Exhibit 4.10
SHARE PURCHASE AND SHAREHOLDERS AGREEMENT
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THIS SHARE PURCHASE AND SHAREHOLDERS AGREEMENT (this "Agreement")
made as of the 21st day of May, 2000, by and among, XxxxxxXxxx.Xxx Ltd.
(51-290897-1) a company limited by shares and formed and existing under the
laws of the State of Israel (the "Company"), the shareholders identified in
Schedule 1 hereto (the "Shareholders"), Xxxxxxxxx Xxxxxxx ID No. 000000000,
Xxxxx Xxxx I.D. 000000000, Xxxxx Xxxxxxx I.D. 000000000, Yuval Lubovitch I.D.
031842883, Xxx Xxxx I.D. 029541216 and Xxxxxx.Xxx Ltd. (51- 289274-6) a
company limited by shares and formed and existing under the laws of the State
of Israel (jointly and severally the "Founders") and Aryt Industries Ltd.
(52-003335-8) a company limited by shares and formed and existing under the
laws of the State of Israel (the "Purchaser") (the Company, Shareholders,
Founders and Purchaser shall be hereinafter collectively referred to as the
"Parties")
W I T N E S S E T H:
WHEREAS: the Company is engaged, inter alia, as an Application Service
Provider, in the development, manufacture and marketing of
integrated web-based applications for document management and
online collaboration (the "Line of Business"); and
WHEREAS: the Board of Directors of the Company has decided to raise
additional capital for the Company through the issuance of the
Company's Preferred B Shares (the "Preferred B Shares"); and
WHEREAS: the Purchaser desire to purchase a minimum of 800 and a maximum of
2,000 Preferred B Shares of the Company (excluding the Preferred B
Shares underling the Warrants) pursuant to the terms and
conditions more fully set forth in this Agreement; and
WHEREAS: the Parties have agreed that immediately following the First
Closing they desire to make certain provisions as hereinafter set
forth relating to the operation of the Company and the rights of
its shareholders, including without limitation rights to purchase,
transfer, encumber or otherwise acquire or dispose of the shares
of the Company which they may own or may thereafter acquire and
the rights of the Company to permit the transfer of or to issue
any such shares; and
WHEREAS: in consideration of the agreement of all of the Parties to enter
into this Agreement, the Founders and the Shareholders agree to
the termination of any existing Shareholders Agreement, if any
(the "Existing Shareholders Agreement"), and that this Agreement
shall supersede and replace the Existing Shareholders Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
1. ISSUANCE OF SERIES B PREFERRED SHARES, AND WARRANTS
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1.1. Subject to the terms and conditions hereof and in reliance on the
representations, warranties and covenants set forth herein, on each
Closing Date (as defined below) the Company shall issue, sell and
allot to the Purchaser, and the Purchaser shall purchase from the
Company Series B Preferred Shares NIS 1 par value each of the
Company at a price of Two Hundred and Fifty US dollars (US$ 250) per
share (the "Purchase Price") (representing a Company's value of US$
1,250,000 pre-money).
1.2. In addition, on the First Closing, the Company shall issue to the
Purchaser Nine Hundred Thirty Two (932) warrants to purchase
additional Nine Hundred Thirty Two (932) Preferred B Shares
(representing, together with the Preferred B Shares issued under
this Agreement, 36.96% of the than outstanding share capital of the
Company on a full dilution basis), at an aggregate purchase price of
Three Hundred Thousand United States Dollars (US$300,000) (the
"Exercise Price").
2. CLOSINGS
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2.1. Time and Location
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The purchase and sale of the Preferred B Shares (excluding the
Preferred B Shares underlying the Warrants) will take place at one
or more closings (each a "Closing", the first being referred to as
the "First Closing" and each additional closing, if any, being
referred to as an "Additional Closing") at the offices of Xxxxxx,
Xxxx & Co., 2 Xxxxx St. Tel-Aviv, on the Closing Date, or at such
other location or on such other date as the Company and the
Purchaser shall agree. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in this Agreement, the date and
time of the issuance and sale of the Preferred B Shares and the
Warrants pursuant to this Agreement (the "Closing Date") shall be
(i) in the case of the First Closing, June 15, 2000, and (ii) in the
case of each Additional Closing, if any, on such date as determined
pursuant to Section 2.5.
2.2. The Closing
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All actions at each Closing and all transactions occurring at each
Closing shall be deemed to take place simultaneously and no
transactions shall be deemed to have been completed or any document
delivered until all such transactions have been completed and all
required documents delivered.
2.3. Purchaser Actions
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At the First Closing, the Purchaser shall deliver or cause to be
delivered to the Company:
2.3.1. A check on the amount of the Purchase Price for the Purchase
of 800 Preferred B Shares (less US$ 43,000 which were given
to the Company as a loan and on the First Closing Date are
being converted to Purchase Price) to the order of the
Company payable in NIS in accordance with the then known
representative rate of the US$ as published by the Bank of
Israel; and
2.3.2. a counterpart of this Agreement and any ancillary agreements
referred to herein duly executed by the Purchaser; and
2.3.3. a written notice appointing the Preferred B Shares'
representatives to the Company's Board of Directors (the
"Board of Directors") in the manner contemplated in Section
7.6 below; and
2.3.4. A confirmation from Xxxxxx, Xxxx & Co. (the "Trustee") in the
form of Schedule 2.3.4 (stating that the Company had
deposited with the Trustee a check on the amount of $300,000
as a security for the payment of the Purchase Price to be
paid on the Additional Closing under the terms of Section
2.5.2.hereinbelow).
2.4. Company Actions
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At or prior to the First Closing, the Company shall deliver or cause
to be delivered to the Purchaser:
2.4.1. a copy of a resolution of the Company's shareholders in the
form attached hereto as Schedule 2.4.1(a) by which: (i) the
execution of this Agreement and all the transactions
contemplated hereby, and the performance of the Company's
obligations hereunder have been fully approved; and (ii) the
Articles of Association of the Company have been amended as
outlined in Schedule 2.4.1(b) (the "Amended Articles"); the
Company shall notify the Israeli Registrar of Companies of
the resolutions mentioned in this Section 2.4.1 promptly
after the Closing and shall deliver a copy of such notice to
the Purchaser's counsel;
2.4.2. a copy of a resolution of the Company's Board of Directors
approving (i) the Company's execution and performance of this
Agreement, and (ii) the issuance by the Company to the
Purchaser of the Preferred B Shares, and Warrants and all
transactions contemplated hereby, in the form attached hereto
as Schedule 2.4.2;
2.4.3. a certificate duly executed by the Chief Executive Officer of
the Company, dated as of the date of the Closing, in the form
attached hereto as Schedule 2.4.3 (the "Compliance
Certificate");
2.4.4. an opinion of the Company's legal counsel in the form
attached hereto as Schedule 2.4.4 (the "Opinion");
2.4.5. validly executed share certificate covering the 800 Preferred
B Shares, issued on the name of the Purchaser, together with
a copy of the issuance deed as filed with the Stamp Tax
Authorities and the Registrar of Companies in the form
attached hereto as Schedule 2.4.5; and
2.4.6. validly executed employment, confidentiality and
non-competition agreements between the Company and the key
employees listed in Schedule 2.4.6.(a) (the "Key Employees"),
in the form attached hereto as Schedule 2.4.6.(b), pursuant
to which the Key Employees undertake to provide their
services on a full time basis to the Company until April 30,
2004 or thereafter; and
2.4.7. validly executed Warrant for the purchase of additional 932
Preferred B Shares issued on the name of the Purchaser, in
the form attached hereto as Schedule 2.4.7; and
2.4.8. validly executed Management Agreement between the Company and
the Purchaser in the form attached hereto as Schedule 2.4.8;
2.5. Additional Closings
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2.5.1. Upon the fulfillment of the conditions specified on Schedule
2.5.1 the Company shall call for Additional Closing and the
Purchaser shall be under the obligation to purchase 1,200
additional Preferred B Shares. The Company shall exercise
such option by delivering to the Purchaser and the Trustee a
written notice, not less than five business days prior to the
applicable Closing Date, (A) stating the date on which the
conditions in Schedule 2.5.1. were satisfied; and (B)
specifying the Closing Date.
