Exhibit 4.4
THIS ASSET PURCHASE AGREEMENT is made on 25th May 2000
BETWEEN:
(1) TELRAD NETWORKS LIMITED, a company incorporated in accordance with the
laws of Israel having its registered office at XX Xxx, XXX 00000,
Xxxxxx, ("Xxxxxx"), Xxxxxx Xxxxx SA, a company incorporated in
accordance with the laws of Chile, Xxxxx Telecom S.R.L., a company
incorporated in accordance with the laws of Romania, and all direct or
indirect Subsidiaries of Telrad (with Telrad hereinafter being
individually referred to as a "Seller" and collectively referred to as
the "Seller Group"); and
(2) NORTEL NETWORKS LIMITED a company incorporated in accordance with the
laws of Canada, having its executive office at 0000 Xxxxx Xxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxx, Xxxxxx, ("the Purchaser") on behalf of itself
and the other members of the Purchaser Group (as defined below).
(3) KOOR INDUSTRIES LIMITED ("Koor") a company incorporated in accordance
with the laws of Israel having its registered office at
00 Xx'xxxxxx Xxxxxx, Xxx Xxxx 00000, Xxxxxx.
(4) NORTEL NETWORKS ISRAEL (SALES AND MARKETING) LIMITED (the "Company") a
company incorporated in accordance with the laws of Israel having its
registered office at Xxxx Xxxxx, 0 Xxxxxxxx Xxxxxx, Xxx Xxxx 00000,
Israel.
RECITALS
(A) The Seller Group owns and operates the Business (as defined herein).
(B) Each member of the Seller Group is a subsidiary of Koor.
(C) The Seller Group has agreed to sell to the Purchaser Group and the
Purchaser Group has agreed to purchase from the Seller Group the
Business on the terms set out in this Agreement.
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement the following terms shall have the following
meanings:
Affiliate means, in the case of a Party,
any company directly or
indirectly Controlled by that
Party, any company which directly
or indirectly Controls such Party
and any company under common
Control with such Party.
Agreement this Asset Purchase Agreement.
Ancillary Agreements the agreements described in
Section 3.1.7 of the Shareholders
Agreement.
Assigned Intellectual means the Intellectual assigned
Property pursuant to Section 3.1 (a).
Assumed Liabilities as defined in Section 2.3.
Assumed Warranty the warranty obligations (excluding
Liabilities any obligations for product
liability) of the Seller with
respect to products of the
Business sold prior to the
Closing Date, provided that such
warranty obligations are reserved
and accounted for in calculating
the Final Net Asset Amount.
Balance Sheet the pro forma balance sheet
of the Business at Balance Sheet
Date, divided between the Israeli
Business and the Foreign
Business.
Balance Sheet Date 31 December, 1999
Blue Avnet the contract dated 1 August 1998
between Seller and the Israeli
Ministry of Defence.
Books and Records all lists, files and documents,
including but not limited to, all
business records, audit records,
tangible data, computer software,
electronic media and management
information systems, disks, files,
customer lists, supplier lists,
blueprints, specifications,
designs, drawings, operation or
maintenance manuals, bids,
personnel records, policy manuals,
invoices, credit records, sales
literature, tax, financial and
accounting records, pricing
information and costing
information, and all other books
and records relating to the
Business.
Business means the Public Networks
Solutions Business and the
Enterprise Solutions Business.
Business Day any day other than a Saturday, a
Sunday or a day on which banking
institutions in Israel are not
open for a full day.
Claim Notice written notification pursuant to
Section 12.3(a) of a Third Party
Claim as to which indemnity under
Section 12 is sought by the
Purchaser Group, enclosing a copy
of all papers served, if any, and
specifying the nature of and basis
for such Third Party Claim and for
the Purchaser Group's claim
against the Seller Group under
Section 12, together with the
amount or estimated amount if then
known or reasonably ascertainable,
determined in good faith, of such
Third Party Claim.
Closing the closing of the transactions
contemplated by this Agreement.
Closing Date as set forth in Section 10.1.
Closing Net Asset Amount as set forth in Section 2.5(b).
Confidential Information as set forth in Section 6.5.
Constitutive Documents means the statutes, articles
of association, memorandum and
articles of association,
articles of incorporation and
bylaws or other similar
documentation of a Person.
Contracts all agreements, contracts, leases,
purchase orders, royalty
arrangements, license agreements,
incentive agreements, refund and
other arrangements, and any other
agreements, commitments or other
legally binding arrangements,
whether oral or written, express
or implied, that are related to
the Business or to which the
Included Assets (other than the
Contracts) are subject, except to
the extent included in the
Excluded Assets, and including,
without limitation, the agreements
and contracts set forth on
Schedule 3.9(a).
Control means ownership of more than 50%
of the issued shares or ownership
of shares conferring more than
50% of the voting rights
exercisable at general meetings.
Customer Deposits the sum of all payments made
by customers under the
Contracts, other than those
listed on Schedule 3.2(a), in
advance of their acceptance of
the products and/or services
provided, except where such
products and services relate to
projects requiring no further
supply or installation in order
to meet the customer's
acceptance criteria.
Dispute Period the period ending 30 calendar
days following receipt by the
Purchaser Group of either a
Claim Notice or Indemnity
Notice.
Dollar or $ a dollar of the United States of
America.
Employee Plan as set forth in Section 4.14.
Employees as set forth in Section 6.10.
Encumbrances pledges, claims, options, liens,
charges, encumbrances, security
interests and mortgages of any
kind or nature whatsoever.
Enterprise means such parts of the business
Solutions Business being carried out by Seller Group
comprising the marketing, selling,
integrating, servicing and
supporting of Nortel
telecommunications products and
network solutions together with
all improvements, adaptations and
modifications thereof, (including,
without limitation, network
design, architecture planning,
consulting, systems integration,
project management and
installation, but excluding
research and development) to end
users, including, without
limitation, as described more
fully in Schedule 2.1(a).
Environmental Claim any written or oral notice, claim,
demand, action, suit, complaint,
proceeding or other communication
by any person alleging material
liability or potential liability
(including without limitation
material liability or potential
liability for investigatory costs,
cleanup costs, governmental
response costs, natural resource
damages, property damage, personal
injury, fines or penalties)
arising out of, relating to, based
on or resulting from (i) the
presence, discharge, emission,
release or threatened release of
any Hazardous Materials at any
location, (ii) circumstances
forming the basis of any violation
or alleged violation of any
Environmental Laws or
Environmental Permits, or (iii)
otherwise relating to obligations
or liabilities under any
Environmental Laws.
Environmental Laws all applicable Laws and Orders
relating in any manner to
contamination, pollution or
protection of human health,
natural resources or the
environment.
Environmental Permits all Permits required under
Environmental Laws.
Excluded Assets as set forth in Section 2.2.
Excluded Intellectual the Intellectual Property
Property particulars of which are set forth
in Schedule 2.2(5)
Excluded Liabilities as set forth in Section 2.4.
Final Net Asset Amount means the amount calculated
pursuant to Section 2.5(e) and
(f).
Financial Statements the Balance Sheet and related
statement of operations and the
Net Asset Statement of the
Business as of the Balance
Sheet Date and for the year
then ended prepared in
accordance with GAAP
consistently applied, attached
hereto as Schedule 4.4(a).
Foreign Business means that part of the Business
which is not the Israeli Business.
Former Employees persons whose employment in the
Business terminated prior to the
Closing Date and who are not
employed by the Purchaser Group
following the Closing Date.
GAAP generally accepted accounting
principles in the United States
of America, consistently applied.
Goodwill the goodwill of the Seller Group
in (i) the marketing, selling,
integrating, servicing and
supporting of telecommunications
products and networks solutions
(including, without limitation,
network design, architecture
planning, consulting, systems
integration, project management
and installation, but excluding
research and development) to
telecommunication service
providers (whether such providers
provide services to end users or
other service providers and
whether such services relate to
data, voice or other
telecommunication services); and
(ii) the marketing, selling,
integrating, servicing and
supporting of Nortel
telecommunications products and
network solutions together with
all improvements, adaptations and
modifications thereof, (including,
without limitation, network
design, architecture planning,
consulting, systems integration,
project management and
installation, but excluding
research and development) to end
users, in each case together with
the exclusive right for the
Purchaser Group or their assignees
to represent themselves as
carrying on such activities in
succession to the Seller Group.
Governmental
or Regulatory Authority any court, tribunal, arbitrator,
authority, agency, department,
ministry, commission, official or
other instrumentality of Israel or
any other country or any domestic
or foreign state, county, city,
municipality or other political
subdivision.
Grants as set forth in Section 4.20.
Hazardous Materials means all hazardous, dangerous
or toxic materials, wastes or
chemicals, including without
limitation, petroleum and
petroleum products, asbestos
and asbestos-containing
materials, and polychlorinated
biphenyls and all other
materials regulated pursuant to
any Environmental Laws or that
could result in liability under
any Environmental Laws.
Included Assets as set forth in Section 2.1(b).
Income Taxes any and all income or
franchise (or an excise tax based
on income) Tax of any country,
state or locality, including a
Tax assessed on a corporation by
reference to its income, gains or
profits, and in each instance any
interest, penalties or addition
to tax attributable to such Tax,
whether or not disputed.
Indemnity Notice written notification of a
claim for indemnity under Section
12 by the Purchaser Group,
specifying the nature of and
basis for such claim, together
with the amount of such claim if
known by the Purchaser Group.
Infringe as set forth in Section 4.6(b).
Intellectual Property all intellectual property, and,
including, without limitation (i)
patents, inventions, discoveries,
processes, designs, techniques,
developments, technology, and
related improvements, know-how and
show-how, whether or not patented
or patentable; (ii) copyrights and
works of authorship in any media,
including computer hardware,
software (including source and
object code), applications,
including source code systems,
networks, databases, documentation
and Internet site content; (iii)
trademarks, service marks, trade
names, brand names, corporate
names, fictitious names, domain
names, e-mail addresses, URLs,
logos, trade dress and other
indicators of origin, and the
goodwill of any business
appurtenant thereto and/or
symbolized thereby ("Trademarks");
(iv) trade secrets, drawings,
blueprints and all non-public,
confidential or proprietary
information, documents or
materials; (v) all registrations,
applications and recordings
related thereto, and including the
right to apply for any renewals,
reissues, re-examinations,
continuations, continuations in
part, divisions or other legal
protections of the foregoing; and
(vi) the right to xxx at law or in
equity for the infringement,
misappropriation, impairment or
other unauthorized use of the
foregoing, including the right to
receive all damages and proceeds
therefrom.
Israeli Business means that part of the
Business operating in the
Territory, together with the
sales to Rwandatel, Ethiopia ETC,
Mali Sotelma and Ghana Telecom.
Inventory means:
(i) the products and
services provided, in
whole or part, to
customers under the
Contracts, other than
those listed in Schedule
3.2(a), in advance of
the acceptance thereof,
except where such
products and services
relate to projects
requiring no further
supply or installation
in order to meet the
customer's acceptance
criteria, and
(ii) custom development
services commissioned by
a customer under a
Contract where further
development is required
in order to meet the
customer's acceptance
criteria; and
(iii) products reserved and
accounted by the Seller
Group for use by
installation and
maintenance engineers to
be supplied to customers
as spare parts under the
Contracts; and
(iv) the captives listed in
Schedule 1.1.
Inventory on Loan means products loaned free of
charge to customers for a
limited period with an option
for the customer to buy such
products at the end of such
period
Key Employees The employees of the Business
whose names are set out in
Schedule 8.9.
Laws all laws, statutes, rules,
regulations, ordinances and other
pronouncements having the effect
of law of Israel or of any
country or any domestic or
foreign state, county, city or
other political subdivision or of
any Governmental or Regulatory
Authority.
Losses all damages, liabilities, losses,
deficiencies, costs and expenses,
including without limitation
reasonable attorney's fees and
expenses.
March Net Asset Amount as set forth in Section 2.5(a)
Material Adverse Effect an effect that (i) is materially
adverse to the value of the
Included Assets taken as a
whole or materially adverse to
the business, assets,
properties, financial condition
or results of operations of the
Business taken as a whole or
(ii) materially impairs or
delays the ability of the
Seller Group to effect the
Closing or of the Purchaser
Group to acquire and operate
the Business after the Closing.
Net Asset Amount the amount equal to (a) the
amount of the Included Assets,
excluding Goodwill, minus (b)
the amount of the Assumed
Liabilities, all as calculated
according to GAAP.
Net Asset Statement the statement representing
the Included Assets (excluding
Goodwill) and the Assumed
Liabilities broken down by
asset or liability category and
split between the Foreign
Business and the Israeli
Business, all as calculated in
accordance with GAAP.
Order any writ, judgement, decree,
injunction or similar order of
any Governmental or Regulatory
Authority (in each case whether
preliminary or final).
Other Employees employees currently employed by
the Business whose names are set
out in Schedule 8.10.
Party a party to this Agreement.
Permits as set forth in Section 4.12(b).
Person any natural person, corporation,
general partnership, limited
partnership, proprietorship,
other business organization,
trust, union or association, and
shall include, as the context
requires, any party to this
Agreement and such party's
Subsidiaries.
Proceeding as set forth in Section 4.10.
Public Networks means such part of the business
Solutions Business being carried out by the Seller
Group in the marketing, selling,
integrating, servicing and
supporting of telecommunications
products and networks solutions
(including, without limitation,
network design, architecture
planning, consulting, systems
integration, project management
and installation, but excluding
research and development) to
telecommunication service
providers (whether such providers
provide services to end users or
other service providers and
whether such services relate to
data, voice or other
telecommunication services), as
described in Schedule 2.1(a).
Purchaser Group means collectively the
Purchaser, the Company and those
other Subsidiaries and Affiliates
of the Purchaser nominated by the
Purchaser to acquire the Included
Assets relating to the Foreign
Business pursuant to Section 2.5.
Resolution Period the period ending 30 calendar days
following receipt by the Purchaser
Group of a Dispute Notice.
