CONTENTS
SALE OF WLAN BUSINESS
On January 5, 2010, Metalink Ltd. (the "Company" or "we") entered into an Asset
Purchase Agreement (the "Purchase Agreement") with Lantiq Israel Ltd. and Lantiq
Beteiligungs - GmbH & Co. KG (together, "Lantiq"), for the sale of the assets
of, and certain specified liabilities related to, our wireless local area
network (WLAN) business to Lantiq. Lantiq is a newly-formed fabless
semiconductor company funded by Golden Gate Capital.
In consideration for the acquired WLAN business, Lantiq has agreed to pay us a
total of up to $16.9 million in cash, consisting of the following:
o $5.7 million will be paid concurrently with the closing;
o Up to $1.2 million (subject to downward adjustments) will be paid on
March 31, 2010; and
o Earn-out payments of up to $10.0 million in the aggregate, contingent
upon the acquired business' achievement of specified performance
targets during a two-year period ending March 31, 2012. Pursuant to
the Purchase Agreement, $2.0 million out of the $10.0 million earn-out
payments are guaranteed payments that, if not otherwise earned
pursuant to the established performance targets, will be paid in four
installments throughout the year 2010.
The performance targets are based on the gross profits generated by the acquired
business during two earnout periods of April 1, 2010 through March 31, 2011 (the
"first earnout period") and April 1, 2011 through March 31, 2012 (the "second
earnout period"). During the first earnout period, if gross profits are between
$2.0 million and greater than $10.0 million, the earnout payment is between $0.5
million and $9.0 million based on a sliding scale of increasing gross profits.
During the second earnout period, if gross profits are between $8.0 million and
greater than $15.0 million, the earnout payment is between $0.5 million and $9.0
million based on a sliding scale of increasing gross profits. Under no
circumstances will the minimum aggregate earnout payments be less than $2.0
million, nor will the maximum aggregate earnout payments be greater than $10.0
million, as described above.
Other key terms of the Purchase Agreement include, among other things:
o Lantiq has agreed to reimburse us for costs related to the operation
of the acquired business in the period prior to closing, subject to
certain limitations and caps;
o Subject to certain exceptions, we made a number of customary
representations and warranties to Lantiq. Lantiq made customary
representations and warranties to us;
o During the pre-closing period, we agreed to act in the ordinary course
of business and not take certain specified actions without obtaining
Lantiq's prior written consent;
o Lantiq agreed to make an offer of continued employment to most of our
WLAN business employees, to generally be no less favorable in the
aggregate than their existing terms of employment;
o We agreed that, subject to closing, until March 31, 2012 we shall not
compete with the acquired WLAN business nor solicit any employee or
consultant working for Lantiq in such business. In connection
therewith, Mr. Shukhman, our Chief Executive Officer, has entered into
a similar non-competition agreement with Lantiq, which will become
effective contingent upon closing;
o We agreed that, subject to closing and for a period of six (6) months
thereafter, Lantiq shall have the non-exclusive right to use certain
trade names and trademarks in connection with the operation of the
acquired business;
o The parties agreed to indemnify each other for breaches of
representations, warranties, covenants and other liabilities under
certain circumstances, subject to certain limitations, including (1) a
cap of $4 million on our obligation to indemnify Lantiq for breaches
of representations and warranties, except for a breach of certain
fundamental representations, which are not capped and (ii) a cap of $2
million on the obligation of Lantiq to indemnify us for breaches of
representations and warranties. The representations and warranties
made by the parties survive the closing and, in general, expire on
March 31, 2012;
o The Purchase Agreement may be terminated by either party due to legal
restraints or certain breaches of representations or covenants of the
other party; by mutual consent of the parties; or by the non-failing
party if the transaction has not closed by March 31, 2010.
The transaction is expected to close in the coming weeks and is subject to
customary closing conditions relating to, among other things, obtaining a
specified list of consents and the approval of the Israeli Office of the Chief
Scientist.
Subject to closing, the parties also agreed to enter into the following
agreements:
o Consulting Agreement, whereby we agreed to provide Lantiq certain
consulting services for up to two years in consideration for $400,000
per year;
o Transition Services Agreement, whereby Lantiq agreed to provide us
with certain transition services for a limited period following the
closing for an insignificant monthly payment. Such transition services
include, among other things, entering into a Sublease Agreement
allowing us to continue using a portion of our existing office space
in Yakum, Israel; and
o Cross-License Agreement, whereby (i) we agreed to grant Lantiq a
royalty-free non-exclusive license to our intellectual property rights
(not sold as part of the transaction to Lantiq) and (ii) Lantiq agreed
to grant us a royalty-free non-exclusive license to the intellectual
property rights we sold as part of the transaction, to be used by us
in connection with our retained DSL business.
AMENDMENT TO LOAN AGREEMENT
On September 8, 2008, we entered into a Loan Agreement (as amended on December
31, 2008 and September 6, 2009, the "Loan Agreement") with an institutional
investor (the "Lender"). Under the Loan Agreement, in the event of a fundamental
transaction (such as the contemplated sale to Lantiq described above), we were
required to repay the lender $4,312,500.
On December 30, 2009, we entered into a third amendment to the Loan Agreement
(the "Third Amendment"), that became effective on January 5, 2010, whereby the
repayment of the $4,312,500 originally due upon the closing of the Lantiq
transaction will be, subject to the closing, reduced to $4,100,000 and repaid in
four installments: $3,750,000 at closing and the remainder in three installments
by March 31, 2011.
DEPARTURE OF CFO
Mr. Yuval Ruhama, our Chief Financial Officer, is expected to leave the Company
concurrently with the closing, but will continue serving the Company as a
consultant through the end of 2010.
A COPY OF THE PRESS RELEASE ANNOUNCING THEMATTERS DESCRIBED ABOVE IS ATTACHED
HERETO AS EXHIBIT 99.1 AND IS INCORPORATED HEREIN BY REFERENCE.
EXHIBITS
99.1 Press Release, dated January 5, 2010.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
METALINK LTD.
Date: January 7, 2010 By: /s/ Yuval Ruhama
--------------------
Yuval Ruhama
Chief Financial Officer
Metalink, Ltd. (MM) (NASDAQ:MTLK)
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