2.5.2. In case the conditions specified on Schedule 2.5.1 shall not
be fulfilled until January 31, 2001, the Purchaser shall have
the option, to be exercised until that date, to purchase, at
one or more Additional Closings, up to 1,200 additional
Preferred B Shares. The Purchaser may elect to exercise such
option, in whole or in part, by delivering to the Company a
written notice, not less than five business days prior to the
applicable Closing Date, specifying (A) the Closing Date and
(B) the total number of Preferred B Shares to be purchased at
such Additional Closing.
2.5.3. On such Additional Closing Date, (A) the Purchaser, or the
Trustee, as the case may be, shall deliver to the Company an
amount equal to the Purchase Price multiplied by the number
of Preferred B Shares being purchased at such Closing
(payable in NIS in accordance with the then known
representative rate of the US$ as published by the Bank of
Israel), (B) the Company shall issue and deliver to the
Purchaser a certificate representing such Preferred B Shares
together with a copy of the issuance deed as filed with the
Stamp Tax Authorities and the Registrar of Companies and (C)
the Company and the Purchaser shall execute and deliver a
cross-receipt acknowledging such purchase and sale; provided
however that the Trustee shall be under the obligation to
transfer not more than the funds held by him at that time.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND FOUNDERS
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Each of the Company and Founders, hereby jointly and severally,
represents and warrants to the Purchaser, and acknowledges that the
Purchaser is entering into this Agreement in reliance thereon, as
follows:
3.1. Organization
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The Company is duly organized and validly existing under the laws of
the State of Israel, and has full corporate power and authority to
own, lease and operate its properties and assets, and to conduct its
business as now being conducted and as proposed to be conducted in
accordance with the Business Plan, attached as Schedule 3.1 hereto.
The Company has all requisite power and authority to execute and
deliver this Agreement, and the other agreements contemplated hereby
or which are ancillary hereto, and to consummate the transactions
contemplated hereby and thereby. Copy of the Articles of Association
(the "Articles of Association") of the Company as of the date hereof
is attached hereto as Schedule 3.1. The Company has not taken any
action, or, has not failed to take any action, which action or
failure would preclude or prevent the Company, from conducting its
respective business after the Closing in substantially the manner
heretofore conducted. The Company has all material franchises,
permits, licenses, and any similar authority necessary for the
conduct of its business as now being conducted and as proposed to be
conducted by it in accordance with the Business Plan, the lack of
which could materially adversely affect business, properties, or
financial condition. The Company is not in material default under
any of such franchises, permits, licenses, or other similar
authority.
3.2. Share Capital
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The registered share capital of the Company is Thirty Nine Thousand
One Hundred New Israeli Shekels (NIS 39,100) divided into: (i)
Thirty Six Thousand One Hundred (36,100) Ordinary A Shares of a
nominal value of NIS 1 each (the "Ordinary A Shares"); and (ii)
Three Thousand (3,000) Preferred B Shares of a nominal value of NIS
1 each (the "Preferred B Shares"). Of the Ordinary A Shares (i) Four
Thousand Seven Hundred and Fifteen (4,715) are issued and
outstanding; and (ii) Two Hundred and Eighty Five (285) are reserved
for issuance to the Company's employees under the Company's Stock
Option Plan.
Schedule 3.2 describes all undertakings or commitments to any
employees, former employees, directors or contractors of the Company
concerning grants or issuance of shares in the Company or options to
purchase such shares made by the Company or any director or officer
of the Company and the number of Ordinary Shares reserved for future
grants or issuances of shares in the Company or options to purchase
shares in the Company to any such former employees, employees,
directors, consultants or contractors. Except for the transactions
contemplated by this Agreement and except as described in Schedule
3.2, there are no other share capital, pre-emptive rights,
convertible securities, outstanding warrants, options or other
rights to subscribe for, purchase or acquire from the Company any
share capital of the Company and there are not any contracts or
binding commitments providing for the issuance of, or the granting
of rights to acquire, any share capital of the Company or under
which the Company is, or may become, obligated to issue any of its
securities.
Except as set forth in this Agreement the Company is not under any
obligation to register for trading on any securities exchange any of
its currently outstanding securities or any of its securities which
may hereafter be issued.
Since its date of incorporation, there has been no declaration or
payment by the Company of dividends, or any distribution of any
assets of any kind to any of its shareholders in redemption of or as
the purchase price for any of the Company's securities.
3.3. Ownership of Shares
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A complete and correct list of the shareholdings including all
warrants and options for the issuance of share capital of the
Company immediately prior to and following the Closing is set forth
in Schedules 3.3(a) and (b) respectively. The individuals and
entities identified in Schedule 3.3(a) as the shareholders and
option holders of the Company, immediately prior to the Closing are
the lawful owners of all of the issued and outstanding share capital
and options of the Company and none of the said individuals and
entities owns any other shares, options or other rights to subscribe
for, purchase or acquire any security of the Company. All issued and
outstanding share capital of the Company was duly authorized, and
validly issued and outstanding and fully paid and non-assessable.
3.4. Directors, Officers
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The directors of the Company are Xxxxxxxxx Xxxxxxx, Xxx Xxxx, Xxxxx
Xxxx, Xxxxxx Xxxxxxx and Xxxxx Xxxxxxxx. The sole officer of the
Company is Xxxxxxxxx Xxxxxxx. Except for the agreements attached and
listed in Schedule 3.4, neither the Company nor its Shareholders are
party to any agreement, obligation or commitment, with respect to:
(i) the election of any individual or individuals to the Board; (ii)
any voting agreement or other arrangement among the Company's
shareholders; or (iii) any compensation to be provided to any of the
Company's directors, officers or shareholders.
3.5. Financial Statements
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The Company was established on 3 February, 2000 and has no financial
statements. Except as expressed in Schedule 3.5(a), the Company has
no material liabilities, debts or obligations, whether accrued,
absolute or contingent. As of 31 March, 2000, the total Company's
liabilities are as set forth in Schedule 3.5(b) (excluding
liabilities as a result of, or in connection with, this Agreement).
Except as set forth in Schedule 3.5(c) since its inception the
Company has operated in the ordinary and usual course of business,
and there has not been to the best of their knowledge, information
and belief:
(i) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets,
properties, condition (financial or otherwise), operating
results, prospects or business of the Company (as such business
is presently conducted and as it is proposed to be conducted in
accordance with the Business Plan);
(ii) any waiver by the Company of a valuable right; or
(iii) any event or condition of any character that would materially
adversely affect the assets, properties, condition (financial
or otherwise), prospects or business of the Company (as such
business is presently conducted and as it is proposed to be
conducted).
3.6. Authorization; Approvals
------------------------
All corporate action on the part of the Company necessary for the
authorization, execution, delivery, and performance of all its
obligations under this Agreement has been (or will be) taken prior
to the Closing. This Agreement, when executed and delivered by or on
behalf of the Company at the Closing, shall constitute the valid and
legally binding obligations of the Company, legally enforceable
against the Company in accordance with its terms. No consent,
approval, order, license, permit, action by, or authorization of or
designation, declaration, or filing with any governmental authority
on the part of the Company is required that has not been, or will
not have been, obtained by the Company prior to the Closing in
connection with the valid execution, delivery and performance of
this Agreement.
