Exhibit 4.9
SHARE PURCHASE AND SHAREHOLDERS AGREEMENT
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THIS SHARE PURCHASE AND SHAREHOLDERS AGREEMENT (this "Agreement") made as
of the 13th day of March, 2000, by and among, Sensotech Ltd. (51-222941-0) 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
(severally the "Shareholders"), 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") Xxx Gal, Israel ID No. 000000000, Uri Agam, Israel ID
No. 000000000, Shlomit Gal, Israel ID No. 000000000, Xxxxx Xxxx, Israel ID No.
000000000, Nichsei Uri Ltd. (51-228637-8) a company limited by shares and
formed and existing under the laws of the State of Israel, and Nichsei Xxx
Ltd. (51-228634-5) a company limited by shares and formed and existing under
the laws of the State of Israel (Xxx, Uri, Shlomit, Ilana, Nichsei Uri and
Nichsei Xxx - jointly and severally the "Founders") (the Company,
Shareholders, Purchaser and Founders 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, in the development,
manufacture and marketing of intelligent, non-contact
sensing equipment (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 shares; and
WHEREAS: the Purchaser desire to purchase shares of the Company
pursuant to the terms and conditions more fully set forth
in this Agreement; and
WHEREAS: the Parties have agreed that immediately following the
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 each of the
Shareholders agree to the termination of any existing
Shareholders Agreement, including, but not limited to,
those dated 29.7.96 and 7.11.96, by and among the Company
and certain Shareholders, (the "Existing Shareholders
Agreements"), and that this Agreement shall supersede and
replace the Existing Shareholders Agreements;
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, the Company shall issue
and allot to the Purchaser, and the Purchaser shall purchase from
the Company an aggregate of Two Thousand One Hundred and Twenty Nine
(2,129) Series B Preferred Shares NIS 1 par value each of the
Company (the "Preferred B Shares") at a price per share of Four
Hundred and Seventy US dollars (US$ 470), at an aggregate purchase
price of One Million and Six Hundred and Thirty United States
Dollars (US$1,000,630) (the "Purchase Price") representing a
Company's value of US$3,000,000 pre-money.
1.2. In addition, the Company shall issue to the Purchaser Two Thousand
One Hundred and Twenty Nine (2,129) warrants to purchase additional
2,129 Preferred B Shares, at an aggregate purchase price of One
Million United States Dollars (US$1,000,000), or, in case the
exercise shall be after 1 May, 2001, Xxx Xxxxxxx xxx Xxx Xxxxxxx
Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$1,200,000) (the "Exercise
Price").
2. CLOSING
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2.1. Closing Time, Date and Location
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The Closing shall take effect at the offices of Xxxxxx, Xxxx & Co.,
0 Xxxxx Xx. Xxx-Xxxx, Xxxxxx, on April 9, 2000, at 10:30 a.m.
Israeli Standard Time, or at such other time and place as the
parties shall agree in writing (the "Closing Date"). In the event
that: (i) all of the events and actions described in this Section 2
have not taken place on or before April 13, 2000; and (ii) the
Purchaser has not agreed to set the Closing to a different date,
then the Closing shall not take place and this Agreement will cease
automatically. In such event, each party will be released from all
of its obligations under this Agreement.
2.2. The Closing
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All actions at the Closing and all transactions occurring at the
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 Closing, the Purchaser shall deliver or cause to be delivered
to the Company:
2.3.1. A certified check on the amount of the Purchase Price
(less $200,000 which were granted as a loan to the Company
and, on the Closing, were converted to advanced payment
for the Preferred B Shares as part of the Purchase Price)
to the order of the Company payable in NIS in accordance
with the then known representative rate of the US$ 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
2.4. Company Actions
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At or prior to the 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 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 each of
the Founders, and the key employees listed in Schedule
2.4.6.(a) (the "Key Employees"), in the form(s) attached
hereto as Schedule 2.4.6.(b), pursuant to which the
Founders and the Key Employees undertake to provide their
services on a full time basis to the Company until April
1, 2003 or thereafter; and
2.4.7. validly executed 2,129 Warrants 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 and Lease Agreement
between the Company and the Purchaser in the forms
attached hereto as Schedule 2.4.8; and
2.4.9. A confirmation by the Company that all of the Company's
outstanding warrants, options and convertible loans,
including the Convertible Loan, issued by the Company in
July 27, 1999, have been fully exercised or converted, as
the case may be, in accordance with the terms thereof, and
as of the date hereof and the Closing the total issued and
outstanding share capital of the Company is 6,387 shares.
