Page 16 of 91 Pages
--------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
dated as of January 10, 2000
between
NEXUS TELOCATION SYSTEMS, LTD.
and
THE PURCHASERS SET FORTH HEREIN
--------------------------------------------------------------------------------
Page 17 of 91 Pages
TABLE OF CONTENTS
Page
Article 1 DEFINITIONS; CERTAIN REFERENCES.................................1
Section 1.1 Definitions................................................1
Section 1.2 Terms Generally............................................7
Article 2 CLOSING AND PAYMENT.............................................7
Section 2.1 Time and Place of the Closings.............................7
Section 2.2 Transaction at Closing.....................................8
Section 2.3 Company Closing Deliveries.................................8
Article 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................10
Section 3.1 Organization, Power, Authority, Etc.......................10
Section 3.2 Due Authorization; No Conflicts...........................11
Section 3.3 Validity, Etc.............................................11
Section 3.4 Capitalization of the Company and Subsidiaries............11
Section 3.5 Financial Statements......................................12
Section 3.6 SEC Documents.............................................12
Section 3.7 Contingent Liabilities....................................13
Section 3.8 Absence of Certain Developments; No Material
Adverse Change............................................13
Section 3.9 Approvals.................................................13
Section 3.10 No Existing Violation, Default, Etc.......................13
Section 3.11 Licenses, Etc.............................................14
Section 3.12 Title to Properties.......................................14
Section 3.13 Environmental Matters.....................................14
Section 3.14 Taxes.....................................................14
Section 3.15 Litigation................................................15
Section 3.16 Indebtedness..............................................15
Section 3.17 Finder's Fees.............................................15
Section 3.18 Securities Law Matters....................................15
Section 3.19 Intellectual Property Rights..............................16
Section 3.20 Disclosure................................................16
Section 3.21 Form F-3 Eligibility......................................16
Section 3.22 Listing and Maintenance Requirements Compliance...........16
Section 3.23 Transactions With Affiliates..............................17
Section 3.24 Foreign Corrupt Practices.................................17
Section 3.25 Year 2000 Compliance......................................17
Section 3.26 Other Agreements..........................................17
Page 18 of 91 Pages
Article 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...............17
Section 4.1 Organization, Good Standing, Power, Authority, Etc........18
Section 4.2 No Conflicts; No Consents.................................18
Section 4.3 Acquisition for Own Account...............................18
Section 4.4 Investor Suitability......................................18
Section 4.5 Disclosure of Information.................................18
Section 4.6 Investment Experience.....................................19
Section 4.7 Restricted Securities.....................................19
Section 4.8 Finder's Fees.............................................19
Article 5 COVENANTS OF THE PARTIES.......................................19
Section 5.1 Shareholders Meeting; Amended Articles....................19
Section 5.2 Amendment/Waiver of Certain Agreements....................20
Section 5.3 Legends...................................................20
Section 5.4 Use of Proceeds...........................................21
Section 5.5 No Inconsistent Agreements................................21
Section 5.6 Information; Access.......................................22
Section 5.7 Ordinary Course Brokerage and Trading.....................22
Section 5.8 Publicity.................................................23
Section 5.9 Other Actions.............................................23
Section 5.10 Integration...............................................23
Section 5.11 Preemptive Rights.........................................23
Section 5.12 Major Decisions...........................................24
Section 5.13 GWH Option Agreement Tax Indemnity........................25
Article 6 CONDITIONS TO THE SECOND CLOSING...............................25
Section 6.1 Second Closing............................................25
Article 7 SURVIVAL AND INDEMNIFICATION...................................26
Section 7.1 Survival Periods..........................................26
Section 7.2 Indemnification by the Company............................26
Section 7.3 Notification..............................................27
Article 8 MISCELLANEOUS..................................................28
Section 8.1 Notices...................................................28
Section 8.2 Fees and Expenses.........................................29
Section 8.3 BVR Technologies, Ltd. Management Fee.....................29
Section 8.4 Amendment; Waiver.........................................29
Section 8.5 Severability..............................................29
Section 8.6 Headings..................................................29
Section 8.7 Entire Agreement..........................................29
Section 8.8 Counterparts..............................................30
Section 8.9 Assignment................................................30
Section 8.10 Remedies..................................................30
Section 8.11 Independent Nature of Purchasers'Obligations and Rights...30
Section 8.12 Payment Set Aside.........................................30
Page 19 of 91 Pages
Section 8.13 Third-Party Beneficiaries.................................31
Section 8.14 Governing Law.............................................31
Section 8.15 Submission to Jurisdiction; Waiver of Jury Trial..........31
Schedules
Schedule 1.1(a) Option Waiver Agreement
Schedule 1.1(b) Voting Agreements
Schedule 2.3(a)(xii) Registration Rights Waivers
Schedule 2.3(a)(xiii) Preemptive Rights Waivers
Schedule 3.1 Subsidiaries
Schedule 3.4 Capitalization of the Company and Subsidiaries
Schedule 3.6(e) Material Agreements
Schedule 3.7 Contingent Liabilities
Schedule 3.8 Material Adverse Changes
Schedule 3.10 No Existing Violations, Defaults, Etc.
Schedule 3.12 Liens of Property
Schedule 3.13 Environmental Matters
Schedule 3.14 Taxes
Schedule 3.15 Litigation
Schedule 3.16 Indebtedness
Schedule 3.17 Finder's Fee
Schedule 3.19 Intellectual Property Rights
Schedule 3.22 Listing and Maintenance RequirementsCompliance
Schedule 3.23 Transactions With Affiliates
Exhibits
Exhibit A Purchasers
Exhibit B AMR Warrant Agreement
Exhibit C GWH Preferred Stock Purchase Agreement
Exhibit D Registration Rights Agreement
Exhibit E Shareholders' Agreement
Exhibit F Stock Pledge Agreement
Exhibit G Third Quarter Financials
Page 20 of 91 Pages
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT dated as of January __, 2000, between
NEXUS TELOCATION SYSTEMS, LIMITED, a company organized under the laws of Israel
(the "Company"), and the purchasers set forth on Exhibit A hereto (each, a
------- ---------
"Purchaser" and, collectively, the "Purchasers").
--------- ----------
WITNESSETH:
WHEREAS, as of the date hereof, the Company has issued and outstanding
13,583,803 ordinary shares, nominal value NIS 0.01 per share (the "Ordinary
--------
Shares"), being 100% of the issued and outstanding share capital of the Company
------
as of such date;
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to issue to each Purchaser, and each Purchaser desires to
purchase from the Company that number of Ordinary Shares as set forth herein;
and
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the Company and the Purchasers agree as follows:
Article 1
DEFINITIONS; CERTAIN REFERENCES
Section 1.1 Definitions. The terms defined in this Article 1, whenever used in
-----------
this Agreement, shall have the following meanings for all purposes of this
Agreement:
"Act" means the Securities Act of 1933, as amended, and the
---
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
"Affiliate" of any specified Person means:
---------
(a) any other Person which, directly or indirectly, is in
control of, is controlled by or is under common control with such specified
Person; or
(b) any other Person which beneficially owns or holds ten
percent or more of any class of the share capital normally entitled to vote in
the election of directors of such specified Person; or
(c) any other Person of which ten percent or more of the share
capital normally entitled to vote in the election of directors of such Person is
beneficially owned or held by such specified Person or a subsidiary of such
specified Person; or
Page 21 of 91 Pages
(d) any other Person who is a director or officer (i) of such
specified Person; (ii) of any Subsidiary of such specified Person or (iii) of
any Person described in paragraph (a) above; and
for purposes of this definition, "control" of a Person means the power, direct
or indirect, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means this Securities Purchase Agreement,
---------
including all exhibits and schedules attached hereto.
"AMR Business" means the business of the Company and its
-------------
Subsidiaries related to automated meter reading.
"AMR Shares" means the ordinary shares of Aptel to be issued
----------
upon the exercise of the AMR Warrants.
"AMR Warrant Agreement" means the Share Purchase Agreement,
----------------------
dated the date hereof, entered into among the Company and the Purchasers,
substantially in the form attached hereto as Exhibit B.
"AMR Warrants" means the Warrants required to be issued to the
------------
Purchasers pursuant to the AMR Warrant Agreement.
"Annual Report" means the Company's Annual Report on Form 20-F
-------------
for the 1998 Fiscal Year, as filed with the SEC.
"Approval" means each and every authorization, approval,
--------
consent, license, filing and registration by, with or from any nation or state
or other political subdivision thereof or by or with any regulatory or
Governmental Authority of any nation or state or other political subdivision
thereof, self-regulatory organization, stock exchange or stock market, or other
party necessary to authorize or permit the execution, delivery or performance of
this Agreement or any other Transaction Document or for the validity,
enforceability or admissibility into evidence hereof or thereof.
"Aptel" means Aptel Ltd., a company organized under the laws
-----
of Israel.
"Business Day" means any day which is neither a Saturday or
-------------
Sunday nor a legal holiday on which banks are authorized or required to be
closed in New York, New York and Tel-Aviv, Israel.
"Code" means the United States Internal Revenue Code of 1986,
----
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of the Code also refer to any successor sections.
"Company" shall have the meaning set forth in the preamble
-------
hereto.
2
Page 22 of 91 Pages
"Dollars" and the sign "$" mean lawful money of the United
-------
States.
"Environmental Laws" shall have the meaning set forth in
-------------------
Section 3.13.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"First Closing" shall have the meaning set forth in Section
--------------
2.1(a).
"First Closing Date" shall have the meaning set forth in
--------------------
Section 2.1(a).
"First Closing Shares" means, with respect to each Purchaser,
--------------------
the number of Ordinary Shares set forth beside such Purchaser's name on Part I
of Exhibit A hereto.
---------
"Fiscal Year" means any period of 12 consecutive calendar
------------
months ending on the Saturday closest to December 31; references to a Fiscal
Year with a number corresponding to any calendar year (e.g. the "1999 Fiscal
Year") refer to the Fiscal Year ending on the Saturday closest to December 31
occurring during such calendar year (or the preceding fiscal year in the event
that the Saturday closest to December 31 of such Fiscal Year is in January).