Retained Business means the business of the Seller
Group not comprised within the
Business.
Shareholders Agreement the agreement between Nortel,
Seller and Koor of even date
herewith.
Subsidiary with respect to any Person, (a)
any corporation of which at least
50% of the securities or interests
having, by their terms, ordinary
voting power to elect members to
the board of directors, or other
persons performing similar
functions with respect to such
corporation, is held directly or
indirectly, by such Person, (b)
any partnership or limited
liability company of which (i)
such Person is a general partner
or managing member or (ii) such
Person possesses a 50% or greater
interest in the total capital or
total income of such partnership
or limited liability company
Taxes all taxes, charges, fees, levies
or other like assessments imposed
by any taxing authority, domestic
or foreign (including, without
limitation, income, profits,
premium, estimated, excise, sales,
use, occupancy, gross receipts,
franchise, ad valorem, value
added, severance, capital levy,
production, transfer, withholding,
employment and payroll related and
property taxes, import duties and
other governmental charges and
assessments), and including
additions to tax or interest, and
penalties with respect thereto.
Territory means Israel, the Palestinian
Autonomous Authorities and such
other territories as shall be
determined by the Parties from
time to time,.
Transferred Employees as the meaning set forth in
Section 6.10.
Value-Added Taxes as the meaning set forth in
Section 6.7.
1.2 Interpretation
(a) Unless specified to the contrary:
(i) a reference to:
"assets" includes every kind of
property, asset, interest, revenue or
right of every description (whether
real, personal or mixed, tangible or
intangible), including any present,
future or contingent right to any
revenues or other payment;
a "month" or a period of one or more
"months" means a period beginning one
calendar month and on the day
preceding the day in the following
calendar month numerically
corresponding to the day of the
calendar month in which such period
started, provided that if such period
started on the last day in a calendar
month, or if there is no such
numerically corresponding day, such
period shall end on the last day in
the following calendar month (and
"monthly" shall be construed
accordingly); and
(ii) a reference to any applicable law or
any provision thereof is a reference
to the applicable law of the
jurisdiction in question or provision
as amended or re-enacted or any
successor thereof;
(iii) the Table of Contents to and the
headings in this Agreement shall not
affect the interpretation thereof and
all references to Sections,
Subsections, paragraphs, Schedules or
Exhibits are to Sections, Subsections
and paragraphs of, and Schedules or
Exhibits to, this Agreement;
(iv) words and defined terms denoting the
singular number include the plural
and vice versa and the use of any
gender shall be applicable to all
genders;
(b) The words "hereunder", "herein", "hereof" or any
words of like import shall refer to this Agreement
in its entirety and not to any particular provision
thereof.
(c) All accounting terms not specifically defined herein
shall be construed in accordance with GAAP.
2. SALE AND PURCHASE OF ASSETS
2.1 Sale and Purchase of the Assets.
(a) At Closing, the Seller Group will sell with full
title guarantee and assign, transfer and deliver to
the Company, and the Company will purchase and
acquire from the Seller Group, all right, title and
interest of the Seller Group in the Included Assets
relating to the Israeli Business. At Closing, the
Seller Group will sell with full title guarantee
and assign, transfer and deliver to the Purchaser
Group and the Purchaser Group will purchase and
acquire from the Seller Group all right, title and
interest of the Seller Group in the Included Assets
relating to Foreign Business, as set forth in
Schedule 2.6.
(b) The "Included Assets" are the assets and rights
owned by or under the control of, the Seller Group
(and not already owned by Purchaser or its
Affiliates and Subsidiaries) and used in the
conduct of the Business set out below:
(1) the Goodwill;
(2) the Inventory;
(3) the Inventory on Loan
(c) In the event that a customer does not acquire the
Inventory on Loan within twelve (12) months
following the date on which the Inventory on Loan
was delivered to the customer, then
(i) in the event that the Inventory on
Loan is in unusable condition; or
(ii) if, despite having used reasonable
efforts for a period of one month
thereafter, Purchaser Group has been
unable to redeploy the Inventory on Loan
and realise its value with another
customer,
then, Purchaser Group shall have the
right to sell to Seller Group and Seller
Group shall be obliged to purchase such
Inventory on Loan in situ at the price
such Inventory on Loan was acquired by
Purchaser Group. Payment shall be made by
the Seller Group to the Purchaser Group
within 45 days of the exercise of such
right by Purchaser Group
2.2 Excluded Assets
Notwithstanding anything herein to the contrary, from and
after the Closing Date, the Seller Group shall retain all of
its right, title and interest in and to, and there shall be
excluded from the sale, conveyance, assignment or transfer to
the Purchaser Group, all assets of the Seller Group other
than the Included Assets (collectively the "Excluded Assets")
including but without limitation, the following:
(1) any freehold, leasehold or tenancy rights to any
premises;
(2) all fixtures and fittings at any premises unless
expressly included in the Included Assets;
(3) computer operating systems;
(4) customer contracts and liabilities in Myanmar;
(5) the Excluded Intellectual Property.
(6) the shares owned by Seller in its subsidiaries and
all rights and obligations of Xxxxx Communications
(Romania) other than the benefit and burden of the
Contracts;
(7) all short term and long term accounts receivable,
including all inter- and intra-company receivables.
2.3 Assumption of Liabilities
On the terms and subject to the conditions set forth herein,
at the Closing, the Purchaser Group agrees to assume, pay,
perform and discharge the Assumed Liabilities being the
following:
(i) liabilities (excluding liabilities for obligations
which should have been performed prior to Closing)
under the Contracts, other than those specified in
Schedule 3.2(a), provided that any such Contracts
in respect of which any required consent to
assignment has not been obtained by the Closing
shall not be deemed an Assumed Liability if the
Purchaser Group has not obtained the benefit of
such Contracts;
(ii) all liabilities and obligations arising after
Closing under the Permits of the Business set forth
in Schedule 4.12(b) that are transferred or
assigned to the Purchaser Group (but only to the
extent so transferred or assigned);
(iii) all liabilities and obligations in respect of
Transferred Employees to the extent set forth in
Section 6.10;
(iv) all liabilities and obligations, set forth or
reflected on the Closing Net Asset Statement
(including, without limitation, the Assumed
Warranty Liabilities and the Customer Deposits);
but, in each case, excluding the Excluded Liabilities.
2.4 Excluded Liabilities
Notwithstanding anything herein to the contrary, it is
expressly understood and agreed that the following
liabilities of the Seller Group (the "Excluded Liabilities")
will not be assumed by the Purchaser Group at the Closing but
will be retained by the Seller Group:
(1) all liabilities arising out of or in respect of the
Excluded Assets;
(2) all liabilities to Former Employees and all
liabilities and obligations relating to employees of
the Seller Group not expressly assumed by the
Purchaser Group;
(3) all debts, liabilities or obligations whatsoever not
specifically described in Section 2.3;
(4) any obligation or liability of the Seller Group
arising from its failure to perform any of their
agreements contained in this Agreement or in the
Ancillary Agreements or incurred by the Seller
Group in connection with the transactions
contemplated by this Agreement and the Ancillary
Agreements;
(5) any obligation or liability arising in connection
with or out of the sale, prior to the Closing Date,
of any products by the Seller, other than the
Assumed Warranty Liabilities;
(6) any environmental costs, obligations and liabilities
in respect of the period prior to the Closing Date;
(7) any Taxes in respect of the Business; and
(8) all liabilities in connection with the supply and
installation of products pursuant to projects
detailed in the list to be provided to Purchaser
pursuant to Section 10.2(h)
2.5 Consideration
On the terms and subject to the conditions set forth herein,
as consideration for the sale of the Included Assets ("the
Consideration") , the Purchaser and the Purchaser Group shall
pay to the Seller Group, in aggregate, the sum of $90,000,000
(Ninety Million Dollars) for the Goodwill, plus the Final Net
Asset Amount, in the following manner:
(a) The Seller has prepared and delivered to the
Purchaser a Net Asset Statement as of 31st March
2000, a copy of which is attached hereto as
Schedule 2.5(a) with the calculation of the Net
Asset Amount as of that date (the "March Net Asset
Amount").
(b) The Purchaser shall, as promptly as practical
following the date hereof but in no event later
than five (5) Business Days prior to the Closing
Date, nominate which of its Subsidiaries and
Affiliates are to acquire each part of the Included
Assets and to receive as assignee the Contracts
relating to the Foreign Business and which,
together with the Purchaser and the Company,
constitute the Purchaser Group;
(c) At the Closing:
(i) the Company shall pay to the Seller
Group, on account for the Consideration,
the sum of $84,000,000 (Eighty Four
Million Dollars) for the Goodwill of the
Israeli Business, plus the March Net
Asset Amount in respect of the Israeli
Business; and
(ii) the respective members of the Purchaser
Group shall pay to the Seller Group, on
account of the Consideration, the sum of
$6,000,000 (Six Million Dollars) for the
Goodwill of the Foreign Business, plus
the March Net Asset Amount in respect of
the Foreign Business;
(d) The Seller shall deliver to the Purchaser, as
promptly as practicable after the Closing Date and
in any event within sixty (60) days after the
Closing Date a Net Assets Statement as of the
Closing Date (the "Closing Net Asset Statement"),
and the Seller's written statement of the Net Asset
Amount as of the Closing Date based upon such
Closing Net Asset Statement (the "Closing Net Asset
Amount").
(e) Following the delivery of the documents contemplated
by Section 2.5(d), the Seller shall make itself and
its employees available to meet and discuss any and
all financial and business matters relating to the
preparation of the Closing Net Asset Statement and
calculation of the Closing Net Asset Amount. Within
forty-five (45) days following the delivery of the
Closing Net Asset Statement, the Purchaser may
deliver to the Seller its objections to the
determination of the Closing Net Asset Statement and
the Closing Net Asset Amount. If the Purchaser does
not deliver written notice of an objection to the
Closing Net Asset Statement and the Closing Net
Asset Amount within such forty-five (45) day period,
the Purchaser shall be deemed to have accepted the
Seller's determination of the Closing Net Asset
Amount and such Closing Net Asset Amount shall be
deemed to be the Final Net Asset Amount.
(f) If the Purchaser delivers written notice of an
objection to the Closing Net Asset Statement or
Closing Net Asset Amount (the "Purchaser
Objections") within the forty-five (45) day period
contemplated above, the Purchaser and the Seller
shall, during the forty-five (45) days (or such
longer period as the parties shall mutually agree)
following delivery of the Purchaser Objections, meet
and discuss in good faith the Purchaser Objections.
If the Purchaser Objections cannot be resolved by
negotiation between the parties within such period
after delivery of the Purchaser Objections, the
Purchaser Objections will be referred for resolution
to PricewaterhouseCoopers in Tel Aviv to serve as
the accounting expert (the "Accounting Expert") with
respect to the Purchaser Objections. The Accounting
Expert will be instructed to select, at its
discretion, the individuals who will have primary
responsibility for this matter, and to reach a
determination within forty-five (45) days from the
date of referral. The Accounting Expert will be
limited to determining matters of accounting as they
relate to the Purchaser Objections, it being
understood that such determination shall be in
conformity with GAAP. The decision of the Accounting
Expert will be final and binding upon the parties.
The fees and expenses of the Accounting Expert
engaged pursuant to this Section 2.5 shall be paid
one-half by the Seller and one-half by the
Purchaser. The Closing Net Asset Amount, as adjusted
by agreement of the Seller and the Purchaser or by
the Accounting Arbitrator in accordance with this
Section 2.5(f), shall be the Final Net Asset Amount.
(g) Within ten (10) days following the determination of
the Final Net Asset Amount in accordance with this
Section 2.5, (i) if the Final Net Asset Amount is
less than the March Net Asset Amount, the Seller
shall pay such difference to the Purchaser, the
Company, or the relevant members of the Purchaser
Group, as nominated by the Purchaser and (ii) if
the Final Net Asset Amount is greater than the
March Net Asset Amount, the relevant member(s) of
the Purchaser Group shall pay to the Seller such
difference. All payments under this Section 2.5(g)
shall be made by wire transfer of immediately
available funds to an account specified by the
payee.
2.6 Allocation of Consideration.
The parties agree to use the allocation of the Foreign
Business between the various members of the Purchaser Group
as determined by the Purchaser in accordance with Section
2.5(b)for all purposes, including preparing all Tax Returns
and forms, and the parties agree not to take a position
inconsistent with such allocation.
3. ASSIGNMENT
3.1 Intellectual Property
(a) Prior to Closing, the Seller Group shall disclose
and transfer to the Purchaser all Intellectual
Property in the possession of the Seller Group
used in relation to the Business but owned by the
Purchaser Group.
(b) At Closing, the Seller Group shall for no
additional consideration assign with full title
guarantee to the Purchaser all Intellectual
Property in any improvements, developments,
changes, inventions, or innovations
("Improvements") relating to the Business but
excluding the Excluded Intellectual Property.
(c) In the event any Intellectual Property cannot be
transferred or the full benefits and liabilities of
any Intellectual Property cannot be provided to the
Purchaser Group prior to or at the Closing for the
reason that this would require the consent of the
Israeli Chief Scientist, the Seller Group shall
covenant not to sell or license any products or
technology developed therefrom to any person other
than the Purchaser or its Affiliates and
Subsidiaries and shall, from time to time, upon
request by the Purchaser, grant the Purchaser such
royalty-free, exclusive, perpetual licences (with
the right to grant sub-licences) as are necessary to
permit the Purchaser and its Affiliates and
Subsidiaries to manufacture, have manufactured,
sell, service and support such products and
technology in such parts of the world as are
specified by the Purchaser.
(d) Prior to Closing the Seller Group shall disclose
to the Purchaser the Telrad basic software
packages set out in Part (c) of Schedule 2.2(5).
Without limiting any of the foregoing it is
acknowledged that the Purchaser Group has the
exclusive rights to use the Excluded Intellectual
Property set out in part (c) of Schedule 2.2(5)
with the products relating to the Business.