3.7. Compliance with Other Instruments
---------------------------------
Except as otherwise set forth in Schedule 3.7, the Company is not in
default: (a) under its Articles of Association ("Governing
Instruments"); (b) under any material note, indenture, mortgage,
lease, agreement, contract, purchase order or other instrument,
document or agreement to which the Company is a party or by which it
or any of its property is bound or affected (the "Agreements"); or
(c) with respect to any law, statute, ordinance, regulation, order,
writ, injunction, decree, or judgment of any court or any
governmental department, commission, board, bureau, agency or
instrumentality, domestic, or with respect to countries in which the
Company operates, including but not limited to the Companies Law
1999, (the "Laws and Regulations"), which default, in any such case
described above, would materially adversely affect or in the future
is reasonably likely to materially adversely affect the Company's
business, condition (financial or otherwise), affairs, operations or
assets. No third party is in default under agreements to which the
Company is a party or by which it or any of its property is
affected. To the best of the Company's and the Founder's information
knowledge and belief, the Company, is not a party to or bound by any
order, judgment or decree of any governmental authority, agency,
court, tribunal or arbitrator.
3.8. No Breach
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Except as described in Schedule 3.8 hereto, as of the Closing,
neither the execution and delivery of this Agreement nor compliance
by the Company with the terms and provisions hereof, will conflict
with, or result in a material breach or violation of, any of the
terms, conditions or provisions of the Governing Instruments,
Agreements or Laws and Regulations, as such terms are defined in
Section 3.7 above. Such execution, delivery and compliance will not:
(a) give to others any rights, including rights of termination,
cancellation or acceleration, in or with respect to any agreement,
contract or commitment referred to in this paragraph, or to any of
the properties of the Company; or (b) otherwise require the consent
or approval of any person, which consent or approval has not
heretofore been obtained.
3.9. Records
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Except as described in Schedule 3.9, the complete minute book of the
Company which has been provided to the Purchaser contains accurate
and complete copies of the minutes of every meeting of the Company's
shareholders and board of directors (and any committee thereof) at
which resolutions were adopted which concerned any subject material
to the Company's business or which concerned the Company's shares,
shareholders, employees or directors. The corporate records of the
Company have been maintained in accordance with all applicable
statutory requirements and are complete and accurate in all material
respects.
3.10. Ownership of Assets
-------------------
Complete and correct copies of leases and licenses of property
leased or licensed to the Company are listed in Schedule 3.10
hereto. Except as set forth in Schedule 3.10 hereto: (i) the Company
has good and marketable title to all of the properties and assets,
both real and personal, tangible and intangible, that it purports to
own, including the properties and assets reflect on the Financial
Statements, and it is not subject to any mortgage, pledge, lien,
security interest, conditional sale agreement, encumbrance or charge
except routine statutory liens securing liabilities not yet due and
payable and minor liens, encumbrances, restrictions, exceptions,
reservations, limitations and other imperfections which do not
materially detract from the value of the specific asset affected or
the present use of such asset; and (ii) the Company is not in
default or in breach of any material provision of its leases or
licenses and holds a valid leasehold or licensed interest in the
property it leases or that is licensed to it.
3.11. Intellectual Property and Other Intangible Assets
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3.11.1. Schedule 3.11.1(a) is a full and complete list of all of the
intellectual property which the Company owns or has the
right to use, including all patents, trademarks, service
marks, trade names and copyrights, and applications,
licenses and rights with respect to the foregoing, and all
trade secrets, including know-how, inventions, designs,
processes, works of authorship, computer programs and
technical data and information (collectively herein
"Intellectual Property") used and sufficient for use in the
conduct of its business as now conducted (including, without
limitation, the development, manufacture, operation and sale
of all products and services sold by the Company). Except as
detailed in Schedule 3.11.1(b), (i) all of the Intellectual
Property is free and clear of all liens, claims and
restrictions, without infringing upon or violating any
right, lien, or claim of others, including without
limitation former employees and former employers of the past
and present employees of the Company, and (ii) the Company
is not obligated, nor is under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to
any owner or licensee of, or other claimant to, any patent,
trademark, service xxxx, trade name, copyright or other
intangible asset, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
3.11.2. Except as set forth in Schedule 3.11.2(a) any and all
Intellectual Property of any kind currently being developed
by any employee of the Company while in the employ of the
Company, is the property solely of the Company. The Company
has taken reasonable security measures to protect the
secrecy, confidentiality and value of all the Intellectual
Property, which measures are satisfactory to the Company's
management and board of directors. As of the Closing each of
the Company's employees will be party to non-disclosure,
invention assignment and non-compete undertakings. True and
correct copies of all agreements regarding ownership and
treatment of Intellectual Property with each of the
Company's employees and other persons who, either alone or
in concert with others, developed, invented, discovered,
derived, programmed or designed the Intellectual Property,
or who have or had knowledge of or access to information
about the Intellectual Property and whose names are listed
in Schedule 3.11.2(b), and who have entered into such
agreements with the Company have been delivered to the
Purchaser and all such agreements are in form and substance
satisfactory to the Company's management.
3.11.3. The Company has not received any communications alleging
that the Company has violated or by conducting its business
as proposed, would violate, any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. None
of the Company's employees, to the best of the Company's and
the Founders knowledge, information and belief, is obligated
under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to
any judgment, decree or order of any court or administrative
agency, that would interfere with the use of such employee's
best efforts to promote the interests of the Company that
would conflict with the Company's business as conducted and
as proposed to be conducted.
3.12. Taxes
-----
Except as set forth in Schedule 3.12, the Company has accurately
prepared and timely filed all income, property, "value added",
payroll and other tax returns and filings that are required to be
filed by them (the "Tax Returns") and have paid or made provision
for the payment of all amounts due pursuant to such returns. The Tax
Returns are true and complete in all material respects. No
deficiency assessment or proposed adjustment of income or payroll
taxes of the Company is pending and the Company has no knowledge, of
any proposed liability for any tax to be imposed.
3.13. Contracts
---------
Schedule 3.13 contains a true and complete list of all material
contracts and agreements (the "Material Contracts") to which the
Company is a party or by which its property is bound. Each of the
Material Contracts is in full force and effect, and neither the
Company nor any other party thereto is in material breach thereof.
True and correct copies of each of the Material Contracts have been
delivered to the Purchaser.
For the purpose hereof the term "Material" shall include any
undertaking whose aggregate value exceeds $12,000.
3.14. Litigation
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3.14.1. Except as described in Schedule 3.14.1(a), no action,
proceeding or governmental inquiry or investigation is
pending or, to the Company's and the Founders' best
knowledge, threatened against the Company or to the best of
the Company's and the Founders' knowledge against any of the
Company's officers, directors or employees (in their
capacity as such) or any of the Company's properties before
any court, arbitration board or tribunal or administrative
or other governmental agency, nor is the Company aware that
there is any basis for the foregoing. The foregoing
includes, to the Company's and the Founders' best knowledge,
without limiting its generality, actions pending or
threatened involving the prior employment of any of the
Company's employees or use by any of them in connection with
the Company's business of any information, property or
techniques allegedly proprietary to any of their former
employers. Except as described in Schedule 3.14.1(b), the
Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or
governmental agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently
pending or that the Company intends to initiate.
3.14.2. Except as described in Schedule 3.14.2 no action, proceeding
or governmental inquiry or investigation is pending, or to
the Company's and the Founders' best knowledge, threatened
against the Company, which might have a material adverse
effect on the Company, before any court, arbitration board
or tribunal or administration or other governmental agency.
3.15. No Public Offer
---------------
Neither the Company nor anyone acting on their behalf has offered
securities of the Company, for issuance or sale to, or solicit any
offer to acquire any of the same from, anyone so as to make issuance
and sale of the Preferred B Shares hereunder a public offering under
the US Securities Act of 1933 or the Securities Exchange Act of
1934, as amended or not exempt from the prospectus publication
requirements of the Israeli Securities Law 1968. None of the issued
and outstanding shares of the Company have been offered or sold in
such a manner as to make the issuance and sale of such shares not
exempt from such registration requirements, and all such shares have
been offered and sold in compliance with the Israeli securities
laws.
