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4.18.17.          Open Source .  Schedule 4.18.17 contains a complete and accurate list of all Open Source that has been used in the last 5 years in the development and testing of the Company Technology.  The Company does not incorporate any Open Source as part of the components which it distributes to its customers while providing the Company Services. The Company has been at all times and is currently in compliance in all material respects with all licenses for Open Source applicable thereto, including without limitation any and all Intellectual Property notice and attribution requirements.

 

4.18.18.        Source Code .  Neither the Company, nor any other Person acting on its behalf has disclosed, delivered or licensed to any Person, agreed to disclose, deliver or license to any Person, or permitted the disclosure or delivery to any escrow agent or other Person of, any source code that is Company’s Intellectual Property, other than to Employees and subcontractors bound by Proprietary Information Agreements.

 

4.18.19.          Government Funding .  Except as set forth on Schedule 4.18.19 , the Company has not entered into any Contract with any university, college or other educational institution or research center for the creation or development of Company’s Intellectual Property. Except as set forth on Schedule 4.18.19 , none of the Intellectual Property owned by the Company was, directly or indirectly, in whole or in part: (i) developed by or on behalf of, or using any funding, grants or subsidies from, or any monetary resources of, any university, college, military, educational institution, research center or any entity affiliated with any university, college, military, educational institution or research center (“ R&D Sponsor ”); or (ii) developed utilizing any facilities of any R&D Sponsor; or (iii) developed by any employee, faculty, independent contractor or students of any R&D Sponsor; or (iv) developed by any independent contractor who in each case was concurrently working for or providing services to any R&D Sponsor. No R&D Sponsor has any claim of right to, ownership of or other Lien on any Company’s Intellectual Property owned by or exclusively licensed to the Company. The Company has not received any written notice from any Israeli Governmental Authority claiming any rights under Section 55, Chapter 6 or Chapter 8 of the Israeli Patent Law-1967.

 

 

4.18.20.           Industry Organizations and Consortia . Schedule 4.18.20 sets forth a complete and correct list of each industry organization in which the Company has participated in the past five years or applied for future participation, and a listing and description of the membership Contracts and other Contracts by which the Company is bound relating to such industry organization, copies of all of which have been made available to Buyer. The Company has not made any contribution or disclosure to any industry organization under, pursuant to or that is subject to, or is bound by, or has agreed to be bound by, any Contract which purports to license or potentially license any Intellectual Property of the Company as a result of any contribution or disclosure to or participation in any industry organization.

 

4.18.21.           Encryption and Other Restricted Technology . Except as set forth on Schedule 4.18.21 , the Company’s business as currently conducted does not involve the use or development of, or engagement in, encryption technology, or other technology whose development, commercialization or export is restricted under Israeli Law. Except as set forth on Schedule 4.18.21 , the Company’s business as currently conducted does not require the Company in the ordinary course of business to obtain a license from the Israeli Ministry of Defense or an authorized body thereof pursuant to Section 2(a) of the Control of Products and Services Declaration (Engagement in Encryption), 5734-1974, or from the Israeli Ministry of Economy pursuant to the Defense Export Control Law, 5767-2007, or under any other legislation regulating the development, commercialization or export of technology .

 

4.18.22.         Permits .

 

4.18.22.1.            The Company Business is conducted solely in Israel and the Company has not exported the Services and/or the Company Technology or any other product outside of Israel. Without derogating from the above, if the Company has exported any technical information or other technology within its control, it has done so in compliance in all material respects with the applicable Laws, including without limitation any Israeli Law and regulation thereunder including the Defense Export Control Law -2007, the Law Governing the Control of Commodities and Services – 1957, the Order Regarding the Engagement in Encryption Items – 1974; the Declaration Governing the Control of Commodities and Services (Engagement in Encryption Items) (Amendment) – 1998; the Import And Export Order (Control Of Dual-Purpose Goods, Services And Technology Exports), 2006, and any other import/export control/sanctions Applicable Laws of the countries where it conducts business, and where applicable, the Company has filed with any other Governmental Authority that regulates exports, all reports that are required under applicable Laws and all such reports are accurate and complete.

 

4.18.22.2.            Except as set forth in Schedule 4.18.21 , the Company currently holds and is in compliance with all licenses, permits, registrations and governmental consents that are necessary for the conduct of its business, and for the performance of Company Services to any of its current or pending customers.  The Company has not received any notices of noncompliance, complaints or warnings with respect to its compliance with import/export control/sanctions Laws.   No event, fact or circumstance has occurred or is existing that is reasonably likely to result in a finding of noncompliance with any export or import control Law.  Within the last seven years, to the knowledge of the Company, the Company has not been the subject of any investigations, inspections or visits from any Governmental Authorities pertaining to export control or customs laws.

 

 

4.18.23.           Privacy .  The Company warrants that it does not collect any Personal Data other than with respect to its employees as customary in connection with their employments. The Company, the Company Service and to the knowledge of Company, all third parties performing services for the Company or that otherwise have access to Personal Data collected, processed, or maintained by or for the Company, comply with all applicable Laws (including Israeli Privacy Protection Law 5741-1981 and related regulations), obligations under Contracts, the Company’s internal and public-facing privacy policies and any public statements made by the Company regarding their privacy policies or practices and industry standards (collectively, “ Privacy Laws and Requirements ”) relating to such Personal Data, including the collection, interception, use, retention, disclosure, disposal, security, or other processing thereof.  Except as set forth in Schedule 4.18.23 , any consents required and notices under applicable Laws for the collection, processing, transfer and other use of Personal Data by the Company for the conduct of the business of the Company have been obtained.  There is not and has not been any complaint to, or claim filed against, proceeding, and, to the Company’s knowledge, any audit or investigation (formal or informal) against, the Company or any of their customers (relating to the Company Services) by any private party or any Governmental Authority, foreign or domestic, relating to Personal Data, and, to the knowledge of the Company, there is no threatened complaint, proceeding, investigation (formal or informal) or claim against the Company with respect thereto.  With respect to all Personal Data collected, stored, processed, used, maintained, or accessed by or for the Company, the Company has at all times implemented reasonable security measures to ensure that such Personal Data is protected against loss and against unauthorized access, use, modification, and disclosure.  To the Company’s knowledge, there has been no unauthorized access to or modification or disclosure of, or any other loss or misuse of, such Personal Data.  Except as set forth in Schedule 4.18.23 , all databases required to be registered by the Company have been properly registered, and the data therein has been used by the Company solely as permitted pursuant to such registrations.

 

4.18.24.         Customer Information .  The Company retains in confidence customer contact information and customer correspondence used in the Company’s Business (the “ Customer Information ”).  The Company's use of the Company’s Customer Information is in compliance in all material respects with applicable Laws and will not give rise to any third party claims.

 

4.19.          Insurance Coverage .  Schedule 4.19 contains a list of, and true and complete copies of, all insurance policies maintained by or on behalf of the Company. The Insurance Policies are in full force and effect, all premiums due thereon have been paid and the Company has complied in all material respects with the provisions of such insurance policies. The Company has not done anything which has rendered or might render any polices of insurance taken out by it void or voidable or which might result in a material increase in premium. The Company has not received any written notices from any issuer of any of the insurance policies canceling or amending them, materially increasing any deductibles or retained amounts thereunder, or materially increasing premiums payable thereunder.  There are no claims by the Company pending under any of such policies.

 

4.20.           Finders’ Fees .  Except as set forth in Schedule 4.20 , there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Seller or the Company who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

 

4.21.          Bank Accounts . Schedule 4.21 of the Disclosure Schedule sets forth a true and complete list of (i) all accounts at banks and other financial institutions maintained by or for the use of the Company, together with the names of authorized signatories thereof on each such account; and (ii) all personal guarantees provided by any of the Company’s shareholders in connection with such accounts specified under the foregoing clause (i).