"GAAP" means generally accepted accounting principles
----
consistently applied in Israel, unless any other jurisdiction is specified, in
which case it shall be the equivalent set of accounting principles for such
jurisdiction.
"Governmental Authority" means any court, tribunal,
-------------------------
governmental department, agency, board or commission, regulatory authority, or
other governmental body, subdivision or instrumentality.
"GWH" shall mean Global Wireless Holdings, Inc., a Delaware
---
corporation.
"GWH Investment" means the Company's proposed acquisition of
--------------
Series B perpetual convertible preferred stock of GWH pursuant to the terms of
the GWH Preferred Stock Purchase Agreement.
"GWH Option Agreement" means the GWH Option Agreement, dated
--------------------
the date hereof, entered into among GWH, Global Wireless Communications, L.P.
and the Purchasers, relating to the granting by GWH to the Purchasers of an
option to purchase GWH Series B Convertible Preferred Stock.
"GWH Preferred Stock Purchase Agreement" means the
----------------------------------------------
Subscription Agreement dated the date hereof, between the Company and GWH,
substantially in the form attached hereto in Exhibit B, relating to the purchase
by Nexus of shares of GWH Series B Convertible Preferred Stock.
"Indebtedness" shall mean (i) any obligation of the Company or
------------
any Subsidiary of the Company, contingent or otherwise, which under GAAP is
required to be shown on the balance sheet of the Company or such Subsidiary as a
liability and (ii) any guaranty or similar obligation by the Company or any of
its Subsidiaries of the indebtedness of any Person. Any obligation secured by a
3
Page 23 of 91 Pages
Lien on, or payable out of the proceeds of or production from, property of the
Company or any Subsidiary of the Company shall be deemed to be indebtedness even
though such obligation is not assumed by the Company or Subsidiary.
"Indebtedness for Borrowed Money" shall mean (a) all
-------------------------------------
Indebtedness in respect of money borrowed including, without limitation,
Indebtedness which represents the unpaid amount of the purchase price of any
property and is incurred in lieu of borrowing money or using available funds to
pay such amounts and not constituting an account payable or expense accrual
incurred or assumed in the ordinary course of business of the Company or any
Subsidiary of the Company, (b) all Indebtedness evidenced by a promissory note,
bond or similar written obligation to pay money, and (c) all such Indebtedness
guaranteed by the Company or any Subsidiary of the Company or for which the
Company or any Subsidiary of the Company is otherwise contingently liable by
contract.
"Instrument" means any contract, agreement, indenture,
----------
mortgage, security, document or writing under which any obligation is evidenced,
assumed or undertaken, or any Security Interest is granted or perfected.
"Intellectual Property Rights" shall have the meaning set
------------------------------
forth in Section 3.20.
"Investment Agreements" means this Agreement and each
-----------------------
Instrument to be executed or delivered pursuant hereto including, without
limitation, the AMR Warrant Agreement, the Registration Rights Agreement, the
Shareholders' Agreement and the Stock Pledge Agreements.
"Last Closing Date" means the Second Closing Date, unless the
-----------------
Second Closing shall fail to occur, in which case it means the First Closing
Date.
"Lead Investor" means QEG-NTS Holdings LLC; provided that to
-------------
the extent that QEG-NTS Holdings LLC transfers any of the Shares to any of
Quantum Emerging Growth Fund, N.V. or its affiliates (such term shall include
any funds managed by Xxxxx Fund Management LLC or any of its affiliates), then
the term "Lead Investor" shall collectively refer to QEG-NTS Holdings LLC and
such other entities.
"Liabilities" shall have the meaning set forth in Section 7.2.
-----------
"Licenses" shall have the meaning set forth in Section 3.11.
--------
"Lien" shall mean any mortgage, pledge, security interest,
----
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the
laws of any relevant jurisdiction and including any lien or charge arising by
statute or other law.
"Material Adverse Effect" means a material adverse effect on
------------------------
the assets, results of operations, business, prospects or condition (financial
or otherwise) of the specified entity and its Subsidiaries, if any, taken as a
whole.
4
Page 24 of 91 Pages
"Memorandum and Articles of Association" shall mean the
------------------------------------------
Memorandum and Articles of Association of the Company dated April 17, 1994, in
effect as of the date hereof, and as amended, supplemented or restated from time
to time.
"New Securities" means any type of equity shares of the
---------------
Company, rights, options or warrants to purchase such equity shares, and
securities of any type whatsoever that are, or may become, convertible into
equity shares; provided that New Securities shall not include (i) securities
issued upon conversion of any outstanding rights, options or warrants or other
securities, outstanding on the date hereof, convertible into equity shares as
disclosed by the Company to the Purchasers in the schedules to this Agreement;
(ii) Ordinary Shares or options to purchase Ordinary Shares issued to employees,
consultants or directors of the Company pursuant to a plan approved by the Board
of Directors of the Company; and (iii) securities issued to any strategic
investor which are expected to substantially benefit the business of the
Company; provided that no determination shall be made with respect to whether a
potential investor qualifies as a strategic investor within the meaning of this
sentence without the prior written consent of the Lead Investor, which consent
shall not be unreasonably withheld.
"NIS" means New Israeli Shekel, the lawful money of Israel.
---
"Option Waiver Agreements" means the agreements entered into
-------------------------
between the Company and the holders of options, warrants and convertible
debentures attached hereto as Schedule 1.1(a).
"Ordinary Shares" shall have the meaning set forth in the
----------------
recitals hereto.
"Person" means any natural person, corporation, firm,
------
association, government, governmental agency or any other entity, whether acting
in an individual, fiduciary or other capacity.
"Purchase Price" means, with respect to each Purchaser, (i)
---------------
with respect to the First Closing, the amount set forth beside such Purchaser's
name on Part I of Exhibit A hereto, payable by such Purchaser to the Company at
---------
the First Closing for the purchase of the First Closing Shares and (ii) with
respect to the Second Closing, the amount set forth beside such Purchaser's name
on Part II of Exhibit A hereto, payable by such Purchaser to the Company at the
---------
Second Closing for the purchase of the Second Closing Shares.
"Purchaser" or "Purchasers" shall have the meaning set forth
--------- ----------
in the preamble hereto; provided that to the extent that QEG-NTS Holdings LLC
--------
transfers any of the Shares to any of Quantum Emerging Growth Fund, N.V. or its
affiliates (such term shall include any funds managed by Xxxxx Fund Management
LLC or any of its affiliates), then the term "Purchasers" shall include QEG-NTS
Holdings LLC and such other entities.
"Registration Rights Agreement" means the Registration Rights
------------------------------
Agreement, dated the date hereof, entered into among the Company and the
Purchasers, substantially in the form attached hereto in Exhibit D.
---------
"Required Approvals" shall have the meaning set forth in
-------------------
Section 5.1.
5
Page 25 of 91 Pages
"Required Registrar Approval" shall have the meaning set forth
---------------------------
in Section 5.1.
"Required Shareholder Approval" shall have the meaning set
-------------------------------
forth in Section 5.1.
"SEC" means the U.S. Securities and Exchange Commission.
---
"SEC Documents" means all documents filed by the Company with
-------------
the SEC since January 1, 1994.
"Second Closing" shall have the meaning set forth in Section
---------------
2.1(b).
"Second Closing Date" shall have the meaning set forth in
---------------------
Section 2.1(b).
"Second Closing Shares" means, with respect to each Purchaser,
---------------------
the number of Ordinary Shares set forth beside such Purchaser's name on Part II
of Exhibit A hereto.
---------
"Security Interest" means any mortgage, pledge, hypothecation,
-----------------
assignment, deposit arrangement, encumbrance, lien (statutory or other) or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement), or any financing lease involving substantially the same
economic effect as any of the foregoing.
"Shares" means (i) prior to the Second Closing, the First
------
Closing Shares and (ii) upon the Second Closing, the First Closing Shares and
the Second Closing Shares.
"Shareholders' Agreement" means the Shareholders' Agreement,
------------------------
dated the date hereof, entered into among the Company, the Purchasers, BVR
Technologies Ltd, CLAL Industries and Investments, CLAL Industries and
Technologies (1997) Ltd. and CLAL (Israel) Ltd., substantially in the form
attached hereto in Exhibit E.
---------
"Stock Pledge Agreement" means the Stock Pledge Agreements,
-----------------------
dated the date hereof, entered into between the Company and each of the
Purchasers, substantially in the form attached hereto as Exhibit F.
---------
"Subsidiary" means, as to any Person, (a) any corporation 51%
----------
or more of the outstanding share capital of which having ordinary voting power
for the election of directors is owned directly or indirectly by such Person and
(b) any partnership, association, joint venture or other entity in which such
Person and/or one or more Subsidiaries of such Person has 51% or more of an
equity interest at the time.
"Taxes" shall mean all taxes, assessments or other charges
-----
payable to or imposed by any Governmental Authority, including without
limitation, income, estimated income, business, occupation, franchise, gross
receipts, profits, real property, personal property, sales, use, transfer,
gains, registration, value-added, alternative or add-on minimum, commercial rent
or withholding taxes, including any interest, penalty or addition thereto,
whether disputed or not.
6
Page 26 of 91 Pages
"Tax Return" shall mean Tax returns, declarations, statements,
----------
reports, schedules, forms and information returns and any amendments thereto.
"Third Quarter Financials" shall have the meaning set forth in
------------------------
Section 3.5.
"Transaction Documents" means (i) the Investment Agreements,
----------------------
(ii) the GWH Preferred Stock Purchase Agreement and each Instrument, to be
executed or delivered pursuant to the GWH Preferred Stock Purchase Agreement,
including, without limitation, the certificate of designation, (iii) the Option
Waiver Agreements and the Voting Agreements and (iv) the waivers delivered by
the Company at the First Closing pursuant to Section 2.3(a)(xii) and
2.3(a)(xiii) hereto.
