SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of November
26, 2003, (the "Execution Date") by and among Commtouch Software Ltd., a
corporation organized under the laws of the State of Israel, with headquarters
located at 0X Xxxxxxx Xxxxxx, Xxxxx Xxxxxxxxxx Xxxx, Xxxxxxx 00000, Xxxxxx (the
"Company"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and
Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act;
B. The Company has authorized a new series of senior secured
convertible notes of the Company in the form attached hereto as Exhibit A
(together with any senior secured convertible notes issued in replacement
thereof in accordance with the terms thereof, the "Initial Notes"), which
Initial Notes shall be convertible into the Company's Ordinary Shares, NIS 0.05
nominal value per share (the "Ordinary Shares") (as converted, the "Initial
Conversion Shares"), in accordance with the terms of the Initial Notes;
C. The Company has authorized a new series of senior secured
convertible notes of the Company in the form attached hereto as Exhibit B
(together with any senior secured convertible notes issued in replacement
thereof in accordance with the terms thereof, the "Additional Notes" and
collectively with the Initial Notes, the "Notes"), which Additional Notes shall
be convertible into Ordinary Shares (as converted, the "Additional Conversion
Shares" and collectively with the Initial Conversion Shares, the "Conversion
Shares"), in accordance with the terms of the Additional Notes;
D. Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate principal
amount of Initial Notes set forth opposite such Buyer's name in column (3) on
the Schedule of Buyers (which aggregate principal amount for all Buyers shall be
$3,000,000) and (ii) warrants, in substantially the form attached hereto as
Exhibit C (the "Initial Warrants"), to acquire up to 200 Ordinary Shares for
each $1,000 of principal amount of Initial Notes purchased (as exercised,
collectively, the "Initial Warrant Shares");
E. Subject to the terms and conditions set forth in this Agreement,
each Buyer shall have the right to purchase, and the Company shall be required
to sell (i) up to that aggregate principal amount of Additional Notes set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (which
aggregate principal amount for all Buyers shall be up to $3,000,000) and (ii)
warrants, in substantially the form attached hereto as Exhibit C (the
"Additional Warrants" and, collectively with the Initial Warrants, the
"Warrants"), to acquire up to 200 Ordinary
Shares for each $1,000 of principal amount of Additional Notes purchased (as
exercised, collectively, the "Additional Warrant Shares" and, collectively with
the Initial Warrant Shares, the "Warrant Shares");
F. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit D (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Conversion Shares and the Warrant Shares
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws; and
G. The Notes, the Conversion Shares, the Warrants and the Warrant
Shares collectively are referred to herein as the "Securities".
H. The Notes will rank senior to all outstanding and future
indebtedness of the Company and will be secured by a first priority, perfected
security interest in the assets of the Company and the stock and assets of all
of the Company's subsidiaries, as evidenced by the security agreement attached
hereto as Exhibit E (the " Security Agreement"), the guarantee attached hereto
as Exhibit F (the "Guarantee"), and the debenture attached hereto as Exhibit G
(the "Debenture", together with the Security Agreement and the Guarantee, the
"Security Documents").
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) Purchase of Notes and Warrants.
(i) Initial Notes and Initial Warrants. Subject to
the satisfaction (or waiver) of the conditions set forth in Sections
6(a) and 7(a) below, the Company shall issue and sell to each Buyer,
and each Buyer severally, but not jointly, agrees to purchase from the
Company on the Initial Closing Date (as defined below), a principal
amount of Initial Notes as is set forth opposite such Buyer's name in
column (3) on the Schedule of Buyers, along with Initial Warrants to
acquire up to 200 Initial Warrant Shares for each $1,000 principal
amount of Initial Notes purchased (the "Initial Closing").
(ii) Additional Notes and Additional Warrants.
Subject to the satisfaction (or waiver) of the conditions set forth in
Sections 1(c), 6(b) and 7(b) below, at the option of each Buyer from
time to time, the Company shall issue and sell to each Buyer, at
multiple closings, if applicable, and each Buyer severally, but not
jointly, may purchase from the Company on an Additional Closing Date
(as defined below), up to the principal amount of Additional Notes as
is set forth opposite such Buyer's name in column (4) on the Schedule
of Buyers, along with Additional Warrants to acquire up to 200
Additional Warrant Shares for each $1,000 principal amount of
Additional Notes purchased (each, an "Additional Closing").
(iii) Closings. The Initial Closing and the
Additional Closings collectively are referred to in this Agreement as
the "Closings". Each Closing shall occur on the
-2-
applicable Closing Date at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(iv) Purchase Price. The purchase price for each
Buyer (the "Purchase Price") of the Notes and related Warrants to be
purchased by each such Buyer at each Closing shall be equal to $1.00
for each $1.00 of principal amount of Notes being purchased by such
Buyer at such Closing.
(b) Initial Closing Date. The date and time of the Initial
Closing (the "Initial Closing Date") shall be 10:00 a.m., New York Time, on the
second Business Day after notification of satisfaction (or waiver) of the
conditions to the Initial Closing set forth in Sections 6(a) and 7(a) below (or
such later date as is mutually agreed to by the Company and each Buyer). As used
herein, "Business Day" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.
(c) Additional Closing Date. The date and time of each
Additional Closing (each, an "Additional Closing Date") shall be 10:00 a.m., New
York Time, on the date specified in the Additional Note Notice (as defined
below), subject to satisfaction (or waiver) of the conditions to each Additional
Closing set forth in Sections 6(b) and 7(b) and the conditions contained in this
Section 1(c) (or such later date as is mutually agreed to by the Company and the
applicable Buyer). Subject to the requirements of Sections 6(b) and 7(b) and the
conditions contained in this Section 1(c), each Buyer may purchase, at such
Buyer's option, Additional Notes by delivering written notice to the Company (an
"Additional Note Notice") at any time during the period beginning after the date
hereof and ending on and including the date which is the six month anniversary
of the effectiveness of the Registration Statement (as defined in the
Registration Rights Agreement) relating to the Initial Notes and Initial
Warrants. The Additional Note Notice shall be delivered at least five Business
Days prior to the Additional Closing Date set forth in the Additional Note
Notice. The Additional Note Notice shall set forth (i) the principal amount of
Additional Notes and related Additional Warrants to be purchased by such Buyer
at the applicable Additional Closing Date, which principal amount, when added to
the principal amount of any Additional Notes previously purchased by such Buyer,
shall not exceed the principal amount of Additional Notes as is set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers, (ii) the
aggregate Purchase Price for the Additional Notes and related Additional
Warrants to be purchased and (iii) the Additional Closing Date.