 

4.22.          Employees .

 

 

4.22.1.           Schedule 4.22.1(a) sets forth a list of all the Company’ employees as of the date of this Agreement and the following information with respect to each such employee: (i) name; (ii) date of hire; (iii) title and job function, full-time, part-time or hourly status; (iv) salary and other compensation including compensation payable pursuant to bonus or grants (for the current fiscal year and the most recently completed fiscal year), commission arrangements, overtime payment (global overtime, payment of overtime per actual work or exempt from overtime payment), travel pay or car maintenance or car entitlement, accrued sick leave and accrued recuperation pay and notice period; (v) social benefits participation (including whether a managers insurance, pension fund, education fund ( keren hishtalmut ) is maintained with respect to such employee), their respective contribution rates and the salary basis for such contributions, whether such employee, is subject to Section 14 Arrangement under the Israeli Severance Pay Law - 1963 (“ Section 14 Arrangement ”) (and, to the extent such employee is subject to the Section 14 Arrangement, an indication of whether such arrangement has been applied to such person from the commencement date of their employment and on the basis of their entire salary); (vi) vacation allowance accrued and unused vacation days; and (vii) whether the employee executed an employment agreement. Other than their salary and as set forth in Schedule 4.22.1(b) , the Company’ employees are not entitled to any payment or benefit that may be reclassified as part of their determining salary for all intent and purposes, including for the social contributions. Except as set forth in Schedule 4.22.1(b ) , there are no written or unwritten Company policies or customs that entitles any Company employee to benefits in addition to those they are entitled to pursuant their employment agreements.

 

4.22.2.          Except as set forth in Schedule 4.22.2 , the Company is in compliance with all mandatory applicable employment laws, procedures and agreements relating to employment, terms and conditions of employment, including without limitation all such laws relating to wages, hours, collective bargaining, employment discrimination, disability, civil rights, fair labor standards, occupational safety and health, workers’ compensation, and mandatory provisions under the Prior Notice to the Employee Law, 2002, the Notice to Employee (Terms of Employment) Law, 2002, the Prevention of Sexual Harassment Law, 1998, the Hours of Work and Rest Law, 1951, the Annual Leave Law, 1951, the Employment by Human Resource Contractors Law, 1996, the Advance Notice for Dismissal and Resignation Law, 2001, the Salary Protection Law, 1958, the Law of Increased Enforcement of Labor Laws, 2011, and wrongful discharge, and to the proper withholding and remission to the proper tax and other authorities of all sums required to be withheld from employees under applicable laws respecting such withholding.

 

4.22.3.          The Company is not bound by or subject to any written or oral, express or implied, contract, commitment or arrangement with any labor union or any collective bargaining agreement or extension orders except, for those provisions of general agreements applicable to all the employees in Israel by extension order. There is no, and there has not been in the past seven years, strike or other labor dispute involving the Company, whether in the past or now pending, or to the Seller’s knowledge, threatened, nor is the Seller aware of any labor organization activity involving Company’s employees . Except as set forth in Schedule 4.22.3 , the Company has not paid in the past seven years, is not required to pay and has not in the past five years been requested to pay any payment (including professional organizational handling charges) to any employers’ association or organization. Except as set forth in Schedule 4.22.3 , the Company is not currently, nor has been in the past seven years a member of any employers’ association or organization, and no employers’ association or organization has made any demand for payment of any kind from the Company. The Company is not currently, nor has in the past seven years been, a party to any collective bargaining agreement or similar labor agreement with a labor union, works council or other employee representative (other than those of general agreements applicable to all the employees in Israel by extension order). There are no actions pending or to the knowledge of Seller threatened against the Company in Israel or under Israeli law, relating to (i) employment practices (including any labor, employment, safety or discrimination matters) or (ii) Israeli labor laws. There are no known union organizing activities involving employees of the Company, nor any employee of the Company notified the Company they are represented by any labor organization or works council.

 

 

4.22.4.          To Seller’s knowledge, none of Company’s employees has violated any material term of his or her employment agreement.

 

4.22.5.          The Company is not delinquent in payments to any of its employees, consultants, or independent contractors for any wages, salaries, commissions, bonuses, or other direct compensation for any service performed for it to the date hereof or amounts required to be reimbursed to such employees, consultants or independent contractors.  The Company has withheld and paid to the appropriate governmental entity or is holding for payment not yet due to such governmental entity all amounts required to be withheld from employees of the Company and is not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing.

 

4.22.6.          Except as set forth in Schedule 4.22.6 , provision for severance pay and accrued vacation days due to the employees has been made as required according to Israeli GAAP in the Financial Statements, and the Seller Parties are not aware of any circumstance whereby any employee may have the right to demand any claim for compensation on termination of employment beyond the statutory or contractual rights to which such employee is entitled, including severance pay.

 

4.22.7.          To the Seller’s knowledge, no key employee intends to terminate employment with the Company or is otherwise likely to become unavailable to continue as a key employee, nor does the Company have a present intention to terminate the employment of any of the foregoing.

 

4.23.            Independent Contractors . Schedule 4.23(a) of the Disclosure Schedule lists the names of all independent contractors currently engaged by the Company (the “ Independent Contractors ”), each such Person’s job title or function, location and department, date of services agreement, termination notice, current remunerations, and any incentive or bonus arrangement with respect to such Person then in effect.   Except as disclosed in Schedule 4.23(b) to the Disclosure Schedule, the Company is not a party to any written or unwritten agreements, arrangements or commitments with Independent Contractors.  The Company has not received any information that would reasonably lead it to believe that any Independent Contractor intends to terminate his/her service with the Company. All Company contractors and consultants were rightly classified as Company contractors or consultants under Israeli law and all such agreements contain provisions which state that no employer-employee relations exist between such consultant or contractor and the Company. The Company does not have and has not in the past seven years had any liability with respect to any misclassification of any contractor or consultant (including former Company contractors and consultants) as an independent contractor. The Company does not engage any personnel through manpower agencies. The Company does not employ or engage or engage through a third party with employees whom the Israeli Law for Employment of Foreign Employees, 1991 applies to. To the knowledge of the Company, no Company contractor and consultant or former Company contractor and consultant has basis for or issued to the Company a written notice of a claim or any other allegation that such contractor and/or consultant was not rightly classified as an independent contractor.

 

4.24.            Government Funding .  Except as set forth in Schedule 4.24 , the Company has not applied for or received any financial assistance, incentive, subsidy, grant or other support or benefits (including, without limitation, tax benefits under a status of a Preferred Enterprise as defined in the Law for the Encouragement of Capital Investment 5719-1959 (the “ Encouragement Law ”)) from any Israeli or foreign government Authority, including the Israeli National Authority for Technological Innovation (formerly referred to as the Office of the Chief Scientist of the Israeli Ministry of Economy).

 

4.25.            Corrupt Practices . Neither the Company nor any of its directors, officers or to the Seller’s knowledge its employees, auditors, agents, consultants, legal, accounting, financial or other advisors or representatives has taken any action which would cause it to be in violation of Sections 291 and 291A of Israel’s Penal Law 5737-1977, as amended till the date hereof, (the “ Anti-Corruption Law ”) and the rules and regulations thereunder. The Seller Parties are not, and to the knowledge of Seller, no director, officer of the Company is aware of any action, directly or indirectly, that has resulted in a violation by such Persons of the Anti-Corruption Law, including, without limitation, making an offer, payment, promise to pay or authorization of the payment of any money, or other offer, gift, promise to give, or authorization of the giving of anything of value to any “Public Official” (oved tzibur) or “Foreign Public Official” (oved tzibur zar) (as such terms are defined in the Anti-Corruption Law) in violation of any such applicable Law.

 

 

4.26.             Environmental Matters .  Except as to matters that would not reasonably be expected to have a Material Adverse Effect, to the knowledge of Seller:

 

  4.26.1.          (a) no written notice, order, request for information, complaint or penalty has been received by Seller or the Company, and (b) there are no judicial, administrative or other actions, suits or proceedings pending or threatened, in the case of each of (a) and (b), which allege a violation of any Environmental Law and relate to the Company;

 

4.26.2.          The Company has, and is in compliance with, all environmental permits, licenses, authorizations, consents, and approvals from any Governmental Authority necessary to lawfully conduct its business as presently conducted.

