FOR SERVICES. Except as set forth in SCHEDULE 4.12(e), Seller
has no agreement, understanding, contract or commitment (written or oral)
with any officer, shareholder, Employee, agent, consultant, distributor,
dealer or franchisee that is not cancelable by Seller on notice of not
longer than 30 days without liability, penalty or premium of any nature
or kind whatsoever.
(f) POWERS OF ATTORNEY. Except as set forth in SCHEDULE 4.12(f), Seller has
not given a power of attorney, which is currently in effect, to any
person, firm or corporation for any purpose whatsoever.
(g) COLLECTIVE BARGAINING AGREEMENTS. Except as set forth in Schedule 4.12(g),
Seller is not a party to, or bound by, any collective bargaining
agreements with any unions, guilds, shop committees or other collective
bargaining groups or any applicable Order in connection therewith.
(h) LOAN AGREEMENTS. Except as set forth in SCHEDULE 4.12(h), Seller is not
obligated under any loan agreement, promissory note, letter of credit, or
other evidence of indebtedness as a signatory, guarantor or otherwise.
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(i) GUARANTEES. Except as set forth in SCHEDULE 4.12(i), Seller has not
guaranteed the payment or performance of any person, firm or corporation,
agreed to indemnify any person or act as a surety, or otherwise agreed to
be contingently or secondarily liable for the obligations of any person.
(j) CONTRACTS SUBJECT TO RENEGOTIATION. Seller is not a party to any contract
with any governmental body that is subject to renegotiation.
(k) BURDENSOME OR RESTRICTIVE AGREEMENTS. Except as set forth in SCHEDULE
4.12(k), Seller is not a party to nor is it bound by any agreement
requiring Seller to assign any interest in any trade secret or proprietary
information, or prohibiting or restricting Seller from competing in any
business or geographical area or soliciting customers or otherwise
restricting it from carrying on its business anywhere in the world.
(l) OTHER MATERIAL CONTRACTS. Seller has no lease, license, contract or
commitment of any nature that is individually material to the operations
of Seller, except as explicitly described in Schedule 4.12(l) or in any
other Schedule.
(m) NO DEFAULT. Except as set forth in SCHEDULE 4.12(m), each lease, contract
or commitment of Seller is in full force and effect and Seller is not in
default under any lease, contract or commitment, nor has any event or
omission occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or cause the
acceleration of any of Seller's obligations or result in the creation of
any Lien on any of the assets owned, used or occupied by Seller. Except as
set forth in SCHEDULE 4.12(m), no third party is, to the Seller's
Knowledge, in default under any lease, contract or commitment to which
Seller is a party, nor does the Seller have any Knowledge of an event or
omission occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder or give rise to an
automatic termination, or the right of discretionary termination, thereof.
(n) MOST FAVORED NATIONS. Seller has not engaged in any act which would have
the effect, before or after Closing, of triggering any "most favored
nations" or similar preferential treatment clause in any material contract
to which Seller is or has been a party.
4.13 LABOR MATTERS.
Except as set forth in SCHEDULE 4.13, Seller is in compliance in all material
respects with all applicable (including, without limitation, the Severance
Compensation Act - 1963, the Equal Opportunities in Labor Act - 1988, the
Employment of Employees by Manpower Contractors Act - 1996, the Protection of
Salary Act - 1958 and the Minimum Salary Act - 1987) laws, policies, procedures
and agreements relating to employment, terms and conditions of employment and to
the proper withholding and remission to the proper tax authorities of all sums
required to be withheld from the Employees (as defined below), and Seller has
paid in full to the Employees all wages, salaries, commissions, bonuses,
Benefits (as defined below) and other compensation due and payable to such
Employees as of the Closing Date, including, without limitation, in connection
with the termination by Seller of the employment of the Employees
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(who will not be Transferred Employees). All the Benefits to which any Employee
or former Employee is or may be entitled including, INTER ALIA, severance pay,
accrued and unpaid vacation days, convalescent pay, leave and health, have been
paid or reserved for in the Financial Statements in accordance with U.S. GAAP.
All contributions to benefit plans (including employer contributions and
employee salary reduction contributions), including insurance and education
funds, that are due as of the Closing Date have been paid to each Employee's
benefit plan.
No work stoppage or labor strike against Seller is pending or threatened. Seller
is not involved in or, to its Knowledge, threatened with, any labor dispute,
grievance, or litigation relating to labor or safety matters involving any of
the Employees. Seller is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract or Order
(including, without limitation, any Order issued by the Histadrut (General
Federation of Labor in Israel) or the Industrialists Association in Israel) with
respect to any of the Employees and no such collective bargaining agreement is
being negotiated by Seller.
4.14 EMPLOYEE BENEFIT AND STOCK OPTION PLANS.
(a) EMPLOYEE EQUITY AND OPTIONS. Set forth in SCHEDULE 4.14(a) is a complete
and accurate list of all currently outstanding equity of Seller or any
Affiliate thereof issued to, and options to acquire any such equity
currently held by, officers, directors, Employees or consultants of Seller
or its Affiliates, indicating the number of shares covered, the name and
title (or relationship) of the holder, the vesting schedule of each such
option and all such shares and exercise prices therefor. Except as set
forth therein, Seller does not operate any share incentive scheme, share
option scheme or profit sharing scheme for the benefit of any of its
officers, directors, Employees or consultants.
(b) EMPLOYEE BENEFIT PLANS. Except as contemplated hereby, neither the
execution, delivery or performance of this Agreement, nor the consummation
of any of the other transactions contemplated by this Agreement, will
result in any payment (including any bonus, golden parachute or severance
payment) to any current or former Employees or directors of Seller
(whether or not under any benefit plan), or increase the Benefits payable
under any benefit plan, or result in any acceleration of the time of
payment or vesting of any such Benefits, except as provided therein.
4.15 EMPLOYMENT COMPENSATION.
SCHEDULE 4.15 contains a true and correct list of all employees and consultants
to whom Seller is paying compensation and/or salary ("Employees"), including
description of their compensation and/or salary and other basic terms of
employment or consultancy, bonuses and incentives for services rendered or
otherwise; and in the case of salaried Employees such list identifies the
current annual rate of compensation for each Employee and in the case of hourly
or commission Employees identifies certain reasonable ranges of rates and the
number of Employees falling within each such range. SCHEDULE 4.15 contains a
true and correct list of all employees and consultants of the Seller. SCHEDULE
4.15 also identifies each Employee who is not fully available to perform work
because of disability or other leave and sets forth the basis of such leave and
the
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anticipated date of return to full service. Seller has provided Buyer with
either a copy of the agreements between Seller and each Employee or a full and
accurate description of the terms of employment or retention of each Employee,
and all benefits, including, without limitation, salaries, directors' fees,
social benefits, bonuses, commissions, profit shares, automobile, reimbursement
of expenses and benefits in kind ("Benefits") payable or which Seller is bound
to provide (whether now or in the future) to each Employee. The Seller has not
adopted any policy or custom with respect to any Benefit that would materially
change the terms of such Benefit to which an Employee is entitled, under an
employment agreement or applicable law, excluding only the policy and custom to
pay employee severance pay upon termination even when such termination is due to
such employee's voluntary termination.
4.16 TRADE RIGHTS.
(a) TRADE RIGHTS LIST. SCHEDULE 4.16(a) lists all Trade Rights of the type
described in clauses (i), (ii), (iii) and (iv) of Section 1.1(e) in which
Seller now has any interest, specifying whether such Trade Rights are
owned, controlled, used or held (under license or otherwise) by Seller,
and also indicating which of such Trade Rights are registered. All Trade
Rights shown as registered in SCHEDULE 4.16(a) have been properly
registered, all pending registrations and applications have been properly
made and filed and all annuity, maintenance, renewal and other fees
relating to registrations or applications are current. All such
registrations, filings and issuances remain in full force and effect, all
fees and other charges with respect thereto are current, and there are no
fees or charges due or that would become due or payable with respect
thereto within the ninety (90) days following the Closing Date.
