Exhibit 2
This ORDINARY SHARES AND WARRANTS PURCHASE AGREEMENT (this "Agreement")
is dated as of the 10th day of July, 2003 (the "Agreement Date") by and between
Commtouch Software Ltd., a corporation organized under the laws of Israel (the
"Company"), and the investors listed on Exhibit A attached hereto (each an
"Investor" and together the "Investors").
The parties hereto agree as follows:
ARTICLE I Definitions
Section 1.1 Definitions.
(a) "Closing" shall have the meaning assigned to such term in Section
2.2 hereof.
(b) "Commission" shall mean the Securities and Exchange Commission.
(c) "Effective Date" shall mean the date the Registration Statement of
the Company covering the Shares being subscribed for hereby and the Ordinary
Shares issuable upon exercise of the Warrants is declared effective by the
Commission.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
(e) "Force Majeure" shall mean a delay in a party's performance of its
obligations or inability to cure a breach by reason of an act of God, fire,
natural disaster, accident, act of government, shortage of equipment, materials
or supplies beyond the reasonable control of such party (a "force majeure
event"); provided that the party whose performance is delayed or prevented
promptly notifies the other party of the nature and duration of the force
majeure event.
(f) "Registrable Securities" shall have the meaning assigned to such
term in Section 3.1(a).
(g) "Registration Statement" shall have the meaning assigned to such
term in Section 3.1(a).
(h) "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
(i) "Shares" shall mean the Ordinary Shares of the Company that may be
purchased hereunder.
(j) "Trading Day" shall mean (a) any day on which the Ordinary Shares
are traded on the Nasdaq SmallCap Market, or (b) if the Ordinary Shares are not
then listed or
1
quoted for trading on the Nasdaq SmallCap Market, then a day on which trading
occurs on the New York Stock Exchange (or any successor thereto).
(k) "Warrants" shall have the meaning assigned to such term in Section
ARTICLE II Purchase and Sale of Shares and Warrants;
Representations of Company
Section 2.1 Purchase and Sale of Shares. Subject to the terms and
conditions of this Agreement, each Investor agrees, severally and not jointly,
to purchase at the Closing, and the Company agrees to issue and sell to each
Investor, that number of Ordinary Shares of Company, 0.05 NIS par value per
share (the "Ordinary Shares"), indicated with respect to the investment amounts
corresponding to each such Investor on Exhibit A attached hereto at a purchase
price equal to $0.50 per Ordinary Share ("Purchase Price"). Against the payment
of the investment proceeds by the Investors to the Company, the Company shall
issue a Stock Certificate to each Investor indicating the number of Shares
purchased by such Investor. In addition, each Investor will receive, and the
Company agrees to issue to each such Investor, a warrant substantially in the
form attached hereto as Exhibit B (the "Warrants") to purchase up to:
o 50% (fifty percent) of the number of Ordinary Shares purchased by
Investor at Closing at a price per Ordinary Share equal to the Purchase
Price
The Ordinary Shares, the Warrants, and the Ordinary Shares issued upon exercise
of the Warrants shall be hereinafter referred to as the "Securities."
Section 2.2 Closing. The purchase and sale of the Securities shall take
place at the offices of Commtouch Inc., 0000 Xxxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxx Xxxx, XX 00000 within three (3) business days upon attainment of all of
the following:
(a) the receipt of approvals from the Chief Scientist of Israel and the
Israel Investment Center, to the extent necessary;
(b) the receipt of approval of the shareholders of the Company, to the
extent necessary; and
(c) any other necessary approvals in connection with this Agreement and
the transactions contemplated thereunder (the "Closing");
provided that the Closing will not take place if the Company receives a
delisting letter from the Nasdaq and the reasons therefor are not cured by the
Company by the time that items (a) through (c) of this Section 2.2. are
achieved, unless the Investors otherwise agree in writing.