(d) Form of Payment. On each Closing Date, (i) each Buyer
shall pay its Purchase Price to the Company for the Notes and Warrants to be
issued and sold to such Buyer at the applicable Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer the Notes (in the
principal amounts as such Buyer shall request) which such Buyer is then
purchasing along with the Warrants (in the amounts as such Buyer shall request)
such Buyer is purchasing, duly executed on behalf of the Company and registered
in the name of such Buyer or its designee.
-3-
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
(a) No Public Sale or Distribution. Such Buyer is (i)
acquiring the Notes and Warrants and (ii) upon conversion of the Notes and
exercise of the Warrants will acquire the Conversion Shares issuable upon
conversion of the Notes and the Warrant Shares issuable upon exercise of the
Warrants, for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such
Buyer does not have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.
(b) Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall modify, amend
or affect such Buyer's right to rely on the Company's representations and
warranties contained herein. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
(e) No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably acceptable to the Company,
to the effect that such Securities to
-4-
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration, or (C) such Buyer provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as
amended, (or a successor rule thereto) (collectively, "Rule 144"); (ii) any sale
of the Securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the seller (or the Person
(as defined in Section 3(s)) through whom the sale is made) may be deemed to be
an underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.
(g) Legends. Such Buyer understands that the certificates or
other instruments representing the Notes and the Warrants and, until such time
as the resale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and such Buyer has confirmed in writing to the Company that it has
delivered the prospectus contained in the registration statement filed pursuant
to the Registration Rights Agreement (the "Registration Statement"), as the same
may have been supplemented by the Company, to any Person to whom such Buyer is
transferring any of the Conversion Shares or the Warrant Shares, the stock
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear any legend as required by the "blue sky" laws of
any state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
COMMTOUCH SOFTWARE LTD., THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities upon
which it is stamped, if, unless otherwise required by state securities
laws, (i) such Securities are registered for resale under the 1933 Act
and such Buyer has confirmed in writing to the Company that it has
delivered the prospectus contained in
-5-
the Registration Statement, as the same may have been supplemented by
the Company, to any Person to whom such Buyer is transferring any of
the Conversion Shares or the Warrant Shares, (ii) in connection with a
sale, assignment or other transfer, such holder provides the Company
with an opinion of counsel, in a form reasonably acceptable to the
Company, to the effect that such sale, assignment or transfer of the
Securities may be made without registration under the applicable
requirements of the 1933 Act, or (iii) such holder provides the Company
with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A.
(h) Validity; Enforcement. This Agreement, the Registration
Rights Agreement and the Security Documents to which such Buyer is a party have
been duly and validly authorized, executed and delivered on behalf of such Buyer
and shall constitute the legal, valid and binding obligations of such Buyer
enforceable against such Buyer in accordance with their respective terms, except
as such enforceability may be limited by general principles of equity or to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(i) No Conflicts. The execution, delivery and performance by
such Buyer of this Agreement, the Registration Rights Agreement and the Security
Documents to which such Buyer is a party and the consummation by such Buyer of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the organizational documents of such Buyer or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
(j) Residency. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
(a) Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns more than 50% of the capital stock or
holds a more than 50% equity or similar interest) are entities duly organized
and validly existing and (in jurisdictions in which such concept is relevant) in
good standing under the laws of the jurisdiction in which they are formed, and
have the requisite power and authorization to own their properties and to carry
on their business as now being conducted. No proceeding has been instituted by
the Registrar of Companies in Israel for the dissolution of the Company. Each of
the Company and its Subsidiaries is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement,
-6-
"Material Adverse Effect" means any material adverse effect on the business,
properties, assets, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a whole,
or on the transactions contemplated hereby and the other Transaction Documents
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Notes, the Registration Rights Agreement,
the Security Documents, the Irrevocable Transfer Agent Instructions (as defined
in Section 5(b)), the Warrants, the Voting Agreement, in the Form of Exhibit K
hereto (the "Voting Agreement"), and each of the other agreements entered into
by the parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction Documents") and to issue the
Securities in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Notes and the Warrants, the reservation for
issuance and the issuance of the Conversion Shares and the Warrant Shares
issuable upon conversion or exercise thereof, as the case may be, and the
granting of a security interest in the Collateral (as defined in the Security
Documents) have been duly authorized by the Company's Board of Directors and
(other than (i) the filing of appropriate UCC financing statements or Israeli
pledge forms with the appropriate states and other authorities pursuant to the
Pledge and Security Agreement, (ii) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement and (iii) the Shareholder Approval pursuant to Section 4(n)) no
further filing, consent, or authorization is required by the Company, its Board
of Directors or its shareholders. This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies. As of each Closing, the Transaction Documents
dated after the date hereof and required to have been executed and delivered
with respect to such Closing shall have been duly executed and delivered by the
Company, and shall constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditor's rights and remedies.
(c) Issuance of Securities. The Notes and the Warrants are
duly authorized. Other than Israeli stamp tax and withholding tax, there is no
tax, levy, impost, duty, fee, assessment or other governmental charge, or any
deduction or withholding, imposed by any governmental agency or authority in or
of Israel either (A) on or by virtue of the execution or delivery of the
Transaction Documents to which Company is a party, (B) the issuance of the
Securities pursuant hereto or (C) on any payment to be made by Company pursuant
to the Transaction Documents. As of the applicable Closing, a number of Ordinary
Shares shall have been duly authorized and reserved for issuance which equals
130% of the maximum number of Ordinary Shares issuable upon conversion of the
Notes and upon exercise of the Warrants to be issued at such Closing. Upon
conversion or exercise in accordance
-7-
with the Notes or the Warrants, as the case may be, the Conversion Shares and
the Warrant Shares, respectively, will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Ordinary Shares. The offer and issuance by the Company of the
Securities is exempt from registration under the 1933 Act. There are no
prospectus delivery requirements under Israeli law in connection with the offer
and issuance of the Securities.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Notes and Warrants, the granting of a security interest in
the Collateral (as defined in the Security Documents) and reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) will not
(i) result in a violation of the Articles of Association of the Company
("Articles of Association"), any capital stock of the Company or Memorandum of
Association ("Memorandum") of the Company or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of The Nasdaq SmallCap Market (the "Principal
Market")) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected.
(e) Consents. The Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency or any
other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in each case in
accordance with the terms hereof or thereof, except for the filing of a Form D
with the SEC and with the California Department of Corporations. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the Initial Closing Date, and the Company and its Subsidiaries are
unaware of any facts or circumstances which might prevent the Company from
obtaining or effecting any of the registration, application or filings pursuant
to the preceding sentence. The Company is not in violation of the listing
requirements of the Principal Market and has no knowledge of any facts which
would reasonably be expected to lead to delisting or suspension of the Ordinary
Shares by the Principal Market in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities.