"Transaction Expenses" means the reasonable out-of-pocket
---------------------
expenses of the Purchasers or any of their respective Affiliates (whether or not
incurred prior to the date hereof), including without limitation, the fees,
disbursements and other reasonable expenses of lawyers, accountants, actuaries,
appraisers, consultants and any other advisors thereto, arising out of or
relating to the discussion, evaluation, negotiation, documentation and closing
or potential closing of the transactions contemplated by the Investment
Agreements, without regard to whether or not such transactions are consummated.
"United States" or "U.S." means the United States of America,
-------------- ----
its 50 states and the District of Columbia.
"Voting Agreements" means the agreements, attached hereto as
------------------
Schedule 1.1(b), entered into between the Company and the holders of Ordinary
----------------
Shares in connection with the Required Shareholder Approval.
"Year 2000 Problem" shall have the meaning set forth in
-------------------
Section 3.26.
Section 1.2 Terms Generally. The definitions in Section 1.1 shall apply equally
---------------
to both the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP.
Article 2
CLOSING AND PAYMENT
Section 2.1 Time and Place of the Closings
------------------------------
(a) First Closing. The initial closing (the "First Closing") for the
------------- --------------
transactions contemplated in Section 2.2(a) shall take place at the offices of
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, immediately following the execution hereof and on the date and
simultaneously with the time of the first closing contemplated by the GWH
Preferred Stock Purchase Agreement (provided that solely for purposes of
--------
determining the temporal order of the First Closing and the first closing
contemplated by the GWH Preferred Stock Purchase Agreement, the First Closing
shall be deemed to have occurred immediately prior to the first closing
contemplated by the GWH Preferred Stock Purchase Agreement), or on such other
date and/or at such other place as the parties shall mutually agree (the "First
-----
Closing Date").
------------
7
Page 27 of 91 Pages
(b) Second Closing. The second closing for the transactions
----------------
contemplated in Section 2.2(b) (the "Second Closing") shall take place on a date
--------------
mutually acceptable to the parties as soon as reasonably practicable following
the receipt of the Required Approvals on the date and simultaneously with the
time of the second closing contemplated by the GWH Preferred Stock Purchase
Agreement (provided that solely for purposes of determining the temporal order
--------
of the Second Closing and the second closing contemplated by the GWH Preferred
Stock Purchase Agreement, the Second Closing shall be deemed to have occurred
immediately prior to the second closing contemplated by the GWH Preferred Stock
Purchase Agreement), but in no event later than March 15, 2000 (the "Second
------
Closing Date").
------------
Section 2.2 Transaction at Closing.
----------------------
(a) First Closing. At the First Closing, subject to the terms and
--------------
conditions of this Agreement, the Company shall issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, shall purchase from
the Company the First Closing Shares. The Purchase Price with respect to each
Purchaser shall be payable by wire transfer in immediately available funds to an
account or accounts previously designated in writing by the Company at least two
Business Days prior to the First Closing Date. At the First Closing, the Company
shall deliver, or cause to be delivered, to each Purchaser certificates
representing the First Closing Shares and each Purchaser or its nominee shall be
registered as the owner of the First Closing Shares in the Company's membership
registry, and each Purchaser shall pay to the Company the Purchase Price.
(b) Second Closing. At the Second Closing, subject to the terms and
--------------
conditions of this Agreement, including, without limitation, Article 6, the
Company shall issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, shall purchase from the Company the Second Closing Shares. The
Purchase Price with respect to each Purchaser shall be payable by wire transfer
in immediately available funds to an account or accounts previously designated
in writing by the Company at least two Business Days prior to the Second Closing
Date. At the Second Closing, the Company shall deliver, or cause to be
delivered, to each Purchaser certificates representing the Second Closing Shares
and each Purchaser or its nominee shall be registered as the owner of the First
Closing Shares in the Company's membership registry, and each Purchaser shall
pay to the Company the Purchase Price.
Section 2.3 Company Closing Deliveries.
--------------------------
(a) First Closing. At the First Closing, the Company shall deliver, or
-------------
cause to be delivered, to each Purchaser the following:
(i) Share certificates with respect to the First Closing Shares;
(ii) The opinion of Xxxxx Xxxxx & Co. as Israeli counsel to the
Company, in form and substance satisfactory to Purchasers;
8
Page 28 of 91 Pages
(iii) The opinion of Xxxxx Xxxxx & Co., as Israeli counsel to
Aptel, in form and substance satisfactory to the Purchasers;
(iv) The opinion of Xxxxxx, Xxxxxxx & Xxxxxxx, as U.S. counsel to
the Company, in form and substance satisfactory to Purchasers;
(v) The opinion of Xxxxxx, Xxxxxxx & Xxxxxxx, as U.S. counsel to
Aptel, in form and substance satisfactory to Purchasers;
(vi) The AMR Warrant Agreement and the Warrants required to be
issued to the Purchasers thereunder at the First Closing;
(vii) The Shareholders' Agreement;
(viii) The Voting Agreements;
(ix) The Option Waiver Agreements;
(x) The Registration Rights Agreement;
(xi) The GWH Preferred Stock Purchase Agreement and related
certificate of designation;
(xii) Waivers in form and substance satisfactory to the Lead
Investor from parties currently entitled to registration rights with respect to
at least 4 million shares of the Company's Ordinary Shares (attached hereto as
Schedule 2.3(a)(xii)) whereby each such party waives (A) its "piggy-back"
---------------------
registration rights with respect to the Shares that the Company is required to
register on behalf of the Purchasers pursuant to the Registration Rights
Agreement and (B) any provisions of the agreements granting the above-listed
parties registration rights which conflict with the provisions of the
Registration Rights Agreement;
(xiii) Waivers in form and substance satisfactory to the Lead
Investor (attached hereto as Schedule 2.3(a)(xiii)) from each of (A) CLAL
----------------------
Industries and Investments, (B) CLAL Industries and Technologies (1997) Ltd.,
(C) Global Wireless Communications, L.P. and (D) Global Wireless Holdings, Inc.
with respect to any preemptive or similar rights with respect to the securities
of the Company, or any similar right to participate in or preclude the
transactions contemplated by this Agreement or any other Transaction Document;
(xiv) The opinion of Golfarb, Xxxx, Xxxx & Co., as Israeli tax
counsel to the Company, in form and substance satisfactory to the Lead Investor;
(xv) Pre-Ruling of Israeli income tax authority with respect to
non-taxability upon disposition of the Shares by the Purchasers;
(xvi) Consent of Bank Hapoalim to granting of pledge pursuant to
the Stock Pledge Agreements;
9
Page 29 of 91 Pages
(xvii) Consent of the Investment Center with respect to the
purchase of the Shares hereunder;
(xviii) Consent of the Office of Chief Scientist with respect to
(A) the purchase of the Shares hereunder (B) the issuance of the AMR Warrants;
(xix) The Stock Pledge Agreements and certificates representing
the shares of Series B Convertible Preferred Stock required to be delivered to
each Purchaser thereunder at the First Closing;
(b) Second Closing. At the Second Closing, the Company shall deliver,
--------------
or cause to be delivered, to each Purchaser the following:
(i) Share certificates with respect to the Second Closing Shares;
(ii) The Warrants required to be issued to the Purchasers under
the AMR Warrant Agreement at the Second Closing;
(iii) The Articles of Association of the Company amended and
approved as contemplated in Section 5.1 hereof;
(iv) Evidence of the Required Registrar Approval;
(v) A certificate of a duly authorized executive officer of the
Company, to the effect that the conditions specified in Article 6 have been
satisfied as of the Second Closing Date;
(vi) Certificates representing the shares of Series B Convertible
Preferred Stock required to be delivered to each Purchaser under the Stock
Pledge Agreements at the Second Closing; and
(vii) Such other documents as the Purchasers shall reasonably
request.
Article 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and
warranties to the Purchasers, each of which is true and correct on the date
hereof and, except as otherwise expressly set forth in the Agreement, shall be
true and correct as of the Second Closing Date:
Section 3.1 Organization, Power, Authority, Etc. The Company is a company duly
--------------------------------------
organized and validly existing under the laws of Israel; each Subsidiary of the
Company is listed on Schedule 3.1 and is duly organized and validly existing
-------------
under the laws of its jurisdiction of incorporation; each of the Company and
each Subsidiary of the Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
business makes such qualification necessary, except, with respect to foreign
jurisdictions, where the failure to be so qualified or licensed and in good
10
Page 30 of 91 Pages
standing would not have a Material Adverse Effect on the Company; and the
Company and each of its Subsidiaries has full power and authority to own and
hold under lease its property and to conduct its business substantially as
presently conducted by it. The Company has full power and authority to enter
into and perform its obligations under this Agreement and each other Transaction
Document executed or to be executed by it.
Section 3.2 Due Authorization; No Conflicts. The execution and delivery by the
--------------------------------
Company of this Agreement, each other Transaction Document and each other
certificate or document executed or to be executed by it, the performance by the
Company of its obligations hereunder and thereunder and the issuance of the
Ordinary Shares by the Company pursuant to this Agreement (A) have been duly
authorized by all necessary corporate proceedings, except, with respect to the
Second Closing, for the Required Approvals, on the part of the Company (and no
other corporate proceedings or actions on the part of the Company or its board
of directors or shareholders are necessary therefor), (B) do not require any
Approval, except, with respect to the Second Closing, for the Required
Approvals, which has not been obtained, (C) do not and will not conflict with,
result in any violation of, or constitute any default under, any provision of
the Memorandum and Articles of Association of the Company, any provision of any
material Instrument of the Company or any Subsidiary of the Company or any
present law, governmental regulation or rule of any stock market applicable to
the Company, any Subsidiary of the Company or any of its or their assets,
properties or operations or any court decree or order applicable to the Company,
any Subsidiary of the Company or its or their assets, properties or operations
and will not, other than as specifically contemplated by the Transaction
Documents, result in or require the creation or imposition of any Security
Interest on any of the properties of the Company or any Subsidiary of the
Company pursuant to any material Instrument or result in the acceleration of any
Indebtedness of the Company or any of its Subsidiaries.