Each party shall deliver all documents, funds, instruments and writings required
to be delivered by such party pursuant to this Agreement at or prior to the
Closing. Notwithstanding the above regarding the place of the Closing, the
Company shall be entitled to cause its transfer agent to deliver directly to
each Investor a share certificate in accordance with the terms of this
Agreement. If the Closing has not occurred by the date 75 days from the
Agreement Date, the Company's obligation to sell and the Investors' obligation
to purchase the Securities will terminate, unless otherwise extended in writing
by mutual agreement of all of the parties hereto. The Investors will not be
obligated to purchase the Securities if, after the Agreement Date and
2
before the Closing, there shall have occurred a material adverse effect upon the
business, financial condition, results of operations, assets, properties or
business prospects of the Company.
Section 2.3 Representations and Warranties of the Company. The Company
hereby represents and warrants as of the Agreement Date and as of the Closing as
follows:
(a) The Company is a company duly incorporated and validly existing
under the laws of Israel. This Agreement constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. Without limiting
the generality of the foregoing, the Company knows of no reason why it will not
be able to register the Registrable Securities as provided in Article III below.
(b) The Company is authorized to issue the Shares, the Warrants and the
Ordinary Shares issuable upon exercise of the Warrants pursuant to this
Agreement, and the same shall be issued free and clear of any and all liens,
encumbrances, preemptive rights, security interests and claims of any kind and
nature, and no third party holds any right or interest (beneficial, voting or
otherwise) in the Shares or Warrants. The Shares when issued and paid for as
provided herein and the Ordinary Shares issuable upon exercise of the Warrants
when issued upon exercise thereof will be fully-paid and non-assessable.
(c) The Company has full power and authority to enter into and
consummate the transactions contemplated by this Agreement, and the consent of
not other party or entity is necessary for the consummation of the transactions
contemplated herein other than as set forth herein. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated in this Agreement and the fulfillment of the terms of this
Agreement have been duly authorized by all necessary corporate action and will
not conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to, any contract, indenture, mortgage, loan
agreement, deed, trust, note, lease, sublease, voting agreement, voting trust or
other instrument or agreement to which the Company is a party or by which it may
be bound, or to which any of the property or assets of the Company is subject,
and will not trigger anti-dilution rights (apart from those described in the
warrant issued to Go2Net, Inc. (now known as Infospace) in July 1999 in the sum
of 1,136,000 Shares (the anti-dilution protection which will result in an
adjustment to the exercise price of such warrant, but will not result in an
adjustment in the amount of shares into which such warrant is exercisable)) or
other rights to acquire additional equity securities of the Company, nor will
such action result in any violation of the provisions of the articles of
association of the Company or any applicable statute, law, rule, regulation,
ordinance, decision, directive or order.
(d) The Company meets the eligibility requirements for the use of Form
F-3 for the registration of securities in a transaction involving secondary
offerings.
(e) The Company does not meet its listing requirements according to
NASDAQ rules and is engaged in discussions with the NASDAQ in an effort to
achieve compliance.
ARTICLE III Registration and Accredited Investor Rights and Obligations
Section 3.1 Registration Statement.
3
(a) Filing and Effectiveness. The Company will file as soon as
commercially practicable a Form F-3 (or if not eligible at such time to file
Form F-3, a Form F-1) registration statement with the Commission (the
"Registration Statement"), for non-underwritten resale into the open market of
the Shares and the Ordinary Shares issuable upon exercise of the Warrants (the
"Registrable Securities"). Once filed, the Company shall take all reasonable
measures to cause such Registration Statement registering the Registrable
Securities to be declared effective. The Company will notify the Investors and
its transfer agent of the effectiveness of the Registration Statement within ten
(10) Trading Days of such event.