The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby and that no Buyer is (i) an
officer or director of the Company, (ii) an "affiliate" of the Company (as
defined in Rule 144) or (iii) to the knowledge of the Company, a "beneficial
owner" of more than 10% of the Ordinary Shares (as defined for purposes of Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the "1934 Act")). The
Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The
-8-
Company further represents to each Buyer that the Company's decision to enter
into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither
the Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has not engaged any
placement agent in connection with the sale of the Notes and the Warrants.
(h) No Integrated Offering. None of the Company, its
Subsidiaries, any of their affiliates, and any Person acting on their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated. None of the Company, its Subsidiaries, their affiliates
and any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would require registration of any of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Notes and
the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the Notes in accordance with this
Agreement and the Notes and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants is
not in any manner diminished due to any dilutive effect that such issuance may
have on the ownership interests of other shareholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Articles of Association (as
defined in Section 3(r)) or the laws of the jurisdiction of its formation which
is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the Securities. The
Company has not adopted a shareholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Ordinary Shares or a change
in control of the Company.
(k) SEC Documents; Financial Statements. Since December 31,
2001, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by
-9-
it with the SEC pursuant to the reporting requirements of the 1934 Act (all of
the foregoing filed prior to the date hereof, or in connection with any Closing
subsequent to the date hereof, filed prior to the date of such Closing, and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of the SEC Documents not
available on the XXXXX system. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
(l) Absence of Certain Changes. Except as disclosed in
Schedule 3(l), since December 31, 2002, there has been no Material Adverse
Effect and no material adverse development in the business, properties,
operations, condition (financial or otherwise), results of operations or
prospects of the Company or its Subsidiaries. Since December 31, 2002, the
Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $250,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $250,000. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at each
Closing, will not be Insolvent (as defined below). For purposes of this Section
3(l), "Insolvent" means (i) the present fair saleable value of the Company's
assets is less than the amount required to pay the Company's total Indebtedness
(as defined in Section 3(s)), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, or (iii) the Company intends to incur
or believes that it will incur debts that would be beyond its ability to pay as
such debts mature.
(m) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable
-10-
securities laws on a registration statement on Form F-1 filed with the SEC
relating to an issuance and sale by the Company of its Ordinary Shares and which
has not been publicly announced.
(n) Conduct of Business; Regulatory Permits.
(i) Neither the Company nor its Subsidiaries is in
violation of any term of or in default under its Articles of
Association or Memorandum or their organizational charter or memorandum
of association or bylaws, respectively. Neither the Company nor any of
its Subsidiaries is in violation of any judgment, decree or order or
any statute, ordinance, rule or regulation applicable to the Company or
its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except
for possible violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Company is not in violation of any of
the rules, regulations or requirements of the Principal Market and has
no knowledge of any facts or circumstances which would reasonably be
expected to lead to delisting or suspension of the Ordinary Shares by
the Principal Market in the foreseeable future. Since December 31,
2002, (i) the Ordinary Shares have been designated for quotation on the
Principal Market, (ii) trading in the Ordinary Shares have not been
suspended by the SEC or the Principal Market and (iii) the Company has
received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Ordinary
Shares from the Principal Market. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or
in the aggregate, a Material Adverse Effect, and neither the Company
nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate,
authorization or permit.
(ii) The Company is in compliance in all material
respects with all conditions and requirements stipulated by the
instruments of approval granted to it with respect to the "Approved
Enterprise" status of any of the Company's facilities by Israeli laws
and regulations relating to such "Approved Enterprise" status and other
tax benefits received by the Company; and the Company has not received
any notice of any proceeding or investigation relating to revocation or
modification of any "Approved Enterprise" status granted with respect
to any of the Company's facilities.
(iii) The Company is not in violation of any
condition or requirement stipulated by the instruments of approval
granted to the Company by the Office of Chief Scientist in the Israeli
Ministry of Industry and Trade (the "OCS") and any applicable laws and
regulations with respect to any research and development grants given
to it by such office as to grants for projects that the OCS has not
confirmed as having been closed. All information supplied by the
Company with respect to such applications was true, correct and
complete in all material respects when supplied to the appropriate
authorities. Schedule 3(n)(iii) provides a correct and complete list of
the aggregate amount of pending and outstanding grants from the OCS,
net of royalties paid.
(iv)
-11-
(o) Foreign Corrupt Practices. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other Person
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any
and all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the
SEC Documents filed at least ten days prior to the date hereof and other than
the grant of stock options disclosed on Schedule 3(r), none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
(r) Equity Capitalization. As of the date hereof, the
authorized share capital of the Company consists of 55,000,000 Ordinary Shares,
of which as of the date hereof, approximately 28,100,000 are issued and
outstanding, approximately 7,750,000 shares are reserved for issuance pursuant
to the Company's stock option and purchase plans and 13,541,555 shares are
reserved for issuance pursuant to securities (other than the Notes and the
Warrants) exercisable or exchangeable for, or convertible into, Ordinary Shares.
Assuming approval of the Authorized Share Capital Resolution (as defined below)
at the Shareholder Meeting (as defined below), the authorized share capital of
the Company shall consist of 75,000,000 Ordinary Shares. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(r) and except pursuant to
benefit plans disclosed in the Company's filings with the SEC available on
XXXXX: (i) none of the Company's share capital is subject to preemptive rights
or any other similar rights or any liens or encumbrances suffered or permitted
by the Company; (ii) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, or exercisable or exchangeable for,
any share capital of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional share capital of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
share capital of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
-12-
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company; (v) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (vi) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.
(s) Indebtedness and Other Contracts. Except as disclosed in
Schedule 3(s), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under which, by the
other party(ies) to such contract, agreement or instrument would result in a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule 3(s) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
-13-
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by the Principal Market, any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company, the Ordinary Shares or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in their
capacities as such, except as set forth in Schedule 3(t).
(u) Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(v) Employee Relations. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company (as defined
in Rule 501(f) of the 0000 Xxx) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company. No executive officer of the Company, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.
(ii) Neither the Company nor any of its Subsidiaries
is not subject to, nor do any of its employees benefit from, whether
pursuant to applicable employment laws, regulations, extension orders
("tzavei harchava") or otherwise, any agreement, arrangement,
understanding or custom with respect to employment (including, without
limitation, termination thereof). The severance pay due to the
Employees is fully funded or provided for in accordance with generally
accepted accounting principles, consistently applied.