(b) CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENTS. None of the former or
present Employees, consultants, officers or directors of Seller or any
distributor, reseller or customer of Seller, owns, directly or indirectly,
or has any other right or interest in, or claim to, in whole or in part,
any of the Trade Rights. Each current and former Employee, consultant or
contractor of Seller, who invented, participated in the invention or
reduction to practice of, or was granted access to, any of the Trade
Rights, executed (i) in the case of Employees, a proprietary information
and confidentiality agreement substantially in the form of SCHEDULE
4.16(b)(i) and (ii) in the case of consultants and contractors, a
non-disclosure agreement substantially in the form of SCHEDULE 4.16(b)
(ii). All technical information which is proprietary to Seller has been
kept confidential by Seller, with the exception of technical information
that has been disclosed in the ordinary course of business under
non-disclosure or similar agreements and information that has been
submitted in the course of filing patent applications.
(c) INTEREST IN TRADE RIGHTS. In order to conduct the business of Seller, as
such is currently being conducted, except as set forth in SCHEDULE
4.16(c), Seller does not require any Trade Rights that it does not already
have.
(d) NO INFRINGEMENT. Except as set forth in Schedule 4.16(d), Seller is not
infringing and has not infringed any Trade Rights of another in the
operation of the business of Seller, including, without limitation, the
Trade Rights of Philips, Sony, Thompson multimedia or
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TTR Technologies; nor, to Seller's Knowledge, is any other person
infringing the Trade Rights of Seller.
(e) NO LICENSE OR ASSIGNMENT; NO THIRD PARTY COMPENSATION; NO ROYALTIES.
Except as set forth in SCHEDULE 4.16(e), Seller has not granted any
license or made any assignment of any Trade Right listed on SCHEDULE
4.16(a), and no other person has any right to use any Trade Right owned or
held by Seller. Seller is not obligated, under contract or by law, to pay
any compensation to any third party in respect of the use, transfer or
sale of any portion of the Trade Rights. Seller does not pay any royalties
or other consideration for the right to use any Trade Rights of others.
(f) NO LITIGATION. There is no Litigation pending or, to Seller's Knowledge,
threatened to challenge Seller's right, title and interest with respect to
its continued use and right to preclude others from using any Trade Rights
of Seller.
(g) GOVERNMENTAL ENTITY GRANT. Except as set forth in SCHEDULE 4.16(g), at no
time during the conception of or reduction of any of the Trade Rights to
practice was any developer, inventor or other contributor to the Trade
rights operating under any grants from any Governmental Entity, performing
research sponsored by any Governmental Entity or private source or other
obligation with any third party that in each case could adversely affect
Seller's rights in the Trade Rights. Seller has not requested from, made
any application to, nor received any benefits from, the Office of the
Chief Scientist of the Israeli Ministry of Industry and Trade for receipt
of research and development funding in accordance with the Law for the
Encouragement of Industrial Research and Development, 1984.
4.17 MAJOR CUSTOMERS AND SUPPLIERS.
(a) MAJOR CUSTOMERS. SCHEDULE 4.17(a) contains a list of all customers,
including distributors, of Seller for each of the two (2) most recent
fiscal years (determined on the basis of the total dollar amount of net
sales) showing the total dollar amount of net sales to each such customer
during each such year. Seller has no Knowledge nor information of any
facts indicating, nor any other reason to believe, that any of the
customers listed on SCHEDULE 4.17(a) would not have continued to be
customers of the business of Seller after the Closing at substantially the
same level of purchases as heretofore had Buyer taken assignment of all of
Seller's agreements with such customers in accordance with their
respective terms.
(b) DEALERS AND DISTRIBUTORS. SCHEDULE 4.17(b) contains a list by product line
of all sales representatives, dealers, distributors and franchisees of
Seller. Seller has furnished to Buyer representative copies of all sales
representative, dealer, distributor and franchise contracts and policy
statements, and all substantial modifications or exceptions thereto.
4.18 PRODUCT WARRANTY AND PRODUCT LIABILITY.
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SCHEDULE 4.18(a) contains a true, correct and complete copy of Seller's standard
warranty or warranties for sales of Products (as defined below) and, except as
stated therein, there are no warranties, commitments or obligations with respect
to the return, repair or replacement of Products. SCHEDULE 4.18(b) contains a
description of all product liability claims and similar Litigation relating to
Products that are presently pending or that to Seller's Knowledge are
threatened, or which have been asserted or commenced against Seller within the
last five (5) years (whether or not covered by insurance). Except as set forth
in SCHEDULE 4.18(c), there are no defects in the Products, to Seller's
Knowledge, that would adversely affect performance or create an unusual risk of
injury to property. None of the Products has been the subject of any
replacement, field fix, retrofit, modification or recall campaign and, to
Seller's Knowledge, no facts or conditions exist which could reasonably be
expected to result in such a recall campaign. The Products have been designed
and manufactured so as to meet and comply with all applicable governmental
standards and specifications currently in effect, and have received all
governmental approvals necessary to allow their sale and use. As used in this
Section 4.18, the term "Products" means any and all products currently or at any
time previously distributed or sold by Seller, or by any predecessor of Seller
under any brand name or mark under which products are or have been distributed
or sold by Seller.
4.19 AFFILIATES' RELATIONSHIPS TO SELLER.
(a) CONTRACTS WITH AFFILIATES. All leases, contracts, agreements or other
arrangements between Seller and any Affiliate are described on Schedule
4.19(a).
(b) NO ADVERSE INTERESTS. No Affiliate has any direct or indirect interest in
(i) any entity that does business with Seller or is competitive with
Seller's business, or (ii) any property, asset or right that is used by
Seller in the conduct of its business.
(c) OBLIGATIONS. All obligations of any Affiliate to Seller, and all
obligations of Seller to any Affiliate, are listed on Schedule 4.19(c).
4.20 SHAREHOLDER LIST.
All shareholders and warrant or option holders of Seller's share capital are
listed on SCHEDULE 4.20 hereto, together with the number of shares, options or
warrants held by each. Other than creditors, no person, other than those listed
on SCHEDULE 4.20, is entitled to participate in any distribution of assets by
Seller in the event of the liquidation or dissolution of Seller. Except as set
forth in SCHEDULE 4.20, each person so listed is a competent adult and is the
record and the beneficial owner of all shares so listed in his or her name, with
the sole right to vote, dispose of, and receive dividends or distributions with
respect to such shares.
4.21 ASSETS NECESSARY TO BUSINESS.
The Purchased Assets include all property and assets (except for the Excluded
Assets), tangible and intangible, and all leases, licenses and other agreements,
which are necessary to permit Buyer to carry on, as currently used or held for
use in, the business of Seller as presently conducted.
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4.22 NO BROKERS OR FINDERS.
Except as set forth in SCHEDULE 4.22, neither Seller nor any of its directors,
officers, shareholders, Employees or agents have retained, employed or used any
broker or finder in connection with the transactions provided for herein or the
negotiation thereof. Without limiting the generality of the foregoing, Seller
acknowledges that Buyer shall not be responsible for any brokerage fees, if any,
payable by Seller to SG Cowen in connection with the transaction contemplated
herein.
4.23 DISCLOSURE.
No representation or warranty by Seller in this Agreement, nor any statement,
certificate, schedule, document or exhibit hereto furnished or to be furnished
by or on behalf of Seller pursuant to this Agreement, contains or shall contain
any untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading. All
statements and information contained in any certificate, instrument, Disclosure
Schedule or document delivered by or on behalf of Seller pursuant to this
Agreement shall be deemed representations and warranties by Seller.