(b) Liquidated Damages for Failure to Register. In the event that (a)
the Registration Statement is not filed by the Company within 60 days from the
Closing Date, (b) the Registration Statement is not declared effective by the
Commission within 120 days from the Closing date, or (c) such Registration
Statement is not maintained as effective by the Company for the period set forth
in Section 3.1(c) below (each a "Registration Default"), and the reason for any
one of the above occurrences is not an event of Force Majeure, then the Company
will pay each Investor (pro-rata on a monthly basis), except for those listed on
Schedule 3.1(b), for each Registration Default then in effect, as liquidated
damages and not as a penalty, during any period in which a Registration Default
is occurring, 5% (five percent) per calendar month or portion thereof of (i) the
aggregate Purchase Price paid by the Investor for the Securities, and (ii) the
value of any outstanding Warrants (valued at the difference between the average
volume weighted average price [based on a trading day from 9:30 a.m. to 4:00
p.m.] on the NASDAQ SmallCap Market as reported by Bloomberg Financial LP using
the AQR function [i.e. volume weighted average quote recap] for the Ordinary
Shares for each Trading Day (the "VWAP") during the applicable month and the
exercise price multiplied by the number of Warrant Shares the Warrants are
exercisable into, but in no case less than zero), held by such Investor until
such corresponding Registration Default no longer exists ("Liquidated Damages").
Such payment of the Liquidated Damages shall be made to the Investor upon 5
Trading Days' irrevocable notice to the Investor, in cash or registered Ordinary
Shares (based on the average of the closing sale prices of an Ordinary Share
during the 5 Trading Days immediately following such irrevocable notice by the
Company of such issuance), on the last day of each month during which a
Registration Default occurred or was continuing, without demand therefor by the
Investor; provided, however, that the payment of the Liquidated Damages shall
not relieve the Company from its obligations to register the Securities pursuant
to this Section. Provided however that in no event shall the amount of
Liquidated Damages payable hereunder to any Investor exceed 45% (forty-five
percent) of the Purchase Price paid by that Investor. And provided however that
the Company retains the discretion whether to pay such Liquidated Damages in
cash or registered Ordinary Shares. To the extent that the issuance of Ordinary
Shares that are registered as Liquidated Damages is subject to the same delay,
notwithstanding the above monthly requirement for payment, the Company may
deliver to the Investor such shares as soon as they become registered.
(c) Effectiveness Period. The Company will maintain the Registration
Statement effective under the Securities Act until the earlier of (i) the date
that all of the Shares and Ordinary Shares issued upon exercise of the Warrants
have been sold pursuant to such Registration Statement, (ii) the date the
Investors receive an opinion from counsel to the Company, which counsel shall be
reasonably acceptable to the Investors, that the Shares may be sold under the
provisions of Rule 144 without limitation as to volume, (iii) the date that all
Shares have been otherwise transferred to persons who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such Shares not bearing a
restrictive legend, or (iv) thirty-six (36) months from the Effective Date.
4
Section 3.2 Investors Representations.
(a) Investor Status Declaration. Each Investor declares that it has
such knowledge and experience as to be capable of evaluating the merits and
risks of its investment. Each Investor is able to fend for itself and can bear
the economic risk of this investment, including a complete loss.
(b) Purchase Entirely for Own Account. Investor undertakes to acquire
the Shares and Ordinary Shares issuable upon exercise of the Warrants for
investment and for Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and Investor has
no present intention of selling, granting any participation in, or otherwise
distributing the same, provided that nothing in this section shall constitute an
agreement by Investor to hold or refrain from disposing of the Shares and
Ordinary Shares issuable upon exercise of the Warrants for any amount of time,
provided that any transfer, sale or other disposition of the Shares by Investor
shall comply in all respects with the requirements of the Securities Act and
similar provisions of state law. Investor will have sole voting control over the
Shares and Ordinary Shares issuable upon exercise of the Warrants for purposes
of Section 13(d) of the Exchange Act. Investor does not presently have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities.
(c) Restricted Securities. Investor understands that the Shares and the
Ordinary Shares issuable upon exercise of the Warrants have not been, and will
not at the time of sale and issuance by the Company be, registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of Investor's
representations as expressed herein. Investor understands that the Shares and
the Ordinary Shares issuable upon exercise of the Warrants are "restricted
securities" under applicable U.S. federal and state securities laws and
regulations, and that pursuant to these laws, Investor must hold the Shares and
the Ordinary Shares issuable upon exercise of the Warrants indefinitely unless
the Securities are registered with the Commission and qualified by necessary
state authorities or an exemption from such registration and qualification
requirements is available. Investor further acknowledges that if an exemption
from registration or qualification is available, it may be conditioned on
various requirements including, but not limited to, the time and manner of sale,
the holding period for the Shares and the Ordinary Shares issuable upon exercise
of the Warrants, and requirements relating to the Company which are outside of
Investor control and which the Company is under no obligation, except as set
forth herein, to satisfy.