 

4.27.            Disclosure .  The representations and warranties of the Company in this Section 4 of the Agreement (including the Disclosure Schedules attached hereto) or in any certificate made or delivered in connection herewith at the Closing, are accurate, correct and complete in all material respects and neither this Agreement, the Disclosure Schedule the representations and warranties of the Seller Parties contained in this Section 4 of the Agreement, as qualified by the Disclosure Schedule, nor certificate to be furnished to Buyer at the Closing, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in view of the circumstances under which they were made. The Buyer has the right to rely fully upon the representations, warranties, covenants and agreements contained in this Section 4 of this Agreement (including, without limitation, any Schedule hereto) or in any certificate made or delivered in connection herewith at the Closing.

 

5.	REPRESENTATIONS AND WARRANTIES OF BUYER

 

Except as set forth in the Buyer Disclosure Schedules, Buyer represents and warrants to Seller Parties that:

 

5.1.               Corporate Existence and Power .

 

Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted.

 

5.2.               Authority .

 

5.2.1.           Buyer has all necessary power and authority to execute and deliver this Agreement and each document required hereby to be executed and delivered by Buyer at the Closing and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance by Buyer of this Agreement and each document required hereby to be executed and delivered by Buyer at the Closing and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action, and no other proceedings on the part of Buyer or DPW are necessary to authorize this Agreement or any document required hereby to be executed and delivered by Buyer at the Closing or to consummate the transactions contemplated hereby.

 

 

5.2.2.           This Agreement and each document required hereby to be executed and delivered by Buyer at the Closing have been duly and validly executed and delivered by Buyer, as the case may be and, assuming the due authorization, execution and delivery by the Seller Parties, constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to bankruptcy, insolvency, reorganization or similar laws of general application affecting the rights and remedies of creditors, and to general equity principles.

 

5.2.3.            No consent, approval, order, permit or authorization of, or registration, declaration or filing with, or notification to any Governmental Authority or other Person is required to be obtained by Buyer, or any of its respective Affiliates (including DPW) in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, except where the failure to submit or obtain the same would not have a material adverse effect on Buyer’s ability to consummate the transactions contemplated by this Agreement.

 

5.3.            Noncontravention .  The execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) conflict with or violate the Organizational Documents of Buyer, (ii) violate any Applicable Law in a material respect (iii) require any consent or other action by any Person under,  result in a breach of, constitute a default under, or give rise to any right of termination, cancellation or acceleration (whether after the giving of notice or the lapse of time or both) of any right or obligation of Buyer or to a loss of any benefit to which Buyer is entitled under any provision of any agreement or other instrument binding upon Buyer, or by which its properties, rights or assets are subject or bound in any material respect or (iv) result in the creation or imposition of any material Lien on any asset of Buyer.

 

5.4.            Financing .  Buyer will have immediately prior to the Closing, sufficient available lines of credit or other sources of immediately available funds to enable it to make payment of the Purchase Price and any other amounts to be paid by it hereunder.

 

5.5.            Purchase for Investment .  Buyer is purchasing the Shares for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof.  Buyer (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Shares and is capable of bearing the economic risks of such investment.

 

5.6.            Inspection .  Buyer has undertaken such investigation and has been provided with and has evaluated such documents and information as it has deemed necessary to enable it to make an informed decision with respect to the execution, delivery and performance of this Agreement. Buyer has had an opportunity to discuss the Company’s business, operations, management, financial affairs and the terms and conditions of the offering of the Shares with the Seller and Company’s management, and to ask questions of, and receive answers and additional information from the Seller and Company’s management in relation thereof, and it and its representatives have been permitted access to the books and records, facilities and personnel of the Company for purposes of conducting their due diligence investigation. Buyer acknowledges that Seller Parties make no representation or warranty with respect to any projections, estimates or budgets delivered to or made available to Buyer of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Company or the future business and operations of the Company.

 

 

5.7.            Litigatio n.  There is no action, suit, investigation or proceeding pending against, or to the knowledge of Buyer threatened against or affecting, Buyer before any arbitrator or any Governmental Authority which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.

 

5.8.            Finders’ Fees .  There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

 

5.9.            No Public Market .  The Buyer understands that no public market now exists for the Shares.

 

5.10.          Seller Parties’ Representations . The representations and warranties in Section 4 above or in the certificates delivered to Buyer at the Closing pursuant to Section 3 , are the only warranties or representations of any kind given by or on behalf of Seller Parties on which the Buyer may rely in entering into this Agreement, and Seller Parties do not make any express or implied representation or warranty, and each of the Seller Parties hereby disclaims any such representation or warranty with respect to the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement.

 

6.	CERTAIN COVENANTS

 

6.1.            Covenants of Seller Parties . Seller Parties agrees that:

 

6.1.1.            Conduct of the Company .  From the date hereof until the Closing Date, the Company shall, and Seller Parties shall cause the Company, to use its best efforts to conduct its businesses in the ordinary course consistent with past practice and in compliance with all material respects of all Applicable Law and to preserve intact its business organizations and relationships with third parties and to keep available the services of its present officers, employees and consultants, and the Company and the Seller Parties will promptly notify the Buyers of any action or event to the contrary. If any action or event not in the ordinary course of business occurs, the Company shall, and Seller Parties shall cause the Company, to, with respect to such action or event, (a) give Buyer, its counsel, financial advisors, auditors and other authorized representatives subject to confidentiality provisions herein, reasonable access to books and records of the Company relating to such action or event and (b) furnish, and will cause the Company to furnish, to Buyer, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating to the Company as such Persons may reasonably request. Without limiting the generality of the foregoing, from the date hereof until the Closing Date, Seller Parties will not permit the Company, without the Buyer’s prior consent to:

 

6.1.1.1.            amend or otherwise make any change to the Company's Organizational Documents;

 

6.1.1.2.            issue, sell pledge, assign, transfer or otherwise dispose of or make subject to any Lien or enter into any agreements in respect of, any equity security to any of its shareholders or any Person;

 

6.1.1.3.            mortgage, pledge or subject to any Lien any of its assets, properties or rights;

 

6.1.1.4.            merge or consolidate with any other Person or acquire a material amount of assets from any other Person;

 

6.1.1.5.            enter into any Contract with a labor union or collective bargaining agreement;

 

 

6.1.1.6.            fail to pay accounts payable and other liabilities or obligations in the ordinary course of business consistent with past practices;

 

6.1.1.7.            modify the payment terms or payment schedule of any receivables other than in the ordinary course of business consistent with past practices, accelerate the collection of receivables or sell, securitize, factor or otherwise transfer any accounts receivable;

 

6.1.1.8.            incur any Financial Indebtedness or other liabilities or obligations outside of the ordinary course of business consistent with past practices;

 

6.1.1.9.            commence, settle or compromise any action, suit, proceeding, litigation, claim, arbitration or investigation;

 

6.1.1.10.          (i) increase the compensation payable or to become payable to any of its directors, officers, consultants or employees outside of the ordinary course of business consistent with past practices; (ii) make any loan, advance or capital contribution to, or grant any bonus, severance or termination pay to, or terminate, enter into or amend any employment, severance or similar Contract with any of its directors, officers or other employees, other than in the ordinary course of business consistent with past practices; (iii) establish, adopt, enter into, amend, terminate or otherwise change the coverage or benefits available under any Company benefit plan for the benefit of any of its current or former directors, officers or employees; (iv) pay or otherwise grant any unusual or extraordinary benefit or other unusual or extraordinary direct or indirect compensation to any Person; or (v) change any actuarial assumption or other assumption used to calculate funding obligations with respect to any pension or retirement plan or change the manner in which contributions to any such plan are made or the basis on which such contributions are determined;

 

6.1.1.11.          enter into any Interested Party transaction;

 

6.1.1.12.          hire any officer or other employee with a rank of VP or higher;

 

6.1.1.13.          sell, lease, license or otherwise dispose of any material assets or property except (a) pursuant to existing contracts or commitments or (b) otherwise in the ordinary course consistent with past practice; or

 

6.1.1.14.          Declare and/or pay any dividends to the shareholders of the Company;

 

6.1.1.15.          agree or commit to do any of the foregoing.