(iii) The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
-14-
(w) Title. The Company and its Subsidiaries have good and
marketable title to all real property and interests therein and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as do not materially interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(x) Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("Intellectual Property Rights") necessary to conduct their respective
businesses as now conducted. Except as set forth in Schedule 3(w) and except for
trademarks, none of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate, within three years from the
date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others. There is no claim, action or proceeding being made or brought, or to
the knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights. The Company is unaware
of any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings. The Company and its
Subsidiaries have taken security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
(y) Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all Environmental Laws (as hereinafter defined),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval where, where the failure to so comply in each of the
foregoing clauses (i), (ii) and (iii) could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
"Environmental Laws" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. The Company or one of its Subsidiaries
has the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital
securities of its Subsidiaries as owned by the Company or such Subsidiary.
(aa) Tax Status. The Company and each of its Subsidiaries (i)
has made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by
-15-
any jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
(bb) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.
(cc) Taxes. No tax, levy, impost, duty, fee, assessment or
other governmental charge or any deduction or withholding imposed by any
governmental agency or authority in or of the State of Israel is payable by or
on behalf of the Buyers or any assignee of any of the Buyers (i) as a result of
the execution, delivery or performance by the Company of any of the Transaction
Documents, including, but not limited to, the issuance by the Company of the
Securities and the payment of the Company of any amounts owing under the Notes
from time to time or (ii) any resale by the Buyers of any of the Securities in
accordance with the terms thereof and this Agreement.
(dd) Form F-3 Eligibility; Foreign Private Issuer Status. The
Company is eligible to register the resale by the Buyers of the Ordinary Shares
acquired pursuant to the Transaction Documents on a registration statement on
Form F-3 under the 1933 Act. The Company qualifies as a "foreign private issuer"
as such term is defined in the 1934 Act.
(ee) Ranking of Notes. No Indebtedness of the Company is
senior to or ranks pari passu with the Notes in right of payment, whether with
respect of payment of redemptions, interest, damages or upon liquidation or
dissolution or otherwise.
(ff) Disclosure. The Company confirms that neither it nor any
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that the Company believes constitutes material,
non-public information. The Company understands and confirms that the Buyers
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement; provided however, that a failure by the Company to
make a required filing with the Israeli Registrar of Companies which is
-16-
occasioned by a strike or work stoppage shall result in postponement of the
relevant Closing Date until such filing becomes practicable and shall not be
considered a breach of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Buyers at each of the Closings pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyers on or prior to
the applicable Closing Dates. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following each
of the Closing Dates.
(c) Reporting Status. During the period in which the Company
is required to maintain the effectiveness of a resale registration statement
under the Registration Rights Agreement (the "Reporting Period"), the Company
shall file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from
the sale of the Securities for working capital purposes and not for the (i)
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (ii) redemption or repurchase of any of its equity securities.
(e) Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period unless the following are
filed with the SEC through XXXXX and are available to the public through the
XXXXX system: (i) within five (5) Business Days after the filing thereof with
the SEC, a copy of its Annual Reports on Form 20-F, any interim reports or any
consolidated balance sheets, income statements, shareholders' equity statements
and/or cash flow statements for any period other than annual, any Reports on
Form 6-K and any registration statements (other than those for benefit plans or
dividend or interest reinvestment plans) or amendments filed pursuant to the
1933 Act, (ii) on the day after the release thereof, facsimile copies of all
press releases issued by the Company or any of its Subsidiaries, and (iii)
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.
(f) Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which the Ordinary Shares are then listed (subject to
official notice of issuance) and shall maintain, so long as any other Ordinary
Shares shall be so listed, such listing of all Registrable Securities from time
to time issuable under the terms of the Transaction Documents. The Company shall
maintain the Ordinary Shares' authorization for quotation on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Ordinary Shares on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).
-17-
(g) Fees. Subject to Section 8 below, at the Initial Closing,
the Company shall pay an expense allowance of $35,000 to Smithfield Fiduciary
LLC (a Buyer) or its designee(s) (in addition to any other expense amounts paid
to any Buyer prior to the date of this Agreement), which amount shall be
withheld by such Buyer from its Purchase Price at the Initial Closing. The
Company shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or broker's commissions (other than for Persons engaged
by any Buyer) relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney's
fees and out-of-pocket expenses) arising in connection with any claim relating
to any such payment. Except as otherwise set forth in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with the
sale of the Securities to the Buyers.
(h) Pledge of Securities. The Company acknowledges and agrees
that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall
be required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
(i) Disclosure of Transactions and Other Material Information.
On or before 8:30 a.m., New York Time, on the first Business Day following the
date of this Agreement, the Company shall file a Report on Form 6-K describing
the terms of the transactions contemplated by the Transaction Documents in the
form required by the 1934 Act and attaching the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this
Agreement), the form of each of the Notes, the form of Warrant, the Registration
Rights Agreement and the Security Documents) as exhibits to such filing
(including all attachments, the "6-K Filing"). On or before 8:30 a.m., New York
Time, on the first Business Day following each Closing Date, the Company shall
file a Report on Form 6-K with the SEC describing the transaction consummated or
proposed on such date. From and after the filing of the 6-K Filing with the SEC,
no Buyer shall be in possession of any material, nonpublic information received
from the Company, any of its Subsidiaries or any of its respective officers,
directors, employees or agents, that is not disclosed in the 6-K Filing. The
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents, not to, provide any
Buyer with any material, nonpublic information regarding the Company or any of
its Subsidiaries from and after the filing of the 6-K Filing with the SEC
without the express written consent of such Buyer. In the event of a breach of
the foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Buyer shall have
the right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or
-18-
agents for any such disclosure. Subject to the foregoing, neither the Company
nor any Buyer shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions (i)
in substantial conformity with the 6-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in the
case of clause (i) each Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
(j) Restriction on Redemption and Cash Dividends. So long as
any Notes are outstanding, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, the Ordinary
Shares without the prior express written consent of the holders of Notes
representing not less than a majority of the aggregate principal amount of the
then outstanding Notes.
(k) Additional Notes; Variable Securities. So long as any
Buyer beneficially owns any Notes or Warrants or any Buyer has the right to
purchase any Additional Notes, the Company will not issue any Notes other than
to the Buyers as contemplated hereby and the Company shall not issue any other
securities that would cause a breach or default under the Notes. For long as any
Notes remain outstanding or any Buyer has the right to purchase any Additional
Notes, the Company shall not, in any manner, issue or sell any rights, warrants
or options to subscribe for or purchase Ordinary Shares or directly or
indirectly convertible into or exchangeable or exercisable for Ordinary Shares
at a price which varies or may vary with the market price of the Ordinary
Shares, including by way of one or more reset(s) to any fixed price unless the
conversion, exchange or exercise price of any such security cannot be less than
the then applicable Conversion Price (as defined in the Notes) with respect to
the Ordinary Shares into which any Note is convertible.