Furthermore, Seller Group hereby grants to
Purchaser and its Affiliates a perpetual, royalty
free, fully paid-up, non-exclusive, worldwide,
license (with the right to sub-licence):
(i) to use such Excluded Intellectual Property
or the subject matter thereof in
conjunction with the Business;
(ii) to make (including have made), sell,
offer for sale, supply, import, export or
otherwise dispose of products relating to
the Business using, incorporating or
based on such Intellectual Property or
the subject matter thereof other than
those products set forth in Parts (a),
(b) and (d) of Schedule 2.2.(5); and
(iii) otherwise to exploit such Intellectual
Property or the subject matter thereof in
relation to the Business other than in
conjunction with those products set forth
in Parts (a), (b) and (d) of Schedule
2.2(5).
3.2 Contracts
(a) At Closing, the Seller Group shall for no additional
consideration assign, transfer and deliver to (i)
the Company (in the case of the Contracts relating
to the Israeli Business) and to (ii) the Purchaser
Group (in the case of Contracts relating to the
Foreign Business) and the Company and Purchaser
Group will purchase and acquire from the Seller
Group all right, title and interest of the Seller
Group in the Contracts, other than:
(i) those Contracts specified in
Schedule 3.2 (a); and
(ii) liabilities for obligations under
the Contracts which should have
been performed prior to Closing.
Provided that any Contracts in respect of which any
required consent to assignment has not been obtained
by the Closing shall not be deemed an Assumed
Liability (as defined in Section 2.3) if the
Purchaser Group has not obtained the benefit of such
Contracts.
(b) Notwithstanding anything to the contrary contained
in this Agreement, to the extent the sale,
assignment, transfer, conveyance or delivery or
attempted sale, assignment, transfer, conveyance or
delivery to the Purchaser Group pursuant to Section
3.2(a) above of any contract is prohibited by any
applicable law or would require any governmental or
third-party authorizations, approvals, consents, or
waivers and such authorizations, approvals, consents
or waivers shall not have been obtained prior to the
Closing, this Agreement shall not constitute a sale,
assignment, transfer, conveyance or delivery
thereof. Following the Closing, and without limiting
the provisions set forth in Section 6.6 but subject
to Section 2.2(d) and Section 6.13, the parties
shall use reasonable best efforts, and cooperate
with each other, to obtain promptly such
authorizations, approvals, consents or waivers.
Pending such authorization, approval, consent, or
waiver, the parties shall cooperate with each other
in any reasonable and lawful arrangements designed
to provide to the Purchaser Group the benefits and
liabilities of such Contract. Once such Contract,
approval, consent or waiver for the sale,
assignment, transfer, conveyance or delivery of an
Contract not sold, assigned, transferred, conveyed
or delivered at the Closing is obtained, the Seller
Group shall promptly assign, transfer, convey or
deliver, or cause to be assigned, transferred,
conveyed and delivered, such Contract to the
Purchaser Group for no additional consideration. To
the extent that any such Contract cannot be
transferred or the full benefits and liabilities of
any such Contract cannot be provided to the
Purchaser Group following the Closing pursuant to
this Section 2.1(c), the Purchaser Group and the
Seller Group shall enter into such arrangements for
no additional consideration from the Purchaser Group
(including subleasing or subcontracting if
permitted) to provide to the Purchaser Group the
economic and operational equivalent of obtaining
such authorization, approval, consent or waiver.
3.3 Blue Avnet
(a) The Blue Avnet Contract shall not be assigned
until Seller has completed Phase B (being the
phase up to and including the obtention of full
customer acceptance). Once Phase B is complete and
customer acceptance has been granted, Seller shall
assign the Blue Avnet Contract to the Company and
the warranty provisions thereunder shall
constitute Assumed Warranty Liabilities subject to
Seller transferring to the Company for no
additional consideration an amount equivalent to
the warranty provision which Seller would
otherwise have been required to make under GAAP.
(b) Seller shall involve the Company fully in any
renegotiation of the Blue Avnet contract and any
negotiation of warranty periods or maintenance
obligations, and shall assist the Company to
negotiate a separate maintenance agreement
pursuant to which the Company shall provide
maintenance services to the Israeli Ministry of
Defence following the end of Phase B in respect of
the Blue Avnet project.
(c) No later than full customer acceptance Seller
shall assign to the Purchaser for no additional
consideration such technology and Intellectual
Property developed during Seller's performance of
the Blue Avnet Contract as is necessary to enable
the Company to perform maintenance services for
the customer.
(d) In order to assist Seller to perform its
obligations under the Blue Avnet Contract, the
Company and Seller shall, with effect from the
Closing Date, enter into a Services Agreement as
referred to in Schedule 3.1.5 of the Shareholders
Agreement.
(e) Seller shall involve the Company in any publicity
or public relations matters relating to the Blue
Avnet Contract, it being acknowledged that no
publicity or public relations exercises are
possible without the consent of the Israeli
Ministry of Defence
(f) Purchaser shall permit Seller to use such of its
technology and Intellectual Property associated
therewith to enable Seller to fulfil its
obligations under the Blue Avnet contact, but for
no other purpose, such technology to be identified
and mutually agreed.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER GROUP
The disclosure of any fact or item in the Schedules (i) shall not be
deemed to constitute an acknowledgement that any such fact or item is
required to be disclosed, (ii) does not represent a determination that
such item did not arise in the ordinary course of business, and (iii)
does not represent a determination that such item is material and
shall not be deemed to establish a standard of materiality
Except as otherwise specifically stated in the Schedules, Seller and
each member of the Seller Group hereby jointly and severally
represents and warrants to Nortel and to each member of the Purchaser
Group as follows.
4.1 Organization and Qualification.
Each member of the Seller Group is a corporation duly
organised, validly existing and in good standing under the
laws of its jurisdiction of incorporation with corporate
power and authority to own the Included Assets and carry on
the Business as presently owned or conducted. Each member of
the Seller Group is duly licensed or qualified to transact
business and is in good standing as a foreign corporation in
each jurisdiction in which, because of its business conducted
there or the nature of its properties there, it would be
required to be so licensed or qualified and in which the
failure to be so licensed or qualified would have, either
individually or in the aggregate, a Material Adverse Effect.
4.2 Authority; No Breach.
(a) Each member of the Seller Group has all requisite
corporate power and authority to execute and deliver
this Agreement and to perform, carry out and
consummate the transactions contemplated hereby. The
execution, delivery and performance of this
Agreement and each of the Ancillary Agreements, and
the consummation of the transactions contemplated
herein have been duly authorized by all necessary
corporate action on the part of each member of the
Seller Group. This Agreement constitutes, and each
of the Ancillary Agreements when executed and
delivered by the parties thereto will constitute, a
legal, valid and binding obligation of each Seller,
enforceable against each Seller in accordance with
its terms except as enforceability may be limited or
affected by applicable bankruptcy, insolvency,
reorganization or other laws of general
applicability relating to creditors' rights and
except as enforceability may be limited by rules of
law governing specific performance, injunctive
relief or other equitable remedies.
(b) Neither the execution, delivery and performance of
this Agreement and each of the Ancillary Agreements
by any member of the Seller Group nor the
consummation of the transactions contemplated herein
and therein will: (i) violate any provision of the
Constitutive Documents of any member of the Seller
Group; (ii) (with or without the giving of notice or
the lapse of time or both) conflict with, result in
a breach of or constitute a default under or result
in the invalidity of, or accelerate the performance
required by or cause the acceleration of the
maturity of any debt or obligation pursuant to any
Contract which individually or in the aggregate
would have a Material Adverse Effect; (iii) (with or
without the giving of notice or the lapse or time or
both) result in the creation of, or give any party
the right to create, any Encumbrances upon any of
the Included Assets, rights under the Contracts or
the Assigned Intellectual Property which
individually or in the aggregate would have a
Material Adverse Effect; (iv) conflict with,
violate, result in a breach of or constitute a
default under any judgement, decree, order, or
process of any Governmental or Regulatory Authority
binding upon any of the Included Assets , the
Contracts, the Assigned Intellectual Property or the
Business which individually or in the aggregate
would have a Material Adverse Effect; (v) conflict
with or violate any statute, Law or regulation
applicable to any of the Included Assets, the
Contracts, the Assigned Intellectual Property or the
Business, except where such conflicts or violations
(individually or in the aggregate) would not have a
Material Adverse Effect; (vi) terminate or modify,
or give any third party the right to terminate or
modify, the provisions or terms of any Contract,
except where any such termination or modification
would not have a Material Adverse Effect; or (vii)
require any member of the Seller Group to obtain any
authorization, consent, approval or waiver from, or
to make any filing with, any Person, except where
the failure to obtain such authorization, consent,
approval or waiver or make any filing (individually
or in the aggregate) would not have a Material
Adverse Effect other than such as have been obtained
or made.
4.3 [reserved]
4.4 Financial Statements.
(a) Prior to the date hereof, the Seller Group has
delivered to the Purchaser Group the Financial
Statements attached hereto as Schedule 4.4(a).
(b) The Financial Statements have been prepared in the
ordinary course of business of the Seller Group in
accordance with GAAP consistently applied
throughout the periods shown and present fairly, in
all material respects, the financial condition of
the Business as of the date thereof and the results
of operations of the Business for the twelve-month
period then ended.
(c) All of the material liabilities reflected on the
Balance Sheet are related to the Business and arose
out of or were incurred in the conduct of the
Business.
(d) The Balance Sheet fairly reflects the assets and
liabilities of the Business at the Balance Sheet
Date and fairly reflects the financial condition of
the Business at such date and its results of
operations and cash flows for the year then ended
in accordance with GAAP consistently applied
throughout the periods shown.
(e) The Net Asset Statement for 31st March 2000 has
been prepared in accordance with GAAP consistently
applied throughout the periods shown and present
fairly, in all material respects, the financial
condition of the Business as of the date thereof
and the results of operations of the Business for
the three-month period then ended.
4.5 Assets.
The Seller Group has and will transfer to the Company or to
the Purchaser Group (as specified in Section 2.1(a) above),
at the Closing, good and marketable title to all assets
(tangible and intangible) included in the Included Assets and
all rights under the Assigned Intellectual Property and all
rights under the Contracts, in each case free and clear of
all title defects and Encumbrances, except for (i)
Encumbrances (if any) reflected on the Financial Statements;
(ii) imperfections of title and Encumbrances disclosed in
Schedule 4.5; and (iii) such other imperfections of title or
Encumbrances which will not, in the aggregate, have a
Material Adverse Effect.
4.6 Intellectual Property.
(a) Schedule 4.6(a) lists all patents, patent
applications, trademarks and trademark applications
included in the Intellectual Property.
(b) The Seller Group owns or has the valid and duly
assignable right to use all of the Intellectual
Property necessary to conduct the Business as
currently conducted and consistent with past
practice, free of all Encumbrances; (ii) to the
knowledge of the Seller Group, all of the
Intellectual Property is valid, enforceable and
unexpired, has not been abandoned or
misappropriated, and to the knowledge of the Seller
Group, the products of the Business do not infringe,
impair or make unauthorized use of ("Infringe") the
Intellectual Property rights of any third party;
(iii) no Order or Proceeding is outstanding or
pending, or to the knowledge of Seller Group,
threatened or imminent, that would limit or
challenge the ownership, use, value, validity or
enforceability of the Intellectual Property; (iv)
the Seller Group has taken all reasonable steps to
protect, maintain and safeguard the value, validity
and their ownership of the Intellectual Property
including without limitation any confidential
Intellectual Property, if any, and has taken all
actions, made all applicable filings, paid all fees
and executed all agreements that are appropriate in
connection with the foregoing; (v) to the knowledge
of the Seller Group, no Employee has in connection
with the provision of services thereto, breached any
third-party contract with respect to any material
item of Intellectual Property which breach could
reasonably be expected to have a Material Adverse
Effect; (vi) without limiting clause (iii), to the
knowledge of the Seller Group no current or Former
Employee of the Seller Group or current or former
consultant or independent contractor retained by the
Seller Group has, or has alleged to have any right,
title or interest in the Intellectual Property, if
any; (vii) to the knowledge of the Seller Group, no
party to any material contract or agreement related
to the Intellectual Property is, or is alleged to
be, in breach or default thereunder, and to the
knowledge of the Seller Group, all material
contracts or agreements related to the Intellectual
Property are in full force and effect; and (viii)
the transactions contemplated by this Agreement
shall not impair the rights of the Seller Group
under any material contract or agreement related to
the Intellectual Property, or cause any new or
additional fees to be due thereunder.
(c) The Seller Group represents that all of the
Intellectual Property owned by the Seller Group
necessary to conduct the Business has been
disclosed to Purchaser and has since its creation
been subject to a worldwide, perpetual royalty-free
licence (with the right to grant sub-licences) to
the Purchaser for all purposes.
(d) None of the representations in this Section 4.6
shall refer to the Excluded Intellectual Property.
4.7 Absence of Undisclosed Liabilities
Except as set forth in Schedule 4.7, and for liabilities
under this Agreement, there are no liabilities or obligations
of any nature, whether absolute, accrued, contingent or
otherwise, which relate to or arise out of the Business or
any of its operations as heretofore or currently conducted,
any of the Contracts, the Assigned Intellectual Property or
any of the Included Assets or the past or present operation,
condition or use of any of the Included Assets.