3.16. Interested Party Transactions
-----------------------------
Except as set forth in Schedule 3.16, no officer or shareholder or
director of the Company, or any affiliate of any such person, entity
or the Company, has or has had, either directly or indirectly: (a)
an interest in any person or entity which: (i) furnishes or sells
services or products which are furnished or sold or are proposed to
be furnished or sold by the Company; or (ii) purchases from or sells
or furnishes to the Company any goods or services; or (b) a
beneficial interest in any contract or agreement to which the
Company is a party or by which it may be bound or affected. There
are no existing material arrangements or proposed material
transactions between the Company and any officer, director, or
holder of more than 5% of the issued share capital of the Company,
or, to the best of the Company's and the Founders' knowledge, any
affiliate or associate of any such person. Except as detailed in
Schedule 3.16, no employee, shareholder, officer, or director of the
Company is indebted to the Company, nor is the Company indebted (or
committed to make loans or extend or guarantee credit) to any of
them, except for the reasonable advances to employees, for out of
pocket expenses in the ordinary course of business.
3.17. Employees
---------
As of the date hereof, except as set forth in Schedule 3.17(a), the
Company, has no deferred compensation or stock option plan covering
any of its officers or employees (including any employee benefit
plans).
Except as described in Schedule 3.17(b), the issuance and sale of
the Preferred B Shares will not give any employee the right to
terminate his employment and receive severance or other payments
from the Company or result in the acceleration or vesting of any
outstanding option or option share issued by the Company.
To the best of the Company's and the Founders' knowledge, neither
the Founders nor any employee of the Company is in violation of any
term of any employment contract, patent or other proprietary
information disclosure agreement, or any other contract or
agreement, relating to the right of any such employee to be employed
by the Company because of the nature of the business conducted or
proposed to be conducted by the Company or any other reason, and the
continued employment by the Company of its respective present
employees will not result in any such violation.
Except as set forth in Schedule 3.17(c), the Company made all
payments and withheld all such monies as is required under the
Israeli laws for the benefits of its employees. The Company has made
all payments to the National Insurance Institute for and on behalf
of its employees.
3.18. No Unlawful Payments
--------------------
Neither the Company nor any of the Founders, nor any director,
officer, agent or employee of any such person, or to the best of the
Company's and the Founders' knowledge, any other person associated
with or acting for or on behalf of the Company, has directly or
indirectly (a) made any unlawful contributions, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any person,
private or public, regardless of form, whether in money, property or
services, (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, or (iii)
to obtain special concessions or special concessions already
obtained, for or in respect of the Company, or (b) established or
maintained any fund or asset that has not been recorded in the books
and records of the Company, or (c) taken any other action in
violation of any law of the State of Israel.
3.19. Insurance
----------
The Company has insurance policies as detailed in Schedule 3.19.
3.20. Finders Fee
-----------
No agent, broker, investment banker, person or firm acting in a
similar capacity on behalf of or under the authority of the Company
is or will be entitled to any broker's or finder's fee or any other
commission or similar fee, directly or indirectly, on account of any
action taken by the Company in connection with any of the
transactions contemplated under the Agreement.
3.21. Year 2000 Compliance
--------------------
The Company warrants that the Company's products and or software
(the "Software") is "Year 2000 Compliant", which means the Software
is designed to:
3.21.1. correctly and unambiguously handle and process date
information before, during and after 1 January 2000. This
includes, but is not limited to, accepting date input,
providing date output, storing and retrieving dates and the
ability to perform calculations on dates or portions of
dates.
3.21.2. correctly process functions that are programmed to commence
and/or end on a particular date, including, but not limited
to month-end, year-end, leap year and any combination
thereof, irrespective of the change in the century
identifier; and
3.21.3. the Software responds to two-digit year date input in a way
that resolves the ambiguity as to the century in a
disclosed, defined and predetermined manner; and to store
and provide output of date information in ways that are
unambiguous as to the century.
3.21.4. The Company's computer system and software or the Company or
its customers were not and shall not be affected by the year
2000 issues.
3.22. Business Plan
-------------
The business plan attached in Schedule 3.23 (the "Business Plan")
fully reflects the business conducted and proposed to be conducted
by the Company. The Business Plan has been prepared in good faith
and with reasonable professional care by the Company and the
Founders, and such parties are not aware of any information that
renders the Business Plan untrue or incomplete in any material way.
The Parties are aware that the Business Plan is based upon various
estimations and assumptions, the materialization of which is
uncertain and cannot be guaranteed. Nevertheless, as of the date
hereof and the Closing Date, the Company does not know of any
material fact which contradicts such estimation and assumption in
any material way.
3.23. Full Disclosure
---------------
Neither this Agreement nor any agreement or document made or
delivered by the Company or the Founders in connection herewith
contains any untrue statement of a fact or omits to state a fact
necessary to make the statements herein or therein not misleading.
The representations and warranties of the Company, and the Founders
as set forth hereinabove fully and accurately reflect the conditions
and state of the Company and they contain substantially all
information and data known to the Company and/or the Founders which
are or might be relevant to a third party who is considering to make
transactions identical to the transaction contemplated hereby.
3.24. Effectiveness; Survival; Indemnification
----------------------------------------
Each representation and warranty herein is deemed to be made on the
date of this Agreement and at each Closing Date. In the event of any
breach or misrepresentation of any covenant, warranty or
representation made by the Company under this Agreement, the
Company, and the Founders jointly and severally shall indemnify the
Purchaser and hold him harmless from any and all actual liquidated
loss, damage, liability and reasonable expense (including reasonable
legal fees and costs), excluding any liability for consequential
loss or loss of profit sustained or incurred by the Purchaser as a
result of or in connection with said breach or misrepresentation
provided that such losses exceed in the aggregate sum of US$ 25,000.
Notwithstanding, any other provision of this Agreement to the
contrary, the liability under this Section to the Purchaser shall be
limited to the amount of the total purchase price paid by the
Purchaser for the Preferred B Shares purchased by it under this
Agreement and the Warrants, if exercised, plus interest of 10% per
year, and may arise upon written notice to the Company with respect
to all representations, except those set forth in Sections 3.2,
("Share Capital") and 3.11 ("Intellectual Property"), only during a
period of thirty-six (36) months, beginning at the Closing. The
liability with respect to sections 3.2 and 3.11 shall be for a
period of seven (7) years beginning at the Closing. The Parties
agree that this Section 3.25 shall constitute a separate agreement
for the requirements of Section 19 of the Israeli Limitations Law,
1958.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser hereby represents and warrants to the Company as follows:
4.1. Organization
------------
It is duly organized, validly existing and in good standing under
the laws of the State of Israel.
4.2. Enforceability
--------------
This Agreement and the agreements to be executed by the Purchaser
under this Agreement, when executed and delivered by the Purchaser,
will constitute the valid, binding and enforceable obligations of
the Purchaser, legally enforceable against the Purchaser in
accordance with its terms, except: (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws
of general application affecting enforcement of creditors' rights
generally; and (ii) as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable
remedies.
4.3. Authorization
-------------
The execution, delivery and performance of the obligations of the
Purchaser hereunder have been duly authorized by all necessary
corporate action prior to the Closing and would not be precluded
under any agreement or restrictive covenant entered into by the
Purchaser. No legal, contractual or other impediment known to the
Purchaser would prevent him from entering into and fully complying
with his obligations herein.