5 REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Seller, each of
which is true and correct on the date hereof and as of the Closing Date, and
shall survive the Closing of the transactions provided for herein.
5.1 CORPORATE.
(a) ORGANIZATION. Buyer is a corporation duly organized, validly existing and
in good standing under the laws of England and Wales.
(b) CORPORATE POWER. Buyer has all requisite corporate power to enter into
this Agreement and the other documents and instruments to be executed and
delivered by Buyer and to carry out the transactions contemplated hereby
and thereby.
5.2 AUTHORITY.
The execution and delivery of this Agreement and the other documents and
instruments to be executed and delivered by Buyer pursuant hereto and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Buyer. No other corporate act or
proceeding on the part of Buyer or its shareholders is necessary to authorize
this Agreement or the other documents and instruments to be executed and
delivered by Buyer pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
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5.3 NO BROKERS OR FINDERS.
Neither Buyer nor any of its directors, officers, shareholders, Employees or
agents have retained, employed or used any broker or finder in connection with
the transactions provided for herein or the negotiation thereof.
5.4 LITIGATION.
To Buyer's Knowledge, no person has threatened to commence any Litigation: (i)
that involves Buyer or the Buyer's Audio Business as conducted immediately prior
to the Closing Date; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
transactions contemplated by this Agreement. To Buyer's Knowledge, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that could reasonably be expected to, give rise to or serve as a basis
for the commencement of any such legal proceeding.
5.5 DISCLOSURE.
No representation or warranty by Buyer in this Agreement, nor any statement,
certificate, schedule, document or exhibit hereto furnished or to be furnished
by or on behalf of Buyer pursuant to this Agreement, contains or shall contain
any untrue statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading.
6 OTHER MATTERS
6.1 ESCROW AGREEMENT.
At the Closing, Seller and Buyer shall execute and deliver an Escrow Agreement
in the form of Exhibit A hereto.
6.2 CONFIDENTIAL INFORMATION.
Seller shall not at any time subsequent to the Closing, except as explicitly
requested by Buyer, use for any purpose, disclose to any person, or keep or make
copies of documents, tapes, discs, programs or other information storage media
(collectively "Records") containing, any Confidential Information concerning the
Seller's Business, the Purchased Assets, or the Assumed Liabilities, all such
information being deemed to be transferred to Buyer hereunder. For purposes
hereof, "Confidential Information" shall mean and include, without limitation,
all Trade Rights in which Seller has an interest, all customer and vendor lists
and related information, all information concerning Seller's processes,
products, costs, prices, sales, marketing and distribution methods, properties
and assets, liabilities, finances, Employees, all privileged communications and
work product, and any other information not previously disclosed to the public
directly by Seller. The foregoing provisions shall not apply to any information
which is an Excluded Asset as defined in Section 1.2, or which relates solely to
one or more Excluded Assets. If at any time after Closing Seller should discover
that it is in possession of any Records containing the Confidential Information
of Buyer, then Seller shall immediately turn such Records over to Buyer, which
shall upon request make available to Seller any information contained therein
which is not Confidential Information. Seller agrees that it will not assert a
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waiver or loss of confidential or privileged status of the information based
upon such possession or discovery. Seller hereby consents to Buyer's
consultation with legal, accounting and other professional advisors to Seller
concerning advice rendered to Seller prior to the Closing regarding Seller's
Business, the Purchased Assets or the Assumed Liabilities, excluding, however,
the negotiation and drafting of this Agreement and the transactions entered into
pursuant hereto.
6.3 USE OF SELLER'S NAME.
Following the Closing, neither Seller nor any Affiliate shall, without the prior
written consent of Buyer, make any use of the name "Midbar," "Midbar Tech Ltd.,"
"Midbar Tech (1998) Ltd." or any other name confusingly similar thereto, except
as may be necessary for Seller to pay its liabilities, prepare tax returns and
other reports, and to otherwise wind up and conclude its business.
6.4 SALES TAX MATTERS.
Seller shall pay and be responsible for all capital gains and other Taxes
applicable under any applicable law in connection with this Agreement and the
transactions contemplated hereby. In addition and without deviating from the
above, Buyer will withhold and deduct from the Purchase Price all applicable
Israeli deductions and withholding Taxes, provided that Buyer will reduce such
deduction or withholding to the extent provided by applicable law in the event
Seller provides to Buyer certificates or other documentation, in form and
substance reasonably satisfactory to Buyer, evidencing any valid exemption from
such deduction or withholding.
6.5 NON-COMPETITION.
As a condition to the Closing, and as an inducement to Buyer to execute this
Agreement and complete the transaction contemplated hereby, and in order to
preserve the goodwill associated with Seller's Business being acquired pursuant
to this Agreement, Seller shall sign a non-competition agreement substantially
in the form of Exhibit B (the "Seller Non-Competition Agreement").
6.6 COVENANTS OF BUYER.
(a) REPORTS. The Buyer shall furnish to the Seller, within sixty (60) days of
the termination of each Installment Period, a report setting forth in
reasonable detail, the sales and amounts collected by Buyer during such
Installment Period, which reports shall include names of customers,
products purchased, amounts billed, terms of payment and amounts
collected.
(b) ACCESS TO BOOKS AND RECORDS. Seller shall have the right, at its own
expense, during the Performance Period and for a period of one (1) year
thereafter, to have an independent public accountant located in the San
Francisco Bay area examine not more than once in each Installment Period
the financial books and records of account relevant to the Buyer's Audio
Business, which examination shall be conducted during normal business
hours and upon reasonable notice to Buyer, to determine the Buyer's
compliance with its obligations hereunder. If errors in the Seller's favor
are discovered as a result of such
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examination, Buyer shall promptly pay to Seller the amount of any such
deficiency and if such error is equal to or exceeds 5%, the Buyer shall,
in addition to the payment of any such deficiency, reimburse Seller for
twice the expense of such examination, not including travel fees. Such
reimbursement of audit expenses shall be capped in any event at Twenty
Thousand U.S. Dollars ($20,000.00). For this purpose, the Buyer shall
grant the Seller's representatives the right of access to all relevant
business documents, have copies prepared thereof and provide all necessary
information. As a condition to such examination, the independent public
accountant selected by Seller shall execute a written agreement,
reasonably satisfactory in form and substance to Buyer, to maintain in
confidence all information obtained during the course of any such
examination except for disclosure to Seller as necessary for the above
purpose. The findings of such independent public accountant shall be
binding on the parties hereto.
7 FURTHER COVENANTS OF SELLER
Seller covenants and agrees as follows:
7.1 ACCESS TO INFORMATION AND RECORDS.
During the period prior to the Closing:
(a) Seller shall, and shall cause its officers, Employees, agents, independent
accountants and advisors to, furnish to Buyer, its officers, employees,
agents, independent accountants and advisors, at reasonable times and
places, all information in their possession concerning Seller as may be
requested, and give such persons access to all of the properties, books,
records, contracts and other documents of or pertaining to Seller that
Seller or its officers, Employees, agents, independent accountants or
advisors shall have in their custody.
(b) With the prior consent of Seller in each instance (which consent shall not
be unreasonably withheld), Buyer and its officers, employees, agents,
independent accountants and advisors, shall have access to vendors,
customers, and others having business dealings with Seller.
7.2 CONDUCT OF BUSINESS PENDING THE CLOSING.
From the date hereof until the Closing, except as otherwise approved in writing
by Buyer:
(a) NO CHANGES. Seller will carry on its business diligently and in the same
manner as heretofore and will not make or institute any changes in its
methods of purchase, sale, management, accounting or operation.