Section 3.3 Validity, Etc. This Agreement constitutes, and each other
----------------
Transaction Document executed by the Company will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
Section 3.4 Capitalization of the Company and Subsidiaries. The authorized and
----------------------------------------------
issued share capital of the Company and each of its Subsidiaries and the
ownership thereof is as set forth on Schedule 3.4(a). At the First Closing and
---------------
the Second Closing, all of the Shares will be duly authorized and, the Shares,
when issued in accordance with this Agreement, will be validly issued, fully
paid and nonassessable and free of all Liens and shall be quoted on Nasdaq.
Except as set forth on Schedule 3.4(b), there are no outstanding (A) securities
---------------
or obligations of the Company or any of its Subsidiaries convertible into or
exchangeable for any shares of the share capital of the Company or any of its
Subsidiaries, (B) warrants, rights or options to subscribe for or purchase from
the Company or any of its Subsidiaries any shares of the share capital or any
such convertible or exchangeable securities or obligations or (C) obligations of
the Company or any of its Subsidiaries to issue such shares, any such
convertible or exchangeable securities or obligations, or any such warrants,
rights or options. Except as set forth on Schedule 3.4(c), no person has
----------------
11
Page 31 of 91 Pages
preemptive or similar rights with respect to the securities of the Company or
any of its Subsidiaries, or any similar right to participate in the transactions
contemplated by this Agreement or any other Transaction Document. Except as set
forth on Schedule 3.4(d), the Company has not granted or agreed to grant to any
---------------
Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the SEC or any other governmental
authority which have not been satisfied.
Section 3.5 Financial Statements. The audited consolidated financial statements
--------------------
and related schedules and notes included in the SEC Documents comply in all
material respects with the requirements of the Exchange Act and the Act, were
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as may be indicated in the notes thereto) and fairly present,
in all material respects, the consolidated financial condition, results of
operations, cash flows and changes in shareholders' equity of the Company and
its consolidated Subsidiaries at the dates and for the periods presented. The
unaudited consolidated financial statements for the period ending September 30,
1999 attached hereto as Exhibit G (the "Third Quarter Financials"), fairly
--------- --------------------------
present, in all material respects, the consolidated financial condition, results
of operations, and changes in shareholders' equity of the Company and its
Subsidiaries at the dates and for the periods to which they relate, subject to
year-end audit adjustments (consisting only of normal recurring accruals), have
been prepared in accordance with GAAP applied on a consistent basis except as
otherwise stated therein and have been prepared on a basis consistent with that
of the audited financial statements referred to above except as otherwise stated
therein.
Section 3.6 SEC Documents.
-------------
(a) The Company has delivered or made available to the Purchasers true and
complete copies of: (i) the Annual Report, (ii) any other reports filed under
cover of Form 6-K filed with the SEC since December 31, 1998, and (iii) all
other SEC Documents.
(b) As of its filing date, each SEC Document (including all exhibits and
schedules thereto and documents incorporated by reference therein) referred to
in (a) above, filed, as amended or supplemented, if applicable, pursuant to the
Exchange Act (i) complied in all material respects with the applicable
requirements of the Exchange Act and (ii) did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(c) Each registration statement (including all exhibits and schedules
thereto and documents incorporated by reference therein) referred to in clause
(a)(iii) filed, as amended or supplemented, if applicable, pursuant to the Act,
as of the date such statement or amendment became or will become effective (i)
complied in all material respects with the applicable requirements of the Act
and (ii) did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any prospectus, in light of
the circumstances under which they were made).
12
Page 32 of 91 Pages
(d) The Company has delivered or made available to the Purchasers true and
complete copies of all correspondence between the SEC and the Company or its
legal counsel, accountants or other advisors since January 1, 1998. The Company
is not aware of any issues raised by the SEC with respect to any of the SEC
Documents, other than those disclosed to the Purchaser pursuant to this Section
3.6(d).
(e) Except as set forth on Schedule 3.6(e), all agreements to which the
----------------
Company or any Subsidiary of the Company is a party or to which the property or
assets of the Company or any Subsidiary of the Company are subject and which are
required to be filed as exhibits to the SEC Documents, including agreements
entered into after December 31, 1998, have been filed as exhibits to the SEC
Documents as required and neither the Company nor any Subsidiary of the Company
nor, to the Company's knowledge, any other party is in breach of any such
agreement and all such agreements, including any agreements listed on Schedule
3.6(e), are in full force and effect.
Section 3.7 Contingent Liabilities. Except as set forth on Schedule 3.7 or as
----------------------- ------------
fully reflected or reserved against in the financial statements included in the
Annual Report, or disclosed in the footnotes contained in such financial
statements, the Company and its Subsidiaries have no material liabilities
(including tax liabilities), absolute or contingent.
Section 3.8 Absence of Certain Developments; No Material Adverse Change.
--------------------------------------------------------------
Except as disclosed (i) in the Third Quarter Financials, (ii) the SEC Documents
filed prior to the First Closing Date, or (iii) as set out in Schedule 3.8,
-------------
since the end of the 1998 Fiscal Year, (A) the Company and its Subsidiaries have
not incurred any material liability, guarantee or obligation (indirect, direct
or contingent), or entered into any material oral or written agreement or other
transaction, that is not in the ordinary course of business or that could
reasonably be expected to result in a Material Adverse Effect on the Company;
(B) the Company and its Subsidiaries have not sustained any material loss or
interference with its business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance); (C) there has
been no material change in the Indebtedness of the Company and its Subsidiaries,
and no dividend or distribution of any kind declared, paid or made by the
Company or any of its Subsidiaries (other than dividends or distributions
declared, paid or made by a wholly owned Subsidiary of the Company on any class
of its shares); (D) neither the Company nor any of its Subsidiaries has made
(nor does it propose to make) (i) any material change in its accounting methods
or practices or (ii) any material change in the depreciation or amortization
policies or rates adopted by it, in either case, except as may be required by
law or applicable accounting standards; and (E) there has been no event causing
a Material Adverse Effect on the Company, nor any developments that could,
singly or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company.
Section 3.9 Approvals. Except for the Required Approvals, no Approval is
---------
required to be obtained by the Company or any Subsidiary of the Company for the
consummation of the transactions contemplated by this Agreement or by any of the
Transaction Documents, which has not already been obtained.
Section 3.10 No Existing Violation, Default, Etc. None of the Company or any of
-------------------------------------
the Company's Subsidiaries is in violation of (A) its memorandum or articles of
association, articles of incorporation, by-laws or other organization documents
13
Page 33 of 91 Pages
or (B) except as set forth on Schedule 3.10, any applicable material law,
--------------
ordinance, administrative, governmental, stock exchange or stock market rule or
regulation, or (C) except as set forth on Schedule 3.10, any material order,
--------------
decree or judgment of any court or governmental agency or body having
jurisdiction over the Company or any such Subsidiary. Except as disclosed on
Schedule 3.10, no material event of default or event that, but for the giving of
-------------
notice or the lapse of time or both, would constitute a material event of
default exists or, upon the consummation by the Company of the transactions
contemplated by this Agreement or any of the Transaction Documents, will exist
under any Instrument to which the Company or any of the Company's Subsidiaries
is a party or by which the Company or any such Subsidiary is bound or to which
any of the properties, assets or operations of the Company or any such
Subsidiary is subject.
Section 3.11 Licenses, Etc. The Company and each of its Subsidiaries possess all
--------------
material certificates, authorizations, licenses, easements, consents, approvals,
orders and permits necessary to own, lease and operate their respective
properties and to conduct their respective businesses as currently conducted
("Licenses"), and there is no proceeding pending, or, to the knowledge of the
--------
Company, threatened, relating to the revocation, modification, suspension or
cancellation of any License. Neither the Company nor any of the Subsidiaries is
in conflict with or default or violation of any License.
Section 3.12 Title to Properties.Except as set forth on Schedule 3.12, the
-------------------- --------------
Company and its Subsidiaries have good and marketable title to all material
properties (real and personal) owned by the Company and any such Subsidiary that
are necessary for the conduct of the business of the Company and such
Subsidiaries as currently conducted, free and clear of any Lien that may
materially interfere with the conduct of the business of the Company and such
Subsidiaries, taken as a whole, and all material properties held under lease by
the Company or the Subsidiaries are held under valid, subsisting and enforceable
leases.
Section 3.13 Environmental Matters. Except as set forth on Schedule 3.13, the
---------------------- -------------
Company and its Subsidiaries (i) are in material compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
-------------------
have received all material permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in material compliance with all terms and conditions of any such
permits, licenses or other approvals.
Section 3.14 Taxes. The Company and all of its Subsidiaries have each timely
-----
filed all Tax Returns required by law to have been filed by it and paid all
Taxes thereby shown to be owing, except any such Taxes which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books. Each Tax Return filed by the Company or any of its Subsidiaries correctly
and accurately reflects the amount of its liability for Taxes thereunder in all
material respects and makes all material disclosures required by applicable
provisions of law. Except as set forth in Schedule 3.14, neither the Company nor
-------------
any of its Subsidiaries has been advised that any of its Tax Returns have been
14
Page 34 of 91 Pages
or are being audited as of the date hereof, and no deficiency assessment or
proposed adjustment of Taxes of each of the Company or any of its Subsidiaries
has been threatened. There are no liens for Taxes upon any of the assets of the
Company or any of its Subsidiaries, except for Taxes not yet otherwise due or
payable. The Company and each of its Subsidiaries has taken all reasonable and
customary steps to ensure that it has complied with all applicable Tax laws and
Tax regulations of any Governmental Authority which affect the operation,
properties, financial condition, operating results or business prospects of the
Company or such Subsidiary to which the Company or such Subsidiary may otherwise
be subject. None of the Company's Subsidiaries is a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Internal
Revenue Code of 1986, as amended.