4.8 Absence of Certain Changes or Events
Since the Balance Sheet Date each member of the Seller Group
has conducted the Business only in the ordinary and usual
course. Without limiting the generality of the foregoing
since the Balance Sheet Date:
(a) there has been no damage, destruction or casualty
loss (whether or not covered by insurance) which,
individually or in the aggregate, has or is
reasonably expected to have a Material Adverse
Effect;
(b) no member of the Seller Group has (i) granted any
increase in the rate or terms of compensation
payable or to become payable to the executive
officers or other employees who will be employed by
the Purchaser Group following the Closing, except,
in the case of non-executive officers and other
employees, for increases occurring in the ordinary
course of business in accordance with its customary
practices (which shall include normal periodic
performance reviews and related compensation and
benefit increases) or (ii) granted any increase in
the rate or terms of any bonus, insurance, pension
or other Employee Plan or arrangement covering
executive officers or other employees who will be
employed by the Purchaser Group following the
Closing except, in the case of non-executive
officers and other employees, for increases
occurring in the ordinary course of business in
accordance with its customary practices (which shall
include normal periodic performance reviews and
related compensation and benefit increases);
(c) no member of the Seller Group has entered into any
agreement or terminated or materially amended any
agreement material to the Business, except
agreements entered into, terminated or amended in
the ordinary course of business consistent with
past practice or as permitted by this Agreement;
(d) no member of the Seller Group has made any material
change in its accounting methods, principles or
practices, except as required by GAAP and concurred
in by the independent accountants of the relevant
member of the Seller Group;
(e) other than as disclosed in Schedule 4.5, no member
of the Seller Group has sold, assigned, pledged,
charged, transferred, or otherwise disposed of any
of the Included Assets, except in the ordinary
course of business;
(f) the Business has not incurred, nor has it or the
Included Assets assumed or become liable for, any
liabilities for borrowed money or other obligations
to the Seller Group or their Affiliates other than
in the ordinary course, consistent with past
practice;
(g) other than acts relating to the transactions
contemplated by this Agreement and the Ancillary
Agreements, the Business has been conducted in all
significant respects only in the ordinary course
consistent with past practice; and
(h) no member of the Seller Group has agreed, neither
in writing nor otherwise, to take any action
prohibited by this Section 4.8.
4.9 Contracts and Commitments.
(a) Schedule 4.9(a) sets forth a list of each written
Contract (other than (i) purchase orders in the
ordinary and usual course of business, (ii) any
Contract or group of related Contracts involving
the payment of less than $100,000 in the aggregate
and (iii) confidentiality agreements entered into
in the usual course of business) and,
notwithstanding clauses (i), (ii) and (iii), such
Schedule 4.9(a) does not omit any Contracts that
are, individually or in the aggregate, material to
the Business. True and complete copies of all the
Contracts have been delivered to the Purchaser
Group or otherwise made available for inspection.
In addition to and without limiting the remedies
provided under Section 11, Koor and the Seller
Group shall indemnify and keep indemnified the
Purchaser and/or relevant member of the Purchaser
Group in respect of any loss or costs arising from
any Contract not disclosed in Schedule 4.9(a) where
such loss or costs would have been avoided had the
Contract been properly disclosed.
(b) Except as set forth in Schedule 4.9(b), each
material Contract is a valid and binding agreement
of the relevant Seller or its respective Subsidiary
which is a party thereto and is in full force and
effect, and no member of the Seller Group has any
knowledge of any default under any Contract listed
on Schedule 3.9(a) which default has not been cured
or waived and which default would have individually
or, when aggregated with other such defaults, a
Material Adverse Effect.
(c) Schedule 4.9(c) sets forth all warranty claims with
respect to all products or services marketed by the
Business brought or settled during the past two
fiscal years which, individually or in the
aggregate for any related warranties, had remedy or
settlement costs of more than US$ 25,000.
4.10 Litigation, Etc.
Except as set forth in Schedule 4.10, there is no claim,
action, suit, inquiry, arbitration, investigation, inquiry or
proceeding ("Proceeding") pending, or to the knowledge of any
Seller threatened against any member of the Seller Group, or
involving the Business, the Contracts, the Assigned
Intellectual Property or any of the Included Assets that
could reasonably be expected to have individually or, when
aggregated with any other such proceeding, a Material Adverse
Effect or which questions or challenges the validity of this
Agreement or any Ancillary Agreement or any action taken or
to be taken by a Seller pursuant to this Agreement or any
Ancillary Agreement or in connection with the transactions
contemplated hereby or thereby. Except as set forth in
Schedule 4.10, there is no judgement, decree, injunction,
rule, stipulation, settlement, award or Order outstanding or
to the knowledge of a Seller threatened against any Seller or
with respect to any Included Asset, Contract or Assigned
Intellectual Property, that could reasonably be expected to
have individually or in the aggregate a Material Adverse
Effect.
4.11 Software
(a) All software comprised in or covered by the
Intellectual Property being disclosed, transferred,
assigned or licensed pursuant to Section 3.1 hereof
shall function in accordance with its specifications
and without service-affecting defects ("the Software
Warranty").
(b) Purchaser Group's sole remedy and Seller's sole
obligation during the period of three (3) years from
the Closing, with respect to the support of the
Software provided hereunder, shall be for Seller to
correct any failure to conform to the above
warranties within the specified periods for the
types of emergencies listed below:
E1 Emergency Outage/System Fail 24 hours
E3 Follow-up to E-1 Emergency 15 days
E2 Potential Traffic Degradation
or Outage 30 days
(c) With respect to failures occurring after the expiry
of three (3) years from the Closing, corrections
made by Seller so as to cause the Software to
conform to the above warranties shall be made in
accordance with a Set of Schedules under the Master
Technology Development Agreement.
(d) Seller's obligations under the Software Warranty
contained in this Section 4.11 are conditioned upon
the defects not being the result of the Software
having been altered, mishandled, misused, improperly
stored, operated or repaired by anyone other than
Seller, or any affiliate or agent of Seller, damaged
by fire, explosion, or power failure not
attributable to Seller, or any other affiliate of
Seller or Seller's agent, or damaged by any act of
nature.
(e) The above warranties shall survive inspection,
acceptance and payment.
(f) With respect to failures which occur on or after the
expiry of three (3) years from the Closing,
Purchaser Group reserves the right to correct on its
own any such failures to conform to the above
warranties or to arrange for such correction by
other entities of any such failures to conform to
the above warranties.
(g) For the avoidance of doubt, the Software Warranty
does not apply to future technology and developments
made pursuant to Sets of Schedules entered into
after the Date of Closing under the Master
Technology Development Agreement, which developments
and technology shall be subject to the warranty
obligations under those Sets of Schedules or other
applicable agreements.
4.12 Compliance with Law; Necessary Authorizations.
(a) Each member of the Seller Group has complied, in
all material respects, in respect of the Business,
with, and the Business is being conducted in
compliance with, all applicable Laws, rules,
regulations, Permits, authorizations, judgements
and decrees of all Governmental and Regulatory
Authorities, and the Seller Group has not received
notice of any material violation of Laws, except
where the failure to so comply, individually or in
the aggregate would not have a Material Adverse
Effect.
(b) Each member of the Seller Group has all material,
governmental approvals, authorizations,
certificates, franchises, licenses, permits and
rights ("Permits") necessary for it to conduct the
Business as now conducted, except where the failure
to so comply would not, individually or in the
aggregate, have a Material Adverse Effect and there
has occurred no default under any such Permit which
individually or in the aggregate would have a
Material Adverse Effect. Schedule 4.12(b) sets
forth all material Permits.
4.13 Labour Matters.
(a) Other than as set forth in Schedule 4.13(a), there
is no labour strike, or material labour dispute,
grievance, or arbitration proceeding, relating to
the Business, or material charge of unfair labour
practice relating to the Business actually pending
or, to the knowledge of any Seller threatened
against or affecting the Business.
(b) Other than as set forth in Schedule 4.13(a), no
member of the Seller Group has, during the 12-month
period prior to the date hereof, experienced any
material work stoppage or other material labour
dispute relating to the Business.
(c) Except as set forth in Schedule 4.13(c), there are
no collective labour bargaining agreements
affecting the Business in regard to any Employee.
(d) Except as disclosed in writing on the date hereof
to the Purchaser Group , and other than pursuant to
applicable employment laws and regulations and
extension orders ("tzavei harchava"), no member of
the Seller Group is subject to, nor do Employees
benefit from, any agreement, arrangement,
understanding or custom with respect to employment
(including, without limitation, termination
thereof). No member of the Seller Group has any
custom with respect to termination of employment.
(e) Set forth in Schedule 4.13(e) is a list of the
employees of the Business (the "Employee List")
containing a full and accurate description, as of
the date hereof, of the names, positions and ranks
(if any), dates of commencement of employment,
salaries and terms and conditions of employment, of
all the employees and officers of the Business,
including all remuneration payable, vacation pay
balances, replenishment ("havraa") pay balances,
illness pay balances, fringe benefits including,
without limitation, balances in provident or pension
funds, "13th and 14th salary", car, telephone,
managers insurance and any profit sharing
commission, incentive or discretionary bonus
arrangements to which a Seller is a party, all in
accordance with Israeli GAAP applied consistently.
The Employee List includes a full and accurate list
of the officers and employees of the Business. All
the personal employment agreements of the employees
of each of the Business are substantially in one of
the forms attached hereto as exhibit to Schedule
4.13(e). Other than as listed on said the Employee
List, there is no person or entity (including,
without limitation, "agents", "distributors",
"independent contractors", "consultants" or
employees of manpower companies or other service
providers) that may be deemed to be an employee of
the Business.
(f) Except for the employment agreements listed in
Schedule 4.13(f) hereto, there are no agreements
between any member of the Seller Group and any of
the Employees which cannot be terminated by such
corporation by three months notice or less without
giving rise to a claim for damages or compensation
(except for statutory severance pay).
(g) Other than as set forth in Schedule 4.13(g) there is
no outstanding claim or complaint (including,
without limitation, any claim resulting from a bonus
arrangement), other than claims and complaints
demanding solely pecuniary damage in an aggregate
amount not exceeding $15,000, against any member of
the Seller Group by any person who is now or has
been an officer or employee of such member of the
Seller Group. Without limiting the generality of the
above, there are no unfair labour practice claims or
charges pending or, to the knowledge of any member
of the Seller Group, threatened against such Seller.
With respect to the employees of any member of the
Seller Group, individually and in the aggregate, no
event has occurred and, to the best knowledge of
each Seller, there exists no condition or set of
circumstances, in connection with which such Seller
could be subject to any liability that is reasonably
likely to have a Material Adverse Effect on the
Business.
(h) Each member of the Seller Group has materially
complied with all applicable provisions, whether
contractual, customary or otherwise legally
required, relating to employees, and their terms
and conditions of employment including, without
limitation, with respect to wages and hours. No
member of the Seller Group is engaged in any unfair
labour practice, except for any non-compliance or
practice that would not have a Material Adverse
Effect on the Business.
(i) The severance pay due to the employees is fully
funded or provided for in accordance with Israeli
GAAP, consistently applied, all liabilities of
Telrad or any other member of the Seller Group in
connection with its employees (excluding illness
pay) were adequately accrued in the Financial
Statements (in accordance with said principles)
and, other than as set forth in Schedule 4.13(i),
no member of the Seller Group is aware of any
circumstance whereby any employee might demand
(whether legally entitled to or not) any claim for
compensation on termination of employment beyond
the statutory severance pay to which such employee
is entitled. To the extent applicable such
representation is repeated for each member of the
Seller Group.
(j) All amounts which any member of the Seller Group is
legally or contractually required to deduct from
its employees' salaries and/or transfer to such
employees' pension or provident, life insurance,
incapacity insurance, continuing education fund or
otherwise have been duly deducted and so paid into
the appropriate fund or funds, and no member of the
Seller Group has any outstanding obligation to make
any such transfer or provision.
4.14 Employee Plans.
(a) With respect to severance funds, management
insurance ("Bitauch Menahalim") and pension funds
(each an "Employee Plan"), the fair market value of
the assets of each funded Employee Plan, the
liability of each insurer for any Employee Plan
funded through insurance or the book reserve
established for any Employee Plan, together with any
accrued contributions, is sufficient to procure or
provide for the accrued benefit obligations, as of
the date of this Agreement, with respect to all
current and former participants in such Employee
Plan according to the actuarial assumptions and
valuations most recently used to determine employer
contributions to such Employee Plan and no
transaction contemplated by this Agreement shall
cause such assets or insurance obligations to be
less than such benefit obligations.
(b) No Employee Plan exists that could result in the
payment (other than any governmental mandated
payment or payment required by Law) to any present
or Former Employee of the Business of any money or
other property or accelerate or provide any other
rights or benefits to any present or Former
Employee of the Business as a result of the
transaction contemplated by this Agreement. There
is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee
of the Business that, individually or collectively,
could reasonably be expected to give rise to the
payment of any amount that would not be deductible
under the Income Tax Ordinance.
4.15 No Brokers or Finders
No member of the Seller Group, nor any of its respective
directors or officers, has taken any action that, directly or
indirectly, would obligate the Purchaser Group to anyone
acting as broker, finder, financial advisor or in any similar
capacity in connection with this Agreement or any
transactions contemplated hereby.
4.16 Inventory.
All material items of Inventory are of good and merchantable
quality and are fit for the purpose for which they are
intended and are of a quantity usable in the ordinary and
usual course of the Business as currently conducted, and do
not consist of obsolete or damaged materials. The Inventory
is valued by the Seller Group for financial reporting
purposes in accordance with GAAP. The Seller Group has good
and marketable title to all of the Inventory free and clear
of all Encumbrances.
4.17 Customers and Suppliers
There has not been any material adverse change and there are
no facts known to any member of the Seller Group which may
reasonably be expected to indicate that any material adverse
change may occur in the business relationship of any member
of the Seller Group with any material customer or supplier of
the Business and no member of the Seller Group is engaged in
any material dispute with any of the material customers or
suppliers of the Business.
4.18 Consents and Approvals of Governmental and Regulatory
Authorities
Except for (i) the approval of the Director of Restrictive
Trade Practices of the Israeli Ministry of Trade & Industry;
(ii) the approval of any Governmental or Regulatory
Authorities relating to competition in appropriate
jurisdictions; and (iii) as set forth in Schedule 4.18, no
consent, approval or authorization of, or declaration, filing
or registration with, or the giving of notice to, any
Governmental or Regulatory Authority or any other Person or
entity is required in connection with the execution, delivery
and performance by the Seller Group of this Agreement or the
Ancillary Agreement or the consummation by the Seller Group
of the transactions contemplated hereby and thereby except
where the failure to secure any of the foregoing would not
(individually or in the aggregate) have a Material Adverse
Effect.