4.4. High Risk Investment
--------------------
The Purchasers have the requisite knowledge and experience in
financial and business matters to be capable of evaluating the
merits and risks of an investment in the Company and recognize that
the purchase of the Preferred B Shares involves a high degree of
risk in that, among other things: (i) an investment in the Company
is highly speculative, and only investors who can afford the loss of
their entire investment should consider investing in the Company;
and (ii) the Business Plan has been reviewed and approved by the
Purchaser, and the Purchaser is aware that the Business Plan is
based upon various estimations and assumptions, the materialization
of which is uncertain and cannot be guaranteed.
4.5. Transferability and Market for the Shares
-----------------------------------------
The Purchaser warrants and represents that: (i) it is not acquiring
the Preferred B Shares with a short term view to, or for resale in
connection with, any distribution thereof; (ii) the transferability
of the Preferred B Shares is extremely limited; (iii) no public
market now exists for any of the Preferred B Shares and there is no
assurance that a public market will ever exist for such shares; (iv)
none of the Preferred B Shares have been registered under the
securities laws of the United States or Israel or the laws of any
other jurisdiction, and the Purchaser agree that the Preferred B
Shares may not be sold, offered for sale, transferred, pledged,
hypothecated or otherwise disposed of except in compliance with
applicable law; and (v) the Purchaser has read the representations
and schedules set forth in Section 3 and is entering into this
Agreement in reliance thereon.
4.6. Financial Resources
-------------------
The Purchaser has the present financial resources required to
fulfill all of its financial obligations hereunder.
4.7. Full Disclosure
---------------
Neither this Agreement nor any certificate made or delivered in
connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements
herein or therein not misleading, in view of the circumstances in
which they were made.
The foregoing representations, agreements and undertakings and
acknowledgments are made by the Purchaser with the intent that they
be relied upon in determining its suitability as a purchaser of the
Preferred B Shares and the Purchaser hereby agrees that such
representations, agreements, undertakings and acknowledgments are
made as of the date of the Closing, and shall survive thereafter for
a period of 36 months.
5. CONDITIONS PRECEDENT TO CLOSING BY THE PURCHASER
------------------------------------------------
The obligations of the Purchaser to purchase the Preferred B Shares and
pay the Purchase Price at the Closings are subject to the fulfillment at
or before the relevant Closing of the following conditions precedent, any
one or more of which may be waived in whole or in part by the Purchaser,
which waiver shall be at the sole discretion of the Purchaser:
5.1. Representations and Warranties
------------------------------
The representations and warranties made by the Company and the
Founders in this Agreement shall have been true and correct when
made, and shall be true and correct as of each Closing as if made on
the date of such each Closing.
5.2. Covenants
---------
All covenants, agreements, and conditions contained in this
Agreement to be performed or complied with by the Founders and the
Company, prior to the Closing, including but not limited to the
performance of the actions and the delivery of the documents
specified in Sections 2.3 and 2.4, shall have been performed or
complied with prior to or at the relevant Closing.
5.3. Consents, etc.
--------------
The Company shall have secured all permits, consents and
authorizations that shall be necessary or required to consummate
this Agreement and to issue the Preferred B Shares to be purchased
by the Purchaser at the Closing and upon the exercise of the
Warrants, all of which permits, consents and authorizations are
listed in Schedule 5.3.
5.4. No Action, Proceeding, etc.
---------------------------
No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain,
prohibit, prevent, or obtain substantial damages in respect of, or
which is related to, or arises out of, this Agreement or the
consummation of the transactions contemplated hereby, or which
affects or may affect the right of the Purchaser to purchase the
Preferred B Shares.
5.5. No Adverse Change
-----------------
There shall not have occurred prior to the relevant Closing any
material adverse change or development in the Company's business, or
in the value or utility of its assets, or in its ability to
consummate the transactions contemplated hereby.
5.6. Ordinary Course of Business
---------------------------
The Company shall have continued to operate its business in the
ordinary course, and shall not have issued any additional
securities, nor declared any dividends, or made any distributions.
6. CONDITIONS TO CLOSING BY THE COMPANY
------------------------------------
The Company's obligations to sell and issue the Preferred B Shares at
each Closing to the Purchaser are subject to the fulfillment, by
Purchaser, at or before the relevant Closing of the following conditions
which conditions may be waived in whole or in part by the Company, and
which waiver shall be at the sole discretion of the Company.
6.1. Representations and Warranties
------------------------------
The representations and warranties made by the Purchaser in this
Agreement shall have been true and correct when made, and shall be
true and correct as of the date of each Closing.
6.2. Purchase Price
--------------
The Purchaser shall have transferred to the Company the applicable
Purchase Price.
7. AFFIRMATIVE COVENANTS
--------------------
7.1. Use of Proceeds
---------------
The Company will use the proceeds of the issuance and sale of the
Preferred B Shares to pay any outstanding debt it has, and in
accordance with the Business Plan, attached hereto as Schedule 3.23.
7.2. Financial Statements
--------------------
The Company shall deliver to the Purchaser, for so long as he is the
record holder of shares and/or warrants and/or options, in either
case constituting or exercisable into at least five percent (5%) of
the Company's issued and outstanding share capital on an as
converted basis:
7.2.1. as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, a
consolidated balance sheet of the Company as of the end of
such year, and statements of income and statements of cash
flow of the Company for such year, setting forth in each case
in comparative form the figures for the previous fiscal year,
all in reasonable detail, prepared in accordance with Israeli
generally accepted accounting principles ("GAAP"), audited by
a firm of Independent Certified Public Accountants and
accompanied by an opinion of such firm which opinion shall
state that such balance sheet and statements of income and
cash flow have been prepared in conformity with GAAP, and
present fairly in all material aspects the financial position
of the Company as of their date, and that the audit by such
accountants in connection with such financial statements has
been conducted in accordance with generally accepted auditing
standards; and
7.2.2. as soon as practicable, but in any event within thirty (30)
days after the end of each quarter of each fiscal year of the
Company, an unaudited consolidated balance sheet of the
Company as at the end of each such period and unaudited
consolidated statements of: (i) income; and (ii) cash flow of
the Company for such period and, in the case of the first,
second and third quarterly periods, for the period from the
beginning of the current fiscal year to the end of such
quarterly period, setting forth in each case, in comparative
form the figures for the corresponding period of the previous
fiscal year, all in reasonable detail and except as otherwise
stated therein, fairly presenting the financial position of
the Company as of their date subject to: (x) there being no
footnotes contained therein; and (y) changes resulting from
year-end audit adjustments.
7.2.3. Upon the request of the Purchaser, the Company will promptly
deliver to the Purchaser such and any reports as may be
required by the Purchaser in order to enable the Purchaser to
be in compliance with (i) the US and/or Israeli Securities
Laws and regulations (ii) the Tel Aviv Stock Exchange's
regulations, (iii) requests and/or demands of the Israeli
Securities Authority or the US SEC, and (iv) any law or
regulation to which the Purchaser is subject to.
7.3. Annual Plan; Quarterly Report
-----------------------------
The management of the Company shall establish an annually operating
plan and budget for the Company (the "Annual Plan") in consultation
with the Board. The Annual Plan for the following year shall be
submitted to the Board of Directors for its approval at least forty
(40) days prior to the first day of the year covered by such Annual
Plan.
The management of the Company shall submit to the Company's Board as
soon as practicable, but in any event within thirty (30) days after
the end of each calendar quarter, an unaudited consolidated balance
sheet of the Company as at the end of such calendar quarter, and an
unaudited estimated consolidated statement of income and statements
of cash flow for such calendar quarter.
7.4. Termination of Financial Information Rights
-------------------------------------------
The Company's obligation to deliver the financial statements and
other information under Sections 7.2 and 7.3 shall terminate and
shall be of no further force or effect upon the closing of the IPO
of the Company. Thereafter, the Company shall deliver to Purchaser
such financial information as the Company from time to time provides
to other holders of its shares; provided, that the Company's
obligations under Sections 7.2 and 7.3 shall be restored if the
Company subsequently ceases to be subject to the informal and
reporting requirements of the relevant countries' or states'
securities law.