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. Copies of the Memorandum of
Association and Articles of Association (the "Articles of
Association") of the Company as of the date hereof are attached
hereto as Schedules 3.1(a) and 3.1(b), respectively. 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 Forty Nine Thousand
Two Hundred New Israeli Shekels (NIS 49,200) divided into: (i)
Thirty Nine Thousand One Hundred and Eighty Three (39,183) Ordinary
Shares of a nominal value of NIS 1 each (the "Ordinary Shares");
(ii) Five Thousand (5,000) Ordinary A Shares of a nominal value of
NIS 1 each (the "Ordinary A Shares"); (iii) Seventeen (17) deferred
Shares of a nominal value of NIS 1 each (the "Deferred Shares"); and
(iv) Five Thousand (5,000) Preferred B Shares (the "Preferred B
Shares"). Of the Ordinary Shares Five Thousand Seven Hundred and
Forty Three (5,743) are issued and outstanding. Of the Ordinary A
Shares, Six Hundred Forty Four (644) are issued and outstanding. Of
the Deferred Shares, Seventeen (17) are issued and outstanding.
Schedule 3.2(a) 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(b), 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.
Except as set forth in Schedule 3.2(c) 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 Xxx Xxxxxx, Xxxxxx Aarenberg,
Xxxxxx Shphir, Dany Xxxxxx, Xxx Gal and Uri Agam. The officers of
the Company are Xxx Gal and Uri Agam. 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 has furnished the Purchaser with its: audited, financial
statements as of and for the year ended December 31, 1998 (the
"Financial Statements"), which are attached hereto as Schedules 3.5.
The Financial Statements are true and correct in all material
respects, are in accordance with the books and records of the
Company and have been prepared in accordance with Israeli generally
accepted accounting principles ("GAAP") consistently applied, and
fairly and accurately present in all material respects the financial
position of the Company as of such dates and the results of its
operations for the periods then ended. Except as expressed in the
Financial Statements, the Company has no material liabilities, debts
or obligations, whether accrued, absolute or contingent other than
liabilities reflected or reserved against in the Financial
Statements. As of February 29, 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 December 31, 1998, 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 material change in the assets, liabilities, condition
(financial or otherwise) or business of the Company from
that reflected in the Financial Statements;
(ii) 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);
(iii) any waiver by the Company of a valuable right or of a
material debt owed to it;
(iv) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company,
except in the ordinary course of business and that is not
individually or in the aggregate adverse to the assets,
properties, condition (financial or otherwise), operating
results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(v) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or
properties are bound or subject;
(vi) any material change in any compensation arrangement or
agreement with any employee of the Company;
(vii) any loans made by the Company to its employees, officers, or
directors other than advances made in the ordinary course of
business to cover out of pocket expenses;
(viii) any sale, transfer or lease of, or mortgage or pledge or
imposition of lien on, any of the Company's assets except in
the ordinary course of business;
(ix) any change in the accounting methods or accounting
principles or practices employed by the Company; or
(x) any other event or condition of any character that would
materially adversely affect 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).
3.6. Authorization; Approvals
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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, to the
best of its knowledge, is not in default: (a) under its Memorandum
or 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 Ordinance [New Version] 1983 and
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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Schedule 3.9, is the complete minute book of the Company which has
been provided to the Purchaser and which 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. Except as set forth in Schedule 3.9 (a) hereto, all
resolutions were adopted in accordance with all applicable laws,
regulations and agreements and are in full force and effect.
3.10. Ownership of Assets
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Complete and correct copies of leases and licenses of property
leased or licensed to the Company have been furnished to counsel for
the Purchaser and 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). To the
best of the Company's and Founders' knowledge, 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
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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. None of the
Tax Returns have been audited by any taxing authority. The Company
has not been advised that any of such Tax Returns will be so
audited, and there are no waivers in effect of the applicable
statute of limitations for any period. 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
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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 $10,000.
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
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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. Chief Scientist and CIIRDF
--------------------------
The Company has submitted to the Chief Scientist of the Ministry of
Industry and Trade of the Government of Israel (the "Chief
Scientist") applications for receiving grants and has received
approvals for such grants. A copy of the applications for and the
certificates of approval of the grants are attached in Schedule
3.21(a). Except as set forth in Schedule 3.21(b), the Company is in
full compliance with all conditions specified in the approvals for
such grants.
The Company has submitted to the Canada Israel Industrial Research
and Development Fund ("CIIRDF") application for receiving grants and
has received approvals for such grants. A copy of the applications
for and the approval of the grants are attached in Schedule 3.21(c).
Except as set forth in Schedule 3.21(d), the Company is in full
compliance with all conditions specified in the approvals for such
grants.
3.22. 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:
3.22.1. 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.
3.22.2. 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 3.22.3. 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.
3.22.4. 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.
3.23. 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.