4.19 Transactions with Affiliates.
(a) Schedule 4.19(a) lists all material agreements and
arrangements related to the Business between the
Seller Group and any Affiliate of the Seller Group
or among divisions of any member of the Seller
Group.
(b) Except as set forth on Schedule 4.19(a), (i) there
are no material intercompany services currently
being provided (x) by any Affiliate of the Seller
Group to the Seller Group or (i) by the Seller
Group to any of their Affiliates relating to the
Business, and (ii) no material contracts between
any of the Seller Group on the one hand and any of
the Seller Group's Affiliates, on the other,
relating to the Business.
4.20 Government Grant Programs
Schedule 4.20 provides a complete list of all material
pending and outstanding grants, incentives and subsidies
(collectively, "Grants") from the Government of the State of
Israel or any agency thereof, or from any foreign
governmental or administrative agency, to the Seller Group
relating to the Business including, without limitation, (i)
Approved Enterprise Status from the Investment Centre and
(ii) grants from the Office of the Chief Scientist of the
Israeli Ministry of Trade & Industry. The Seller Group has
made available to the Purchaser Group, prior to the date
hereof, correct copies of all applications for Grants
submitted by any Seller and of all letters of approval, and
supplements thereto, granted to any Seller. Schedule 4.20
details all material undertakings of the Sellers given in
connection with the Grants. Without limiting the generality
of the above, Schedule 4.20 includes the aggregate amounts of
each Grant, and the aggregate outstanding obligations
thereunder of the Sellers with respect to royalties, or the
outstanding amounts to be paid by the Office of the Chief
Scientist of the Israeli Ministry of Trade & Industry to the
Sellers and the composition of such obligations or amount by
the product or product family that it relates to. Each member
of the Seller Group is in compliance, in all material
respects, with the terms and conditions of its Grants and,
has duly fulfilled, in all material respects, all the
undertakings relating thereto. The Seller Group is not aware
of any event or other set of circumstances that might lead to
the revocation or material modification of any of the Grants.
4.21 Environmental Matters
Except as could not reasonably be expected, individually or
in the aggregate, to result in material liability under or
relating to Environmental Laws and relating to the Included
Assets, and the Business:
(a) To the best knowledge of the Seller Group, the
Included Assets and the Business hold, and are in
compliance with and have been in continuous
compliance with, all Environmental Permits and are,
and have been, otherwise in compliance in all
material respects with all Environmental Laws and,
to the knowledge of the Seller Group, there is no
condition that would reasonably be expected to
prevent or interfere with compliance with all
Environmental Laws in the future;
(b) To the best knowledge of the Seller Group, no
modification, revocation, reissuance, alteration,
transfer, or amendment of the Environmental
Permits, or any review by, or approval of, any
third party of the Environmental Permits is
required in connection with the execution or
delivery of this Agreement or the consummation of
the transactions contemplated hereby or the
continuation of the Business following such
consummation;
(c) No Seller has received any Environmental Claim
relating to the Included Assets or the Business and
the Seller Group is not aware after reasonable
inquiry of any such threatened Environmental Claim
nor has any reason to believe that any such
Environmental Claim will be made or threatened in
the future;
(d) No Seller has entered into, nor has agreed to, or
is subject to any judgement, decree, order or other
similar requirement of any governmental authority
under any Environmental Laws and relating to the
Included Assets, the Business or the Corporations
which would have individually or in the aggregate a
Material Adverse Effect;
(e) There are no (i) underground or aboveground storage
tanks, (ii) sumps, (iii) surface impoundments, (iv)
landfills (v) sewer or septic systems or (vi)
Hazardous Materials currently or formerly present
at or about any of the Included Assets, or any
properties or facilities currently or formerly
owned, leased or otherwise used in connection with
the Business, that could reasonably be expected to
give rise to liability under or relating to any
Environmental Laws which would have individually or
in the aggregate a Material Adverse Effect; and
(f) Hazardous Materials have not been generated,
transported, treated, stored, disposed of, arranged
to be disposed of, released or threatened to be
released at, on, from or under any of the Included
Assets, any properties or facilities currently or
formerly owned, leased or otherwise used by the
Seller Group , or any properties or facilities
currently or formerly owned, leased or otherwise
used in connection with the Business, in violation
of Environmental Laws or in a manner or to a
location that could reasonably be expected to give
rise to liability under any Environmental Laws
which would have individually or in the aggregate a
Material Adverse Effect.
4.22 Year 2000
The change to the Year 2000 has not caused, and, to the best
knowledge of the Seller Group, is not expected to cause, a
material disruption to the operation of the Business or
otherwise have a Material Adverse Effect.
4.23 Joint and Several
The representations given by Seller and each member of the
Seller Group are joint and several and every representation
herein stated to be made by any Seller shall be considered a
representation of each member of the Seller Group mutatis
mutandis.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER GROUP
Nortel and each member of the Purchaser Group hereby represents and
warrants to the Seller Group as follows:
5.1 Organization and Qualification.
Each Purchaser is licensed or qualified to transact business
and is in good standing in each jurisdiction in which,
because of its business conducted there or the nature of its
properties there, it is required to be so licensed or
qualified and in which the failure to be so licensed or
qualified would have a material adverse effect on the
business or operations (as currently conducted) or on the
financial condition of the Purchaser Group, taken as a whole.
5.2 Authority; No Breach.
(a) The Purchaser Group has all requisite power and
authority to execute and deliver this Agreement and
the Ancillary Agreements and to perform, carry out
and consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance
of this Agreement and the Ancillary Agreements have
been duly authorized by all necessary action on the
part of each member of the Purchaser Group. This
Agreement is the legal, valid and binding obligation
of the Purchaser Group, enforceable against each
Purchaser in accordance with its terms except as
enforceability may be limited or affected by
applicable bankruptcy, insolvency, reorganization or
other laws of general applicability relating to
creditors' rights and except as enforceability may
be limited by rules of law governing specific
performance, injunctive relief or other equitable
remedies.
(b) Neither the execution and delivery of this Agreement
by the Purchaser Group nor the consummation of the
transactions contemplated herein will: (i) violate
any provision of the Constitutive Documents of any
Purchaser; (ii) conflict with, result in a breach of
or constitute a default under or result in the
invalidity of, or accelerate the performance
required by or cause the acceleration of the
maturity of any debt or obligation pursuant to any
material agreement or commitment to which any
Purchaser is a party or by which such Purchaser (or
any of its material properties or assets) is subject
or bound; (iii) conflict with, violate, result in a
breach of or constitute a default under any material
judgement, decree, order, or process of any
Governmental or Regulatory Authority; (iv) conflict
with or violate any statute, Law or regulation
applicable to the business or operations of any
Purchaser, except where such conflicts or violations
(individually or in the aggregate) would not have a
Material Adverse Effect on the business or
operations (as currently conducted) or the financial
condition of a Purchaser, taken as a whole; (v)
terminate or modify in any material respect, or give
any third party the right to terminate or modify in
any material respect, the provisions or terms of any
material contract or agreement to which a Purchaser
is a party or by which it (or any of its material
assets) is subject or bound; or (vi) require a
Purchaser to obtain any authorization, consent,
approval or waiver from, or to make any filing with,
any Person, except where the failure to obtain such
authorization, consent, approval or waiver or make
any filing would not have a Material Adverse Effect
on the business or operations (as currently
conducted) or on the financial condition of the
Purchaser Group, taken as a whole, other than such
as have been obtained or made.
5.3 No Brokers or Finders
No Purchaser, nor any of its directors or officers, has taken
any action that, directly or indirectly, would obligate the
Seller Group to anyone acting as broker, finder, financial
advisor or in any similar capacity in connection with this
Agreement or the transactions contemplated hereby.
6. COVENANTS
6.1 Operation of the Business for the Benefit of the Purchaser Group
Until the Closing, the Seller Group shall operate the
Business in accordance with the provisions of Section 6.2.
6.2 Conduct of the Business.
In order to preserve the value of the Included Assets, the
Seller Group hereby covenants (i) that since the Balance
Sheet Date it has conducted the Business in the ordinary and
usual course and (ii) that from the date hereof until the
Closing, and except as contemplated by this Agreement (in
which case the Seller Group shall promptly notify Nortel
Networks of the action taken or to be taken) or expressly
consented to by the Purchaser Group, the Seller Group
undertakes to conduct the Business in the ordinary and usual
course, and to use its reasonable best efforts to preserve
intact the Business as conducted as of the Balance Sheet
Date. Without limiting the generality of the foregoing, from
the date hereof and until the Closing the Seller Group will:
(a) use reasonable best efforts to maintain the assets
and properties of the Business in reasonably good
working order and condition, ordinary wear and tear
excepted;
(b) use reasonable best efforts to maintain adequate
insurance upon the properties and assets of the
Business in such amounts and of such kinds as are
comparable to those in effect on the date of this
Agreement;
(c) use reasonable best efforts to keep available
(subject to dismissals and retirements in the
ordinary course of business consistent with past
practice), the services of the current officers and
employees of the Business;
(d) use reasonable best efforts to preserve the current
advantageous relationships with Persons having
business dealings with the Business;
(e) use reasonable best efforts to maintain its Books
and Records in the ordinary course, consistent with
past practice, comply in all material respects with
all Laws and contractual obligations applicable to
the Included Assets or the Business and perform all
of its material obligations relating to the
Business;
(f) not, except as required by the terms of an
employment contract entered into prior to the date
of this Agreement except (in the case of
non-executive officers and other employees only) in
the ordinary course of business consistent with
past practice, make any increase in the salary,
wages or other compensation of any officer or
Employee of the Business;
(g) not adopt, enter into, terminate or materially
amend or modify any Employee Plan relating to the
Business, except to the extent required by
applicable law or expressly consented to by the
Purchaser Group;
(h) not modify or change in any material respect any
Contract relating to the Business other than in the
ordinary course of business consistent with past
practice, or enter into any Contract relating to
the Business other than in the ordinary course of
business consistent with past practice;
(i) not make, or enter into commitments to make, capital
expenditures other than in the ordinary course of
business consistent with past practice;
(j) not sell, transfer, or otherwise dispose of or
voluntarily encumber any fixed asset of the
Business other than in the ordinary course of
business, consistent with past practice;
(k) not sell, transfer, or otherwise dispose of or
voluntarily encumber or agree to sell, transfer, or
otherwise dispose of or voluntarily encumber, any
prospects;
(l) not sell, transfer, license or otherwise dispose of,
any Intellectual Property;
(m) not settle any lawsuit or claim if such settlements
of lawsuits and claims impose any continuing
liability or non-monetary obligation on the
Business, the Contracts, the Assigned Intellectual
Property or any of the Included Assets or if such
settlement payments (net of any insurance
recoveries) exceeds the reserves therefor set forth
in the Balance Sheet unless such lawsuit or claim
is not an Assumed Liability and other than the
settlement of claims listed in Schedule 3.10;
(n) not enter into or agree to enter into any
employment agreement or collective bargaining
agreement for the benefit of the employees of the
Business or amend or modify or agree to amend or
modify any existing employment or collective
bargaining agreement for the benefit of the
employees of the Business;
(o) not make any material changes in the Seller Group's
accounting methods, practices or procedures as they
relate to the Business (except as required by GAAP
and approved in writing by the Seller Group's
independent accountants);
(p) not make any changes in the Seller Group's methods,
practices or procedures relating to accounts
receivable, accounts payable or credit policies of
the Business (including without limitation
extending its trade receivables or making any
changes to its receivables write-off policies or
changing its payables cycle policies);
(q) not make any material changes in its marketing
programs, sales promotion, pricing policies or
product lines relating to the Business;
(r) not enter into any other material transaction
relating to the Business;
(s) not submit any bid or proposal in respect of the
provisions of goods or services by Telrad outside
Israel (other than to the Purchaser Group) without
the prior consent of Nortel;
(t) not submit any bid or proposal in respect of the
provisions of goods or services by Telrad within
Israel (other than to the Purchaser Group) which
could be deemed to be uneconomic for the Business
as a separate business unit, and
(u) not enter into any agreement to do or engage in any
of the foregoing.
Notwithstanding the above, the Seller Group shall be
entitled (A) to offer incentives to employees and customers
in order to accelerate the completion of supply and
installation of products or services under the Contracts
and (B) to negotiate with customers to split the projects
under the Contracts in order to be able to complete
discrete phases, provided in each case that any such
actions shall not result in (i) any material adverse on the
relationship with the customer, (ii) any material adverse
impact on market price expectations, (iii) any material
adverse change in the pricing or other expectations of such
customer, (iv) a price discount or reduction exceeding 5%
of the Contract value (or, in the case the Contract is
split into phases, of the value of the completed phase).
6.3 Access to Information
From and after the date hereof until the earlier of the
Closing Date or the date on which this Agreement is
terminated, the Seller Group will (i) afford the Purchaser
Group and its representatives reasonable access to all of its
offices and other facilities and properties, (ii) permit the
Purchaser Group to make such inspections thereof as it may
reasonably request, and (iii) furnish the Purchaser Group
with such financial and operating data and other information
as it may from time to time reasonably request, and (iv) make
its employees available to the Purchaser Group for such
consultation as it may from time to time reasonably request.
All such consultations shall be made in coordination with the
Seller, provided that such coordination does not limit in any
way the Purchaser Group's access to the information and
personnel described above. In furtherance of the foregoing,
the Seller Group shall provide the Purchaser Group and its
representatives reasonable access to its Books and Records
and to the work papers and audit files prepared by the Seller
Group and their independent accountants in connection with
the preparation of the Financial Statements and the Closing
Date Financial Statements. All information obtained by or on
behalf of the Purchaser Group pursuant to this Section 6.3
shall be kept confidential.