Notwithstanding the above, the Company's obligation to deliver the
financial statements and other information under Sections 7.2.3
shall terminate and shall be of no further force or effect upon the
Purchaser's holdings in the Company (shares and/or warrants and/or
options, in on an as converted basis) being reduce to less than 5%.
7.5. Accounting
----------
The Company will maintain a system of accounting established and
administered in accordance with Israeli GAAP consistently applied,
and will set aside on its books all such proper reserves as shall be
required by Israeli GAAP.
7.6. Composition of the Board
------------------------
The Boards of Directors of the Company shall comprise up to eight
(8) directors, to be nominated as follows:
7.6.1. Three (3) directors shall be designated and elected by the
holders of the Preferred B Shares, for as long as the holders
of the Preferred B Shares hold at least ten percent (10%) of
the total issued and outstanding share capital of the
Company. Upon the Preferred B Shareholders' being reduced to
less than 10% Percent ownership the number of their directors
shall be reduced to two directors. The appointment and
removal of such directors and filling of any vacancy with
respect to such positions shall be made by a written notice
to the Company.
Notwithstanding the above, it is agreed that (i) in case
there shall not be an Additional Closing until January 31,
2001- from February 1, 2001 onwards, the number of the
directors of the Company shall be reduced to 6 out of which
only 1 director shall be designate by the holders of the
Preferred B Shares; and (ii) in case there shall be an
Additional Closing until January 31, 2001 but the Warrants
shall not be exercised up to that date- from February 1, 2001
onwards, the number of the directors of the Company shall be
reduced to 7 out of which only 2 directors shall be designate
by the holders of the Preferred B Shares.
7.6.2. Up to five (5) Directors shall be designated by the majority
of the holders of the Ordinary A Shares. The appointment and
removal of such directors and filling of any vacancy with
respect to such positions shall be made by a written notice
to the Company.
7.6.3. The parties hereto agree that as long as there are at least 2
directors which were nominated by the holders of the
Preferred B Shares (i) the Chairman of the Board (the
"Chairman") shall be one of the Directors elected on behalf
of the holders of Preferred B Shares and (ii) each Board's
committee shall includes at least one board member appointed
by the holders of the Preferred B Shares.
7.7. Board and Shareholders Resolutions
----------------------------------
7.7.1. Subject to any applicable law, and to the Amended Articles,
as applicable, all resolutions and actions of the Board of
Directors and of the shareholders of the Company shall be
taken by a majority vote. Notwithstanding the aforesaid,
until the consummation of an IPO of the Company, and as long
as there are at least 2 directors which were nominated by the
holders of the Preferred B Shares, the Company shall not take
any of the following resolutions or actions except if the
directors designated by the holders of the Preferred B
Shares, or in case of a general meeting the majority holders
of the Preferred B Shares, consented in writing to such
resolution or action prior thereto: (i) the effecting of the
IPO of the Company; (ii) adopt any amendment of the
Memorandum, or Amended Articles (iii) adopt any action which
would have the effect of amending the specific rights,
preferences or privileges of the Preferred B Shares; (iv)
only after an Additional Closing - authorize or issue any
equity securities of any class or other securities
convertible into shares of the Company, nor enter into any
contract or grant any option for the issue of any such
securities; (v) merge with or consolidate into any
corporation, firm or entity, or sell or otherwise dispose of
all or substantially all of its assets, tangible or
intangible; (vi) enter into voluntary liquidation or effect
the winding up of the Company; (vii) incur debt, that was not
included in the respective Annual Plan or yearly budget,
which exceeds the amount of US$20,000; (viii) enter into any
transactions with any officer, director, shareholder or other
Interested Party (as such term is defined in the Israeli
Securities Law - 1968, or any member of the family or
affiliate of such Interested Party, person controlled by it,
person under common control or person it) or any other party
related, directly or indirectly, to any of them; (ix)
increase the number of Directors above eight (8) (or 7, as
the case may be under the terms of Section 7.6.1) or change
the manner of their designation to the Board of Directors;
(x) declare or pay any dividend or other distribution of
cash, shares, or other assets to the Company's shareholders
in their capacity as such; (xi) effect a fundamental change
in the Company's business; (xii) approve the Company's yearly
budget and plan; (xiii) approve and fix signatory rights on
behalf of the Company; and (xiv) the appointment and
compensation of the Company's Chief Executive Officer, Chief
Operating Officer, Chief Technical Officer and Chief
Financial Officer.
7.7.2. As long as there are at least 2 directors nominated by the
holders of the Preferred B Shares, in the event that the
Board of Directors of the Company is unable to reach a
majority with respect to the following issues, the Chairman
shall have the casting vote: (i) approval of the budget of
the Company; (ii) the issuance of any debt or equity
securities by the Company; (iii) any proposed change in the
Line of Business of the Company; (iv) approve and fix
signatory rights on behalf of the Company; and (v) any
proposal for the Company to enter into an agreement to merge
into, acquire, or be acquired by, another company, provided,
however, that such company is not owned or controlled by the
Preferred B Shareholders.
7.8. Information Rights
------------------
The Company will permit the holders of Preferred B Shares or their
authorized representatives, upon reasonable prior notice, at all
reasonable times during normal business hours and as often as
reasonably requested, to visit and inspect any of the properties of
the Company, including its books and records and lists of security
holders, and to make extracts therefrom and to discuss the affairs,
finances and accounts of the Company with its officers, provided,
however, that any inspections of books and records made by the
holders of Preferred B Shares in accordance with the procedures of
this Section 7.8 shall be approved by, and made together with, one
member of the Board of Directors.
The Company will promptly advise the holders of Preferred B Shares
in writing of each suit or proceeding commenced or threatened
against the Company which, if adversely determined, would result in
a material adverse effect on the Company, whether on its business
and financial condition, or otherwise.
The Company will also furnish to the holders of Preferred B Shares
with reasonable promptness such other information and data with
respect to the Company as the holders of Preferred B Shares, may
from time to time reasonably request.
7.9. Certain Transfers
-----------------
In the event that any person or entity makes an offer to purchase
all of the issued and outstanding share capital of the Company or to
merge the Company with or into another entity, and shareholders
holding more than 75% of the issued and outstanding share capital of
the Company on an as converted basis indicate their acceptance of
such offer and such offer is approved by a majority of the Board of
Directors, then, at the closing of such offered purchase of all the
issued and outstanding issued and outstanding share capital of the
Company or merger, all of the holders of Ordinary Shares and
Preferred Shares in the Company will transfer such Ordinary Shares
or Preferred Shares to such person or entity; provided, however,
that the consideration for all of the Company's share capital shall
in any event be allocated among the members in accordance with the
applicable provisions of the Amended Articles.
7.10. Pre-emptive Rights; Rights of First Refusal, Tag Along etc.
-----------------------------------------------------------
Except for a transfer of shares by a shareholder to its Permitted
Transferee(s), as such term is defined in the Amended Articles, any
issuance or transfer of shares of the Company shall be subject to
the pre-emptive rights, rights of first refusal, Tag Along and other
rights of the Preferred B Shareholders and other shareholders (when
applicable) as set forth in the Amended Articles.
7.11. Restrictions on Sales
---------------------
As long as there are at least 2 directors nominated by the Preferred
B Shares, each of the Founders hereby undertakes not to sell,
assign, transfer, pledge, hypothecate, mortgage or dispose of, by
gift or otherwise, or in any way encumber any of their shares in the
Company (or in companies under their control which are shareholders
in the Company) for a period of three (3) years following the
Closing, other than with the consent of the holders of Preferred B
Shares. Any transfers after the aforementioned periods of
restriction, shall be subject to the restrictions, if any, set forth
in the Articles of Association of the Company as shall be in effect
following the Closing.