 

6.1.2.             Directors and Officers Insurance . The Seller or Parent shall purchase and shall pay all related premiums, prior to or concurrent with the Closing, a prepaid directors’ and officers’ liability insurance policy or policies (i.e., “tail coverage”) for acts or omissions of the directors and officers of the Company occurring prior to the Closing Date that will remain in effect for a period of seven (7) years after the Closing Date, the material terms of which, including coverage and amount, are comparable to those of the Company’s current directors’ and officers’ liability insurance policy (copies of which have been delivered by the Seller to Buyer and its representatives prior to the date hereof).  Buyer shall cooperate in good faith with the former directors and officers of the Company to use the tail coverage with respect to claims relating to acts or omissions occurring prior to the Closing Date.

 

 

6.1.3.             Related Party Agreements . Except for the consulting agreement pursuant to Section 3.2.3. 1 on the Closing Date, the Seller shall have (a) terminated all Contracts between the Seller or its Affiliates (other than the Company) or director or officer of any of the foregoing, on the one part, and the Company, on the other part (all such Contracts to be terminated, the “ Related Party Agreements ”) and (b) delivered releases executed by such Persons with whom the Company has terminated such Contracts pursuant to this Section 6.1.3 providing that such Related Party Agreement has been terminated and is of no further force and effect and no further payments are due, or may become due, and that neither Company nor Buyer has any liability or obligation, under or in respect of any such terminated Contracts.

 

6.1.4.             Execution of IP Assignments .  From the date hereof until the Closing Date, the Company shall use its reasonable efforts, and the Seller Parties shall cause the Company, to use its reasonable efforts to have the Company’s current employees engaged in the development of Company’s Intellectual Property execute a proprietary information, confidentiality and assignment agreement substantially in the form attached hereto as Exhibit 6.1.4 . The foregoing notwithstanding, the Company shall and the Seller Parties shall cause the Company to have the Company's directors execute the aforementioned proprietary information, confidentiality and assignment agreement.

 

6.1.5.             Non-Competition and Non-Solicitation .

 

6.1.5.1.            Each of the Seller Parties, on behalf of itself and its Affiliates, agrees that until the lapse of the later of (i) the termination of the consulting agreement; and (ii) three (3) years commencing from the Closing Date (the “ Non-Compete Period ”), the Seller Parties shall not, anywhere in the State of Israel or in the United States, directly or indirectly, as an agent, consultant, advisor, independent contractor, general partner, officer, director, stockholder, investor, lender or guarantor of any corporation, partnership or other entity, or in any other capacity (i) engage in the Company Business; (ii) participate in or facilitate the financing, operation, management or control of, any firm, partnership, corporation, entity or business which is competitive to the Company Business; or (iii) approach, contact or solicit any of the Company’s customers in connection with a business which is competitive to the Company Business, all other than passive ownership of no more than five percent (5%) of the outstanding voting shares of a publicly traded company.

 

6.1.5.2.            Non-Solicitation . Each of the Seller Parties, on behalf of itself and its Affiliates, agrees that until the lapse of the Non-Compete Period they shall not directly or indirectly, personally or through others, encourage, induce or solicit (on their own behalf or on behalf of any other Person) any individual who (i) is or was an employee of the Company on the Closing Date or during the 6 months period prior to the Closing Date, and (ii) remains or becomes an employee of the Company upon the Closing or at any time during the Non-Compete Period, to leave his or her employment with the Company.

 

6.1.5.3.            If the foregoing provisions of non-competition and non-solicitation shall be held for any reason invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein, provided, however, that if the provision is held invalid, illegal or unenforceable due to the length of the Non-Compete Period or due to the geographical scope of the restriction and if such holding would be reversed had the Non-Compete Period been for a shorter period of time or the geographical scope been reduced, the Non-Compete Period will be reduced to the longest period of time that would allow a reversal of such holding and the geographical scope will be reduced to the largest scope that would allow a reversal of such holding and the Parties will continue to perform this Section as before in all other respects. Seller Parties acknowledge that Buyer may be irreparably harmed by any breach of this Section and that there would be no adequate monetary remedy at law or in damages to compensate Buyer for any such breach. Seller agrees that Buyer shall be entitled to injunctive relief requiring specific performance by each of the Seller Parties and/or any of its Affiliates of this Section.

 

 

6.1.6.          Change of Name . As of the Closing Date, each of the Seller Parties and each of its Affiliates that is located in Israel or in the United States or that does business in Israel or in the United States shall change its name to a name that is not similar to “Enertec”, shall register the name changes with the Israeli Registrar of Companies and any equivalent bodies of any foreign Governmental Entity, and shall entirely cease any and all use of the name “Enertec” in the State of Israel and in the United States.  From and after the Closing Date, the Seller Parties and their Affiliates shall be prohibited from conducting business in or relating to the State of Israel and to the United States with the use of the name “Enertec” or any similar name. All trademarks registered in Israel by the Seller Parties or the Company or any Affiliate of the foregoing with the name “Enertec” and the domain name www.enertec.co.il   and the “Enertec” logo shall be irrevocably assigned to the Company at Closing .

 

6.1.7.           General Release and Waiver . Subject to Closing, each of the Company and the Seller Parties and each of its Affiliates, directors, officers and employees, upon the Closing, shall be deemed to have, and hereby do, unconditionally and irrevocably, release and forever discharge the Buyer and any Affiliate of Buyer, including their respective officers, directors and employees, and Company (the “ Released Parties ”), from (i) any and all obligations or duties the Company might have to each of the Seller Parties and each of their Affiliates, directors, officers and employees in connection with any events or circumstances occurring prior to the Closing and (ii) any and all claims and actions of liability, whether legal or equitable, of every kind and nature, which each of the Company and/or the Seller Parties and each of Seller Parties’ Affiliates, directors, officers and employees ever had, now has or may claim against the Released Parties, in each case arising out of facts or circumstances occurring at any time on or prior to the date hereof (the “ Released Claims ”). The Released Claims shall exclude claims, liabilities, obligations and duties (i) of the Buyer under this Agreement or any agreement entered pursuant hereto, and/or (ii) under any existing director and officer indemnification agreement, and/or (iii) any on-going payments due to the Seller Parties or each of their Affiliates pursuant to the existing arrangement as set forth in Schedule 4.5 and 4.10 not yet paid .   The Released Claims include all other claims and actions arising out of facts or circumstances occurring at any time on or prior to the Closing even if the claims and their existence are unknown or not suspected, and even if knowledge of those claims would have affected the acceptance of this general release.

 

6.1.8.          Notices of Certain Events .  Seller Parties shall promptly notify Buyer of:

 

6.1.8.1.            any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

 

6.1.8.2.            any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and

 

6.1.8.3.            any actions, suits, claims, investigations or proceedings commenced relating to Seller Parties or the Company that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.15 .

 

6.2.            Covenants of Buyer .  Buyer agrees that:

 

 

6.2.1.            Confidentiality .  Prior to the Closing Date and after any termination of this Agreement, Buyer and its Affiliates will hold, and will cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the Company furnished to Buyer or its Affiliates in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Buyer, or (ii) in the public domain through no fault of Buyer, and/or its Affiliates, their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents; provided that Buyer may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such Persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially.  Buyer shall be responsible for any failure to treat such information confidentially by such Persons.  The obligation of Buyer and its Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information.  If this Agreement is terminated, Buyer and its Affiliates will, and will cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to Seller, upon request, all documents and other materials, and all copies thereof, obtained by Buyer or its Affiliates or on their behalf from Seller or the Company in connection with this Agreement that are subject to such confidence. Notwithstanding the foregoing, Buyer may disclose the terms of this Agreement and related documents in any SEC document if required to be filed under the rules of either the Securities Act or Exchange Act rules or NYSE American listing rules, provided that such publication/disclosure is in reliance on the advice of counsel concluding that said publication is necessary , and to the extent necessary . Any press release by Buyer shall be coordinated in advance with Seller Parties.

 

6.2.2.            Buyer will cause the Company, on and after the Closing Date, to afford to Seller Parties and its agents reasonable access to Company properties, books, records, employees and auditors to the extent necessary to permit Seller Parties to determine any matter relating to its rights and obligations hereunder or to any period ending on or before the Closing Date; provided that any such access by Seller Parties shall not unreasonably interfere with the conduct of the business of Buyer or the Company.  Seller Parties will hold, and will use its best efforts to cause their officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Applicable Law, all confidential documents and information concerning the Company or provided to it pursuant to this Section.