(b) MAINTAIN ORGANIZATION. Seller will take such action as may be necessary to
maintain, preserve, renew and keep in favor and effect the existence,
rights and franchises of Seller and will use its best efforts to preserve
the business organization of Seller intact and to preserve for Buyer its
present relationships with suppliers and customers and others having
business relationships with Seller.
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(c) NO BREACH. Seller will not do or omit any act, or permit any omission to
act, which may cause a breach of any material contract, commitment or
obligation, or any breach of any representation, warranty, covenant or
agreement made by Seller herein.
(d) NO MATERIAL CONTRACTS. No contract or commitment will be entered into, and
no purchase of raw materials or supplies and no sale of goods or services
(real, personal, or mixed, tangible or intangible) will be made, by or on
behalf of Seller, except contracts, commitments, purchases or sales which
are in the ordinary course of business and consistent with past practice,
are not material to Seller (individually or in the aggregate) and would
not have been required to be disclosed in the Disclosure Schedule had they
been in existence on the date of this Agreement.
(e) NO CORPORATE CHANGES. Seller shall not amend its Memorandum or Articles of
Association or make any changes in authorized or issued capital stock.
(f) MAINTENANCE OF INSURANCE. Seller shall maintain all of the insurance in
effect as of the date hereof.
(g) MAINTENANCE OF PROPERTY. Seller shall use, operate, maintain and repair
all property of Seller in a normal business manner.
(h) INTERIM FINANCIALS. Seller will provide Buyer with interim monthly
financial statements and other management reports as and when they are
available. Seller will report regularly (but in no event less frequently
than weekly) to Buyer concerning the status of the Seller's Business.
(i) NO NEGOTIATIONS. Seller will not directly or indirectly (through a
representative or otherwise) solicit or furnish any information to any
prospective buyer, commence, or conduct presently ongoing, negotiations
with any other party or enter into any agreement with any other party
concerning the sale of Seller, Seller's assets or business or any part
thereof or any equity securities of Seller (an "Acquisition Proposal"),
and Seller shall immediately advise Buyer of the receipt of any
Acquisition Proposal.
7.3 CHANGE OF CORPORATE NAME.
Concurrently with the Closing, Seller shall change its corporate name to a new
name bearing no resemblance to its present name so as to permit the use of its
present name by Buyer.
7.4 EMPLOYEES.
(a) As of the Closing Date, Seller shall terminate all Employees of Seller who
do not become Transferred Employees (as defined below). During the
pre-Closing period, Buyer shall offer to assume the employment agreements
of those Employees of Seller identified in SCHEDULE 7.4(a), effective as
of the day after the Closing, and who execute the waiver and consent
attached hereto as Exhibit E (the "Employee Waiver and Consent"). Such
individuals who consent to Buyer's assumption of his/her employment
agreement, as well as Seller's assignment of such agreement to Buyer, and
execute an Employee Waiver and
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Consent shall be referred to herein as "Transferred Employees". SCHEDULE
7.4(a) also identifies those Employees who are considered Key Employees
and whose execution of an employment agreement with Buyer and whose
execution of the Employee Waiver and Consent shall be a condition
precedent to the Closing obligations of Buyer.
(b) At or before Closing, Seller shall pay and release to all Employees or to
Buyer for the benefit of Transferred Employees (where applicable), based
on such Employees' last salary and level of seniority, any and all
applicable payments or rights, including, without limitation, salaries,
retention bonuses, vacation pay, managers' insurance policies, employer's
social security matching funds, workers' compensation payments, education
funds, pension funds, severance pay funds, and any other funds, (including
with respect to stock options or similar equity rights granted to such
Employee in Seller ("Employee Options")) to which any of such Employees is
entitled through the Closing Date (by applicable Law or agreement), and
pay to such Employee the balance of employment and severance benefits, if
any, payable to him or her by applicable Law or agreement) and provide
equitable compensation with respect to Employee Options.
(c) Notwithstanding any confidentiality, non-compete or intellectual property
ownership obligations of any Employee to Seller, or any Affiliate thereof,
all Employees shall be permitted, as of the Closing Date, to engage in the
Seller's Business on behalf of Buyer and its Affiliates. At the sole
discretion of Buyer, the Transferred Employees shall be deemed as intended
third parties beneficiaries of this Section 7.4(c).
(d) Seller shall retain all obligations and liabilities (including, without
limitation, any and all prior notice payments and other employment and
severance benefits as is required by applicable Law, custom or agreement,
as well as liability with respect to employee stock options) related to
the employment (and termination, if applicable) of any Employee that
accrued before, during or after the Closing Date; provided, however, that
any liability with respect to any Transferred Employees relating to the
agreements between Buyer and such Transferred Employees or to the period
following the Closing Date shall be Buyer's (taking into account Seller's
obligation to transfer all Benefits and Liabilities concerning all
Transferred Employee that have accrued through the Closing, pursuant to
Section 7.4(b)).
7.5 CONSENTS.
Seller will use its best efforts prior to Closing to obtain all consents
necessary for the consummation of the transactions contemplated hereby.
7.6 ONGOING INSURANCE COMMITMENT.
Seller shall maintain in effect for sixty (60) days following Closing all
insurance policies that were in effect as of January 1, 2002 (other than the D&O
insurance); provided that the electronic equipment insurance will be maintained
only until December 31, 2002. As a condition to the Closing, Buyer and
Macrovision Corporation shall be listed as a named insured under all such
insurance policies.
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7.7 OTHER ACTION.
Seller shall use its best efforts to cause the fulfillment at the earliest
practicable date of all of the conditions to Seller's obligations to consummate
the transactions contemplated in this Agreement.
7.8 DISCLOSURE.
Seller shall have a continuing obligation, during the period prior to the
Closing, to promptly notify Buyer in writing with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule.
7.9 USE OF PROCEEDS
(a) SATISFACTION OF INDEBTEDNESS. Seller undertakes, immediately following the
Closing, to use the proceeds from the Minimum Payment to satisfy all
amounts owed to creditors in full prior to making any distribution or
other payment to its shareholders.
(b) BANKRUPTCY EVENT. Following the Closing, and unless Seller is solvent,
Seller undertakes (i) not to initiate a Bankruptcy Event; (ii) to notify
Buyer immediately upon the commencement of any Bankruptcy Event or any
other event that could lead to a Bankruptcy Event; and (iii) to take
promptly, at its expense, all measures as are required for preventing,
discharging, terminating, removing or achieving a stay of a Bankruptcy
Event. "Bankruptcy Event" shall mean any of the following events: (1)
application for or consent by Seller to the appointment of any liquidator,
receiver, trustee or administrator for all or a substantial part of its
business, properties, assets or revenues; (2) the appointment of a
liquidator, receiver, trustee or administrator for Seller; (3) any
bankruptcy, arrangement, readjustment of debt, dissolution, liquidation or
similar executory or judicial proceeding instituted by Seller (by
petition, application, answer, consent or otherwise); (4) a bankruptcy,
arrangement, readjustment of debt, dissolution, liquidation or similar
executory or judicial proceeding instituted against Seller; or (5) a
creditors' meeting called by Seller for the purpose of entering into an
arrangement with them.
8 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date shall be
subject to the satisfaction prior to or at the Closing of each of the following
conditions, any of which may be waived, in writing, exclusively by Buyer:
8.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE.
Each of the representations and warranties made by Seller in this Agreement, and
the statements contained in the Disclosure Schedule or in any instrument, list,
certificate or writing delivered by Seller pursuant to this Agreement, shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
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representations and warranties were made or given on and as of the Closing Date,
except for any changes permitted by the terms of this Agreement or consented to
in writing by Buyer.