In case of a Founder which is a company (in this paragraph
"ComFounder"), prior to May 1, 2003, (i) neither of the shareholders
in such ComFounder shall sell, assign, transfer, pledge,
hypothecate, mortgage or dispose of, by gift or otherwise, or in any
way encumber (each of the foregoing being referred to as a
"Disposition") all or any of the shares of the capital stock of such
ComFounder, of any class or series, now owned or hereafter acquired
by him (such shares are hereinafter collectively referred to as the
"Securities"); and (ii) such ComFounder shall not issue, or
undertake to issue, to any person or entity which is not a Founder,
Securities in such ComFounder; provided however that such
Disposition or issuance of Securities to a person or entity which is
not a Founder, shall be permitted as long as a Founder which is an
individual shall continue to own Directly in such ComFounder more
than 50% of the equity and voting capital of such ComFounder.
The restrictions provided in this Section 7.11 shall terminate upon
the consummation of an IPO to the Company or in case whereby the
Company shall merge into, acquire, or be acquired by, another
company. It is further agreed that notwithstanding the restrictions
provided in this Section 7.11, Misgav Com. Ltd. shall be permitted
to sell up to 20% of its holdings in the Company.
7.12. Right of Co-Sale
----------------
7.12.1. From and after a period of three (3) years from the Closing,
should any of the Founders (in each case, the "Offeree")
receive one or more bona fide offers (collectively, the
"Offer"), from any person or entity (the "Offeror") to
purchase from the Offeree any of the shares in the Company
owned by the Offeree, which Offer the Offeree intends to
accept, such Offeree shall promptly notify the holders of
Preferred B Shares in writing of the name and address of the
Offeror and terms and conditions of such Offer. In the event
that the holders of Preferred B Shares, or part thereof,
wish to join in the sale (the "Selling Holders of Preferred
Shares"), they shall notify the Offeree thereof in writing,
with a copy to the Company, within fifteen (15) business
days of receipt by them of the copy of the Offer. If no such
notice is received by the Offeree within the specified time,
the Offeree(s) shall be under no restriction with respect to
the sale of the shares to the Offeror. If the Offeree
receives notice from the Selling Holders of Preferred B
Shares that they wish to join in the sale, then the Offeree
shall not sell any shares to the Offeror unless the Offeror
agrees to purchase from the Selling Holders of Preferred B
Shares such percentage of the shares being offered under the
Offer, as is equal to the Selling Holders of Preferred B
Shares percentage shareholding of the issued and outstanding
share capital of the Company.
7.12.2. As long as there are at least 2 directors which were
nominated by the holders of the Preferred B Shares, in the
event of a proposed acquisition of shares of the Company
from the holders of the Preferred B Shares, the holders of
the Preferred B Shares shall not sell any of the Preferred B
Shares subject to said acquisition, unless such purchaser
agrees to purchase concurrently from the holders of the
Preferred B Shares, a pro rata portion of the shares of the
Founders, as reflects the ratio between the percentage of
issued shares of the Company held at such time by the
contemplated sellers and the percentage of issued shares of
the Company held by the Founders.
7.12.3. The provisions of Sections 7.11 and 7.12 shall not derogate
from any right of first refusal to purchase shares being
offered for sale pursuant this Agreement or the Company's
Articles of Association as may be in effect from time to
time.
7.13. Registration Rights
-------------------
The shareholders of the Company shall have the registration rights
set forth in Schedule 7.13 attached hereto.
8. RIGHTS OF PREFERRED B SHARES
----------------------------
The Company, Shareholders and the Founders covenant that the Preferred B
Shares shall have, inter alia, the following rights and privileges, as
more fully set forth in the Amended Articles:
8.1. Liquidation Preference
----------------------
8.1.1. In the event of: (i) any dissolution or liquidation of the
Company; or (ii) the appointment of a receiver or liquidator
with respect to all or substantially all of the Company's
assets: (A) the holders of the Preferred B Shares at such
event, shall be entitled to receive, prior to and in
preference to any payments to any of the holders of any other
classes of shares of the Company, in full, the U.S. Dollar
amount paid for such Preferred B Shares plus interest on such
amount of 6% per year (the "Preferred B Preference Amount").
If the assets thus distributed among the holders of the
Preferred B Shares shall be insufficient to permit the
payment to such holders of the full Preferred B Preference
Amount, then the entire assets available for distribution
shall be distributed pro-rata among the holders of the
Preferred B Shares in proportion to the Preferred B
Preference Amount each such holder would otherwise have been
entitled to receive; and (B) after payment to the holders of
the Preferred B Shares of the Preferred B Preference Amounts,
the entire remaining assets and funds of the Company legally
available for distribution, if any, shall be distributed
ratably to the holders of all Ordinary Shares and Preferred B
Shares (treating the Preferred B Shares on an as converted
basis), in each case in proportion to the nominal value of
the shares then held by them; provided that the amounts
distributed to the holders of the Preferred B Shares under
(A) (after the distribution under (A)) shall be subtracted
from the amounts to be paid to the holders of the Preferred B
Shares under (B).
8.2. Event of Deemed Liquidation
---------------------------
8.2.1. Upon the sale by the Company of all or substantially all of
its assets in consideration for cash, ("Event of Deemed
Liquidation"), the holders of Preferred B Shares shall be
entitled, in accordance with provisions as more fully
described in the Amended Articles, to treat the Event of
Deemed Liquidation as a dissolution or liquidation (as
referred to in Section 8.1 above), and shall entitle the
shareholders of the Company to receive at the closing of such
Event of Deemed Liquidation, in cash, securities or other
property (valued as provided in the Amended Articles)
amounts, in accordance with Section 8.1 above, as applicable,
as if all consideration being received by the Company and its
shareholders in connection with such Event of Deemed
Liquidation were being distributed in a dissolution or
liquidation.
8.3. Conversion of Preferred B Shares
--------------------------------
Each Preferred B Share shall be convertible into one Ordinary Share.
Initially, the conversion ratio shall be one-to-one, but such
conversion ratio shall be adjusted in accordance with any
recapitalization event.
Each Preferred B Share shall be convertible into Ordinary Shares as
aforesaid at any time, at the discretion of the holder of such
Preferred B Share, and automatically (i) upon a decision of the
holders of at least 85% of the voting power of the Preferred B
Shares to convert the Preferred B Shares; and (ii) at immediately
prior to the consummation of the IPO of the Company, to the extent
that such conversion is required by the underwriter as a condition
to the IPO.
8.4. Anti-Dilution.
-------------
Until the consummation of an IPO of the Company, if the Company
issues Additional Shares at a price per share lower than the price
per share paid by the Purchaser for each Preferred B Share, the
Company shall immediately issue the holders of Preferred B Shares
sufficient additional Preferred B Shares, for no additional
consideration, as if the Purchaser had made their investment based
on such lower price (Full Ratchet adjustment), all upon the terms as
more fully set forth in the Amended Articles. For the purpose of
this Section, the term "Additional Shares" shall mean any shares
issued by the Company other than: (i) shares issued to employees,
officers, consultants or directors of the Company, under an Employee
Stock Option Plan including future option plans to which the
Purchaser shall agree in accordance to the terms of this Agreement;
(ii) shares issued upon conversion of existing Preferred B Shares;
(iii) shares issued due to a recapitalization of the Company's share
capital; or (iv) shares issued to an investor who is deemed by the
Board of Directors as a strategic partner or investor with added
value to the Company and/or its activities and/or the marketing of
its products ("Strategic Investor"); or (v) an issuance to existing
holders of Preferred B Shares.