(l) Corporate Existence. So long as any Buyer beneficially
owns any Notes or Warrants or has the right to purchase any Additional Notes,
the Company shall maintain its corporate existence and shall not sell all or
substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets, where
the surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose common
equity stock is quoted on or listed for trading on the Nasdaq National Market,
The Nasdaq SmallCap Market, the American Stock Exchange or The New York Stock
Exchange, Inc.
(m) Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, (x) as of each Closing Date, 130% of the number of Ordinary Shares
issuable upon conversion of the Notes being issued at such Closing and issuable
upon exercise of the Warrants being issued at such Closing, and (y) after each
Closing Date, no less than 130% of the number of Ordinary Shares issuable upon
conversion of the Notes issued at all previous Closings and issuable upon
exercise of the Warrants issued at such Closings.
(n) Proxy Statement. The Company shall provide each
shareholder entitled to vote at the next meeting of shareholders of the Company
(the "Shareholder Meeting"), which shall be called and held not later than
December 26, 2003 (the "Shareholder Meeting Deadline"), a proxy statement,
substantially in the form which has been previously reviewed by the Buyers and a
counsel of their choice, soliciting each such shareholder's affirmative vote at
the Shareholder Meeting for approval of resolutions providing for the following
(the "Resolutions"): (i) an increase in the authorized share
-19-
capital of the Company to allow, at a minimum, the Company to reserve for
issuance the number of Ordinary Shares required to be reserved hereunder for
issuance of the Ordinary Shares issuable upon conversion of all Notes and
exercise of all Warrants (the "Authorized Share Capital Resolution") and (ii)
the Company's issuance of all Ordinary Shares upon conversion of the outstanding
promissory notes of the Company issued pursuant to that certain loan agreement,
dated as of January 29, 2003, by and between the Company and the Lenders named
therein (the "Old Notes") (such affirmative approval of the Resolutions being
referred to herein as the "Shareholder Approval"), and the Company shall use its
best efforts to solicit its shareholders' approval of the Resolutions and to
cause the Board of Directors of the Company to recommend to the shareholders
that they approve the Resolutions. The Company shall be obligated to seek to
obtain the Shareholder Approval by the Shareholder Meeting Deadline.
(o) Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(p) Incurrence of Liens. So long as any Notes are outstanding,
the Company shall not, directly or indirectly, allow or suffer to exist any
Lien, other than Liens pursuant to or as permitted by the Security Documents,
upon any property or assets (including accounts and contract rights) owned by
the Company.
(q) Additional Issuances of Securities.
(i) For purposes of this Section 4(q), the following
definitions shall apply.
(1) "Convertible Securities" means any stock
or securities (other than Options) convertible into or
exercisable or exchangeable for Ordinary Shares.
(2) "Options" means any rights, warrants or
options to subscribe for or purchase Ordinary Shares or
Convertible Securities.
(3) "Ordinary Share Equivalents" means,
collectively, Options and Convertible Securities.
(ii) From the date hereof until the date that is 90
Trading Days (as defined in the Notes) following the date on which the
Initial Registration Statement (as defined in the Registration Rights
Agreement) is declared effective (the "Trigger Date"), the Company will
not, directly or indirectly, offer, sell, grant any option to purchase,
or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of its or its
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security
that is, at any time during its life and under any circumstances,
convertible into or exchangeable or exercisable for Ordinary Shares or
Ordinary Share Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a "Subsequent Placement").
-20-
(iii) From the Trigger Date until the eighteen month
anniversary thereof, the Company will not, directly or indirectly,
effect any Subsequent Placement unless the Company shall have first
complied with this Section 4(q)(iii).
(1) The Company shall deliver to each Buyer
a written notice (the "Offer Notice") of any proposed or
intended issuance or sale or exchange (the "Offer") of the
securities being offered (the "Offered Securities") in a
Subsequent Placement, which Offer Notice shall (w) identify
and describe the Offered Securities, (x) describe the price
and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the Offered Securities
to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and
(z) offer to issue and sell to or exchange with the Buyers
one-third (1/3) of the Offered Securities, allocated among the
Buyers (a) based on such Buyer's pro rata portion of the
aggregate principal amount of the Notes purchased hereunder
(the "Basic Amount"), and (b) with respect to each Buyer that
elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of
other Buyers as such Buyer shall indicate it will purchase or
acquire should the other Buyers subscribe for less than their
Basic Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part,
a Buyer must deliver a written notice to the Company prior to
the end of the tenth (10th) Business Day after such Buyer's
receipt of the Offer Notice (the "Offer Period"), setting
forth the portion of the Buyer's Basic Amount that such Buyer
elects to purchase and, if such Buyer shall elect to purchase
all of its Basic Amount, the Undersubscription Amount, if any,
that such Buyer elects to purchase (in either case, the
"Notice of Acceptance"). If the Basic Amounts subscribed for
by all Buyers are less than the total of all of the Basic
Amounts, then each Buyer who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed
for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all
the Basic Amounts and the Basic Amounts subscribed for (the
"Available Undersubscription Amount"), each Buyer who has
subscribed for any Undersubscription Amount shall be entitled
to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such Buyer
bears to the total Basic Amounts of all Buyers that have
subscribed for Undersubscription Amounts, subject to rounding
by the Company to the extent its deems reasonably necessary.
(3) The Company shall have five (5) Business
Days from the expiration of the Offer Period above to offer,
issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been
given by the Buyers (the "Refused Securities"), but only to
the offerees described in the Offer Notice (if so described
therein) and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are
not more favorable to the acquiring person or persons or less
favorable to the Company than those set forth in the Offer
Notice.
-21-
(4) In the event the Company shall propose
to sell less than all the Refused Securities (any such sale to
be in the manner and on the terms specified in Section
4(q)(iii)(3) above), then each Buyer may, at its sole option
and in its sole discretion, reduce the number or amount of the
Offered Securities specified in its Notice of Acceptance to an
amount that shall be not less than the number or amount of the
Offered Securities that the Buyer elected to purchase pursuant
to Section 4(q)(iii)(2) above multiplied by a fraction, (i)
the numerator of which shall be the number or amount of
Offered Securities the Company actually proposes to issue,
sell or exchange (including Offered Securities to be issued or
sold to Buyers pursuant to Section 4(q)(iii)(3) above prior to
such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities. In the event that
any Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company
may not issue, sell or exchange more than the reduced number
or amount of the Offered Securities unless and until such
securities have again been offered to the Buyers in accordance
with Section 4(q)(iii)(1) above.
(5) Upon the closing of the issuance, sale
or exchange of all or less than all of the Refused Securities,
the Buyers shall acquire from the Company, and the Company
shall issue to the Buyers, the number or amount of Offered
Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 4(q)(iii)(3) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer.
The purchase by the Buyers of any Offered Securities is
subject in all cases to the preparation, execution and
delivery by the Company and the Buyers of a purchase agreement
relating to such Offered Securities reasonably satisfactory in
form and substance to the Buyers and their respective counsel.