6.4 Discussions with Others
Except as otherwise permitted by this Agreement, from the
date of this Agreement until the Closing Date, no Seller or
Koor, nor any of its officers, employees, representatives or
agents, will, directly or indirectly, solicit, encourage, or
initiate any discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other
entity or group other than the Purchaser Group and its
employees, representatives and agents, concerning any
transaction involving the sale of the Included Assets or the
transfer of the Contracts or any Intellectual Property,
except as required by law or stock exchange rules, in which
case the Seller or Koor, as appropriate, shall liase with the
Purchaser to the closest extent possible concerning the
wording and timing of such disclosures.
6.5 Confidentiality
Each Party shall, and shall use reasonable best efforts to
cause its representatives and affiliates to: (a) hold in
strict confidence and not utilize in its respective
businesses all and any non-public information and documents
concerning the other party hereto or any of its affiliates
furnished to it by such other party or its representatives in
connection with this Agreement or the transactions
contemplated hereby, including the delivery by the Seller
Group of the Books and Records or copies thereof, to the
extent such Books and Records contain non-public information
which is not related to the Business ("Confidential
Information"), except where disclosure may be required by
judicial or administrative process or by Law or as may be
necessary for each Party to enforce its rights under this
Agreement or the Ancillary Agreements (or any documents or
instruments executed pursuant hereto or thereto) provided
that, if disclosure is required by Law or judicial or
administrative process, the party that is required to
disclose the Confidential Information shall notify the
non-disclosing party of such requirement as soon as possible.
Notwithstanding the foregoing, the following will not
constitute "Confidential Information" for purposes of this
Agreement: (i) information which was already in the
possession of the receiving party or its affiliates prior to
the date hereof and which was not acquired or obtained from
the other party or its affiliates, (ii) information which is
independently developed by the receiving party or any
affiliate thereof without access to the Confidential
Information, (iii) information which is obtained or was
previously obtained by the receiving party or its affiliates
from a third person who, insofar as is known to the receiving
party or its affiliates, is not prohibited from transmitting
the information to the receiving party or its affiliates by a
contractual, legal or fiduciary obligation to any other party
or its affiliates and (iv) information which is or becomes
generally available to the public other than as the result of
a disclosure by the receiving party or any Affiliate thereof
or their agents or employees. Notwithstanding the foregoing,
following the Closing, the foregoing restrictions shall not
apply to the use by the Purchaser Group of documents or
information concerning the Business furnished by the Seller
Group hereunder.
6.6 Regulatory and Other Approvals and Consents
Each Party will (a) take all reasonable steps necessary or
desirable, and proceed diligently and in good faith and use
all reasonable best efforts, as promptly as practicable to
obtain all consents, approvals or actions of, to make all
filings with and to give all notices to any Governmental or
Regulatory Authorities or any other Person required of each
Party to consummate the transactions contemplated hereby, and
(b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as
either the Purchaser Group or the Seller Group or such
Governmental or Regulatory Authorities or other Persons may
reasonably request. The Seller Group agrees to use its
reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary,
proper or advisable to assist the Purchaser Group in
obtaining prior to the Closing Date all Permits and Orders as
are necessary in order to enable the Purchaser Group to
conduct the Business in the ordinary course as of and from
the opening of business on the Closing Date. Where the
consent of any third party is required under the terms of any
of the Contracts to be assumed by the Purchaser Group
hereunder the Seller Group will take, all reasonable and
necessary steps to obtain such consent on terms and
conditions not materially less favourable than as in effect
on the date hereof. The Seller Group and the Purchaser Group
shall cooperate fully to the extent reasonably required to
obtain such consents. To the extent that any such consent is
not so obtained with respect to any such lease, contract,
license or agreement, this Agreement shall not constitute an
assignment or an attempted assignment thereof. In each such
case, the Seller Group agrees to cooperate, with the
Purchaser Group in any reasonable arrangement designed to
provide for the Purchaser Group the benefits under any such
Contract, including enforcement of any and all rights of the
Seller Group against the other party thereto arising out of
the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot
be made, the Purchaser Group shall not have any obligation
with respect to any such lease or contract.
6.7 Transfer Taxes.
(a) All value-added taxes incurred in connection with
the transactions contemplated hereby (the
"Value-Added Taxes") shall be borne by the Purchaser
Group, with no reduction in the consideration to be
paid to the Seller Group. The Seller Group shall
cooperate with the Purchaser Group to cause the
amount of the Value-Added Taxes to be refunded by
the applicable Governmental or Regulatory Authority
to the Purchaser Group as soon as reasonably
practicable. Subject to paragraph (c) below, payment
of the Value-Added Taxes shall be made against
presentation to the Purchaser Group of a valid value
added tax invoice and shall be made on the due date
for payment of the Value-Added Taxes by the Seller
Group to the value added tax authorities.
(b) For the avoidance of doubt, no Value-Added Taxes
shall be due in respect of (i) the sale of cash or
securities; (ii) the sale of assets situated
outside Israel; (iii) the export of goods out of
Israel; or (iv) the sale of intangible assets to a
foreign corporation which is not required to make
notification to the value added tax authorities
under Section 60 of the VAT Law.
(c) At the Purchaser Group's request, the Purchaser
Group shall be entitled to be registered with the
Seller Group under a joint value added tax
registration or to request the consent of the value
added tax authorities to bear any Value-Added Taxes
due in connection with the purchase of assets in
accordance with Section 20 of the VAT Law. The
Seller Group shall give the Purchaser Group such
assistance as they may reasonably request in
connection with such procedures;
(d) Any stamp duties incurred in connection with the
transactions contemplated hereby shall be borne
equally by the Seller Group and the Purchaser Group
respectively.
6.8 Supply Agreements
Prior to Closing, the Seller and the Purchaser Group shall
negotiate in good faith to conclude the Schedules to the
Manufacturing and Services Subcontract Agreement and identify
the hardware, software, firmware and documentation comprised
in the Systems to be supplied by Seller pursuant to that
Agreement, it being understood that such Systems shall
include fully or partially assembled and tested TX-1, DMS 10,
TMX 100, DMS 300, TOPS, INM or Unirem systems. The Seller and
the Purchaser Group shall, concurrently with such
negotiations, use all reasonable best efforts to conclude the
Manufacturing 2000 Agreements no later than 30 June 2000.
6.9 [reserved]
6.10 Employees.
(a) Prior to Closing, the Seller shall conduct
discussions in good faith with all relevant trade
unions and workers committees active in the Seller
Group (the "Unions") with the intention of
obtaining the consent of Unions that all the
employees set forth in Schedule 6.10(a), in the
event that their employment is transferred to the
Company, shall be entitled to be transferred onto
personal employment agreements with the Company and
shall not be subject to or entitled to enjoy the
benefit of any collective labour agreement, labour
arrangement, custom, practice or other benefit
(whether written or oral) resulting from their
employment by the Seller.
(b) Following the signing of this Agreement, the
Purchaser Group shall issue the Employees with
offers of employment in the form attached hereto as
Schedule 6.10(b), which shall include enhanced
severance provisions, the details of which are set
forth in Schedule 6.10(b).
(c) The Seller Group shall use all reasonable endeavours
to cooperate in Purchaser's efforts to employ all of
the Employees and shall in no event assist any other
person in employing or soliciting the employment of
such individuals and shall not dismiss any of the
Employees prior to Closing. In addition, the Seller
shall assist the Company, at its request, in
entering into an agreement with manpower agencies
(or other entities through whom the Seller obtains
"manpower" services) with which the Seller works
with respect to the provision of services by those
persons listed in Schedule 6.10(c) through such
agencies from the Closing Date. The Purchaser agrees
that Seller's undertaking in this Section is
predicated upon the Company signing an agreement
with the above mentioned manpower agencies for the
provision of services in respect of such persons.
(d) The Seller Group will retain all liability for (i)
liabilities or obligations related to current or
former employees who are not Transferring Employees
(ii) liabilities or obligations related to an
Employee's employment with the Seller Group or
related Union claims on or before the Closing Date
other than liabilities or obligations which are
being assumed by the Purchaser and appearing in the
Closing Net Asset Statement (iii) severance,
termination, retirement payments required to be made
to any Employee in connection with the consummation
of the transactions contemplated by this Agreement
to the extent that such amounts are not accrued as a
liability on the Closing Net Asset Statement or are
funded in a pension or severance fund transferred to
the Purchaser pursuant to the provisions of this
Agreement or in such funds in the name of the
employees (iv) severance or termination payments to
be made to any Employee, whose employment was
terminated by Seller and to whom severance payments
were due to be made by Seller, in respect of the
period of such Employee's employment with the Seller
Group and which becomes payable after the Closing
Date, alone or together with severance or
termination payments in respect of the period of
such Employee's employment after the Closing Date
with any member of Purchaser Group, except for
amounts appearing in the Closing Net Asset
Statement, or amounts received by such Employees
from severance, termination or pension funds in the
name of such Employee or in the name of the Company
and held on behalf of such Employee, or amounts
detailed in the enhanced severance provisions set
forth in Schedule 6.10(b), provided, however, that
the Seller Group's liability hereunder shall be
limited to the amount of severance payments due to
such Employee by Seller and (v) liabilities or
obligations relating to its failure to comply with
any employee notifications, consultation and
information requirements applicable to the Seller
Group. The Seller Group, as an additional indemnity,
hereby indemnifies the Purchaser Group and holds it
harmless and defends it from and against any and all
demands, claims, action, liabilities, losses, costs,
damages or expenses whatsoever (including reasonable
attorneys' fees) asserted against, imposed upon or
incurred by the Purchaser Group resulting from or
arising out of any claim against it in connection
with any of the above liabilities. The provisions of
Section 12.3 below concerning the terms and
conditions of indemnification shall apply to the
indemnification contained in this Section 6.10(d),
except that the Purchaser Group shall be entitled to
bring claims for indemnification under this Section
6.10(d) even in the event that it has suffered
damages or losses in an amount of less than
$100,000.
(e) The Closing Net Asset Statement, together with the
amounts disclosed in writing on the date hereof to
the Purchaser Group shall reflect all severance,
termination, pension or retirement liabilities (the
"Employment Liabilities") that have been accrued
with respect to the Employees except for the
liabilities pursuant to the enhanced severance
provisions as disclosed in Schedule 6.10(b) as of
the Closing Date, which shall reflect the said
amount actually owed to the Employees less the
value at the Closing Date of any assets set aside
for, or dedicated to any such liability that is
transferred to the Purchaser pursuant to this
Agreement.
(f) The Seller Group shall transfer to the Purchaser
Group in accordance with and to the extent permitted
by applicable law and subject to the conditions of
the relevant policy (i) ownership and all other
rights in all policies and independent funds in
respect of the Employment Liabilities (ii) all
dedicated or set-aside assets with respect to the
Employment Liabilities, other than liabilities or
obligations which are being assumed by the Purchaser
and appearing in the Closing Net Asset Statement,
including, but not limited to, pension, severance,
retirement or other funds (together the "Accrued
Funds") in respect of the Employee. Prior to
Closing, the Seller shall, at its own expense,
provide to the Purchaser a calculation of the amount
of the Accrued Funds to be transferred on the
Closing Date in respect of each Employee.
(g) Each member of the Seller Group undertakes to sign
all documents and take all actions required in
order to effect the transfer of the assets
described in Section 6.10 (e) and (f) above and
shall cooperate with the Purchaser Group in
effecting such transfers.
6.11 Notices
(a) Each of the Purchaser Group and the Seller Group
will notify the other promptly in writing of, and
contemporaneously will provide the other parties
with true and complete copies of any and all
information or documents relating to, and will use
all reasonable best efforts to cure before the
Closing, any event, transaction or circumstance
occurring after the date of this Agreement that
causes or is reasonably likely to cause any covenant
or agreement of such party under this Agreement to
be breached in any material respect or that renders
or will render untrue in any material respect any
representation or warranty of such party contained
in this Agreement as if the same were made on or as
of the date of such event, transaction or
circumstance. No notice given pursuant to this
Section 6.11 shall have any effect on the
representations, warranties, covenants or agreements
contained in this Agreement or for the purposes of
determining satisfaction of any condition contained
herein.
(b) Each of the Purchaser Group and the Seller Group
shall promptly notify the other of:
(i) any material notice or other material
communication of which such party has
knowledge from any Person alleging
that the consent of such Person is or
may be required in connection with the
transactions contemplated by this
Agreement or the Ancillary Agreements;
(ii) any material notice or other material
communication of which such party has
knowledge from any Governmental or
Regulatory Authority in connection
with the transactions contemplated by
this Agreement or the Ancillary
Agreements;
(iii) any actions, suits, charges,
complaints, claims, investigations or
proceedings commenced or to the
knowledge of such party threatened
against, relating to, involving or
otherwise affecting, the Business
which, if pending on the date of this
Agreement, would individually or in
the aggregate have a Material Adverse
Effect or which relate to the
consummation of the transactions
contemplated by this Agreement and the
Ancillary Agreements; or
(iv) any other material adverse effect or
of any event that would materially
impair such party's ability to perform
its obligations under this Agreement
or the Ancillary Agreements.
The notification to the other party of any of the events set
forth above in accordance with this Section 6.11 shall not be
deemed to cure any related breaches of the representations,
warranties, covenants or agreements contained in this
Agreement, nor shall the failure of the non-notifying party
to take any action with respect to such notice be deemed a
waiver of any such breaches.
6.12 Warranty Liabilities
After the Closing Date, the Seller shall at its cost resolve
any claims arising from the Seller's or a member of the
Seller Group's sale of products prior to the Closing Date
(other than in respect of Assumed Warranty Liabilities). The
Seller shall handle such claims (excluding those claims
giving rise to Assumed Warranty Liabilities) in a
commercially reasonable manner and reasonably cooperate with
the Purchaser in regard to any such claim made by a customer
of the Purchaser, provided that the ultimate resolution of
such claim shall, unless the Purchaser has agreed in its sole
discretion to pay or otherwise resolve such claim, remain
with the Seller.