(d) Information. Each Investor acknowledges that (i) it has been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Investor; (ii) it has been afforded the
opportunity to ask questions of the Company; (iii) it has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities;
(iv) it understands that it (and not the Company) shall be responsible for
Investor's own tax liabilities that may arise as a result of this investment or
the transactions contemplated by this Agreement; (v) it has had access to the
Company's Annual Report on Form 20-F for the year ended December 31, 2002, and
with Reports on Form 6-K for the months of April (2 reports) and June 2003, all
as filed with the
5
SEC; and (vi) it understands that an investment in the Company may be considered
as a high-risk investment, and the Investor nevertheless has voluntarily agreed
to consummate the investment.
Section 3.3 Piggy-Back Registration.
(a) The Company shall notify the Investors in writing at least fifteen
(15) days prior to filing any registration statement under the 1933 Act for
purposes of effecting a public offering of securities of the Company (including,
but not limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any
employee benefit plan or a corporate reorganization) and will afford the
Investors an opportunity to include in such registration statement all or any
part of the Shares or the Ordinary Shares reserved for issuance upon exercise of
the Warrant. If an Investor desires to include in any such registration
statement all or any part of such securities, the Investor shall, within ten
(10) days after receipt of the above-described notice from the Company, so
notify the Company in writing, and in such notice shall inform the Company of
the number of Shares and Ordinary Shares reserved for issuance upon exercise of
the Warrant that Investor wishes to include in such registration statement. If
Investor decides not to include all of the Shares or Ordinary Shares issued or
reserved for issuance upon the exercise of the Warrant in any registration
statement thereafter filed by the Company, the Investor shall nevertheless
continue to have the right to include any such securities in any subsequent
registration statement or registration statements as may be filed by the Company
with respect to offerings of its securities, all upon the terms and conditions
set forth herein. The Company will cooperate with the Investor to facilitate its
distribution of securities pursuant to any such registration statement.
(b) All expenses incurred by the Company in complying with Section
3.3(a) (other than the underwriter's discounts and commissions), including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.),
fees and expenses of complying with securities and blue sky laws (except for
blue sky expenses required by law to be borne by Investors), expense allowances
of the underwriters, printing expenses, fees and disbursements of counsel or
other advisor to the Company, and of the accountants to Company, are herein
called "Registration Expenses." All fees and expenses of counsel for any selling
Investor and all underwriting discounts and commissions applicable to the
eligible securities covered by any such registration, are herein called "Selling
Expenses." The Company shall pay all Registration Expenses in connection with
each registration pursuant to Section 3.3(a). All Selling Expenses and blue sky
expenses required by law to be borne by Investors in connection with each
registration pursuant to Section 3.3(a) shall be borne by the Investor or
Investors therein in proportion to the number of eligible securities included by
each in such registration or in such other proportions as they may agree upon.
In the event of any dispute as to how Selling Expenses are allocated, the
Company shall be entitled to apportion the expenses in a reasonable manner
between the various Investors.
(c) The piggy-back registration rights granted in this Section 3.3
shall take effect solely if the Registration Statement described in Section
3.1(a) above is not declared effective within 90 days of the Closing date.
Section 3.4 Indemnification.
(a) Indemnification by Company. In the event of a registration of any
Shares pursuant to this Article III, the Company will hold harmless Investors
and each officer, director, employee and advisor of each of the foregoing,
against any expenses, losses, claims, damages or
6
liabilities, joint or several, to which Investors may become subject under the
Securities Act, any state securities law or otherwise, including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
insofar as such expenses, losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained, on the Effective Date thereof,
in any registration statement under which such Shares are registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
expense, loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, said preliminary prospectus or said
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished in writing to the Company by or on behalf of
Investors or specifically for use in the preparation thereof.