Section 3.15 Litigation. Except as set forth on Schedule 3.15, there is no
---------- --------------
pending action, suit, proceeding, arbitration or investigation against or
affecting the Company or any of its Subsidiaries or any of their respective
properties, assets or operations, or with respect to which the Company or any
such Subsidiaries is responsible by way of indemnity or otherwise, (A) that is
required under the Exchange Act to be described in the SEC Documents and was not
so described, (B) that questions the validity of this Agreement or any of the
other Transaction Documents or any action to be taken pursuant to this Agreement
or any of the other Transaction Documents, or (C) that would individually, or in
the aggregate with all other such actions, suits, investigations or proceedings,
reasonably be expected to have, a Material Adverse Effect on the Company or an
adverse effect on the ability of the Company to perform its obligations under
this Agreement or any of the Transaction Documents; and, to the best knowledge
of the Company, except as set forth on Schedule 3.15, no such actions, suits,
--------------
proceedings or investigations are threatened or contemplated.
Section 3.16 Indebtedness. Schedule 3.16 contains a true and complete list,
------------ --------------
including the names of the parties thereto, of all debt instruments, loan
agreements, indentures, guaranties or other obligations, whether written or
oral, exceeding $10,000 in amount, relating to (i) Indebtedness for Borrowed
Money or (ii) money loaned to others by the Company or its Subsidiaries. All of
the aforesaid items are valid and binding, in full force and effect and are
enforceable in accordance with their respective terms and there exists no breach
or default, or any event which with notice or lapse of time or both, would
constitute a breach or default by any party thereto. All of the Company's and
each Subsidiary's Indebtedness for Borrowed Money, as required by GAAP, is
disclosed on the balance sheet contained in the Company's most recent Annual
Report.
Section 3.17 Finder's Fees. No broker, finder or other party is entitled to
--------------
receive from the Company, any of its Subsidiaries or any other Person any
brokerage or finder's fee or any other fee, commission or payment as a result of
the transactions contemplated by this Agreement for which the Purchasers could
have any liability or responsibility.
Section 3.18 Securities Law Matters. Neither the Company nor any person acting
----------------------
on its behalf has, in connection with the sale of the Shares or the granting of
the AMR Warrants, engaged in (A) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Act), (B) (assuming the accuracy of the Purchaser's representations in Section
4.3) any action involving a public offering within the meaning of Section 4(2)
of the Act, or (C) (assuming the accuracy of the Purchaser's representations in
Section 4.3) any action that would require the registration under the Act of the
offering and sale of the Shares pursuant to this Agreement, the granting of the
AMR Warrants or the issuance to the Purchasers of the AMR Shares, or that would
15
Page 35 of 91 Pages
violate applicable state securities or "blue sky" laws. The Company has not made
and will not make, directly or indirectly, any offer or sale of Ordinary Shares,
the AMR Warrants or the AMR Shares or of securities of the same or a similar
class as the Ordinary Shares, the AMR Warrants or the AMR Shares if, as a
result, the offer and sale of the Ordinary Shares or the granting of the AMR
Warrants or the issuance to the Purchasers of the AMR Shares contemplated hereby
or by the AMR Warrant Agreement could fail to be entitled to exemption from the
registration requirements of the Act. As used herein, the terms "offer" and
"sale" have the meanings specified in Section 2(3) of the Act.
Section 3.19 Intellectual Property Rights. The Company and its Subsidiaries own
-----------------------------
or possess adequate rights or licenses to use all trademarks, trademark
applications, trade names and service marks, whether or not registered, and all
patents, patent applications, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and intellectual property rights
(collectively, "Intellectual Property Rights") which are necessary for use in
------------------------------
connection with their respective businesses as now conducted and as described in
the SEC Documents. Except as set forth on Schedule 3.19, none of the Company's
-------------
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate within two years from the date of this Agreement. Neither
the Company nor any of its Subsidiaries has infringed or is infringing on any of
the Intellectual Property Rights of any Person and, there is no claim, action or
proceeding which has been made or brought or alleged against, or to the
Company's knowledge, is being made, brought or threatened against, the Company
or its Subsidiaries regarding the infringement of any of the Intellectual
Property Rights, and the Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing, except where any
of the foregoing would not have a Material Adverse Effect. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
Section 3.20 Disclosure. No representation or warranty contained in this
----------
Agreement, the schedules or exhibits hereto, the Transaction Documents or
information appearing in any writing furnished by the Company to the Purchasers
or their representatives pursuant hereto or in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading. To the best of the
Company's knowledge, there is no fact which the Company has not disclosed to the
Purchasers in writing which is reasonably likely to have a Material Adverse
Effect or is reasonably likely to adversely affect the ability of the Company to
perform its obligations under this Agreement or the Transaction Documents.
Section 3.21 Form F-3 Eligibility. The Company is eligible to register
----------------------
securities (including the Shares) for resale with the SEC under Form F-3 (or any
successor form) promulgated under the Act.
Section 3.22 Listing and Maintenance Requirements Compliance. The principal
--------------------------------------------------
market on which the Ordinary Shares are currently traded is Nasdaq. Except as
disclosed on Schedule 3.22, the Company has not in the three years preceding the
date hereof received notice (written or oral) from Nasdaq (or any stock
exchange, market or trading facility on which the Ordinary Shares are or have
been listed (or on which it has been quoted)) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such market or
16
Page 36 of 91 Pages
exchange. The Company is not aware of any facts which would reasonably lead to
delisting or suspension of the Ordinary Shares by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the other Transaction
Documents, the Company is and will be in compliance with all such maintenance
requirements.
Section 3.23 Transactions With Affiliates. Except as set forth on Schedule 3.23,
---------------------------- -------------
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 services as employees, officers and 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 officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
Section 3.24 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 form 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.
Section 3.25 Year 2000 Compliance. Other than those modifications the cost of
--------------------
which is not material, there are no modifications required to any of the
Company's Intellectual Property Rights in order for such property to contain no
deficiencies relating generally to formatting for entering dates (commonly
referred to and referred to herein as the "Year 2000 Problem"). The Company's
and each Subsidiaries' Intellectual Property Rights are susceptible to all
necessary modification and the Company has adequate personnel and consultants
under contract to so timely modify its own Intellectual Property Rights. The
Company is not aware of any inability on the party of any customer, insurance
company or service provider with which the Company transacts business to timely
remedy their own deficiencies in respect of the Year 2000 Problem.
Section 3.26 Other Agreements. The Company has not, directly or indirectly, made
----------------
any agreements with any Purchasers relating to the terms and conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. The Company has made available to Purchasers copies
of all Transaction Documents.
Article 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby, severally but not jointly, represents
and warrants to the Company that:
17
Page 37 of 91 Pages
Section 4.1 Organization, Good Standing, Power, Authority, Etc. Each Purchaser
-----------------------------------------------------
is validly organized and existing and in good standing under the laws of its
jurisdiction of organization and has the full corporate power and authority to
execute and deliver this Agreement and each of the other Investment Agreements
to which it is a party, as applicable, and to perform its obligations hereunder
and thereunder. Each Purchaser has taken all action required by law, its
organizational documents or otherwise required to be taken by it to authorize
the execution and delivery of this Agreement and the other Investment Agreements
to which it is a party and the consummation of the transactions contemplated to
be performed by it hereby and thereby. This Agreement constitutes, and each
other Investment Agreement executed by each Purchaser will, on the due execution
and delivery thereof, constitute, the legal, valid and binding agreement of such
Purchaser, enforceable against such Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 4.2 No Conflicts; No Consents. Neither the execution and delivery
--------------------------
of this Agreement nor the consummation by each Purchaser of the purchase
contemplated hereby will (A) conflict with, or result in any violation of, or
constitute any default under, any provision of its organizational documents, (B)
violate any statute or law or any judgment, order, writ, injunction, decree,
rule or regulation applicable to such Purchaser or (C) violate, conflict with,
or result in a breach of any material Instrument of such Purchaser.
Section 4.3 Acquisition for Own Account. The Shares and the AMR Warrants are
-----------------------------
being acquired by each Purchaser for its own account and not with a view to or
for sale or other disposition in connection with, any distribution of all of the
Shares or AMR Warrants, or any part thereof in any transaction that would be in
violation of the Act or the securities laws of any state; without prejudice,
however, to the rights of each Purchaser at all times to sell or otherwise
dispose of all or any part of the Shares or AMR Warrants under an effective
registration statement under the Act or under an exemption from such
registration available under the Act, or to pledge all or any part of the Shares
or AMR Warrants to secure any obligation of such Purchaser.
Section 4.4 Investor Suitability. Each Purchaser is an "accredited investor" as
--------------------
such term is defined in Rule 501 under the Act.
Section 4.5 Disclosure of Information. Each Purchaser acknowledges that it or
-------------------------
its representatives have been furnished with all information regarding the
Company and its business, assets, results of operations and financial condition
that such Purchaser has requested. Each Purchaser further represents that it has
had an opportunity to ask questions of and receive answers from the Company
regarding the Company and its business, assets, results of operations, and
financial condition and the terms and conditions of the issuance of the Shares
and AMR Warrants; however, no representations or warranties have been made by
the Company except as are set forth in this Agreement and the other Transaction
Documents. Nothing contained in this Section 4.5 and no investigation by
Purchasers shall in any way affect the Purchasers' right to rely upon the
Company's representations and covenants contained in this Agreement and the
other Transaction Documents.
18
Page 38 of 91 Pages
Section 4.6 Investment Experience. Purchasers each represent that they have suc
---------------------
knowledge, experience and skill in evaluating and investing in ordinary shares,
options and other securities, based on actual participation in financial,
investment and business matters, so that they are each capable of evaluating the
merits and risks of an investment in the Shares and receipt of the AMR Warrants
and have such knowledge, experience and skill in financial and business matters
that they are each capable of evaluating the merits and risks of the investment
in the Company and the suitability of the Shares and AMR Warrants as an
investment and can bear the economic risk of an investment in the Shares and AMR
Warrants.
Section 4.7 Restricted Securities. Purchasers understand that the Shares and th
---------------------
AMR Warrants will not have been registered pursuant to the Act or any applicable
state securities laws, that the Shares and the AMR Warrants will be
characterized as "restricted securities" under federal securities laws, and that
under such laws and applicable regulations the Shares and the AMR Warrants
cannot be sold or otherwise disposed of without registration under the Act or an
exemption therefrom. In this connection, Purchasers each represent that they are
familiar with Rules 144 and 144A promulgated under the Act, as currently in
effect, and understand the resale limitations imposed thereby and by the Act.