8.2 COMPLIANCE WITH AGREEMENT.
Seller shall have in all material respects performed and complied with all of
its agreements and obligations under this Agreement which are to be performed or
complied with by it prior to or on the Closing Date, including the delivery of
the closing documents specified in Section 11.1.
8.3 ABSENCE OF LITIGATION.
No Litigation shall have been commenced or threatened, and no investigation by
any Government Entities shall have been commenced, against Buyer, Seller or any
of the Affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby.
8.4 CONSENTS AND APPROVALS.
All approvals, consents and waivers that are required to effect the transactions
contemplated hereby shall have been received, and executed counterparts thereof
shall have been delivered to Buyer not less than two business days prior to the
Closing; and all notices required to have been given in connection with the
transaction contemplated herein shall have been duly given.
8.5 EMPLOYMENT AGREEMENTS SIGNED.
Employment agreements in a form reasonably acceptable to Buyer shall have been
entered into by all Key Employees, and such persons shall have executed the
Employee Waiver and Consent.
8.6 CONTINUED EMPLOYMENT OF CERTAIN EMPLOYEES.
All Support Employees, as identified and defined in Schedule 7.4(a), shall
remain in the continued employment of Seller until the Closing.
8.7 TERMINATION OF CONTRACTS.
On or prior to Closing, all of Seller's oral contracts, as well as all expired
agreements that may have been extended by action of the parties, shall have been
terminated in writing, a copy of which termination letters Seller shall provide
to Buyer at Closing together with proof of delivery. Additionally, Seller shall
have terminated its distribution agreement with Midbar BV and shall have
commenced winding-up the Midbar BV entity.
8.8 JOINT DEFENSE AGREEMENT.
Seller shall have executed a Joint Defense Agreement substantially in the form
set out in Exhibit D attached hereto.
8.9 CHANGED DISCLOSURE SCHEDULE.
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In the event that there are any changes to the Disclosure Schedule made by
Seller between the Effective Date and Closing Date, Buyer shall have approved
any such changes prior to Closing.
9 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Each and every obligation of Seller to be performed on the Closing Date shall be
subject to the satisfaction prior to or at the Closing of the following
conditions, any of which may be waived, in writing, exclusively by Seller.
9.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE.
Each of the representations and warranties made by Buyer in this Agreement shall
be true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date.
9.2 COMPLIANCE WITH AGREEMENT.
Buyer shall have in all material respects performed and complied with all of
Buyer's agreements and obligations under this Agreement which are to be
performed or complied with by Buyer prior to or on the Closing Date, including
the delivery of the closing documents specified in Section 11.2.
9.3 ABSENCE OF LITIGATION.
No Litigation shall have been commenced or threatened, and no investigation by
any Government Entities shall have been commenced, against Buyer, Seller or any
of the Affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby.
9.4 TAX RULING.
Seller shall have obtained a pre-ruling from the Income Tax Commission in a form
and substance reasonably satisfactory to it (the "Tax Ruling").
10 INDEMNIFICATION
10.1 BY SELLER.
Subject to the terms and conditions of this Article 10, Seller hereby agrees to
indemnify, defend and hold harmless Buyer, and its directors, officers,
employees and controlled and controlling persons (hereinafter "Buyer's
Affiliates"), from and against all Claims asserted against, resulting to,
imposed upon, or incurred by Buyer, Buyer's Affiliates or the business and
assets transferred to Buyer pursuant to this Agreement, directly or indirectly,
by reason of, arising out of or resulting from:
(a) The inaccuracy or breach of any representation or warranty of Seller
contained in this Agreement (regardless of whether such breach is deemed
"material") to the extent
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affecting or relating to the Purchased Assets or the ability of the Buyer
to consummate the transactions contemplated herein;
(b) The breach of any covenant of Seller contained in this Agreement
(regardless of whether such breach is deemed "material") to the extent
affecting or relating to the Purchased Assets or the ability of the Buyer
to consummate the transactions contemplated herein; or
(c) Any Claim brought by or on behalf of any broker or finder retained,
employed or used by Seller or any of its directors, officers, Employees,
shareholders or agents in connection with the transactions provided for
herein or the negotiation thereof, whether or not disclosed herein; or
(d) Any Claim of or against Seller, the Purchased Assets or the business of
Seller with respect to Retained Liabilities;
provided, however, that notwithstanding anything set forth in this Agreement,
except in the case of fraud, Buyer's remedies with respect to any such claim
shall be recouped solely and exclusively from the Escrow Account in accordance
with the provisions of the Escrow Agreement.
As used in this Article 10, the term "Claim" shall include (i) all Liabilities;
(ii) all losses, deficiencies, damages (including, without limitation,
consequential damages), judgments, awards, penalties and settlements; (iii) all
demands, claims, suits, actions, causes of action, proceedings and assessments,
whether or not ultimately determined to be valid; and (iv) all costs and
expenses (including, without limitation, interest (including prejudgment
interest in any litigated or arbitrated matter), court costs and fees and
expenses of attorneys and expert witnesses) of investigating, defending or
asserting any of the foregoing or of enforcing this Agreement.
10.2 BY BUYER.
Subject to the terms and conditions of this Article 10, Buyer hereby agrees to
indemnify, defend and hold harmless Seller, its directors, officers,
shareholders, Employees and controlling persons from and against all Claims
asserted against, resulting to, imposed upon or incurred by any such person,
directly or indirectly, by reason of or resulting from (a) the inaccuracy or
breach of any representation or warranty of Buyer contained in or made pursuant
to this Agreement (regardless of whether such breach is deemed "material"); (b)
the breach of any covenant of Buyer contained in this Agreement (regardless of
whether such breach is deemed "material"); or (c) all Claims of or against
Seller with respect to Assumed Liabilities.
10.3 INDEMNIFICATION OF THIRD-PARTY CLAIMS.
The following provisions shall apply to any Claim subject to indemnification
pursuant to Sections 10.1 and 10.2 that is (i) a suit, action or arbitration
proceeding filed or instituted by any third party, or (ii) any other form of
proceeding or assessment instituted by any Government Entities:
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(a) NOTICE AND DEFENSE. The party to be indemnified (the "Indemnified Party")
will give the party from whom indemnification is sought (the "Indemnifying
Party") prompt written notice of any such Claim, and the Indemnifying
Party will undertake the defense thereof by representatives chosen by it.
The assumption of defense shall constitute an admission by the
Indemnifying Party of its indemnification obligation hereunder with
respect to such Claim, and its undertaking to pay directly all costs,
expenses, damages, judgments, awards, penalties and assessments incurred
in connection therewith. Failure to give such notice shall not affect the
Indemnifying Party's duty or obligations under this Article 10, except to
the extent the Indemnifying Party is materially prejudiced thereby. So
long as the Indemnifying Party is defending any such Claim actively and in
good faith, the Indemnified Party shall not settle such Claim. The
Indemnified Party shall make available to the Indemnifying Party or its
representatives all records and other materials required by them and in
the possession or under the control of the Indemnified Party, for the use
of the Indemnifying Party and its representatives in defending any such
Claim, and shall in all other respects give reasonable cooperation in
such defense.
(b) FAILURE TO DEFEND. If the Indemnifying Party, within a reasonable time
after notice of any such Claim, fails to defend such Claim actively and in
good faith, the Indemnified Party will (upon further notice) have the
right to undertake the defense, compromise or settlement of such Claim or
consent to the entry of a judgment with respect to such Claim, on behalf
of and for the account and risk of the Indemnifying Party, and the
Indemnifying Party shall thereafter have no right to challenge the
Indemnified Party's defense, compromise, settlement or consent to
judgment; provided the Indemnified Party promptly notifies the other
party, and consults the other party in good faith with respect to any
proposed compromise or settlement.