(b) Indemnification by Investors. In the event of any registration of
any Shares under the Securities Act pursuant to this Article III, each Investor,
severally and not jointly, will indemnify and hold harmless the Company, each
officer of the Company who signs the registration statement, and each director
of the Company against any and all such expenses, losses, claims, damages or
liabilities referred to in the first paragraph of this Section 3.4, if the
statement, alleged statement, omission or alleged omission in respect of which
such expense, loss, claim, damage or liability is asserted was made in reliance
upon and in conformity with information furnished in writing to the Company by
or on behalf of such Investor specifically for use in connection with the
preparation of such registration statement, preliminary prospectus, prospectus,
amendment or supplement.
(c) Indemnification Procedure. Each party entitled to indemnification
under this Section 3.4 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting thereon, provided that the
Indemnified Party may participate in such defense at its own expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 3.4 except to the extent such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
ARTICLE IV Additional Covenants
Section 4.1 Transfer Restrictions.
7
(a) The Investors agree to the imprinting, so long as is required by
this Section 4.1, of the following legend (the "Legend") on any certificate
evidencing Securities:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
(b) Certificates evidencing the Shares shall not contain any legend
(including the legend set forth in Section 4.1(a)) while a registration
statement covering the resale of such security is effective under the Securities
Act, provided that an Investor wishing to have the legend removed from a
certificate first provide the Company with a broker's letter in appropriate form
evidencing the Investor's present intent to resell the security or (ii)
following any sale of such Shares pursuant to Rule 144, or (iii) if such Shares
are eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
Section 4.2 Rule 144 and 144A Reporting.
(a) With a view to making available to holders of Registrable
Securities the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees at all times to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144 and
Rule 144A; and (ii) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
(b) For purposes of facilitating sales pursuant to Rule 144A, so long
as the Company is not subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, each holder of Registrable Securities and any
prospective purchaser of such holder's securities shall have the right to obtain
from the Company, upon request of the holder prior to the time of sale, a brief
statement of the nature of the business of the Company and the products and
services it offers; and the Company's most recent balance sheet and profit and
loss and retained earnings statements, and similar financial statements for the
two preceding fiscal years (the year end financial statements should be audited
to the extent reasonably available).
Section 4.3 For as long as the Company's shares are listed on the
Nasdaq SmallCap Market or any relevant market or system, the Company will use
best efforts to list the Shares and Ordinary Shares obtained upon exercise of
the Warrants for trading on the Nasdaq system or any relevant market or system,
if applicable. The Company will use commercially reasonable efforts to continue
the listing or trading of its Ordinary Shares on the Nasdaq SmallCap Market or
any relevant market or system, if applicable, and will use commercially
8
reasonable efforts to comply in all respects with the Company's reporting,
listing or other obligations under the rules of the Nasdaq SmallCap Market or
any relevant market or system.
ARTICLE V Miscellaneous
Section 5.1 Fees and Expenses.
(a) The Company agrees to reimburse the Investors for their legal costs
incurred in connection with this Agreement in an amount up to and including
$5,000 plus VAT as required by applicable law. Apart from such reimbursement,
each party will pay its own fees and expenses related to the transactions
contemplated by this Agreement.
Section 5.2 Consent to Jurisdiction and Governing Law.
Each of the Company and Investors (i) hereby irrevocably submit to the exclusive
jurisdiction of the United States District Court and other courts of the United
States sitting in the State of California for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Company,
Investors consent to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section shall
affect or limit any right to serve process in any other manner permitted by law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of California, without giving effect to the choice of
law provisions thereof.
Section 5.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor Investors
makes any representations, warranty, covenant or undertaking with respect to
such matters. The parties hereto may not amend this Agreement or any rights or
obligations hereunder without the prior written consent of the Company and
Investors.