Stop transfer instructions may be issued to the respective transfer agents for
securities of the Company (or a notation may be made in the appropriate records
of the Company) in connection with the Shares and the AMR Warrants, but only to
the extent customary for securities which are "restricted securities." The
Company shall also be entitled to request an opinion of counsel to the
Purchaser, reasonably acceptable in form and substance to the Company, that a
transfer of the Shares and the AMR Warrants, other than pursuant to an effective
registration statement, does not require registration under the Act.
Section 4.8 Finder's Fees. No broker, finder or other party is entitled to
--------------
receive from any Purchaser, any brokerage or finder's fee or any other fee,
commission or payment as a result of the transactions contemplated by this
Agreement for which the Company could have any liability or responsibility.
Article 5
COVENANTS OF THE PARTIES
Section 5.1 Shareholders Meeting; Amended Articles. As soon as practicable
-----------------------------------------
following the First Closing Date but in no event later than March 15, 2000, the
Company shall cause:
(a) an extraordinary general meeting of the shareholders of the Company to
take place in order to approve the amendment of the Company's Articles of
Association to provide for:
i. the increase of the share capital of the Company necessary to permit
(A) the issuance of the Shares in the Second Closing and (B) the
exercise of all of the outstanding convertible securities of the
Company;
19
Page 39 of 91 Pages
ii. the right of the Lead Investor to appoint one member to the board of
directors of the Company until such time as (A) the Lead Investor
holds less than (x) 2,000,00 Shares purchased by it hereunder if the
Second Closing shall not have occurred and (y) 3,500,000 Shares
purchased by it hereunder if the Second Closing shall have occurred or
(B) the Purchasers, in the aggregate, hold less than 10% of the
outstanding share capital of the Company; and
iii. the right of the Lead Investor to assign its right in clause (ii)
above (with the consent of the Company not to be unreasonably
withheld) to a transferee so long as (A) the Lead Investor transfers
to such transferee not less than (x) 2,000,000 Shares purchased by the
Lead Investor hereunder if the Second Closing shall not have occurred
or (y) 3,500,000 Shares purchased by the Lead Investor hereunder if
the Second Closing shall have occurred; provided that such transferee
--------
shall only have the right to appoint a director to the board of
directors of the Company as long as (A) the transferee holds more than
(x) 2,000,000 Shares purchased by it from the Lead Investor if the
Second Closing shall not have occurred or (y) 3,500,000 Shares
purchased by it from the Lead Investor if the Second Closing shall
have occurred and (B) the Purchasers, including such transferee, in
the aggregate, hold more than 10% of the outstanding share capital of
the Company;
(Clauses (i), (ii) and (iii) are collectively referred to as the "Required
--------
Shareholder Approval").
--------------------
(b) the amendments to Articles of Association contemplated by paragraph (a)
above to be approved by the Registrar of Companies in Israel (the "Required
--------
Registrar Approval" and together with the Required Shareholder Approval, the
-------------------
"Required Approvals").
------------------
Section 5.2 Amendment/Waiver of Certain Agreements. The Company shall not amend
--------------------------------------
or waive, or permit the amendment or waiver of, any of the Option Waiver
Agreements and/or the Voting Agreements or any of the waivers obtained pursuant
to Section 2.3(a)(xii) and (xiii). The Company shall take all necessary action
to enforce the provisions of such agreements and waivers.
Section 5.3 Legends.
-------
(a) Each Purchaser agrees to the imprinting, so long as is required by this
Section 5.3(a), of the following legend on the Shares:
THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
20
Page 40 of 91 Pages
AMENDED, AND UNDER ANY APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN
APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER.
(b) The Shares shall not contain the legend set forth above (or any other
legend) (i) at any time while a registration statement is effective under the
Act covering such security, (ii) if in the written opinion of counsel to the
Company experienced in the area of United States securities laws such legend is
not required under applicable requirements of the Act (including judicial
interpretations and pronouncements issued by the staff of the SEC) or (iii) if
the Shares may be sold pursuant to Rule 144. The Company agrees that it will
provide each Purchaser, upon request, with a certificate or certificates
representing the Shares, free from such legend at such time as such legend is no
longer required hereunder. If such certificate or certificates had previously
been issued with such a legend or any other legend, the Company shall, upon
request and delivery of such certificate or certificates to the Company by such
Purchaser, reissue to such Purchaser such certificate or certificates free of
any legend.
Section 5.4 Use of Proceeds.
---------------
(a) The sum of (A) the aggregate Purchase Price of $12,900,000 received in
respect of the First Closing and (B) the aggregate purchase price of $2,025,000
to be received by Aptel at the First Closing for the issuance of the AMR
Warrants, shall be used by the Company (i) to pay the approximate $8.9 million
purchase price in connection with the first closing under the GWH Preferred
Stock Purchase Agreement and (ii) for working capital in an aggregate amount of
approximately $3,000,000 and the remainder by Aptel to invest in developing its
AMR Business.
(b) The sum of (A) the aggregate Purchase Price of $8,600,000 received in
respect of the Second Closing and (B) the aggregate purchase price of $1,350,000
to be received by Aptel at the Second Closing for issuance of the AMR Warrants,
shall be used by the Company (i) to pay the purchase price of approximately
$5.95 million in connection with the second closing under the GWH Preferred
Stock Purchase Agreement and (ii) for working capital in an aggregate amount of
approximately $2,000,000 and the remainder by Aptel to invest in developing the
AMR Business.
(c) The Company may apply the proceeds to such other purposes or in such
other amounts as the Lead Investor may agree in writing, such consent not to be
unreasonably withheld.
Section 5.5 No Inconsistent Agreements. The Company and its Subsidiaries shall
---------------------------
not enter into any Instrument, or enter into any amendment or other modification
to any currently existing Instrument, restricting the Company's ability to
perform any of its obligations under this Agreement or restricting the Company's
rights or obligations under any of the other Transaction Documents. The Company
shall not, while the GWH Option Agreement is in effect, amend or waive any
provisions of the GWH Preferred Stock Purchase Agreement or the related
certificate of designation, or exercise any registration rights under the GWH
Preferred Stock Purchase Agreement, without the prior written consent of the
Lead Investor. The Company shall not, following exercise by the Purchasers of
the option granted pursuant to the GWH Option Agreement, vote to amend or waive
any provisions of the certificate of designation with respect to the Series B
21
Page 41 of 91 Pages
Convertible Preferred Stock of GWH without the prior written consent of the Lead
Investor. In addition, the Purchasers agree among themselves that, in the event
of a transfer of shares of GWH Series B Convertible Preferred Stock to any of
the Purchasers pursuant to the Stock Pledge Agreements prior to the exercise by
the Purchasers of the option under the GWH Option Agreement, no such Purchaser
shall exercise any registration rights that it may have under the GWH Preferred
Stock Purchase Agreement as a result of such transfer, without the prior written
consent of the Lead Investor.
Section 5.6 Information; Access.
-------------------
(a) So long as any Purchaser owns any of the Shares, the Company shall
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) with the SEC and with any U.S. or foreign stock
exchange or stock market on which any securities of the Company are listed, the
information, documents and other reports that are required to be filed with the
SEC pursuant to Sections 13 and 15 of the Exchange Act, whether or not the
Company has or is required to have a class of securities registered under the
Exchange Act and whether or not the Company is then subject to the reporting
requirements of the Exchange Act, at the time the Company is or would be
required to file the same with the SEC and, promptly after the Company is or
would be required to file such reports, information or documents with the SEC,
and so long as the Purchasers hold in the aggregate at least 5% of the
outstanding Ordinary Share capital of the Company, to mail copies of such
reports, information and documents (including any registration statements filed
with the SEC (without exhibits)) to such Purchasers at their addresses set forth
in the register maintained by the transfer agent of the Company therefor.
(b) So long as the Lead Investor owns at least 5% of the outstanding
Ordinary Share capital of the Company, the Company shall furnish to the director
designated by the Lead Investor (or to such other person designated by the Lead
Investor if no such director has been designated) as soon as practicable upon
the request of the Lead Investor reasonable access during normal business hours
to the Company's and its Subsidiaries' properties, books, contracts and records
and personnel and advisors (who will be instructed by the Company to cooperate)
and the Company shall (and shall cause each of the Subsidiaries to) furnish
promptly to the director designated by the Lead Investor (or to such other
person designated by the Lead Investor if no such director has been designated)
all information concerning its business, properties, tax matters and personnel
as the Lead Investor may reasonably request. Each Purchaser will keep, and will
cause their respective representatives to keep, all information and documents
obtained pursuant to this Section 5.6(b) confidential except to the extent
otherwise publicly disclosed by the Company.
Section 5.7 Ordinary Course Brokerage and Trading. Subject to compliance with
---------------------------------------
all applicable securities laws and Nasdaq regulations, no Purchaser shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Company's Ordinary Shares; provided that the personnel engaged
--------
in such activities have not been involved with the transactions contemplated
hereby and have not been provided with confidential information with respect to
the Company.
22
Page 42 of 91 Pages
Section 5.8 Publicity. Each Purchaser and the Company will consult with each
---------
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by the Transaction Documents and the GWH Investment
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable law and
provided that each Purchaser shall be entitled to disclose information with
respect to its investment in the Company on any reports such Purchaser furnishes
to its investors.
Section 5.9 Other Actions. Each of the Company and the Purchasers agrees to
--------------
execute and deliver such other documents and take such other acts, as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the other Transaction Documents. At any time that any party hereto
is in breach of any representation, warranty, covenant or agreement in this
Agreement or any of the other Transaction Documents, such party shall inform the
other parties of such breach, and shall take all actions necessary to mitigate
the adverse effects of such breach; provided that in no event will disclosure of
--------
a breach relieve the breaching party from any of its obligations or affect the
rights of any other party hereto or be deemed to amend or supplement any
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
Section 5.10 Integration. The Company shall not sell, offer to sell or solicit
-----------
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Act) that would be integrated with the offer or sale of the
Shares or the grant of the AMR Warrants in a manner that would require the
registration under the Act of the sale of the Shares or the grant of the AMR
Warrants to any Purchaser or cause the offering of such securities to be
integrated with any other offering of securities by the Company for the purpose
of any stockholder approval provision applicable to the Company or its
securities.