(6) Any Offered Securities not acquired by
the Buyers or other persons in accordance with Section
4(q)(iii)(3) above may not be issued, sold or exchanged until
they are again offered to the Buyers under the procedures
specified in this Agreement.
(iv) The restrictions contained in subsections (ii)
and (iii) of this Section 4(q) shall not apply in connection with the
issuance of any Excluded Securities (as defined in the Notes).
(r) Incurrence of Indebtedness. During the period commencing
on the date of this Agreement until this Agreement is either (A) terminated
pursuant to Section 8 or (B) from and after the issuance of any Notes, no Notes
are still outstanding, the Company shall not, and the Company shall not permit
any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume
or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced
by the Notes and (ii) Permitted Subordinated Indebtedness (as defined in the
Notes) and (iii) Purchase Money Indebtedness (as defined in the Notes).
(s) Voting Agreement. The Company shall take all action
necessary to have the Voting Agreement executed by the Company and
Xxxxxxx Xxxx, Xxxxx Xxxxxxxx, Xxxx Xxx, and Xxxxxx Xxxxxx as of the date hereof.
-22-
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to each holder of Notes or Warrants), a register for the
Notes and the Warrants, in which the Company shall record the name and address
of the Person in whose name the Notes and the Warrants have been issued
(including the name and address of each transferee), the principal amount of
Notes held by such Person and the number of Warrant Shares issuable upon
exercise of the Warrants held by such Person. The Company shall keep the
register open and available at all times during business hours for inspection of
any Buyer or its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at The Depository Trust Company ("DTC"), registered in the name of each Buyer or
its respective nominee(s), for the Conversion Shares and the Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in the form of Exhibit H
attached hereto (the "Irrevocable Transfer Agent Instructions"). The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves Conversion Shares or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or pursuant to Rule
144, the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend provided, in the
case of sale, assignment or transfer pursuant to an effective registration
statement, that the Buyer has confirmed in writing to the Company that it has
delivered the prospectus included in the Registration Statement, as the same may
have been supplemented by the Company, to any Person to whom such Buyer is
selling, assigning or transferring any of the Conversion Shares or the Warrant
Shares. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
(a) Initial Closing Date. The obligation of the Company
hereunder to issue and sell the Initial Notes and the related Initial Warrants
to each Buyer at the Initial Closing is subject to the satisfaction, at or
before the Initial Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:
-23-
(i) Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the same to
the Company.
(ii) Such Buyer and each other Buyer shall have
delivered to the Company the Purchase Price (less, in the case of
Smithfield Fiduciary LLC, the amounts withheld pursuant to Section
4(g)) for the Initial Notes and the related Initial Warrants being
purchased by such Buyer at the Initial Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided
by the Company.
(iii) The representations and warranties of such
Buyer shall be true and correct in all material respects as of the date
when made and as of the Initial Closing Date as though made at that
time (except for representations and warranties that speak as of a
specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by such Buyer at or prior to the Initial Closing Date.
(b) Additional Closing Date. The obligation of the Company
hereunder to issue and sell the Additional Notes and the related Additional
Warrants to each Buyer at each Additional Closing is subject to the
satisfaction, at or before such Additional Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have delivered to the Company
the Purchase Price for the Additional Notes and the related Additional
Warrants being purchased by such Buyer at the applicable Additional
Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.
(ii) The representations and warranties of such Buyer
shall be true and correct in all material respects as of the date when
made and as of the applicable Additional Closing Date as though made at
that time (except for representations and warranties that speak as of a
specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by such Buyer at or prior to the applicable Additional
Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
(a) Initial Closing Date. The obligation of each Buyer
hereunder to purchase the Initial Notes and the related Initial Warrants at the
Initial Closing is subject to the satisfaction, at or before the Initial Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
(i) The Company shall have executed and delivered to
such Buyer (i) each of the Transaction Documents and (ii) the Initial
Notes (in such principal amounts as such Buyer shall request) and the
related Initial Warrants (in such amounts as such Buyer shall request)
being purchased by such Buyer at the Initial Closing pursuant to this
Agreement.
-24-
(ii) Such Buyer shall have received the opinions of
Xxxxxxx XxXxxxxxx LLP, the Company's United States outside counsel, and
Naschitz, Xxxxxxx & Co., the Company's Israeli outside counsel, each
dated as of the Initial Closing Date, in a form reasonably acceptable
to such Buyer.
(iii) The Company shall have delivered to such Buyer
a copy of the Irrevocable Transfer Agent Instructions, in the form of
Exhibit H attached hereto, which instructions shall have been delivered
to and acknowledged in writing by the Company's transfer agent.
(iv) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing and/or valid
existence of the Company and each of its Subsidiaries in such entity's
jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of
the Initial Closing Date.
(v) The Company shall have delivered to such Buyer a
certificate evidencing the Company's qualification as a foreign
corporation and good standing issued by the Secretary of State (or
comparable office) of each jurisdiction in which the Company conducts
business, as of a date within 10 days of the Initial Closing Date.
(vi) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of
the Initial Closing Date, as to (i) the resolutions consistent with
Section 3(b) as adopted by the Company's Board of Directors in a form
reasonably acceptable to such Buyer (the "Transaction Resolutions"),
(ii) the Articles of Association and (iii) the Memorandum, each as in
effect at the Initial Closing, in the form attached hereto as Exhibit
I.
(vii) The representations and warranties of the
Company shall be true and correct as of the date when made and as of
the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied in all
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by
the Company at or prior to the Initial Closing Date. Such Buyer shall
have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Initial Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by
such Buyer in the form attached hereto as Exhibit J.
(viii) The Ordinary Shares (I) shall be designated
for quotation or listed on the Principal Market and (II) shall not have
been suspended, as of the Initial Closing Date, by the SEC or the
Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as
of the Initial Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market.
(ix) The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Initial Notes and the Initial Warrants.
Without limiting the generality of the foregoing, the Company shall
also have
-25-
obtained approval by the OCS and the Investment Center of the
transactions contemplated hereunder, together with such other
agreements as the Buyers shall reasonably require to ensure that the
Buyers enjoy full rights with respect to the Collateral (subject to the
rights of the OCS under the R&D Law), evidence of which shall have been
provided to the Buyers.
(x) In accordance with the terms of the Security
Documents, the Company shall have delivered to the Agent (as defined in
the Pledge and Security Agreement) certificates representing the
Subsidiaries' shares of capital stock, along with duly executed blank
stock powers.
(xi) Any Old Notes shall have been converted into
Ordinary Shares and all of the Company's obligations thereunder shall
have been terminated and all security interests pursuant thereto shall
have been released and terminated and all filings necessary to remove
recordation of floating charge created in connection with old notes
have been made.