 

6.2.3.             Buyer Financing .  Buyer shall use its best efforts to take all actions necessary to obtain such amounts of cash as required to make all payments to Seller as required under this Agreement and to otherwise consummate the transactions contemplated hereby (the “ Required Financing ”).  It is understood and acknowledged that the Required Financing may be obtained from the working capital of Buyer, pursuant to the issuance of debt or equity securities of Buyer to one or more third parties (whether privately or through the public equity or debt markets), through drawdowns of existing lines of credit held by Buyer or through a combination of any of the foregoing.  The terms and conditions of any Required Financing will be at the sole discretion of Buyer.  Nothing contained in this Agreement, including in this Section 6.2.2 , shall be deemed to, nor shall it, make the consummation of the Required Financing by Buyer a condition to Buyer’s obligations to consummate the transactions contemplated hereby.

 

6.2.4.            Waiver of Conflicts Regarding Representation; Nonassertion of Attorney-Client Privilege .

 

6.2.4.1.            Buyer waives and will not assert, and agrees to cause the Company to waive and not to assert, any conflict of interest arising out of or relating to the representation, after the Closing (the “ Post-Closing Representation ”), of any Seller, shareholder, officer, employee or director of Company (any such Person, a “ Designated Person ”) in any matter involving this Agreement or any other agreements or transactions contemplated thereby, by any legal counsel currently representing the Company in connection with this Agreement or any other agreements or transactions contemplated thereby (the “ Current Representation ”).

 

 

6.2.4.2.            Buyer waives and will not assert, and agrees to cause the Company to waive and to not assert, any attorney-client privilege with respect to any communication between any legal counsel and any Designated Person occurring during the Current Representation in connection with any Post-Closing Representation, including in connection with a dispute with Buyer, and following the Closing, with the Company, it being the intention of the Parties that all such rights to such attorney-client privilege and to control such attorney-client privilege shall be retained by the Seller; provided that the foregoing waiver and acknowledgement of retention shall not extend to any communication not involving this Agreement or any other agreements or transactions contemplated thereby, or to communications with any Person other than the Designated Persons and their advisers.

 

6.3.            Covenants of Buyer and Seller Parties . Buyer and Seller Parties agree that:

 

6.3.1.          Further Assurances .  Subject to the terms and conditions of this Agreement, Buyer and Seller Parties will use their best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under Applicable Law to consummate the transactions contemplated by this Agreement.  Seller Parties and Buyer agree, and Seller Parties, prior to the Closing, and Buyer, after the Closing, to cause the Company, to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement.

 

6.3.2.          Certain Filings .  Seller Parties and Buyer shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (ii) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.

 

6.3.3.          Public Announcements .  The Parties agree to consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and, except for any press releases and public announcements the making of which may be required by Applicable Law or any listing agreement with any national securities exchange (provided however that any publication relating to the financial condition of the Company or results of operations of the Company in respect of the period prior to Closing, shall be coordinated in advance between the Parties), will not issue any such press release or make any such public statement prior to such consultation.

 

6.3.4.          Intercompany Accounts .  All intercompany accounts, Financial Indebtedness or other liabilities or obligations between each of the Seller Parties or its Affiliates, on the one hand, and the Company, on the other hand  (the “ Intercompany Accounts ”), as of the Closing shall be settled or waived (irrespective of the terms of payment of such Intercompany Accounts) in the manner provided in this Section.  At least two Business Days prior to the Closing, Seller shall prepare and deliver to Buyer a statement setting out in reasonable detail the calculation of all such Intercompany Accounts balances based upon the latest available financial information as of such date and, to the extent requested by Buyer, provide Buyer with supporting documentation to verify the underlying Intercompany Accounts.  All such Intercompany Accounts balances shall be paid and in any event deemed waived by Seller Parties in full on or prior to the Closing.

 

7.	TAX MATTERS

 

 

7.1.            Straddle Period .  All Tax Returns of the Company for any Tax period ending on or before the Closing Date (the “ Pre-Closing Tax Period ”) and any Straddle Period, to the extent filed or required to be filed after the Closing Date, shall be prepared and filed (or caused to be filed) by Buyer.  With respect to any such Tax Return relating to income Taxes (or other taxes based on income), (a) Buyer will prepare (or cause to be prepared) such returns consistent with past practice, except as required by Applicable Law and (b) Buyer shall provide Seller Parties with a copy of such return prior to the filing thereof, and Seller Parties shall have a reasonable opportunity (for a period of not less than twenty (20) days) to review and comment on such return prior to filing.  In any case of a taxable period which includes the Closing Date (but does not end on that day) (a “ Straddle Period ”), the Taxes, if any, attributable to a Straddle Period shall be allocated (a) to the Seller Parties for the period up to and including the close of business on the Closing Date and (b) to Buyer for the period subsequent to the Closing Date (the “ Post-Closing Tax Period ”).  For purposes of such allocation, the amount of (i) any Taxes based on or measured by income, receipts or payroll (other than payroll that is accrued but unpaid as of the Closing Date) and (ii) any withholding Taxes to the extent not withheld from amounts paid, shall in each case be allocated based on an interim closing of the books of the Company as of the close of business on the Closing Date, provided that any transaction (other than the transactions contemplated by this Agreement) that occurs on the Closing Date and after the Closing that is not in the ordinary course of business and is undertaken at the direction of Buyer shall be included in the Post-Closing Tax Period.  The amount of other Taxes of the Company shall be apportioned to the Seller Parties based on the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the portion of the taxable period up to and including the Closing Date, and the denominator of which is the number of days in such Straddle Period.

 

7.2.            Cooperation on Tax Matters .  Buyer and the Sellers Parties shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with any Tax matters with respect to Buyer, the Seller Parties and/or the Company, including any such matters relating to the preparation and filing of any Tax Return, amended Tax Return or claim for refund, determining a Tax liability or participating in or conducting any Tax Proceeding.  All refunds for Taxes for all Pre-Closing Tax Periods and any portion of the Straddle Period ending on the Closing Date shall be paid to Seller Parties net of costs and expenses of obtaining such refund (and only to the extent such amount is not attributable to a tax attribute arising after the Closing Date) after receipt from the Seller Parties of an undertaking that the Seller Parties shall return such amounts (together with interest and penalties imposed by the applicable Tax Authority) that may be subsequently claimed by the Tax Authority paying such refund.  Buyer and the Company shall not file any amended Tax Return that will increase the Sellers Parties’ liability for Taxes or for indemnification under this Agreement, without the written consent of the Seller Parties, which consent shall not be unreasonably withheld.

 

8.	CONDITIONS TO CLOSING

 

8.1.            Conditions to Obligation of Buyer .  The obligation of Buyer to consummate the Closing is subject to the satisfaction, or, to the extent permitted by Applicable Law, waiver by Buyer, of each of the following conditions:

 

8.1.1.          No provision of any Applicable Law shall prohibit the consummation of the Closing.

 

8.1.2.          The representations and warranties of the Company and the Seller Parties contained in Section 4 shall be true and correct in all material respects as of the Closing Date, as if made at and as of such date.

 

8.1.3.          Seller Parties have obtained a Valid Certificate or Paying Agent holds a certificate or ruling issued by the ITA in form and substance reasonably acceptable to the Buyer, which is sufficient to enable to conclude that no withholding of Israeli Tax is required with respect to the payment of the Purchase Price to Paying Agent and specifically imposes the exclusive liability on the Paying Agent for any withholding obligation with respect to the Purchase Price (“ Paying Agent Certificate ”).

 

 

 

8.1.4.          Each of the Company and the Seller Parties shall have performed and complied, in all material respects, with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company and/or the Seller Parties on or before the Closing Date.