Section 5.11 Preemptive Rights.
-----------------
(a) Until the third anniversary of the First Closing Date, the Company
hereby grants to each Purchaser the right to purchase a pro rata share of all
New Securities which the Company may, from time to time, propose to sell and
issue. A Purchaser's pro rata share, for purposes of this right, is the ratio of
the number of Ordinary Shares owned by such Purchaser on a fully diluted basis
immediately prior to the issuance of New Securities, to the total number of
Ordinary Shares of the Company issued and outstanding on a fully diluted basis
immediately prior to the issuance of New Securities.
(b) If a Purchaser does not or does not fully exercise its rights under
Section 5.11(a), the remaining Purchasers shall be entitled to purchase a pro
rata share of all such unclaimed New Securities. A Purchaser's pro rata share,
for purposes of this Section 5.11(b), is the ratio of the number of Ordinary
Shares owned by such Purchaser immediately prior to the issuance of New
Securities, to the total number of Ordinary Shares owned by the Purchasers at
such time.
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser prior written notice of its intention,
describing the type of New Securities, their price and the general terms upon
which the Company proposes to issue the same. Each Purchaser shall have 14 days
23
Page 43 of 91 Pages
after any such notice is delivered to agree to purchase its pro rata share of
such New Securities for the price and upon the terms specified in the notice by
giving written notice to the Company and the other Purchasers. The Company shall
provide the Purchasers reasonable opportunity to exercise their rights under
Section 5.11(b) above.
(d) Whether or not a Purchaser exercises its rights granted in Section
5.11(a) within said 14 day period (or longer to the extent required to provide
the Purchasers reasonable opportunity to exercise their rights under Section
5.11(b)), the Company shall have 60 days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within 60 days from the date of said agreement) to sell the
New Securities for which each such Purchaser's right set forth in this Section
5.11 was or was not exercised, at a price and upon terms no more favorable than
what was offered in the Company's notice pursuant to Section 5.11(a). In the
event the Company has not sold the New Securities within said 60-day period or
entered into an agreement to sell the New Securities in accordance with the
foregoing 60-day period from the date of said agreement, the Company shall not
thereafter issue or sell any New Securities, without first again offering such
securities to the Purchasers in the manner provided in Section 5.11(a) and
5.11(b).
Section 5.12 Major Decisions. At all times until the earlier to occur of (i) the
---------------
Lead Investor holds less than (x) 2,000,000 Shares purchased by it hereunder if
the Second Closing shall not have occurred and (y) 3,500,000 Shares purchased by
it hereunder if the Second Closing shall have occurred or (ii) the Purchasers,
in the aggregate, hold less than 15% of the outstanding Ordinary Share capital
of the Company, without either the prior written consent of the Lead Investor or
the affirmative vote of the Purchaser Nominee (as defined in the Shareholders'
Agreement) in connection with any resolutions of the Board of Directors of the
Company, the Company shall not, and shall ensure that each of its Subsidiaries
does not:
(a) enter into any merger or consolidation with or into any other entity or
the sale, lease or other disposition of any material asset to any other entity;
(b) invest in research and/or development an amount in excess of $4 million
in any twelve (12) month period from the date of the First Closing until the
third anniversary of the date of the First Closing;
(c) make capital expenditures (including the acquisition of assets outside
the ordinary course of business) in an amount in excess of $3 million in any
twelve (12) month period from the date of the First Closing until the third
anniversary of the date of the First Closing;
(d) have outstanding at any time Indebtedness for Borrowed Money (excluding
convertible securities currently owned by BVR Technologies, Ltd.) in excess of
$10 million; or
(e) authorize the issuance of Ordinary Shares or options or warrants to
purchase Ordinary Shares issuable to employees, consultants or directors of the
Company pursuant to a plan approved by the Board of Directors of the Company
which at any time (after taking into account all Ordinary Shares and options and
24
Page 44 of 91 Pages
warrants to purchase Ordinary Shares then issued under all other such plans)
exceeds 15% of the fully diluted Ordinary Share capital of the Company.
Section 5.13 GWH Option Agreement Tax Indemnity. In addition to the indemnity
------------------------------------
provided for in Article 7, the Company hereby covenants to indemnify and hold
harmless each of the Purchasers for the entirety of any amount required to be
paid by any such Purchaser, upon exercise of the option granted pursuant to the
GWH Option Agreement, to any Israeli Tax authority with respect to any Taxes.
Any indemnity payment made hereunder shall be increased by the amount of the
such Purchaser's Tax cost (as defined below). The amount of such Purchaser's Tax
cost shall be equal to the amount of the income (or present value of any
decreased depreciation or amortization deductions) resulting from the receipt of
such indemnity payment, multiplied by the highest marginal income tax rate, U.S.
or foreign, imposed on such Purchaser. For the purpose of this section, present
values will be computed using the midterm applicable federal rate existing at
the time the obligation arises as the discount rate.
Article 6
CONDITIONS TO THE SECOND CLOSING
Section 6.1 Second Closing. The obligations of each of the Purchasers to be
---------------
discharged under this Agreement at the Second Closing are subject to
satisfaction of the following conditions at or prior to the Second Closing
(unless expressly waived in writing by such Purchaser at or prior to the Second
Closing):
(a) First Closing. The First Closing shall have occurred;
-------------
(b) Accuracy of the Company's Representations and Warranties. The
------------------------------------------------------------
representations and warranties of the Company set forth in this Agreement and in
the Investment Agreements shall be true and correct in all material respects as
of the date when made and as of the Second Closing Date as though made at that
time (except for representations and warranties made as of a specific date);
(c) Performance by the Company. The Company shall have performed,
----------------------------
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the other Transaction Documents to
be performed, satisfied or complied with by the Company at or before the Second
Closing Date;
(d) Closing Deliveries. The Company shall have delivered the items
-------------------
specified in Section 2.3(b);
(e) Required Waivers. The waivers obtained pursuant to Sections
-----------------
2.3(a)(xii) and (xiii) shall be in full force and effect through the Second
Closing Date;
(f) Registration Statements for the Shares. The registration statement
---------------------------------------
with respect to the Shares shall have been filed with the Commission; and, if on
or prior to the Second Closing Date such registration statement has been
declared effective under the Securities Act, such registration statement shall
25
Page 45 of 91 Pages
not be subject to any stop order and shall not be subject to any suspension
pursuant to the Registration Rights Agreement, and no stop order shall be
pending or threatened as at the Second Closing Date;
(g) GWH Closing. The second closing under the GWH Preferred Stock
------------
Purchase Agreement shall occur simultaneously with the Second Closing as
contemplated by Section 2.1(b) hereof; and
(h) No Order. No Governmental Authority or court of competent
---------
jurisdiction shall have enacted, issued, promulgated, enforced or entered into
any statute, rule regulations, injunction or other order which is in effect and
has the effect of making the transactions contemplated by this Agreement or the
Transaction Documents illegal or otherwise prohibiting consummation of such
transactions; provided, however, that the parties hereto shall use their
-------- -------
reasonable best efforts to have any such order or injunction vacated.
Article 7
SURVIVAL AND INDEMNIFICATION
Section 7.1 Survival Periods. All representations and warranties contained in
----------------
this Agreement shall survive until the fourth anniversary of the Last Closing
Date, regardless of any investigation made by or on behalf of any Person, except
that the representations and warranties contained in Section 3.4
(Capitalization) shall survive indefinitely. Notwithstanding the preceding
sentence, if notice of a bona fide claim for indemnity hereunder asserted before
a court of competent jurisdiction shall have been given to the party against
whom such indemnity may be sought prior to the time at which a claim under such
representation or warranty would otherwise terminate pursuant to the preceding
sentence, such claim shall survive such time. The covenants and agreements
contained in this Agreement shall survive the Last Closing Date without limit,
except to the extent specifically limited by their terms.
Section 7.2 Indemnification by the Company. In addition to all other sums due
-------------------------------
hereunder or provided for in this Agreement, the Company agrees to indemnify and
hold harmless each Purchaser and its Affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners and controlling persons
(each, an "indemnified party") to the fullest extent permitted by law from and
against any and all losses, claims, damages, expenses (including reasonable fees
and disbursements of counsel) or other liabilities ("Liabilities") resulting
-----------
from any breach of any covenant, agreement, representation or warranty of the
Company in this Agreement or any other Transaction Document or any legal,
administrative or other actions brought by any person or entity, proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of such Purchaser entering into this Agreement
or any other Transaction Document; provided, however, that the Company shall not
-------- -------
be liable under this Section 7.2: (i) for any amount paid in settlement of
claims without its consent (which consent shall not be unreasonably withheld),
(ii) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from a breach by such Purchaser of any
representation, warranty, covenant or agreement of such Purchaser contained in
this Agreement or any other Transaction Document or the gross negligence or
26
Page 46 of 91 Pages
willful misconduct of such Purchaser or (iii) to any individual Purchaser
(including such Purchaser's Affiliates and their respective officers, directors,
agents, employees, subsidiaries, partners and controlling persons) for any
amounts in excess of the aggregate Purchase Price paid by such Purchaser
hereunder; provided that the limitation on indemnification under this clause
--------
(iii) shall not apply to the Company's indemnification obligations under the
Registration Rights Agreement or the AMR Warrant Agreement. If and to the extent
that the indemnification as provided under this Article 7 is unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of such indemnified liability that shall be permissible under
applicable laws. In connection with the obligations of the Company to indemnify
for Liabilities as set forth above, the Company further agrees to reimburse each
indemnified party for all such expenses (including reasonable fees,
disbursements and other charges of counsel) as they are incurred by such
indemnified party.