(xii) Within six (6) Business Days prior to the
Initial Closing, the Company shall have delivered or caused to be
delivered to each Buyer certified copies of UCC search results, listing
all effective financing statements which name as debtor the Company or
any of its Subsidiaries filed in the prior five years to perfect an
interest in any assets thereof, together with copies of such financing
statements, none of which, except as otherwise agreed in writing by the
Buyers, shall cover any of the Collateral (as defined in the Security
Documents) and the results of searches for any tax lien and judgment
lien filed against such Person or its property, which results, except
as otherwise agreed to in writing by the Buyers shall not show any such
Liens (as defined in the Security Documents).
(xiii) The Company shall have obtained the
Shareholder Approval.
(xiv) The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.
(b) Additional Closing Date. The obligation of each Buyer
hereunder to purchase the Additional Notes and the related Additional Warrants
at each of the applicable Additional Closings is subject to the satisfaction, at
or before each of the Additional Closing Dates, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
(i) The Company shall have executed and delivered to
such Buyer the Additional Notes (in such principal amounts as such
Buyer shall request) and related Additional Warrants (in such amounts
as such Buyer shall request) being purchased by such Buyer at the
applicable Additional Closing pursuant to this Agreement.
(ii) Such Buyer shall have received the opinions of
Xxxxxxx XxXxxxxxx LLP, the Company's United States outside counsel, and
Naschitz, Xxxxxxx & Co., the Company's Israeli outside counsel, dated
as of the applicable Additional Closing Date, in a form reasonably
acceptable to such Buyer.
-26-
(iii) The Irrevocable Transfer Agent Instructions
shall remain in effect as of the applicable Additional Closing Date and
the Company shall cause its transfer agent to deliver a letter to such
Buyer to that effect.
(iv) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing and/or valid
existence of the Company and each of its Subsidiaries in such entity's
jurisdiction of formation of incorporation issued by the Secretary of
State (or comparable office) of such jurisdiction, as of a date within
10 days of the applicable Additional Closing Date.
(v) The Company shall have delivered to such Buyer a
certificate evidencing the Company's qualification as a foreign entity
and good standing issued by the Secretary of State (or comparable
office) of each jurisdiction in which the Company conducts business, as
of a date within 10 days of the applicable Additional Closing Date.
(vi) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company dated as of the
applicable Additional Closing Date, as to (i) the Transaction
Resolutions, (ii) the Articles of Association and (iii) the Memorandum,
each as in effect at the applicable Additional Closing, in the form
attached hereto as Exhibit I.
(vii) The representations and warranties of the
Company shall be true and correct as of the date when made and as of
the applicable Additional Closing Date as though made at that time
(except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in
all respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with
by the Company at or prior to the applicable Additional Closing Date.
Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the applicable Additional
Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer in the form attached hereto
as Exhibit J.
(viii) The Ordinary Shares (I) shall be designated
for quotation or listed on the Principal Market and (II) shall not have
been suspended, as of the applicable Additional Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been
threatened, as of the applicable Additional Closing Date, either (A) in
writing by the SEC or the Principal Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Market.
(ix) The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Additional Notes and the Additional
Warrants being purchased at the applicable Additional Closing. Without
limiting the generality of the foregoing, the Company shall have
obtained approval by the OCS and the Investment Center for the
transactions contemplated hereunder, together with such other
agreements as the Buyers shall reasonably require to ensure that the
Buyers enjoy full rights with respect to the Collateral (subject to the
rights of the OCS under the R&D Law), evidence of which shall have been
provided to the Buyers.
-27-
(x) Within six (6) Business Days prior to the
applicable Additional Closing Date, the Company shall have delivered or
caused to be delivered to each Buyer certified copies of UCC search
results, listing all effective financing statements which name as
debtor the Company or any of its Subsidiaries filed in the prior five
years to perfect an interest in any assets thereof, together with
copies of such financing statements, none of which, except as otherwise
agreed in writing by the Buyers, shall cover any of the Collateral (as
defined in the Security Documents) and the results of searches for any
tax lien and judgment lien filed against such Person or its property,
which results, except as otherwise agreed to in writing by the Buyers
shall not show any such Liens (as defined in the Pledge and Security
Agreement).
(xi) The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.
8. TERMINATION. In the event that the Initial Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
Shareholder Meeting Deadline due to the Company's or such Buyer's failure to
satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, this if this Agreement is terminated
pursuant to this Section 8, the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
-28-
(b) Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyers, the Company,
their affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of Notes representing at least a majority of the
aggregate principal amount of the Initial Notes, or, if prior to the Initial
Closing Date, the Company and the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least a majority of the aggregate principal
amount of the Initial Notes, and any amendment to this Agreement made in
conformity with the provisions of this Section 9(e) shall be binding on all
Buyers and holders of Notes, as applicable. No provision hereof may be waived
other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Notes then outstanding. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be. The Company has not, directly or indirectly, made any agreements with
any Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier service, in each case properly addressed
to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:
-29-
If to the Company:
Commtouch Software Ltd.
0X Xxxxxxx Xxxxxx
Xxxxx Xxxxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxx 00000
Xxxxxx
Telephone: (000) 000-0-000-0000
Facsimile: (000) 000-0-000-0000
Attention: Chief Executive Officer
Copy to:
Commtouch Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxx #000
Xxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx, Esq.
and
Xxxxxxx XxXxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Transfer Agent:
Xxxxx Fargo Shareholder Services
000 Xxxxx Xxxxxxx Xxxxxxxx Xx.
Xxxxx Xx.Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X Xxxxx,
Account Manager,
Shareowner Services
If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set
forth on the Schedule of Buyers, or to such other address and/or
facsimile number and/or to the attention of such other Person as the
recipient party has specified by written notice given to each other
party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing
the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier
service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
The Company hereby irrevocably appoints Xxxx Xxxxx, Esq. at
Commtouch Inc, 0000 Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx Xxxx,
Xxxxxxxxxx 00000, Telephone: (000) 000-0000,
-30-
Facsimile: (000) 000-0000, as its agent for the receipt of service of
process in connection with any action pursuant to any Transaction
Document in the United States. The Company agrees that any document may
be effectively served on it in connection with any action, suit or
proceeding in the United States by service on its agents.
Any document shall be deemed to have been duly served if
marked for the attention of the agent at its address (as set out above)
or such other address in the United States as may be notified to the
party wishing to serve the document and delivered in accordance with
the notice provisions set forth in this Section 9(f).
If the Company's agent at any time ceases for any reason to
act as such, the Company shall appoint a replacement agent having an
address for service in the United States and shall notify each Buyer in
writing of the name and address of the replacement agent. Failing such
appointment and notification, each Buyer shall be entitled by notice to
the Company to appoint a replacement agent to act on the Company's
behalf. The provisions of this Section 9(f) applying to service on an
agent apply equally to service on a replacement agent.