3.24. 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.
3.25. Effectiveness; Survival; Indemnification
----------------------------------------
Each representation and warranty herein is deemed to be made on the
date of this Agreement and at the Closing. 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$50,000.
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 (or will be) 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. 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.
4.5. Financial Resources
-------------------
The Purchaser has the present financial resources required to
fulfill all of its financial obligations hereunder.
4.6. 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 Closing are subject to the fulfillment at
or before the 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 the Closing as if made on
the date of such 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 2.4 and 2.5, shall have been performed or
complied with prior to or at the 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. Payments to Isratech
--------------------
Isratech have delivered to the Company a confirmation and consent,
in the form of Schedule 5.4, whereby Isratech consents to defer
management fees (in an amount of US$58,000) due to it pursuant to a
certain agreement among the Company and Isratech, and confirms that
except this debt the Company is under no debt or liability
whatsoever to Isratech.
5.5. 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.
5.6. No Adverse Change
-----------------
There shall not have occurred prior to the 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.
5.7. 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 the
Closing to the Purchaser are subject to the fulfillment, by Purchaser, at
or before the 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 the Closing.
6.2. Purchase Price
--------------
The Purchaser shall have transferred to the Company the Purchase
Price for the Preferred B Shares in full ($200,000 by conversion of
the loan granted by the Purchaser to the Company to advanced payment
for the Preferred B Shares and $800,000 by certified check or wire
transfer).
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 holders of shares and/or warrants and/or options, in either
case constituting or exercisable into at least nine percent (9%) 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 sixty (60)
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 9%.
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. Two (2) 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 twenty
percent (20%) of the total issued and outstanding share
capital of the Company. Upon the Preferred B Shareholders'
being reduced to less than 20% Percent Ownership and for so
long as they are (i) as a result of dilution due to new
issuance of securities - the record holders 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; or (ii) in case such reduction is the result of the
sale of its Preferred B Shares to any third party - the
record holders of shares and/or warrants and/or options, in
either case constituting or exercisable into at least nine
percent (9%) of the Company's issued and outstanding share
capital on an as converted basis; the number of their
directors shall be reduced to one director. 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.
7.6.2. Up to six (6) Directors shall be designated by the other
shareholders of the Company whereby each holder, or holders,
as the case may be, of Ordinary Shares representing not less
than 12.5% of the than issued and outstanding share capital
of the Company, shall be entitled to elect 1 director.
7.6.3. The parties hereto agree that (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, 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, and the 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) 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$10,000; (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 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 General Manager(s), Chief
Executive Officer, Chief Operating Officer, Chief Technical
Officer and Chief Financial Officer.
7.7.2. 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 capital stock 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 (for the sake of clarity, the term Preferred
Shares, as used in this Agreement refers to both Series A and
Preferred B Shares collectively).
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 the Preferred B Shares represents not less than 15% in
the share capital of the Company (on a full dilution basis taking
into consideration the Preferred B Shares covered by the Warrants),
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.
Upon the Preferred B Shares being reduced to 5% - 15% in the share
capital of the Company, the Founders shall be entitled to sell up to
one third of their shares in the Company.
The restrictions provided in this Section 7.11 shall terminate (A)
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; or (B) with respect to each Founder, upon the termination
other than for "Cause" (as such term is defined in each Founder's
employment agreement) by the Company of such Founder's employment
with the Company (in accordance with such Founder's employment as
shall then be effect with 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. The restrictions provided in
this Section 7.12.1 shall terminate, with respect to each
Founder, upon the termination other than for "Cause" (as
such term is defined in each Founder's employment agreement)
by the Company of such Founder's employment with Company (in
accordance with such Founder's employment as shall then be
effect with the Company).
7.12.2. In the event of a proposed acquisition of shares of the
Company which constitute over 50% but less than 100% of the
Company's issued share capital by a purchaser which operates
and competes in the Line of Business of the Company in the
same geographical and customer markets in which the Company
operates and competes, the holders of the Preferred Shares
shall not sell any of the Preferred Shares subject to said
acquisition, unless such purchaser agrees to purchase
concurrently from the holders of the Preferred Shares, a pro
rata portion of the shares of the Founders, as reflects the
ratio between the percentage of issued stock 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 10% 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 holders of
Preferred B Shares of the Preferred B Preference Amount,
prior to and in preference to any distribution of the entire
remaining assets and funds of the Company legally available
for distribution, if any, to the holders of all other
classes of shares, Isratech shall be entitled to receive in
full, the US Dollar amount paid by Isratech for each of the
Ordinary A Shares, held by Isratech at that time (the
aggregate amount shall be not more than USD 1,000,000), plus
interest on such amount of 4% per year (the "Isratech
Preference Amount") (which collectively together with the
Preferred B Preference Amount shall be hereinafter referred
to as the "Preference Amount"); and (C) after payment to the
holders of the Preferred B Shares and Israetech of the
respective 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, Ordinary A 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.