Section 7.3 Notification. Each indemnified party under this Article 7 will,
------------
promptly after the receipt of notice of the commencement of any action or other
proceeding against such indemnified party in respect of which indemnity may be
sought from the Company under this Article 7, notify the Company and each other
Purchaser in writing of the commencement thereof. The omission of any
indemnified party so to notify the Company of any such action shall not relieve
the Company from any liability that it may have to such indemnified party except
to the extent that the Company is actually and materially prejudiced by such
failure to give notice. In case any such action or other proceeding shall be
brought against any indemnified party and it shall notify the Company of the
commencement thereof, the Company shall be entitled to participate therein and,
to the extent that either may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however, that any
-------- -------
indemnified party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action or
proceeding in which the Company and an indemnified party are, or are reasonably
likely to become, a party, such indemnified party shall have the right to employ
separate counsel at the expense of the Company and to control its own defense of
such action or proceeding if, in the reasonable opinion of counsel to such
indemnified party, (i) there are or may be legal defenses available to such
indemnified party or to other indemnified parties that are different from or
additional to those available to the Company or (ii) any conflict or potential
conflict of interest exists between the Company and such indemnified party that
would make such separate representation advisable in the view of the indemnified
party; provided, however, that (1) any such separate counsel employed by the
-------- -------
indemnified party at the expense of the Company shall be reasonably satisfactory
to the Company, (2) the indemnified party will not, without the prior written
consent of the Company, settle, compromise or consent to the entry of any
judgment in such action or proceeding unless such settlement, compromise or
consent includes an unconditional release of the Company from all liability
arising or that may arise out of such action or proceeding relating to any
matter subject to indemnification hereunder and (3) in no event shall the
Company be required to pay fees and expenses under this Article 7 for more than
one firm of attorneys representing the indemnified parties in any jurisdiction
in any one legal action or group of related legal actions. The Company agrees
that it will not, without the prior written consent of the Purchasers, and the
Purchasers agree that they will not, without the prior written consent of the
Company, settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding relating to any matter subject
to indemnification hereunder unless such settlement, compromise or consent
includes an unconditional release of the Purchasers or the Company, as the case
may be, and each other indemnified party from all liability arising or that may
27
Page 47 of 91 Pages
arise out of such claims, action or proceeding. The rights accorded to
indemnified parties hereunder shall be in addition to any rights that any
indemnified party may have at common law, by separate agreement or otherwise.
Article 8
MISCELLANEOUS
Section 8.1 Notices. All notices or other communications given or made hereunder
-------
shall be validly given or made if in writing and delivered by facsimile
transmission or in person at, mailed by registered or certified mail, return
receipt requested, postage prepaid, or sent by a reputable overnight courier to,
the following addresses (and shall be deemed effective at the time of receipt
thereof).
If to the Company:
Nexus Telocation Systems, Limited
6B Tfutzot Xxxxxx Xxxxxx
Xxxxxxxxx 00000, Xxxxxx
Facsimile: (000) 000-0-000-0000
Attention: Xxxxx Xxxxxx
with a copy to:
Xxxxx Xxxxx & Xx.
0, Xxxxxx Xxxxxx Xxxxxx
Xxx-Xxxx 00000
Israel
Facsimile: (000) 000-0-000-0000
Attention: Xxxx Xxxx, Adv.
If to the Purchasers:
At their respective addresses set forth
on Exhibit A hereto
---------
if to the Lead Investor, with a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esquire
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
28
Page 48 of 91 Pages
Section 8.2 Fees and Expenses. The Company agrees to pay to the Lead
------------------
Investor the Transaction Expenses of the Lead Investor and its Affiliates, up to
an aggregate of $125,000. Subject to the aggregate limit in the preceding
sentence, the Company shall pay to the Lead Investor at each of the First
Closing and the Second Closing those Transaction Expenses incurred by the Lead
Investor and its Affiliates up to such time as notified to the Company by the
Lead Investor prior to each such closing. The Lead Investor may set-off such
Transaction Expenses due under this Section 8.2 against the aggregate Purchase
Price paid by the Lead Investor. Except as otherwise provided in the preceding
sentence, each party hereto will be responsible for their respective expenses
incurred in connection with the transactions contemplated by this Agreement and
the other Transaction Documents. If the Second Closing does not occur due to the
failure of the conditions set out in Section 6 to be satisfied, the Company
shall promptly pay to the Lead Investor, upon notice from the Lead Investor, any
unpaid Transaction Expenses incurred by the Lead Investor and its Affiliates in
connection with this Agreement and the Investment Agreements. The Lead Investor
shall, upon the request of the Company, provide the Company with a statement of
the Transaction Expenses incurred by the Lead Investor and its Affiliates.
Section 8.3 BVR Technologies, Ltd. Management Fee. The Company shall pay to BVR
--------------------------------------
Technologies, Ltd. a management fee of $50,000 in consideration for services
rendered by BVR Technologies, Ltd. to the Company in connection with the
negotiation and execution of this Agreement and the other Transaction Documents.
Section 8.4 Amendment; Waiver. No provision of this Agreement may be waived or
------------------
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom a waiver of any such provision is sought. The failure at any
time to require performance of any provision hereof shall in no way affect the
full right to require such performance at any time thereafter. The waiver by any
party to this Agreement of a breach of any provision hereof shall not be taken
or held to be a waiver of any succeeding breach of such provision or any other
provision or as a waiver of the provision itself.
Section 8.5 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the provision held to be
invalid, illegal or unenforceable.
Section 8.6 Headings. The index and article and section headings herein are for
--------
convenience only and shall not affect the construction hereof.
Section 8.7 Entire Agreement. This Agreement and the other Investment Agreements
----------------
embody the entire agreement between the parties relating to the subject matter
hereof and any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations, and
memoranda, whether written or oral, between the Company and the Purchasers, or
between or among any of their agents, representatives, parents, Subsidiaries,
29
Page 49 of 91 Pages
Affiliates, predecessors in interest or successors in interest, with respect to
the subject matter hereof are of no further force and effect.
Section 8.8 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and both of which together shall be
deemed to be one and the same instrument.
Section 8.9 Assignment. All covenants and agreements contained in this Agreement
----------
by or on behalf of the parties hereto shall bind, and inure to the benefit of,
the respective successors and assigns of the parties hereto. The rights and
obligations of the Company may not be assigned without the prior written consent
of the Purchasers.
Section 8.10 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the other Transaction Documents without the showing of
economic loss and without any bond or other security being required. Each of the
Company and the Purchasers (severally and not jointly) agree that monetary
damages would not be adequate compensation for any loss incurred by reason of
any breach of its obligations described in the foregoing sentence and hereby
agree to waive in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
Section 8.11 Independent Nature of Purchasers' Obligations and Rights. The
------------------------------------------------------------
obligations of each Purchaser hereunder are several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
Section 8.12 Payment Set Aside. To the extent that the Company makes a payment
-----------------
or payments to the Purchasers hereunder or pursuant to the Transaction Documents
or the Purchasers 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 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, state or
federal law, common law or equitable cause of 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.
30
Page 50 of 91 Pages
Section 8.13 Third-Party Beneficiaries. Except for Article 7 with respect to
--------------------------
indemnified parties, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein expressed or implied shall
give or be construed to give to any Person, other than the parties hereto and
such assigns, any legal or equitable rights hereunder.
Section 8.14 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 8.15 Submission to Jurisdiction; Waiver of Jury Trial. Each of the
---------------------------------------------------
Company and the Purchasers hereby submits to the exclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York State Court sitting in the City of New York for purposes of all legal
proceedings which may arise hereunder or under any other Transaction Documents.
The Company irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The Company
hereby consents to process being served in any such proceeding by the mailing of
a copy thereof by registered certified mail, postage prepaid, to its address
specified in Section 8.1 or in any other manner permitted by law. THE COMPANY
AND THE PURCHASERS (AND ANY PERSON CLAIMING THROUGH THEM OR PURSUANT TO THIS
AGREEMENT) HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OF THE PURCHASER OR THE COMPANY. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE PURCHASER'S ENTERING INTO THIS AGREEMENT. The
Company hereby irrevocably designates Nexus America (1998) Inc., as the
designee, appointee and agent of the Company to receive, for and on behalf of
the Company, service of process in such jurisdiction in any legal action or
proceeding with respect to this Agreement or any other Investment Agreement. It
is expected that a copy of such process served on such agent will be promptly
forwarded by mail to the Company at its address set forth in Section 8.1, but
the failure of the Company to receive such copy shall not affect in any way the
service of such process. The Company further irrevocably consents to the service
of process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered certified mail, postage prepaid,
to the Company at such address. Nothing herein shall affect the right of the
Purchasers to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
31
Page 51 of 91 Pages
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
NEXUS TELOCATION SYSTEMS, LTD.
By:___________________________
Name:
Title:
QEG-NTS HOLDINGS LLC
By:___________________________
Name:
Title:
HAPOALIM ELECTRONICS
COMMUNICATIONS LTD.
By:_________________________
Name:
Title:
BVR TECHNOLOGIES LTD.
By:___________________________
Name:
Title:
______________________________
XXXXX XXXXXXXX
32
Page 52 of 91 Pages
THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC.
By:__________________________
Name:
Title:
EMV CTSL LLC
By:__________________________
Name:
Title:
CLAL (ISRAEL) LTD.
By:__________________________
Name:
Title:
CLAL INDUSTRIES AND INVESTMENTS LTD.
By:_________________________________
Name:
Title:
STI VENTURE FUND LTD.
By:__________________________
Name:
Title:
33
Page 53 of 91 Pages
ADASHA PROJECT INITIATION
DEVELOPMENT (TA) LTD.
By:__________________________
Name:
Title:
SHREM, FUDIM, XXXXXX & CO. LTD.
By:____________________________
Name:
Title:
DS FOUNDERS GROUP L.P.
By:__________________________
Name:
Title:
THE CANADA ISRAEL OPPORTUNITY FUND II
By:__________________________________
Name:
Title:
THE KAHANOFF FOUNDATION
By:__________________________
Name:
Title:
34
Page 54 of 91 Pages
LEADER HOLDINGS & INVESTMENTS LTD.
By:_______________________________
Name:
Title:
_____________________________
XXXXXX XXXXX
_____________________________
ITAMAR PATISHI
35