(c) INDEMNIFIED PARTY'S RIGHTS. Anything in this Article 10 to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect the Indemnified Party other than as a
result of money damages or other money payments, the Indemnified Party
shall have the right to defend, compromise or settle such Claim (other
than with respect to the payment of money damages or money payments), and
(ii) the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry
of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all Liability in respect of such Claim.
10.4 INDEMNIFICATION FOR REIMBURSEMENT THAT DOES NOT INVOLVE A THIRD PARTY
CLAIM.
In the event of a Claim which does not involve a third party (a "Direct Claim"),
the party requested to be indemnified shall notify the other party of such
Direct Claim with reasonable promptness, specifying, to the extent known, the
nature, circumstances and amount of such Direct Claim (a "Direct Claim Notice").
If the other party notifies the party giving the Direct Claim Notice that it
disputes the other party's right of indemnification with respect to the Claim
set forth in a Direct Claim Notice, the parties shall use reasonable efforts to
resolve such dispute and, in the event that such efforts are unsuccessful within
thirty (30) days, shall resolve such dispute in accordance with the provisions
of Section 13.6.
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10.5 PROCEDURE FOR INDEMNIFICATION.
The Indemnifying Party shall promptly pay the Indemnified Party any amount due
under this Article 10. Upon judgment, determination, settlement or compromise of
any third party Claim, the Indemnifying Party shall pay promptly on behalf of
the Indemnified Party, and/or to the Indemnified Party in reimbursement of any
amount theretofore required to be paid by it, the amount so determined by
judgment, determination, settlement or compromise and all other Claims of the
Indemnified Party with respect thereto, unless in the case of a judgment an
appeal is made from the judgment. If the Indemnifying Party desires to appeal
from an adverse judgment, then the Indemnifying Party shall post and pay the
cost of the security or bond to stay execution of the judgment pending appeal.
Upon the payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed to the rights of such Indemnified Party, to the
extent not waived in settlement, against the third party who made such third
party Claim.
10.6 NO WAIVER.
The closing of the transactions contemplated by this Agreement shall not
constitute a waiver by any party of its rights to indemnification hereunder.
11 CLOSING
The closing of this transaction (the "Closing") shall take place at Buyer's
London, England offices located at Charlwood House, The Runway, South Ruislip,
Middlesex, HA4 6SE, England, at 11:00 a.m. local time on November 15, 2002, or
at such other time and place as the parties hereto may agree upon in advance in
writing. Such date is referred to in this Agreement as the "Closing Date".
11.1 ITEMS TO BE DELIVERED BY SELLER.
(a) EFFECTIVE DATE. On the Effective Date, Seller shall deliver to Buyer the
following documents, in each case duly executed or otherwise in proper
form:
(i) CERTIFIED RESOLUTIONS. Certified copies of
resolutions of the Board of Directors of Seller and,
to the extent required, of Seller's shareholders,
authorizing and approving this Agreement and the
consummation of the transactions contemplated by this
Agreement in a form reasonably acceptable to Buyer.
(ii) MEMORANDUM; ARTICLES OF ASSOCIATION. Copies of the
Memorandum and Articles of Association of Seller
certified by an officer of Seller.
(iii) ASSIGNMENT OF AGREEMENTS. All documents necessary for
the assignments of the agreements herein being
assumed by Buyer, including, without
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limitation, the consent of the landlord of assignment
of the Leased Real Property, duly executed by Seller.
(iv) PATENT ASSIGNMENTS. All documents necessary for the
assignment of all right, title and interest in and to
those patents constituting Trade Rights hereunder to
the Buyer, duly executed by the Seller, in a form
acceptable to the U.S. Patent and Trademark Office,
and so as to clearly indicate the chain of title from
the appropriate inventor to Seller
(v) NAME CHANGE. All documents required to effect a
change of the Seller's corporate name to a new name
bearing no resemblance to its present name, duly
executed by Seller.
(vi) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Buyer at or
prior to the Closing pursuant to this Agreement and
such other certificates of authority and documents as
Buyer may reasonably request.
(b) AT CLOSING. At the Closing, Seller shall deliver to Buyer the following
documents and deliverables, in each case duly executed or otherwise in
proper form:
(i) BILLS OF SALE. Bills of sale and such other
instruments of assignment, transfer, conveyance and
endorsement in the form attached as Exhibit F hereto,
required to transfer, assign, convey and deliver to
Buyer the Purchased Assets as contemplated hereby.
(ii) COMPLIANCE CERTIFICATE. A certificate signed by the chief
executive officer of Seller (without personal liability
thereto) that each of the representations and warranties
made by Seller in this Agreement is true and correct in all
respects on and as of the Closing Date with the same effect
as though such representations and warranties had been made
or given on and as of the Closing Date (except for any
changes permitted by the terms of this Agreement or
disclosed in writing to Buyer), and that Seller has
performed and complied with all of Seller's obligations
under this Agreement which are to be
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performed or complied with on or prior to the Closing
Date.
(iii) ESCROW AGREEMENT. The Escrow Agreement duly executed
by Seller and the Escrow Agent in the Form of Exhibit
A hereto.
(iv) OPINION OF COUNSEL. A written opinion of Naschitz,
Brandes & Co., counsel to Seller, dated as of the
Closing Date, addressed to Buyer, substantially in
the form of Exhibit C hereto.
(v) TRADE RIGHTS. All Trade Rights in Seller's possession
or control that are in tangible form, including
without limitation all source codes, copyrights,
trademarks, assignments of domain names and other
items of like nature applicable to the transaction
contemplated herein.
(vi) TERMINATION LETTERS. A copy of the termination
letters with regard to the oral contracts, as well as
all expired agreements that may have been extended by
action of the parties, together with proof of
delivery pursuant to Section 8.6 of this Agreement.
(vii) SOURCE CODE. Back-up magnetic media containing all
Source Code of the Seller shall be delivered to
Goldarb, Levy, Eran & Co. Trustees Ltd., to hold on
behalf of the Buyer.
(viii) EMPLOYMENT AGREEMENTS. The employment agreements and
Employee Waiver and Consent referred to in Section
7.4(a), duly executed by the Key Employees referred
to in Schedule 7.4(a).
(ix) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Buyer at or
prior to the Closing pursuant to this Agreement and
such other certificates of authority and documents as
Buyer may reasonably request.
11.2 ITEMS TO BE DELIVERED BY BUYER.
(a) EFFECTIVE DATE. On the Effective Date, Buyer shall deliver to Seller the
following documents, in each case duly executed or otherwise in proper
form:
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(i) CERTIFIED RESOLUTIONS. A certified copy of the
resolutions of the Board of Directors of Buyer
authorizing and approving this Agreement and the
consummation of the transactions contemplated by this
Agreement.
(ii) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Seller at or
prior to the Effective Date pursuant to this
Agreement and such other certificates of authority
and documents as Seller may reasonably request.
(b) AT CLOSING. At the Closing, Buyer shall deliver to Seller the following
documents, in each case duly executed or otherwise in proper form:
(i) CASH PURCHASE PRICE. The Minimum Payment in
immediately available funds as required by Section
3.2(b) hereof, less the Initial Escrow Amount
delivered to the Escrow Agent in accordance with
Section 3.2(a), and documentation evidencing delivery
of the Initial Escrow Amount to the Escrow Agent.