6.13 Fulfilment of Conditions
Each of the Purchaser Group and the Seller Group will use
their respective best efforts to and take all reasonable
steps necessary or desirable and proceed diligently and in
good faith to satisfy each condition to the obligations of
the other parties contained in this Agreement and will not
take, or fail to take, any action that could reasonably be
expected to result in the non-fulfilment of any such
condition. Notwithstanding the foregoing, neither the
Purchaser Group nor the Seller Group shall be required to
expend any material amount of money or agree to make any
material concession or give any material undertaking in order
to obtain the consent of any Governmental or Regulatory
Authority or other third party necessary to consummate the
transactions contemplated by this Agreement.
6.14 Public Announcements
All announcements, press releases or other publications
relating to this Agreement or the transactions contemplated
hereby prior to the Closing, including announcements to
employees, will be made only with the prior written approval
as to form and content by the other Party, provided, however,
that with respect to any public disclosure which is deemed
necessary by such party's counsel in order to comply with
applicable Law or Stock Exchange rules, no such approval or
consent shall be required, provided that the parties shall to
the fullest extent practicable consult with each other prior
to making any such announcement, press release or other
publication. Notwithstanding the foregoing, the parties agree
that the initial press release announcing the execution and
delivery of this Agreement shall be in a form mutually agreed
by the parties hereto.
6.15 Refunds and Remittances, Etc.
(a) In the event that the Seller Group receives any
amount which is reflected as an Included Asset on
the Balance Sheet or is otherwise properly due and
owing to the Purchaser Group in accordance with the
terms of this Agreement, the Seller Group shall
cause the same to be promptly remitted to the
Purchaser Group as the Purchaser Group may direct.
(b) In the event the Purchaser Group receives any
amount that is an Excluded Asset or is otherwise
properly due and owing to the Seller Group in
accordance with the terms of this Agreement, the
Purchaser Group shall cause the same to be promptly
remitted to the Seller Group as the Seller Group
may direct.
(c) In the event that there are any assets of any of
the corporations acquired by the Purchaser Group
that belong to the Seller Group, at the Purchaser
Group's option, exercisable within 90 days after
the Closing, the Purchaser Group shall transfer
such assets to the Seller Group, at book value and
shall be reimbursed therefor by the Seller Group.
6.16 Purchaser Group covenants not to enter into any arrangements
with previous customers of Seller Group calculated to damage
Seller Group's ability to collect receivables from those
customers, and the Purchaser Group shall cooperate with the
Seller Group in good faith and to the extent consistent with
Purchaser Group's business practices to facilitate the Seller
Group to collect such receivables..
7. PARTIES' CLOSING CONDITIONS
The obligation of the Purchaser Group and the Seller Group under this
Agreement to consummate the purchase and sale of the Included Assets
and transfer of the Contracts and assignment of the Assigned
Intellectual Property at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived by the Purchaser
Group or the Seller Group, as the case may be.
7.1 Ancillary Agreements
All the relevant Parties shall have executed the Ancillary
Agreements.
7.2 Shareholder Agreement
Each of Nortel, Koor and the Seller shall have executed the
Shareholders Agreement.
8. PURCHASER GROUP'S CLOSING CONDITIONS
The obligation of the Purchaser Group under this Agreement to
consummate the purchase of the Included Assets and transfer of the
Contracts and assignment of the Assigned Intellectual Property at the
Closing shall be subject to the satisfaction, at or prior to the
Closing, of all of the following conditions, any of which may be
waived by the Purchaser Group:
8.1 Representations and Warranties Accurate
All representations and warranties of the Seller Group
contained in this Agreement shall be true and accurate in all
material respects on and as of the Closing Date.
8.2 Performance by the Seller Group
The Seller Group shall have performed and complied in all
material respects with all agreements, covenants and
conditions required by this Agreement to be performed and
complied with by it prior to or on the Closing Date.
8.3 Certificate
The Purchaser Group shall have received a certificate, dated
the Closing Date, signed on behalf of the Seller Group by a
principal corporate officer of the Seller Group, to the
effect that the conditions set forth in Sections 8.1 and 8.2
have been satisfied.
8.4 Orders and Laws
No Order or Law shall be in effect on the Closing Date that
restrains, enjoins, or otherwise prohibits or makes illegal
the consummation of the transactions contemplated by this
Agreement and no action or proceeding shall be pending or
overtly threatened before or by any Governmental or
Regulatory Authority which could reasonably be expected to
result in the issuance of any such Order or the enactment or
promulgation of any such Law.
8.5 Consents.
(a) All consents, approvals and actions of, filings
with, and notices to, all Governmental or Regulatory
Authorities required to be obtained or made in order
to consummate the transactions contemplated by this
Agreement and which could reasonably be expected to
have a Material Adverse Effect if not obtained,
shall have been made and obtained and shall be in
full force and effect, and all terminations or
expirations of waiting periods imposed by any
Governmental or Regulatory Authority with regard to
those consents, approvals, filings and notices shall
have occurred and no such consents or approvals or
similar actions from any Governmental or Regulatory
Authority shall impose terms or conditions or
qualifications that, individually or in the
aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b) All third party consents (or in lieu thereof
waivers) set forth in Schedule 4.18 (in form and
substance reasonably satisfactory to the Purchaser
Group) to the performance by the Seller Group of
its obligations under this Agreement and the
Ancillary Agreements or the consummation of the
transactions contemplated hereby and thereby
(including transfer of the Included Assets and the
Contracts to the Purchaser Group), shall have been
obtained, shall not be subject to the satisfaction
of any condition that has not been satisfied or
waived and shall be in full force and effect.
(c) The consent of the Israeli Ministry of Defence (or
in lieu thereof waivers), in a form reasonably
satisfactory to the Purchase Group, to the
assignment or transfer, with effect from the date
of Closing, of Contracts with the Israeli Ministry
of Defence (including, without limitation, the Blue
Avnet Contract) shall have been obtained, shall not
be subject to the satisfaction of any condition
that has not been satisfied or waived and shall be
in full force and effect.
(d) The consent of Bezeq (or in lieu thereof waivers),
in a form reasonably satisfactory to the Purchaser
Group, to the assignment or transfer, with effect
from the date of Closing, of Contracts with Bezeq
shall have been obtained, shall not be subject to
the satisfaction of any condition that has not been
satisfied or waived and shall be in full force and
effect.
8.6 Material Adverse Change
Since the date of this Agreement, there shall have been no
change, circumstance or occurrence in the Included Assets or
Contracts or the Assigned Intellectual Property or the
Business or financial condition of the Business that would
have a Material Adverse Effect.
8.7 Additional Documents, etc.
The Seller Group shall have delivered to the Purchaser Group
such other documents, instruments and certificates as shall
be reasonably requested by the Purchaser Group for the
purpose of effecting the transactions provided for and
contemplated by this Agreement.
8.8 Due Diligence
The Purchaser Group shall have completed its due diligence
investigations into the business to its satisfaction.
8.9 Key Employees
At least 90% of the Key Employees shall have signed
employment agreements with the Purchaser Group in form and
substance acceptable to the Purchaser Group.
8.10 Employees
At least 80% of the Employees shall have accepted employment
with the Purchaser Group.
8.11 Shareholders Agreement
The Shareholders Agreement between Koor, the Seller and the
Purchaser signed on the date hereof shall have closed
according to its terms.
8.12 Removal of Encumbrances over Included Assets
Any Encumbrances over the Included Assets, even if disclosed
at or prior to signing, shall have been removed and evidence
thereof in a form satisfactory to the Purchaser Group
submitted to the Purchaser Group.
9. SELLER GROUP'S CLOSING CONDITIONS
The obligations of the Seller Group under this Agreement to consummate
the sale of the Assets at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived by the Seller
Group.
9.1 Representations and Warranties Accurate
All representations and warranties of the Purchaser Group
contained in this Agreement shall be true and accurate in all
material respects on and as of the Closing Date.
9.2 Performance by the Purchaser Group
The Purchaser Group shall have performed and complied in all
material respects with all agreements, covenants and
conditions required by this Agreement to be performed and
complied with by them prior to or on the Closing Date.
9.3 Certificate
The Seller Group shall have received a certificate, dated the
Closing Date, signed on behalf of the Purchaser Group by a
principal corporate officer of the Purchaser Group, to the
effect that the conditions set forth in Sections 9.1 and 9.2
have been satisfied.
9.4 Orders and Laws
No Order or Law shall be in effect on the Closing Date that
restrains, enjoins, or otherwise prohibits or makes illegal
the consummation of the transactions contemplated by this
Agreement and no action or proceeding shall be pending or
overtly threatened before or by any Governmental or
Regulatory Authority which could reasonably be expected to
result in the issuance of any such Order or the enactment or
promulgation of any such Law.
9.5 Consents
All the consents, approvals and actions of, filings with, and
notices to, all Governmental or Regulatory Authorities
required to be obtained or made in order to consummate the
transactions contemplated by this Agreement, and which could
reasonably be expected to have a material adverse effect if
not obtained, shall have been made and obtained and shall be
in full force and effect, and all terminations or expirations
of waiting periods imposed by any Governmental or Regulatory
Authority with regard to those consents, approvals, filings
and notices shall have occurred.
9.6 Additional Documents, Etc.
The Purchaser Group shall have delivered to the Seller Group
such other documents, instruments and certificates as shall
be reasonably requested by the Seller Group for the purpose
of effecting the transactions provided for and contemplated
by this Agreement.
10. CLOSING
10.1 The Closing
The Closing shall take place at 10:00 A.M. on the date (the
"Closing Date") which is the first Business Day of the
calendar month following the month during which all of the
conditions to Closing set forth in Sections 7, 8, and 9 are
satisfied or waived (other than those conditions which by
their terms are to be satisfied at the Closing) at the
offices of Koor, or at such other time, date or place as the
parties may mutually agree. The actual time and date of the
Closing are herein called the "Closing Date".
10.2 Obligations of the Seller Group
At the Closing, the Seller Group shall deliver to the
Purchaser Group the following:
(a) such deeds, bills of sale, endorsements, consents,
assignments, and other good and sufficient
instruments of conveyance and assignment, all in
recordable form, where applicable, in form and
substance reasonably acceptable to the Purchaser
Group, as shall be effective to vest in the
Purchaser Group all right, title and interest of the
Seller Group and their subsidiaries in and to the
Included Assets
(b) all Books and Records (or, in the case of Books and
Records not exclusively related to the Business or
where the delivery of original Books and Records is
prohibited by law, copies thereof);
(c) the certificate and other documents required by
Section 8;
(d) appropriate receipts;
(e) all internal policy and instruction manuals and
directories relating to the conduct and operations
of the Business, and all sales and promotional
literature, customer lists and other sales-related
materials pertaining to the Business;
(f) all Permits and licenses held or used by the Seller
Group in connection with, or required for, the
Business, to the extent transferable;
(g) such other instruments or documents, in form and
substance reasonably acceptable to the Purchaser
Group, as may be necessary to carry out the
provisions of this Agreement; and
(h) a list showing details of the products and services
provided to customers under the Contracts which
relate to projects where customer acceptance has not
been granted but which require no further supply or
installation in order to meet the customer's
acceptance criteria
10.3 Obligations of the Purchaser Group
At the Closing, the Purchaser Group shall deliver to the
Seller Group:
(a) the sums on account of the Consideration set forth
in Section 2.5(a) and (b);
(b) the certificate and other documents required by
Section 9;
(c) appropriate receipts;
(d) such instruments of assumption and other
instruments or documents, in form and substance
reasonably acceptable to the Seller Group, as may
be necessary to effect the assumption of the
Assumed Liabilities by the Purchaser Group; and
(e) such other instruments and documents, in form and
substance reasonably acceptable to Seller Group, as
may be necessary to carry out the provisions of
this Agreement.
10.4 Further Assurances.
From time to time after the Closing Date, the Seller Group
will execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such other instruments
of conveyance, assignment, transfer and delivery and will
take or cause to be taken such other actions as the Purchaser
Group may reasonably request in order to more effectively
sell, transfer, convey, assign and deliver to the Purchaser
Group any of the Included Assets and Contracts and Assigned
Intellectual Property or to enable the Purchaser Group to
exercise and enjoy all rights and benefits with respect
thereto, and as otherwise may be appropriate to carry out the
transactions contemplated by this Agreement.
10.5 Customer Guarantees
The Purchaser Group shall use reasonable endeavours to cause
the release of any guarantees provided by the Seller Group in
respect of those Contracts assigned and transferred at
Closing. The Seller Group and Koor shall cooperate with the
Purchaser Group in order to effect such releases, which
cooperation shall include agreeing to the provision of such
guarantees by the Company, as shall be deemed reasonably
necessary by the Purchaser Group. Should the Purchaser Group
fail to procure the release of said guarantees by Closing,
then, until such time as the release is obtained, the
Purchaser Group shall indemnify and hold the Seller Group
harmless from and against any liability or loss which may
accrue to the Seller Group as a result of any claim in
respect of such guarantee brought against a member of the
Seller Group to the extent they concern acts or omissions
attributable to the Purchaser Group.
11 TERMINATION
11.1 Rights to Terminate
This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of the Purchaser Group and the
Seller Group;
(b) by the Purchaser Group or the Seller Group if there
has been a material breach of this Agreement on the
part of the other party and such other party has
failed to cure such material breach after not less
than 30 days' notice of such material breach;
(c) by the Purchaser Group or the Seller Group if the
transactions contemplated herein shall not have
been consummated by 31 August 2000; provided,
however, that this Section 11.1 will not be
available to any party whose failure to perform any
of its obligations under this Agreement results in
the failure of the transactions contemplated herein
to be consummated by such time.
11.2 Consequences
In the event of termination of this Agreement pursuant to
Section 11.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of any
party except (a) to the extent that such termination results
from a material breach of this Agreement by such party, (b)
Sections 6.5 (Confidentiality) and 15.1 (Expenses) shall
survive the termination date. The Seller Group or the
Purchaser Group may seek such remedies, including damages and
fees of attorneys, against the other with respect to any such
breach described in the prior sentence as are provided in
this Agreement or as are otherwise available at Law or in
equity.