9. CONFIDENTIALITY; NON-COMPETITION
--------------------------------
9.1. From time to time, the Parties may make available to each other, in
written form or orally, information of a confidential and
proprietary nature including, but not limited to, technical, test
and analysis data, specifications, prototypes, marketing,
application, financial, bookkeeping, business, and customer
information. The Parties shall not disclose such information to
others or use such information without the prior written consent of
the disclosing party, except as necessary to carry out the terms of
this Agreement. Each party shall treat such information with the
same care as it would exercise in the handling of its own
confidential or proprietary information and in no event shall such
information be disclosed to any person including employees,
consultants and/or contractors unless such individual undertakes to
be bound by the terms of this Section 9.1.
9.2. Upon termination of a party's participation in the Company, whether
by termination of employment or other engagement (including
directorship) or by the termination of a party's shareholdings for
any reason, all such data, proprietary information and confidential
information of the disclosing party shall be immediately returned by
the other party to the disclosing party and the limitations and
undertakings specified in this Section 9 shall survive the date of
such termination of participation.
9.3. Confidential information as referred to in this Section shall not
include information: (i) which is or becomes public knowledge
through no fault of the receiving party; (ii) which is known to the
receiving party at the time of disclosure by the disclosing party,
as evidenced by the receiving party's written records; (iii) which
is disclosed to the receiving party on a non-confidential basis by a
third party having no obligation of secrecy to the disclosing party;
or (iv) information required to be disclosed by law, rule or
regulation, provided that prior notice of disclosure is given to the
disclosing party. For avoidance of doubt, the parties agree that
disclosure or public discussion of information not considered
confidential hereunder shall not be made unless it is in the
Company's best interest.
9.4. As long as any of the Founders and Shareholders hold shares in the
Company and for a period of 24 months thereafter (and with respect
to the Founders, directors, officers, or employees of the Company,
24 months from the termination of its nomination), it shall not be
actively engaged directly or indirectly (except as a passive
shareholder) either for remuneration or not in any business which is
identical or similar to the Company's Line of Business, as may be
from time to time.
10. Shareholders Agreement
----------------------
10.1. Waivers and Consents. The Company, the Founders and the other
Shareholders (where applicable) hereby agree to waive any rights
that they may have, whether pursuant to a shareholders agreement,
the Articles of Association of the Company in effect immediately
prior to the Closing Date (the "Former Articles") or otherwise,
with respect to the issuance of the Preferred B Shares to the
Purchaser. Furthermore, the Company, the Founders and the other
Shareholders hereby consent to all of the transactions contemplated
pursuant to this Share Purchase Agreement.
10.2. New Shareholders Agreement. The Company, the Founders and the other
Shareholders (where applicable) hereby terminate any shareholders
agreement they had or have prior to the Closing Date. Immediately
after the consummation of the transaction contemplated by this
Agreement, the Parties agree to be bound by the terms and
conditions of this Agreement and the Amended Articles of
Association.
11. MISCELLANEOUS
-------------
11.1. Expenses
--------
In case there shall be an Additional Closing, the Company will pay,
directly or through the Purchaser, from the proceeds hereof, at the
Additional Closing all expenses for legal fees and out-of-pocket
disbursements of the Purchaser for work performed, by its legal
counsels and /or advisors, in completing the documentation relating
to this transaction up to $10,000 plus VAT.
11.2. Further Assurances
------------------
Each of the parties hereto shall perform such further acts and
execute such further documents as may reasonably be necessary to
carry out and give full effect to the provisions of this Agreement
and the intentions of the parties as reflected thereby.
11.3. Governing Law; Jurisdiction
---------------------------
This Agreement shall be governed by and construed according to the
laws of the State of Israel without regard to the conflict of laws
provisions thereof. Any and all differences and disputes arising
under this Agreement shall be submitted to the jurisdiction of the
competent Courts in Tel-Aviv.
11.4. Successors and Assigns; Assignment
----------------------------------
Except as otherwise expressly limited herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors, and administrators of the parties
hereto. None of the rights, privileges, or obligations set forth
in, arising under, or created by this Agreement may be assigned or
transferred without the prior consent in writing of each party to
this Agreement, with the exception of assignments and transfers
from the Purchaser or Founders to any other entity which fully
controls, or is fully controlled by such Purchaser or Founders.
11.5. Entire Agreement; Amendment and Waiver
--------------------------------------
This Agreement and the Schedules hereto and any agreements
contemplated herein and therein constitute the full and entire
understanding and agreement between the parties with regard to the
subject matters hereof and thereof. Any term of this Agreement may
be amended and the observance of any term hereof may be waived
(either prospectively or retroactively and either generally or in a
particular instance) only by written agreement of each of the
parties hereto.
11.6. Notices
-------
All notices and other communications required or permitted hereunder
to be given to a party to this Agreement shall be in writing and
shall be telecopied or mailed by registered or certified mail,
postage prepaid, or otherwise delivered by hand or by messenger,
addressed to such party's address as set forth below or at such
other address as the party shall have furnished to each other party
in writing in accordance with this provision:
if to a Purchaser to: if to the Company or the Founders to:
Aryt Industries Ltd. Xxxxxxxxxx.Xxx Ltd.
0 Xxxxxxx Xx. 0 Xxxxxxxxx Xx.
Xx Xxxxxx, 00000 Petach-Tikva, Israel
Tel.: (00) 000-0000 Tel: (00) 000-0000
Fax: (00) 000-0000 Facsimile: (00) 000-0000
Attn: C.E.O.
or such other address with respect to a party as such party shall
notify by ten (10) days advance written notice to each other party
in writing as above provided. Any notice sent in accordance with
this Section shall be effective: (i) if mailed, five (5) business
days after mailing; (ii) if sent by messenger, upon delivery; and
(iii) if sent via telecopier, upon transmission and telephone
confirmation of receipt or (if transmitted and received on a
non-business day) on the first business day following transmission
and telephone confirmation of receipt.
11.7. Delays or Omissions
-------------------
No delay or omission to exercise any right, power, or remedy
accruing to any party upon any breach or default under this
Agreement, shall be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent, or
approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of
any party of any provisions or conditions of this Agreement, or any
waiver on the part of any party of any provisions or conditions of
this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies,
either under this Agreement or by law or otherwise afforded to any
of the parties, shall be cumulative and not alternative.
11.8. Severability
------------
If any provision of this Agreement is held by a court of competent
jurisdiction to be unenforceable under applicable law, then such
provision shall be excluded from this Agreement and the remainder of
this Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms;
provided, however, that in such event this Agreement shall be
interpreted so as to give effect, to the greatest extent consistent
with and permitted by applicable law, to the meaning and intention
of the excluded provision as determined by such court of competent
jurisdiction.
11.9. Counterparts
------------
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and enforceable against the
parties actually executing such counterpart, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have signed this Agreement, in one or more
counter pages, as of the date first hereinabove set forth.
XXXXXXXXXX.XXX LTD. ARYT INDUSTRIES LTD.
By: /s/ Xxxxxxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxxxx
---------------------- -------------------
Title: ____________ By: /s/ Ram Xxxxxxx
----------------
Title: ___________________
IN WITNESS WHEREOF, the parties have signed this Agreement, in one or more
counter pages, as of the date first hereinabove set forth.
/s/ Xxxxxxxxx Xxxxxxx /s/ Xxxxxxxxx Xxxxxxx
---------------------- ----------------------
/s/ Xxxxx Xxxx
---------------
Xxxxxxxxx Xxxxxxx Xxxxxx.Xxx Ltd.
By:
Title:
/s/ Xxxxx Xxxx /s/ Xxxxx Xxxxxxx
--------------- ------------------
Xxxxx Xxxx Xxxxx Xxxxxxx
/s/ Yuval Lubovitch /s/ Xxx Xxxx
------------------- -------------
Yuval Lubovitch Xxx Xxxx