(ii) COMPLIANCE CERTIFICATE. A certificate signed by the chief
executive officer of Buyer (without personal liability
thereto) that the representations and warranties made by
Buyer in this Agreement are true and correct in all
material respects on and as of the Closing Date with the
same effect as though such representations and warranties
had been made or given on and as of the Closing Date
(except for any changes permitted by the terms of this
Agreement or disclosed in writing to Seller), and that
Buyer has performed and complied with all of Buyer's
obligations under this Agreement which are to be performed
or complied with on or prior to the Closing Date.
(iii) ESCROW AGREEMENT. The Escrow Agreement duly executed
by Buyer and Escrow Agent in the form of Exhibit A
hereto.
(iv) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Seller at or
prior to the Closing pursuant to this
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Agreement and such other certificates of authority and
documents as Seller may reasonably request.
12 TERMINATION
12.1 RIGHT OF TERMINATION WITHOUT BREACH.
This Agreement may be terminated without further liability of any party at any
time prior to the Closing:
(a) By mutual written agreement of Buyer and Seller, or
(b) By either Buyer or Seller if the Closing shall not have occurred on or
before December 31, 2002, provided however, the terminating party has
not, through breach of a representation, warranty or covenant,
prevented the Closing from occurring on or before such date.
(c) By Buyer, if the Closing shall not have occurred on or before November
30, 2002 due to Seller's failure to obtain the Tax Ruling unless Seller
has waived in writing the condition set forth in Section 9.4. For the
avoidance of doubt, the Buyer shall have the right to terminate this
Agreement under this subsection (c) if the Closing shall not have
occurred by November 30, 2002 under circumstances in which the Seller
either (i) has not received any pre-ruling from the Income Tax
Commission, or (ii) has received a pre-ruling that is unacceptable to
the Seller and/or its shareholders, and in either case Seller has not
waived in writing the condition set forth in Section 9.4.
12.2 TERMINATION FOR BREACH.
(a) TERMINATION BY BUYER. If, prior to Closing, (i) there has been a
material violation or breach by Seller of any of the agreements,
representations or warranties contained in this Agreement which has not
been waived in writing by Buyer, or (ii) there has been a failure of
satisfaction of a condition to the obligations of Buyer which has not
been so waived, then Buyer may, by written notice to Seller reasonably
specifying the nature of the breach or failure, terminate this Agreement
with the effect set forth in Section 12.2(c) hereof.
(b) Termination by Seller. If, prior to Closing, (i) there has been a
material violation or breach by Buyer of any of the agreements,
representations or warranties contained in this Agreement which has not
been waived in writing by Seller, or (ii) there has been a failure of
satisfaction of a condition to the obligations of Seller which has not
been so waived, then Seller may, by written notice to Buyer reasonably
specifying the nature of the breach or failure, terminate this Agreement
with the effect set forth in Section 12.2(c) hereof.
(c) EFFECT OF TERMINATION. Termination of this Agreement pursuant to this
Section 12.2 shall not in any way terminate, limit or restrict the rights
and remedies of either party hereto against the other party which has
violated, breached or failed to satisfy any of the representations,
warranties, covenants, agreements, conditions or other provisions of this
Agreement prior to termination hereof. In addition to the right of either
party under
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common law to redress for any such breach or violation, either party whose
breach or violation has occurred prior to termination shall indemnify the
other party for whose benefit such representation, warranty, covenant,
agreement or other provision was made from and against all losses, damages
(including, without limitation, consequential damages), costs and expenses
(including, without limitation, interest (including prejudgment interest
in any litigated matter), penalties, court costs, and attorneys' fees and
expenses) asserted against, resulting to, imposed upon, or incurred by the
Indemnified Party, directly or indirectly, by reason of, arising out of or
resulting from such breach or violation. Subject to the foregoing, the
parties' obligations under Section 13.9 of this Agreement shall survive
termination.
13 MISCELLANEOUS
13.1 DISCLOSURE SCHEDULE.
Information set forth in the Disclosure Schedule specifically refers to the
article and section of this Agreement to which such information is responsive.
The Disclosure Schedule shall not vary, change or alter the language of the
representations and warranties contained in this Agreement except to the extent
specifically set forth therein. The Disclosure Schedule is qualified in its
entirety by references to specific provisions of the Agreement and is not
intended to constitute, and shall not be construed as constituting, any
representation and/or warranty of the Seller except as and to the extent
provided in the Agreement.
13.2 FURTHER ASSURANCE.
From time to time before, during and after the Closing, at a party's request and
without further consideration, Seller or Buyer, as the case may be, will execute
and deliver to the other party such documents, instruments and consents and take
such other action as the other party may reasonably request in order to
consummate more effectively the transactions contemplated hereby.
13.3 DISCLOSURES AND ANNOUNCEMENTS.
Both the timing and the content of all disclosure to third parties and public
announcements concerning the transactions provided for in this Agreement by
either Seller or Buyer shall be subject to the approval of the other in all
essential respects, except that the other party's approval shall not be required
as to any statements and other information which Buyer may submit to the
Securities and Exchange Commission, the Nasdaq National Market or that a party
may submit to its stockholders or be required to make pursuant to any rule or
regulation of the Securities and Exchange Commission or the Nasdaq National
Market, or otherwise required by law.
13.4 ASSIGNMENT; PARTIES IN INTEREST.
(a) ASSIGNMENT. Except as expressly provided herein, the rights and
obligations of a party hereunder may not be assigned, transferred or
encumbered without the prior written consent of the other party.
Notwithstanding the foregoing, Buyer may, without consent of the Seller,
cause one or more subsidiaries of Buyer to carry out all or part of the
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transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any
such subsidiary, to Seller hereunder.
(b) PARTIES IN INTEREST. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the respective successors and permitted
assigns of the parties hereto. Nothing contained herein shall be deemed to
confer upon any other person any right or remedy under or by reason of
this Agreement.
13.5 EQUITABLE RELIEF.
The parties agree that any breach of a party's obligation to consummate the sale
of the Purchased Assets on the Closing Date, or with respect to any breach by
Seller of its obligations imposed by Section 6.3 hereof, will result in
irreparable injury to the other party for which a remedy at law would be
inadequate; and that, in addition to any relief at law which may be available to
the non breaching party for such breach and regardless of any other provision
contained in this Agreement, the non breaching party shall be entitled to
injunctive and other equitable relief as a court may grant. This Section 13.5
shall not be construed to limit any party's right to obtain equitable relief for
other breaches of this Agreement under general equitable standards.
13.6 LAW GOVERNING AGREEMENT.
This Agreement shall be construed in accordance with, and governed in all
respects by, the laws of the state of New York. The parties hereby stipulate
that any action or other legal proceeding arising under or in connection with
this Agreement shall be commenced and prosecuted in its entirety exclusively in
the federal courts in the Southern District of New York, New York and, in the
event such federal courts do not have subject matter jurisdiction, the competent
state courts located in New York, New York), each party hereby submitting to the
personal jurisdiction thereof, and the parties agree not to raise the objection
that such courts are not a convenient forum. Process and pleadings mailed to a
party at the address provided in Section 13.8 shall be deemed properly served
and accepted for all purposes.
13.7 AMENDMENT AND MODIFICATION.
Buyer and Seller may amend, modify and supplement this Agreement in such manner
as may be agreed upon by them in writing.
13.8 NOTICE.
All notices, requests, demands and other communications hereunder shall be given
in writing and shall be: (a) personally delivered; (b) sent by telecopier,
facsimile transmission or other electronic means of transmitting written
documents; or (c) sent to the parties at their respective addresses indicated
herein by registered or certified mail, return receipt requested and postage
prepaid, or by private overnight mail courier service. The respective addresses
to be used for all such notices, demands or requests are as follows:
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(a) IF TO BUYER, TO:
Macrovision Corporation
2830 De La Cruz Boulevard
Santa Clara, California 95050
Attention: Chief Financial Officer
Facsimile: (408) 743-9659
Email: LEGAL@MACROVISION.COM
(with a copy, which shall not constitute notice, to)
Goldfarb, Levy, Eran & Co.