 

8.1.5.          All corporate, governmental, regulatory and other approvals, consents and/or waivers necessary lawfully to effect the transfer of the Shares, or otherwise to consummate the transaction contemplated hereunder, to be obtained by the Company and the Seller Parties, including the approvals of the Board of Directors and the general meeting of the Company, all as provided in Exhibit 8.1.5 hereto, shall have been obtained, and a copy thereof shall have been transferred to the Buyer at Closing, in each case in form and substance reasonably satisfactory to Buyer, and no such consent, authorization or approval shall have been revoked.

 

8.1.6.          There shall not have been threatened, instituted or pending any lawsuit, litigation, claims, investigations or other proceedings by any third party which purports to prevent the transaction contemplated hereunder;

 

8.1.7.          There shall have been no outstanding Lien on any assets of the Company (other than the Permitted Liens).

 

8.1.8.          No Material Adverse Effect shall have occurred from the date hereof to the Closing Date;

 

8.1.9.          The Company shall not be precluded from registering in its Share Registry the transfer of all the Shares held by the Seller to the Buyer in accordance with the Israeli Companies Law of 5759-1999 and its Organizational Documents.

 

8.1.10.         The Company shall have taken care of the items listed on Exhibit 8.1.10 hereto, in a reasonable form and substance.

 

8.2.            Conditions to Obligation of Seller Parties .  The obligation of Seller Parties to consummate the Closing is subject to the satisfaction, or, to the extent permitted by Applicable Law, waiver by Seller Parties, of the following further conditions:

 

8.2.1.          No provision of any Applicable Law shall prohibit the consummation of the Closing.

 

8.2.2.          The representations and warranties of the Buyer contained in Section 5 shall be true and correct in all material respects as of the Closing Date, as if made at and as of such date.

 

8.2.3.          Buyer shall have performed and complied, in all material respects, with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by Buyer on or before the Closing Date.

 

8.2.4.          All actions by or in respect of or filings with, and all authorizations, approvals or permits, if any, of, any Governmental Authority that are required in connection with the consummation of the Closing shall have been taken, made or obtained and effective as of the Closing Date, in each case in form and substance reasonably satisfactory to Seller Parties, and no such consent, authorization or approval shall have been revoked.

 

 

8.2.5.          All consents and approvals of the banks identified on Exhibit 8.2.5 shall have been obtained, in a manner reasonably satisfactory in form and substance to Seller Parties, and no such consent, approval, order or authorization shall have been revoked;

 

8.2.5.1.            there shall not have been threatened, instituted or pending any lawsuit, litigation, claims, investigations or other proceedings by any third party which purports to prevent the transaction contemplated hereunder.

 

8.3.            Each Party shall not (i) take any action that would make any of its representations or warranties contained in this Agreement untrue or incorrect or otherwise prevent such Party from performing its covenants hereunder or (ii) omit to take any action necessary to prevent any such representation or warranty from being untrue or incorrect or otherwise prevent such Party from performing, or cause the Seller Parties or the Company not to perform, its covenants hereunder.

 

9.	SURVIVAL; INDEMNIFICATION

 

9.1.            Survival .

 

9.1.1.           Representations and Warranties . Seller’s representations and warranties contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith, shall survive the Closing and continue in effect until the lapse of twenty (20) months of the Closing Date; provided that the representations and warranties contained in (a)  Section 4.1.1 and 4.1.2 (Corporate Existence and Power), 4.2 (Corporate Authorization), 4.4 (Capitalization), Section 4.6 (Subsidiaries), and Section 4.20 (Finders’ Fees in respect of the Company only) (collectively, the “ Seller’s Fundamental Representations ”) shall survive the Closing and remain in full force and effect until the expiration of the applicable statute of limitation, (b)  Section 4.18 (Intellectual Property) shall survive the Closing and continue in effect until the date that is twenty four (24) months after the Closing Date, and (c) Section 4.12 (Tax) and Section 4.22 (Employees)  shall survive the Closing and continue in effect until the date that is thirty six (36) months after the Closing Date (the “ Claims Period ”). The representations and warranties of the Buyer contained in this Agreement shall survive the Closing and remain in full force and effect until twenty four (24) months after the Closing Date, provided that the representations and warranties contained in (a)  Sections 5.1 ( Corporate Existence and Power ), 5.2 ( Authority ), 5.6 ( Inspectio n), and 5.10 ( Seller Parties’ Representations) (collectively, the “ Buyer’s Fundamental Representations ”) shall survive the Closing and remain in full force and effect until the expiration of the applicable statute of limitation, and (b) the representations and warranties contained in Section 5.4 ( Financing ) shall terminate at Closing. Except in the case of fraud or willful misrepresentation, the Seller Parties shall not have any liability with respect to any such representation and warranty unless a detailed written notice of an indemnity claim is given pursuant to this Agreement prior to the expiration of the Claims Period for such representation and warranty and, other than with respect to claims originated by third parties (subject however to the provisions of Section 9. 3 below), a claim in relation to the subject matter of such notice has been filed by Buyer with a competent court within no later than 180 days following the expiration of the Claims Period for such representation and warranty, in which case such representation and warranty shall survive as to that claim until the claim has been finally resolved and paid (if applicable).

 

9.1.2.           Covenants and Obligations .  All covenants and obligations contained herein or in any document or certificate delivered hereunder in connection with the transactions contemplated hereby shall survive the Closing and continue in full force until performed in accordance with their terms.

 

9.2.            Indemnification .

 

 

9.2.1.          Effective at and after the Closing and subject to the terms and conditions of this Agreement, Seller Parties, jointly and severally, shall indemnify Buyer and its officers and directors (the “ Buyer Indemnified Parties ”) against, and agrees to hold each of them harmless from, any and all  losses, damages, awards, fines, penalties, claims, expenses, fees, liabilities, obligations, judgments, out of pocket costs and amounts paid in settlement approved by Seller Parties in accordance with the procedure Section 9.3 (including reasonable fees and expenses of counsel and reasonable expenses of investigation) (“ Losses ”) actually suffered by Buyer Indemnified Parties or by the Company as a result of (i) any misrepresentation or breach of representation or warranty (in each case, for purposes of determining the amount of Losses such representation or warranty would read if all qualifications as to materiality, including each reference to the defined term Material Adverse Effect, were deleted therefrom) (each such misrepresentation and breach of representation or warranty a “ Warranty Breach ”), or (ii) breach of covenant or agreement made or to be performed by Seller Parties pursuant to this Agreement, or (iii) any claims by any directors of the Company for indemnification from the Company with respect to the period prior to Closing; provided that with respect to indemnification by Seller for Warranty Breaches pursuant to this Section, except in with respect to the Seller’s Fundamental Representations, (a) Seller Parties shall not be liable unless the aggregate amount of Losses with respect to such Warranty Breaches exceeds US$120,000 and if so exceeds then the Seller Parties shall be liable from US$ 60,000 and beyond, and (b) Seller Parties’ maximum liability for all such Warranty Breaches shall not exceed the Indemnification Escrow Amount. The Buyer shall be entitled to satisfy any claims for indemnification from the Indemnification Escrow Amount, subject to the terms and conditions of the Escrow Agreement.

 

9.2.2.          Effective at and after the Closing and subject to the terms and conditions of this Agreement, Buyer shall indemnify Seller Parties and their respective officers and directors (the “ Seller Indemnified Parties ”) against, and agrees to hold each of them harmless from, any and all Losses actually suffered by Seller Indemnified Parties arising out of any Warranty Breach or breach of covenant or agreement made or to be performed by Buyer pursuant to this Agreement; provided that with respect to indemnification by Buyer for Warranty Breaches pursuant to this Section, except in with respect to the Buyer’s Fundamental Representations (a)  Buyer shall not be liable unless the aggregate amount of Losses with respect to such Warranty Breaches exceeds US$ 120,000 and if so exceeds then the Buyer shall be liable from US$ 60,000 and beyond, and (b) Buyer’s maximum liability for all such Warranty Breaches shall not exceed 10% of the Purchase Price.

 

9.2.3.          Any limitation of liability or limitation of period shall not apply in the event of fraud or willful misrepresentation or willful misconduct.