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 Shares
------------------------------
Each Preferred B Share and Ordinary A 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, or Ordinary A Share as the case may be,
shall be convertible into Ordinary Shares as aforesaid at any time,
at the discretion of the holder of such Preferred B Share, or
Ordinary A Share as the case may be, 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, which are also
employees, officers, consultants or directors of the Purchaser,
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.
Subject to the above and other terms and conditions of this
Agreement, in case the Company shall issue shares, or options to
purchase shares, to its employees, officers, consultants or
directors (which are not employees, officers, consultants or
directors of the Purchaser) under an Employee Stock Option Plan
including future option plans to which the Purchaser shall agree in
accordance to the terms of this Agreement ("Employees Issuance"),
the Company shall immediately issue the holders of Preferred B
Shares sufficient additional Shares, warrants or options, as the
case may be, for no additional consideration, identical in numbers
and terms to those issued under the Employee Issuance.
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 or agents 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
competes with the Company, its subsidiary or parent company.
10. Shareholders Agreement
----------------------
10.1. Waivers and Consents. The Company, the Founders, the Ordinary A
--------------------
Shareholders and the other Shareholder (where applicable) hereby
agree to waive any rights that they may have, whether pursuant to
any 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, Warrants and the Preferred B Shares
underlying the Warrants, to the Purchaser. Furthermore, the
Company, the Founders, the Ordinary A Shareholders and the other
Shareholder hereby consent to all of the transactions contemplated
pursuant to this Share Purchase Agreement.
10.2. New Shareholders Agreement. The Company, the Founders, the Ordinary
--------------------------
A Shareholders and the other Shareholder (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
--------
The Company will pay from the proceeds hereof, at the 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 US$ 35,000 (excluding VAT).
The Company will pay all expenses for legal fees and out-of-pocket
disbursements of the Company for work performed, by its legal
counsel and/or advisors in completing the documentation relating to
this transaction up to US$ 15,000 (excluding 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.
Sensotech Ltd.
7 Haplada Xx.
0 Xxxx Xx.
Xx Xxxxxx, 00000
Petach-Tikva, Israel
Tel.: (00) 000-0000
Facsimile: (00) 000-0000
Fax: (00) 000-0000
-------------------------------------------------------------------------------
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. Due Diligence
-------------
The Purchaser confirms that it is entering into this Agreement after
it has conducted due diligence based only on the Company's and
Founders' representations and warranties stated herein and the
Schedules attached to this Agreement and in reliance thereon. It is
clarified that other than the Company's and Founders'
representations and warranties stated herein and the Schedules
attached to this Agreement, the Purchaser did not receive, and it is
not relying on, any other representations, warranties or documents.
11.8. 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.
11.9. 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.
11.10. 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.
SENSOTECH LTD. ARYT INDUSTRIES LTD.
By: /s/ Xxx Gal By: /s/ Xxxxxxx Xxxxxx
------------ --------------------
/s/ Uri Agam By: /s/ Ram Xxxxxxx
------------- ----------------
Title: ____________ Title: ___________________
IN WITNESS WHEREOF, the parties have signed this Agreement, in one or more
counter pages, as of the date first hereinabove set forth.
-----------------------------------------------------------------------------------------------
XXX GAL URI AGAM
-----------------------------------------------------------------------------------------------
Shlomit Gal Xxxxx Xxxx Xxxxxx Xxxxxxx
-----------------------------------------------------------------------------------------------
Nichsei Uri Nichsei Xxx
By: /s/ Uri Agam By: /s/ Xxx Gal
------------- ------------
Title: ________________ Title: ________________ Xxxxxx Xxxxxx
-----------------------------------------------------------------------------------------------
Isratech XX
Xxx-Xxxx Xxxxxxxxx Xxx Mor By: /s/ Xxx Xxxxxx
---------------
Title: ________________
-----------------------------------------------------------------------------------------------
Isratech LLC Isratech Fund
By: /s/ Xxx Xxxxxx By: /s/ Xxx Xxxxxx _______ Xxxx
--------------- ---------------
Title: ________________ Title: ________________
-----------------------------------------------------------------------------------------------
Dov Pakelman Frod Askim Sofer
-----------------------------------------------------------------------------------------------
Xxxxx Xxxx Xxxx Archus
-----------------------------------------------------------------------------------------------
Chag Abdul Loyaltech Yosi Fish
By: /s/
---
Title: ________________
-----------------------------------------------------------------------------------------------