(g) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Notes or the Warrants. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of Notes representing at least a
majority of the aggregate principal amount of the Notes then outstanding,
including by merger or consolidation, except pursuant to a Change of Control (as
defined in Section 5 of the Notes) with respect to which the Company is in
compliance with Section 5 of the Notes and Section 4(b) of the Warrants. A Buyer
may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
(i) Survival. Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3 and the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive each Closing. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
(j) Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any
-31-
of the foregoing Persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, (iii) any disclosure made by such Buyer pursuant to Section
4(i), or (iv) the status of such Buyer or holder of the Securities as an
investor in the Company pursuant to the transactions contemplated by the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.
(l) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
(m) Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under the Transaction
Documents, any remedy at law may prove to be inadequate relief to the Buyers.
The Company therefore agrees that the Buyers shall be entitled to seek temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages and without posting a bond or other security.
(n) Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
-32-
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
(o) Tax Adjustments.
(i) All payments by the Company to the Buyers and any
of their respective assignees in regard or in connection with this
Agreement, the other Transaction Documents or any of the Securities
shall be made in freely transferable United States Dollars and free and
clear of and without deduction for any present or future income,
excise, stamp, documentary, property or franchise taxes and other
taxes, levies, fees, duties, withholdings or other charges of any
nature whatsoever ("Taxes"), whether of any governmental agency or
authority in Israel or otherwise, and including any stamp taxes or any
other similar taxes which may be required in Israel for enforcement
purposes or any stamp tax due upon issuance of the shares underlying
the Notes and Warrants. In the event that any withholding or deduction
from any interest, distribution or payment to be made by the Company
hereunder, the other Transaction Documents or any of the Securities is
required in respect of any Taxes pursuant to any applicable law, rule
or regulation, then the Company shall promptly:
(1) pay directly or caused to be paid
directly to the relevant authority the full amount required to
be so withheld or deducted;
(2) forward to the applicable Buyer an
official receipt or other documentation satisfactory to such
Buyer evidencing such payment to such authority; and
(3) pay to the applicable Buyer such
additional amount or amounts as is necessary to ensure that
the net amount actually received by such Buyer will equal the
full amount such Buyer would have received had no such
withholding or deduction been required.
(ii) The Company further agrees that if any present
or future taxes, fees, duties, withholdings or other charges of any
nature whatsoever imposed by any taxing authority, including franchise
taxes and taxes imposed on or measured by any Buyer's net income or
receipts ("Further Taxes") are directly or indirectly asserted against
such Buyer with respect to any payment of any additional amount
described in paragraph (iii) and received by such Buyer hereunder, such
Buyer may pay such Further Taxes and the Company will promptly pay to
such Buyer such additional amounts (including all penalties, interest
or expenses) that such Buyer specifies as necessary to preserve the
after-tax return that such Buyer would have received if such Taxes or
Further Taxes had not been imposed.
(iii) If the Company fails to pay any Taxes when due
to the appropriate taxing authority or fails to remit to the applicable
Buyer the required receipts or other required documentary evidence, the
Company shall indemnify such Buyer for any incremental Taxes, interest,
penalties, expenses and costs that may become payable or are incurred
by such Buyer as a result of any such failure. In addition to the
foregoing, the Company hereby indemnifies and holds each Buyer harmless
for any and all payments made by any Buyer of any Taxes and
-33-
Further Taxes and for any liabilities (including penalties, interest,
legal costs and expenses) incurred by any Buyer or which may be imposed
on any Buyer in connection therewith or any delays in their payment.
(p) Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitations, the rights arising out of this Agreement or out of any
other Transaction Documents, and it shall not be necessary for any other Buyer
to be joined as an additional party in any proceeding for such purpose.
[Signature Page Follows]
-34-
IN WITNESS WHEREOF, each Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
COMMTOUCH SOFTWARE LTD. SMITHFIELD FIDUCIARY LLC
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxx X. Chill
------------------------------- ---------------------------------
Name: Xxxxxx Xxxxxx Name: Xxxx X. Chill
Title: Chief Executive Officer Title: Authorized Signatory
OMICRON MASTER TRUST
By: /s/ Xxxx Xxx By: /s/ Xxxxx Xxxxxxxxx
--------------------------- ---------------------------------
Name: Xxxx Xxx Name: Xxxxx Xxxxxxxxx
Title: President and Chief Title: Managing Partner
Technology Officer
CRANSHIRE CAPITAL L.P.
By: /s/ Xxxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: President-Downsview Capital
The General Partner
VERTICAL VENTURES INVESTMENTS, LLC
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Partner
Israel Seed IV, L.P.
By: /s/ Xxxx Xxxxx
---------------------------------
Signature
Xxxx Xxxxx, Director
---------------------------------
Name and Title of Signatory
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5)
Maximum
Aggregate
Aggregate Principal
Principal Amount of
Amount of Additional Legal Representative's
Buyer Address and Facsimile Number Initial Notes Notes Address and Facsimile Number
----- ---------------------------- ------------- ----- ----------------------------
Smithfield Fiduciary LLC c/o Highbridge Capital Management, LLC $ 800,000 $ 800,000 Xxxxxxx Xxxx & Xxxxx LLP
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxx Attention: Xxxxxxx Xxxxx, Esq.
Xxxx X. Chill Facsimile: (000) 000-0000
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Omicron Master Trust c/o Omicron Capital $ 500,000 $ 500,000
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Bermuda
Cranshire Capital L.P. c/o Downsview Capital, Inc. $ 700,000 $ 700,000
The General Partner
000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Illinois
Vertical Ventures, LLC c/o Vertical Ventures, LLC $ 500,000 $ 500,000
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx
Residence: New York
Israel Seed IV, L.P. c/x Xxxxxx and Calder, P.O. Box $ 500,000 $ 500,000
309 G.T., Xxxxxx House, South
Church Street, Grand Cayman,
Cayman Islands
Telephone: (000) 000 0000
Facsimile: (000) 000 0000
Attention: Xxxxxx Xxxxx
Residence: Cayman Islands
EXHIBITS
Exhibit A Form of Initial Notes
Exhibit B Form of Additional Notes
Exhibit C Form of Warrants
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Security Agreement
Exhibit F Form of Guarantee
Exhibit G Form of Debenture
Exhibit H Irrevocable Transfer Agent Instructions
Exhibit I Form of Secretary's Certificate
Exhibit J Form of Officer's Certificate
Exhibit K Form of Voting Agreement
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(l) Absence of Certain Changes
Schedule 3(n)(iii) OCS Grants
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