 

9.3.            Third Party Claim Procedures .

 

9.3.1.          The Party seeking indemnification under Section 9.2 (the “ Indemnified Party ”) agrees to give prompt notice in writing to the Party against whom indemnity is to be sought (the “ Indemnifying Party ”) of the assertion of any claim or the commencement of any suit, action or proceeding by any third party (“ Third Party Claim ”) in respect of which indemnity may be sought under such Section.  Such notice shall set forth in reasonable detail such Third Party Claim and the basis for indemnification including a copy of the written notice/suit received by the Indemnified Party asserting or commencing such Third Party Claim (taking into account the information then available to the Indemnified Party).  The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have adversely prejudiced the Indemnifying Party.

 

9.3.2.          The Indemnifying Party shall be entitled to participate in the defense of any Third Party Claim and, subject to the limitations set forth in this Section, shall be entitled to control and appoint lead counsel for such defense, in each case at its own expense.

 

 

9.3.3.          If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this Section 9.3 , (a) the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which shall not be unreasonably withheld) before entering into any settlement of such Third Party Claim, if the settlement does not release the Indemnified Party from all liabilities and obligations with respect to such Third Party Claim or the settlement imposes injunctive or other equitable relief against the Indemnified Party, and (b) the Indemnified Party shall be entitled to participate in the defense of any Third Party Claim and to employ separate counsel of its choice for such purpose.  The fees and expenses of such separate counsel shall be paid by the Indemnified Party.

 

9.3.4.          Each Party shall cooperate, and cause their respective affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.

 

9.4.            Direct Claim Procedures .  In the event an Indemnified Party has a claim for indemnity under Section  9.2 against an Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party agrees to give prompt notice in writing of such claim to the Indemnifying Party.  Such notice shall set forth in reasonable detail such claim and the basis for indemnification (taking into account the information then available to the Indemnified Party).  The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have actually prejudiced the Indemnifying Party.  If the Indemnifying Party has disputed its indemnity obligation for any Losses with respect to such claim, the parties shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations within thirty (30) days after notice of such notice was given to the Indemnifying Party, such dispute shall be resolved by litigation in an appropriate court of jurisdiction determined pursuant to Section 11.5 .

 

9.5.            Calculation of Losses .

 

9.5.1.          The amount of any Losses payable under Section 9.2 by the Indemnifying Party shall be net of any (a) amounts recovered (and subject to Indemnified Party obligations pursuant to Section 9.5.4) by the Indemnified Party under applicable insurance policies (less the amount of any premium paid) or from any other Person alleged to be responsible therefor and (b) Tax benefit realized by the Indemnified Party arising from the incurrence or payment of any such Losses.  In computing the amount of any such Tax benefit, the Indemnified Party shall be deemed to fully utilize, at the highest marginal tax rate then in effect, all Tax items arising from the incurrence or payment of any indemnified Losses.  If the Indemnified Party receives any amounts under applicable insurance policies, or from any other Person alleged to be responsible for any Losses, subsequent to an indemnification payment by the Indemnifying Party, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made or expense incurred by such Indemnifying Party in connection with providing such indemnification payment up to the amount received by the Indemnified Party, net of any expenses incurred by such Indemnified Party in collecting such amount, including any premium paid.

 

9.5.2.          The Indemnifying Party shall not be liable under Section 9.2 for any (a) Losses relating to any matter to the extent that (A) there is included in the Financial Statements a specific liability or reserve relating to such matter or (B) the Indemnified Party had otherwise been compensated for such matter pursuant to the Purchase Price adjustment hereunder.

 

9.5.3.          An Indemnified Party shall not be entitled to recover Losses or obtain payment, reimbursement, restitution or indemnity more than once in respect of any Loss, breach or other set of circumstances which gives rise to more than one Claim.

 

 

9.5.4.          Each Indemnified Party must mitigate in accordance with Applicable Law any loss for which such Indemnified Party seeks indemnification under this Agreement, including by enforcement of its rights under any applicable insurance policies.  If such Indemnified Party mitigates its loss after the Indemnifying Party has paid the Indemnified Party under any indemnification provision of this Agreement in respect of that loss, the Indemnified Party must notify the Indemnifying Party and pay to the Indemnifying Party the extent of the value of the benefit to the Indemnified Party of that mitigation (less the Indemnified Party’s reasonable costs of mitigation) within two Business Days after the benefit is received.

 

9.5.5.           Adjustment to Purchase Price .  Buyer and Seller agree to treat any indemnity payment made pursuant to this Section 9.2 as an adjustment to the Purchase Price for federal, state, local and foreign income tax purposes, except as otherwise required by Applicable Law.

 

9.5.6.          Each Indemnified Party shall use reasonable efforts to collect any amounts available under insurance coverage, or from any other Person alleged to be responsible, for any Losses payable under Section 9.2 .

 

9.6.            Assignment of Claims .  If the Indemnified Party receives any payment from an Indemnifying Party in respect of any Losses pursuant to Section 9.2 and the Indemnified Party could have recovered all or a part of such Losses from a third party (a “ Potential Contributor ”) based on the underlying Claim asserted against the Indemnifying Party, the Indemnified Party shall assign such of its rights to proceed against the Potential Contributor as are necessary to permit the Indemnifying Party to recover from the Potential Contributor the amount of such payment.

 

 

9.7.            Exclusivity . Notwithstanding anything to the contrary, all remedies whatsoever sought by Buyer Indemnified Parties, their affiliates, the Company or anyone acting to their behalf in connection with this Agreement and under any law, whether in contracts, torts, restitution or otherwise, shall be subject to the limitations in Section 9.2 . Indemnification under Section 9.2 shall be the sole and exclusive remedy of the Indemnified Parties, their affiliates, the Company or anyone acting to their behalf for a breach of the representations, warranties, covenants and agreements in this Agreement and the Indemnified Parties shall not be entitled to any further remedies in respect thereof under Applicable Law or otherwise, all of which Indemnified Parties hereby waives, provided (i) that Indemnified Party shall be entitled to seek specific performance and other equitable remedies (ii) nothing set forth in this Agreement shall limit the rights, remedies and claims of the Indemnified Party with respect to any fraud or willful misconduct by any Indemnifying Party. Without derogating from the generality of the forgoing and other than in the event of fraud or willful misconduct, Buyer, on behalf of itself and Buyer Indemnified Parties, their affiliates, the Company (to the maximum extent permitted by law), its directors, officers, employees and/or anyone acting on their behalf, hereby unconditionally and irrevocably waives any demand and/or claim of any kind whatsoever they may have against any officers or directors of Seller Parties and the Company with respect to the period prior to Closing, regardless of the form of action, whether in contract, tort (including but not limited to negligence) or otherwise, including claims for breach of duty, provided that any claims by the Company that are not permitted by law to be waived, shall be subject to all limitations under this Section 9 .

 

10.	TERMINATION

 

10.1.          Grounds for Termination .  This Agreement may be terminated at any time prior to the Closing:

 

10.1.1.          by mutual written agreement of Seller Parties and Buyer;

 

10.1.2.          by either Seller Party or Buyer if the Closing shall not have been consummated on or before the later of (i) 60 days following Effective Date and (ii) 15 days of the date that the Company delivered to the Buyer the 2017 Statements (the “ End Date ”) (subject however to the automatic extension, if applicable, as set forth in Section 2.3 above, provided, however , that the right to terminate this Agreement under this Section 10.1.2 shall not be available to any Party whose action or failure to act has been a principal cause of or resulted in the failure of the consummation of the Closing on or before such date and such action or failure to act constitutes a material breach of this Agreement;

 

 

10.1.3.          by either Seller Party or Buyer if any Applicable Law irrevocably prohibits or makes the consummation of the transactions illegal, or if consummation of the transactions contemplated hereby would violate any nonappealable final order, decree or judgment of any Governmental Authority having competent jurisdiction;

 

10.1.4.          by Buyer, if there has been a material breach of any of the representations, warranties or covenants of Seller Parties contained in this Agreement, which breach has not been cured within fifteen (15) days after the receipt of written notice of the breach from Buyer;

 

10.1.5.          by the Buyer, if a Material Adverse Effect shall have occurred after the date hereof;

 

10.1.6.          by a Seller Party, if there has been a material breach of any of Buyer’s representations, warranties or covenants contained in this Agreement, and which material breach has not been cured or cannot be cured within fifteen (15) days after the receipt of written notice of breach from Seller Party.