12 INDEMNIFICATION
12.1 Termination of Representations and Warranties
All representations and warranties contained in Sections 4
and 5 shall survive the Closing and shall expire on the third
anniversary of the Closing Date.
12.2 Indemnification by the Seller Group
From and after the Closing, the Seller Group and Koor shall
jointly and severally indemnify and save the Purchaser Group
harmless from and defend it from and against any and all
demands, claims, actions, liabilities, losses, costs, damages
or expenses whatsoever (including reasonable attorneys' fees)
asserted against, imposed upon or incurred by the Purchaser
Group resulting from or arising out of (i) any Excluded
Liabilities, (ii) any breach of the representations and
warranties of the Seller Group contained in Section 4 but
only for the period such representation or warranty survives
pursuant to Section 12.1, (iii) the breach of any covenant or
agreement of the Seller Group contained in this Agreement, or
(iv) any Income Taxes imposed upon gain from the asset
purchase transaction under this Agreement. In the event
notice of a claim for indemnification under this Section 12.2
is given by the Purchaser Group within the applicable
survival period, the representations and warranties that are
the subject of such indemnification claim shall survive until
such time as such claim is finally resolved.
12.3 Terms and Conditions of Indemnification
The Purchaser Group shall only be entitled to bring claims
for indemnification under Section 12.2 where it has suffered
damages or losses in excess of $100,000. All claims for
indemnification by the Purchaser Group under Section 12.2
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which
the Purchaser Group might seek indemnity under
Section 12.2 is asserted against or sought to be
collected from the Purchaser Group by a Person other
than the Seller Group or the Purchaser Group (a
"Third Party Claim"), the Purchaser Group shall
deliver a Claim Notice with reasonable promptness to
the Seller Group. If the Purchaser Group fails to
provide the Claim Notice with reasonable promptness
after the Purchaser Group receives notice of such
Third Party Claim, the Seller Group will not be
obligated to indemnify the Purchaser Group with
respect to such Third Party Claim to the extent that
the Seller Group's ability to defend against the
claim has been actually and materially prejudiced by
such failure of the Purchaser Group. The Seller
Group will notify the Purchaser Group as soon as
practicable within the Dispute Period whether the
Seller Group disputes its liability to the Purchaser
Group under Section 12.2, and whether the Seller
Group desires, at its sole cost and expense, to
defend the Purchaser Group against such Third Party
Claim.
(b) If the Seller Group notifies the Purchaser Group
within the Dispute Period that the Seller Group
desires to defend the Purchaser Group with respect
to the Third Party Claim pursuant to this Section
12.3, then the Seller Group will have the right to
defend, with counsel reasonably satisfactory to the
Purchaser Group, at the sole cost and expense of the
Seller Group, such Third Party Claim by all
appropriate proceedings, which proceedings will be
prosecuted by the Seller Group in a reasonable
manner and in good faith or will be settled at the
discretion of the Seller Group (but only with the
consent of the Purchaser Group, which shall not be
unreasonably withheld or delayed, in the case of any
settlement that provides for any relief other than
the payment of monetary damages or that provides for
the payment of monetary damages as to which the
Purchaser Group will not be indemnified in full
pursuant to Section 12.2). The Seller Group will
have full control of such defence and proceedings,
including (subject to the preceding sentence) any
compromise or settlement thereof; provided, however,
that if requested by the Seller Group, the Purchaser
Group will, at the sole cost and expense of the
Seller Group, provide reasonable co-operation to the
Seller Group in contesting any Third Party Claim
that the Seller Group elects to contest. The
Purchaser Group may participate in, but not control,
any defence or settlement of any Third Party Claim
controlled by the Seller Group pursuant to this
clause, and except as provided in the preceding
sentence, the Purchaser Group will bear its own
costs and expenses with respect to such
participation. Notwithstanding the foregoing, the
Purchaser Group may take over the control of the
defence or settlement of a Third Party Claim at any
time if it irrevocably waives its right to indemnity
under Section 12.2, with respect to such Third Party
Claim.
(c) If the Seller Group notifies the Purchaser Group
within the Dispute Period that the Seller Group does
not desire to defend the Third Party Claim pursuant
to Section 12.3(c), or if the Seller Group fails to
give any notice whatsoever within the Dispute
Period, or if the Purchaser Group reasonably
concludes that it may have separate or different
defences available to it that are not available to
the Seller Group, then the Purchaser Group will have
the right to defend, at the sole cost and expense of
the Seller Group, the Third Party Claim by all
appropriate proceedings, which proceedings will be
prosecuted by the Purchaser Group in a reasonable
manner and in good faith or will be settled at the
discretion of the Purchaser Group (with the consent
of the Seller Group, which consent will not be
unreasonably withheld). The Purchaser Group will
have full control of such defence and proceedings,
including (subject to the preceding sentence) any
compromise or settlement thereof; provided, however,
that if requested by the Purchaser Group, the Seller
Group will, at the sole cost and expense of the
Seller Group, provide reasonable co-operation to the
Purchaser Group and its counsel in contesting any
Third Party Claim which the Purchaser Group is
contesting. Notwithstanding the foregoing provisions
of this Section 12.3(c), if the Seller Group has
notified the Purchaser Group within the Dispute
Period that the Seller Group disputes its liability
hereunder to the Purchaser Group with respect to
such Third Party Claim and if such dispute is
resolved in favour of the Seller Group in the manner
provided in Section 12.3(d) below, the Seller Group
will not be required to bear the costs and expenses
of the Purchaser Group's defence pursuant to this
Section 12.3(c) or of the Seller Group's
participation therein at the Purchaser Group's
request, and the Purchaser Group will reimburse the
Seller Group in full for all reasonable costs and
expenses incurred by the Seller Group in connection
with such litigation. The Seller Group may
participate in, but not control, any defence or
settlement controlled by the Purchaser Group
pursuant to this Section 12.3(c), and the Seller
Group will bear its own costs and expenses with
respect to such participation.
(d) If the Seller Group notifies the Purchaser Group
that it does not dispute its liability to the
Purchaser Group with respect to the Third Party
Claim under Section 12.2 or fails to notify the
Purchaser Group within the Dispute Period whether
the Seller Group disputes its liability to the
Purchaser Group with respect to such Third Party
Claim, the Seller Group shall indemnify the
Purchaser Group for such liability. If the Seller
Group has timely disputed its liability with respect
to such claim, the Seller Group and the Purchaser
Group will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved
through negotiations within the Resolution Period,
such dispute shall be resolved by litigation in a
court of competent jurisdiction. Pending such
resolution the Seller Group shall nevertheless be
obligated to indemnify the Purchaser Group as
provided in Section 12.3(c).
(e) In the event the Purchaser Group should have a claim
under Section 12.2 against the Seller Group that
does not involve a Third Party Claim, the Purchaser
Group shall deliver an Indemnity Notice with
reasonable promptness to the Seller Group. The
failure by any Purchaser Group to give the Indemnity
Notice shall not impair such party's rights
hereunder except to the extent that an Seller Group
demonstrates that it has been actually and
materially prejudiced thereby. If the Seller Group
notifies the Purchaser Group that it does not
dispute the claim described in such Indemnity Notice
or fails to notify the Purchaser Group within the
Dispute Period whether the Seller Group disputes the
claim described in such Indemnity Notice, the Losses
in the amount specified in the Indemnity Notice will
be conclusively deemed a liability of the Seller
Group under Section 12.2 and the Seller Group shall
pay the amount of such Losses to the Purchaser Group
on demand. If the Seller Group has timely disputed
its liability with respect to such claim, the Seller
Group and the Purchaser Group will proceed in good
faith to negotiate a resolution of such dispute, and
if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved in
a court of competent jurisdiction.
12.4 Exclusive Remedy
Save for the software warranty and remedies for
breach thereof set out in Section 4.11, the
indemnification provided for under this Section 12
shall be the Purchaser Group's exclusive remedy for
any and all liability, Losses, cost, damage and
expense whatsoever resulting from or arising out of
or relating to this Agreement or any of the
transactions contemplated by this Agreement, absent
fraud or other wilful misconduct.
13. MYANMAR
Seller Group undertakes not to enter into any new contracts for the
supply of equipment or services to customers in Myanmar. At any time
after Closing, at Nortel Networks' request, Seller Group Telrad
shall terminate all customer contracts in Myanmar and will use its
best efforts to minimise the costs of such termination and collect
outstanding receivables. Nortel Networks shall pay to Seller Group
any uncollected amounts payable by the customer in Myanmar in
respect any such customer contracts entered into prior January 2000,
and any pre-approved expenses relating thereto.
14. NON-COMPETITION
In order to preserve the value of the Businesses and assets
transferred hereunder, the Seller Group agrees and undertakes
towards the Purchaser Group that it shall not buy, establish or
engage in a business (or acquire a controlling interest in a
business) that has as its principle business the marketing, selling,
integrating, servicing or supporting of competing telecommunications
or networking products or equipment in Israel for a period of three
years from Closing.
15. MISCELLANEOUS
15.1 Expenses
All costs, fees or expenses (including, without limitation,
legal and accounting fees), incurred in connection with this
Agreement and the Ancillary Agreements and in connection with
all obligations required to be performed by each party hereto
under this Agreement and the Ancillary Agreements shall be
borne by the party incurring such costs, fees or expenses,
except as expressly provided herein.
15.2 Amendment
This Agreement may not be modified, amended, altered or
supplemented except by a written agreement executed by the
Purchaser Group and the Seller Group.
15.3 Entire Agreement
This Agreement, including the Exhibits and Schedules hereto,
contain all of the agreements, covenants, terms, conditions
and representations and warranties agreed upon by the parties
relating to the subject matter of this Agreement and
supersede all prior and contemporaneous agreements,
negotiations, correspondence, undertakings, representations,
warranties and communications of any kind of or between the
parties and their representatives, whether oral or written,
respecting each subject matter.
15.4 Waivers
Waiver by any party of any breach of or failure to comply
with any provision of this Agreement by the other parties
shall not be construed as, or constitute, a continuing waiver
of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this
Agreement. No waiver of any such breach or failure or of any
term or condition of this Agreement shall be effective unless
in a written notice signed by the waiving party and
delivered, in the manner required for notices generally, to
each affected party.
15.5 Notices
Any notice, demand, request, consent, approval, declaration,
delivery or other communication hereunder to be made pursuant
to the provisions of this Agreement ("notice") shall be
sufficiently given or made if in writing and delivered in
person with receipt acknowledged, sent by registered or
certified mail, receipt requested, posted prepaid, sent by
overnight courier with guaranteed next day delivery or sent
by telex or facsimile to the party to whom directed at the
following address:
To the Purchaser Group
Nortel Networks
Xxxxxxxx Xxxx Xxxxx
XXXXXX
X00 0XX
Xxxxxxx
Fax: 00 (00) 0000 0000
Attention: Company Secretary
With a copy to
Xxxxxx, Xxx & Xxxxxx
Xxxx Xxxxx, 0 Xxxxxxxx Xxxxxx
Xxx Xxxx 00000, Xxxxxx
Fax: (000 0)000 0000
Attention: Xxxxxx Xxxxx
To Telrad
X.X. Xxx 00
Xxx 00000
Xxxxxx
Fax: (x000) 0 000 0000
Attention: Reuven Avi-Tal
To Koor
00 Xx'xxxxxx Xxxxxx
XXX XXXX, Xxxxxx 00000
Fax: (x000) 0 000 0000
Attention: Xxxxxxxx Xxxxxx
With a copy to
Xxxxxxx, Behar Chen & Co
3 Xxxxxx Xxxxxx Xxxxxx
XXX XXXX 00000
Xxxxxx
Fax (x000) 0 000 0000
Attention: Xxxxxx Xxxxx
or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required
hereunder may be waived in writing by the party entitled to
receive such notice. Every notice shall be deemed to have
been duly given or served on the date on which personally
delivered, with receipt acknowledged, one Business Day after
sent by overnight (next day) courier, two Business Days after
sent by international (two day) courier or on the day telexed
or faxed.
15.6 Counterparts
This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of
which together shall constitute one and the same document.
15.7 Governing Law
This agreement shall be governed by and construed in
accordance with the laws of England and the parties submit to
the exclusive jurisdiction of the courts of England in
respect of any dispute arising out of or connected to this
Agreement.
15.8 Binding Effect; Assignment; No Third Party Beneficiaries
This Agreement shall be binding upon, enure to the benefit
of, and be enforceable by, the parties hereto and their
respective legal representatives, successors and permitted
assigns; provided, that the Seller Group shall not assign or
transfer this Agreement nor any right or obligation hereunder
by operation of law or otherwise; provided further, that the
Purchaser Group may prior to the Closing Date assign all or a
portion of their rights under this Agreement to any of its
subsidiaries; provided, further that no assignment by the
Purchaser Group shall relieve it of its obligations
hereunder. Neither this Agreement no any of the Ancillary
Agreements shall be construed to confer any benefits or
rights on, or be enforceable by, any Person other than the
parties that are signatories hereto.
15.9 Severability
Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other
jurisdiction, and any such provision, to the extent invalid
or unenforceable, shall be replaced by a valid and
enforceable provision which comes closest to the intention of
the parties underlying such invalid or unenforceable
provision.
15.10 Headings
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.11 Further Assurances
After the Closing Date, without further consideration, the
Seller Group and the Purchaser Group shall take such further
action and shall respectively cause each member of the Seller
Group and the Purchaser Group and shall execute and deliver
such further instruments and documents as either party shall
reasonably request in order to carry out the provisions and
purposes of this Agreement.
IN WITNESS whereof the Parties have executed this Agreement effective as of
the date first above written
NORTEL NETWORKS KOOR INDUSTRIES LTD.
LIMITED
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NORTEL NETWORKS ISRAEL TELRAD NETWORKS LIMITED
(SALES AND MARKETING) LIMITED
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