2 Ibn Gvirol Street
Tel Aviv, Israel
Attention: Oded Eran and Michael A. Heller
Facsimile: 03-608-9908
or to such other person or address as Buyer shall furnish to Seller in writing.
(b) IF TO SELLER, TO:
Midbar Tech (1998) Ltd.
34 Kibbutz Galuyot Street
Tel Aviv, Israel 66550
Attention: Roy Machnes_
Facsimile: 972-3-518-6677
(with a copy, which shall not constitute notice, to)
Naschitz, Brandes & Co.
5 Tuval St.
Tel Aviv, Israel 67897
Attention : Sharon A. Amir
Facsimile: 972-3-6235005
or to such other person or address as Seller shall furnish to Buyer in writing.
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if electronically transmitted pursuant to this paragraph, such
communication shall be deemed delivered the next business day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be deemed delivered
upon receipt; and if sent by certified mail pursuant to this paragraph, such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt
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issued by the relevant postal service, or, if the addressee fails or refuses to
accept delivery, as of the date of such failure or refusal. Any party to this
Agreement may change its address for the purposes of this Agreement by giving
notice thereof in accordance with this Section.
13.9 EXPENSES.
Regardless of whether or not the transactions contemplated hereby are
consummated:
(a) EXPENSES TO BE PAID BY SELLER. Seller shall pay, and shall indemnify,
defend and hold Buyer harmless from and against, each of the following:
(i) TRANSFER TAXES. Any sales, use, excise, transfer,
stamp or other similar tax imposed with respect to
the transactions provided for in this Agreement, and
any interest or penalties related thereto.
(ii) PROFESSIONAL FEES. All fees and expenses of Seller's
legal, accounting, investment banking and other
professional counsel in connection with the
transactions contemplated hereby.
(b) OTHER. Except as otherwise provided herein, each of the parties shall bear
its own expenses and the expenses of its counsel and other agents in
connection with the transactions contemplated hereby.
(c) COSTS OF LITIGATION. The parties agree that the prevailing party in any
action brought with respect to or to enforce any right or remedy under
this Agreement shall be entitled to recover from the other party all
reasonable costs and expenses of any nature whatsoever incurred by the
prevailing party in connection with such action, including without
limitation attorneys' fees and prejudgment interest.
13.10 SEVERABILITY.
In the event any provision of this Agreement is held to be invalid, illegal or
unenforceable for any reason or in any respect, such invalidity, illegality or
unenforceability shall in no event affect, prejudice or disturb the validity of
the remainder of this Agreement, which shall be and remain in full force and
effect, enforceable in accordance with its terms.
13.11 FORCE MAJEURE.
Each party shall be excused from any breach or default with respect to this
Agreement to the extent that the party was prevented from performance by reason
of anything beyond the party's control and not reasonably avoidable such as a
strike or other labor disturbance, act of any governmental authority or agency,
fire, flood, wind storm, or any act of God, or the act or omission of any person
or entity not controlled by that party ("Force Majeure"). No party shall be
liable to the other party for any delay in or failure of performance under this
Agreement due to a Force Majeure. Any such delay or failure shall extend the
period of performance to such extent
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as is mutually determined by the parties to be necessary to enable complete
performance by a party if reasonable diligence is exercised after the causes or
delay or failure have been removed.
13.12 ENTIRE AGREEMENT.
This instrument embodies the entire agreement between the parties hereto with
respect to the transactions contemplated herein, and there have been and are no
agreements, representations or warranties between the parties other than those
set forth or provided for herein, except that for so long as the transactions
set forth herein are not consummated, the NDA executed by the parties on July
30, 2002 shall survive in accordance with its terms.
13.13 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
13.14 HEADINGS.
The headings in this Agreement are inserted for convenience only and shall not
constitute a part hereof.
13.15 GLOSSARY OF TERMS.
The following sets forth the location of definitions of capitalized terms
defined in the body of this Agreement:
"Acquisition Proposal" - Section 7.2(i)
"Additional Contingent Payments" - Section 3.1(b)
"Additional Escrow Amount" - Section 3.2(a)
"Affiliate" - Section 1.2(f)
"Agreement" - Introduction.
"Assumed Liabilities" - Section 2.1
"Audio Business" - Section 3.1(b)
"Bankruptcy Event" - Section 7.8(b)
"Benefits" - Section 4.15
"Buyer" - Introduction.
"Buyer's Affiliates" - Section 10.1
"Buyer SEC Documents" - Section 5.4(a)
"Claim" - Section 10.1
"Closing" - Preamble to Article 11
"Closing Date" - Preamble to Article 11
"Confidential Information" - Section 6.3
"Contracts" - Section 1.1(f)
"Direct Claim" - Section 10.4
"Direct Claim Notice" - Section 10.4
"Effective Date" - Introduction
"Employee Options" - Section 7.4(b)
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"Employee Waiver and Consent" - Section 7.4(a)
"Employees" - Section 4.15
"Escrow Account" - Section 3.2(a)
"Escrow Agent" - Section 3.2(a)
"Escrow Agreement" - Section 3.2(a)
"Exchange Act" - Section 5.4(a)
"Excluded Assets" - Section 1.2
"Executive Team" - Section 4.7
"Final Payment" - Section 3.3
"Financial Statements" - Section 4.4
"Force Majeure" - Section 13.11
"Government Entities" - Section 2.2(j)
"Indemnified Party" - Section 10.3(a)
"Indemnifying Party" - Section 10.3(a)
"Initial Escrow Amount" - Section 3.2(a)
"Installment Periods" - 3.1(b)
"Inventory" - Section 1.1(c)
"Key Employees" - Schedule 7.4(a)
"Knowledge" - Section 4.7
"Laws" - Section 2.2(j)
"Leased Real Property" - Section 1.1(a)
"Liability" - Section 2.1
"Liens" - Section 4.10(a)
"Litigation" - Section 2.2(e)
"Minimum Payment" - Section 3.1(a)
"Net Revenue" - Section 3.1(b)
"Orders" - Section 2.2(j)
"Performance Period" - Section 3.1(b)
"Performance Revenue" - Section 3.1(b)
"Personal Property Leases" - Section 1.1(d)
"Products" - Section 4.18
"Purchased Assets" - Section 1.1
"Purchase Price" - Section 3.1
"Real Property Leases" - Section 1.1(a)
"Recent Balance Sheet" - Section 4.5(a)
"Records" - Section 6.3
"Retained Liabilities" - Preamble to Section 2.2
"Securities Act" - Section 5.4(a)
"Seller" - Intro.
"Seller Non-Competition Agreement" - Section 6.6
"Seller's Business" - Recitals
"Source Codes" - Section 1.1(g)
"Support Employees" - Schedule 7.4(a)
"Tax", "Taxes" and "Taxable" - Section 4.5(d)
"Tax Returns" - Section 4.5(d)
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"Tax Ruling" - Section 9.4
"Trade Rights" - Section 1.1(e)
"Transferred Employees" - Section 7.4(a)
"U.S. GAAP" - Section 1.2(a)
"VAT" - Section 3.1(a)
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
MACROVISION EUROPE LTD.
-----------------------------------
(Authorized Signature)
-----------------------------------
(Printed Name)
-----------------------------------
(Title)
-----------------------------------
(Date)
MIDBAR TECH (1998) LTD.
----------------------
Name: Ran Alcalay
Title :Chief Executive Officer
Date: November , 2002
----------------------
Name: Roy Machnes
Title :Authorized Signatory
Date: November , 2002
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[Signature Page to Asset Purchase Agreement]
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