 

The party desiring to terminate this Agreement pursuant to Sections 10.1.2 - 10.1.6 shall give notice of such termination to the other Party, specifying the provision or provisions hereof pursuant to which such termination is being effected.

 

10.2.           Effect of Termination .  If this Agreement is terminated as permitted by Section 10.1 , such termination shall be without liability of either Party (or any stockholder, director, officer, employee, agent, consultant or representative of such Party) to the other Parties to this Agreement; provided that if such termination shall result from the (i) failure of either Party to fulfill a condition to the performance of the obligations of the other Party, (ii) failure to perform a covenant of this Agreement or (iii) material breach by either Party of any representation or warranty or agreement contained herein, such Party shall be fully liable for any and all Losses incurred or suffered by the other Party as a result of such failure or breach, excluding however any indirect, special, consequential or punitive Losses, such as loss of profits, loss of revenue, loss of a business opportunity or loss of goodwill.  The provisions of Sections 1 ( Definitions and Interpretations ), 9 (Indemnification, except 9.1), which shall apply, mutatis mutandis , 10 ( Termination ) and 11 (Miscellaneous) shall survive any termination hereof.

 

10.3.          Buyer Termination Fee .

 

10.3.1.           Buyer shall pay to Seller and/or Parent, as shall be instructed in writing by Parent,  a termination fee in an amount of US$ 300,000 (the “ Buyer Termination Fee ”) if this Agreement is terminated by Buyer or a Seller Party:

 

10.3.1.1.            pursuant to Section 10.1.6 ; or

 

10.3.1.2.            pursuant to Section 10.1.2 and (a) all of the conditions set forth in Section 8.1 have been satisfied, and (b) Buyer shall have failed to consummate the Closing by the End Date.

 

 

10.3.2.          Buyer shall pay to Seller the Buyer Termination Fee by wire transfer of same-day funds within two (2) Business Days following the date of termination of this Agreement, in accordance with the terms and conditions of the Escrow Agreement.  Buyer acknowledges and agrees that the agreements contained in this Section 10.3 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Seller Parties would not have entered into this Agreement; accordingly, if Buyer fails to promptly pay the Buyer Termination Fee when due pursuant to this Section 10.3 , and in order to obtain such payment Seller makes a claim against Buyer that results in an order against Buyer, then in such case, Buyer shall pay to Seller Parties the Buyer Termination Fee and all of Seller Parties’ costs and expenses (including attorneys’ fees and expenses) in connection with such claim, together with interest on the full amount of the Buyer Termination Fee from the date such payment was required to be made until the date of payment at the prime lending rate as published in The Wall Street Journal in effect on the date such payment was required to be made.  Buyer acknowledges that the Buyer Termination Fee is not a penalty, but rather is liquidated damages in a reasonable amount that will compensate Seller as sole and exclusive remedy (if collected by Seller, and other than in the event of fraud or willful misconduct), in the circumstances in which such fee is due and payable, for the efforts and resources expended, for the damages that will be suffered by Seller Parties and their respective businesses as a result of the termination of this Agreement and for the opportunities forgone by Seller Parties while negotiating this Agreement and in the expectation of the consummation of the transactions contemplated hereby, which amount would otherwise be impossible to calculate with precision.

 

10.3.3.          In the event that any of the conditions set forth in Section 8.1 have not been satisfied within the applicable timeframes (other than non-fulfillment due to a material breach of any of Buyer’s representations, warranties or covenants contained in this Agreement), without derogating from any remedy entitled to under this Agreement and under applicable law, Seller Parties shall not be entitled to the Buyer Termination Fee, and the Buyer and Seller Parties shall then immediately jointly instruct in writing the Escrow Agent to immediately release the Buyer Termination Fee to the Buyer in accordance with the provisions of the Escrow Agreement.

 

11.	MISCELLANEOUS

 

11.1.            Notices .  All notices, requests and other communications to any Party hereunder shall be in writing (including facsimile transmission and electronic mail (“ e-mail ”) transmission, so long as a receipt of such e-mail is requested and received) and shall be given,

 

or such other address or facsimile number as such Party may hereafter specify for the purpose by notice to the other Parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. in the place of receipt and such day is a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

 

11.2.            Amendments and Waivers .

 

  11.2.1.          Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each Party to this Agreement, or in the case of a waiver, by the Party against whom the waiver is to be effective.

 

  11.2.2.          No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

11.3.            Expenses .  Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including fees and expenses of financial advisors, financial sponsors, legal counsel and other advisors, shall be paid by the Party incurring such cost or expense.

 

11.4.            Successors and Assigns .  The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns; provided that no Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other Parties hereto.

 

11.5.            Governing Law; Jurisdiction . This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, without regard to the conflict of law provisions thereof.  The Parties hereby irrevocably and unconditionally submit to the exclusive jurisdiction of courts in Tel-Aviv in respect of any matter arising in connection with this Agreement.

 

 

11.6.            Counterparts; Effectiveness; Third Party Beneficiaries .  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purpose.  This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Parties.  Until and unless each Party has received a counterpart hereof signed by the other Parties, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the Parties hereto and their respective successors and permitted assigns.

 

11.7.            Entire Agreement . This Agreement and the Schedules and exhibits hereto constitute the full and entire understanding and agreement between the Parties with regard to the subject matters hereof and thereof and any other written or oral agreement relating to the subject matter hereof existing between the Parties are expressly canceled, including the LOI executed between Parent and Buyer dated July 11, 2017 (as amended).  Previous drafts shall not be used for interpretation of this Agreement.

 

11.8.            Severability .  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, hen such provision shall be excluded from this Agreement and the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

11.9.            Disclosure Schedules .  Seller Parties have set forth information on the Disclosure Schedule in a section thereof that corresponds to the section of this Agreement to which it relates. A matter set forth in one section of a Schedule need not be set forth in any other section so long as its relevance to such other section of the Schedule or section of the Agreement is reasonably apparent on the face of the information disclosed therein and such matter will be deemed to have been appropriately disclosed against or qualified for in each such other section of the Disclosure Schedule, representation and warranty notwithstanding the presence or absence of any cross-reference made in or to any section of the Disclosure Schedule, representation or warranty.  The Parties acknowledge and agree that (a) the Schedules to this Agreement may include certain items and information solely for informational purposes for the convenience of Buyer and (b) the disclosure by Seller Parties of any matter in the Schedules shall not be deemed to constitute an acknowledgment by Seller Parties that the matter is required to be disclosed by the terms of this Agreement or that the matter is material.

 

11.10.          Specific Performance .  The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof or otherwise are breached. Therefore, notwithstanding anything to the contrary set forth in this Agreement, the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity, and each Party hereby agrees to waive the defense in any such suit that the other Parties to this Agreement have an adequate remedy at law and to interpose no opposition, legal or otherwise, as to the propriety of injunction or specific performance as a remedy, and hereby agrees to waive any requirement to post any bond in connection with obtaining such relief.

 

 

11.11.          Mutual Drafting .  The Parties have participated jointly in the negotiation and drafting of this Agreement and have been (or had and voluntarily waived the opportunity to be) represented by their own legal counsel in connection with the transactions contemplated by this Agreement, with the opportunity to seek advice as to their legal rights from such counsel.  In the event any ambiguity or question of intent or interpretation arises, this Agreement is to be construed as jointly drafted by the parties hereto and no presumption or burden of proof is to arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement or by reason of the extent to which any such provision is inconsistent with any prior draft hereof.

 

11.12.          Wro ng Pocket .

 

11.12.1.          In the event that receivables due or to be due to the Company are received by the Seller or any of its Affiliates after the Closing Date, it shall forward such receivables to the Company. The Seller and Buyer shall agree upon a method reconciliation of claims on a periodic basis.

 

11.12.2.          In the event that receivables due or to be due to the Seller or any of its Affiliates are received by the Company or any of its Affiliates after the Closing Date, it shall forward such receivables to the Seller. The Seller and Buyer shall agree upon a method reconciliation of claims on a periodic basis.

 

 

[Remainder of Page Left Intentionally Blank]

 

 

IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

 

 

 

 

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