Section 5.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of dispatch by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such dispatch,
whichever shall first occur. The addresses for such communications shall be:
9
If to the Company: Commtouch Software Ltd.
c/o Commtouch Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000-0000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxx Xxxxxx, Chief Executive Officer
If to the Investors: To the address and fax number indicated on the
signature page hereof.
With a copy (which shall Xxxxx Xxxxx & Co.
not constitute notice) to: 00 Xxxxxx Xxxxxx
Xxxxxxxxx 00000, Xxxxxx
Attention: Xxxxx Xxxxxxxxx
Fax No.: (000-0) 000-0000
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 5.5 Waivers. No provision of this Agreement may be waived other
than by a written instrument signed by the party against whom enforcement of any
such waiver is sought. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 5.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 5.7 Successors and Assigns. Investors may not assign this
Agreement to any person without the prior consent of the Company, which consent
will not be unreasonably withheld. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Section 5.8 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument.
Section 5.9 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of
10
such provision, had never been contained herein, so that such provisions would
be valid, legal and enforceable to the maximum extent possible.
Section 5.10 Further Assurances. From and after the date of this
Agreement, upon the request of the Investors or the Company, each of the Company
and the Investors shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
Section 5.11 Corporate Securities Laws. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
[remainder of page intentionally left blank]
11
[ORDINARY SHARES AND WARRANTS PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
COMMTOUCH SOFTWARE LTD.
By: /s/Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
INVESTORS INVESTORS
By: /s/Itai Horstock By: /s/Tis Prager
---------------------------------------- ----------------------------------------
Name: Hawkeye Ventures, Inc. Name: OZF Ltd.
Title: Title: Director
By: /s/Xxxxxxxx Xxxxx By: /s/Xxxxx Xxxxx
---------------------------------------- ----------------------------------------
Name: Apollo Nominees Inc. Name: Compugen Systems Ltd.
Title: Title:
By: /s/Xxxx Xxxxxx By: /s/Izik Applboum
---------------------------------------- ----------------------------------------
Name: AxcessNet Resources LLC Name: Izik Applboum
Title: Title:
By: /s/Xxxxx Xxxxxx By: /s/Chen Bardichev
---------------------------------------- ----------------------------------------
Name: Xxxxx Xxxxxx Name: Chen Bardichev
Title: Title:
By: /s/Xxxx Xxxxxx By: /s/Xxxxxxx Xxxxx
---------------------------------------- ----------------------------------------
Name: Shem Basum Ltd. Name: KKB Ventures LLC
Title: Title: Principal Partner
By: /s/Xxx Straight By: /s/Xxxxx Bardichev
---------------------------------------- ----------------------------------------
Name: Xxx Straight Name: Xxxxx Bardichev
Title: Title:
By: /s/Xxxxxxxxxxx Xxxxxxxxxxx By: /s/Xxxxxx Xxxxxxxxx
---------------------------------------- ----------------------------------------
Name: Clarenville Ltd. Name: JoRon Management
Title: Director Title:
By: /s/Xxxxx Xxxxxxxx
----------------------------------------
Name: Delta Capital Ltd.
Title:
12
By: /s/Xxxxx Xxxxx By: /s/Xxxxx Xxxxxx
---------------------------------------- ----------------------------------------
Name: Xxxxx Xxxxx Name: Xxxxx Xxxxxx
Title: Title:
13
Exhibit A
Schedule of Investors and Investment Amount
------------------------------------------ ---------------- ------------- --------------
Name and Address of Investor Amount of No. of No. of
Investment Ordinary Warrants
Shares
------------------------------------------ ---------------- ------------- --------------
Apollo Nominees Inc.
Suite 100 $100,000 200,000 100,000
One Financial Place,
Lower Xxxxxxxxx Rock,
St.Xxxxxxx,
Barbados
Tel: (000) 000-0000
Fax: (000) 000-0000
Email: xxxxxx@xxxxxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
AxcessNet Resources LLC.
0000 Xxxxxx Xxxxxx (Xxxxx 0000), Xxxxxxx $50,000 100,000 50,000
XX 00000
Tel: (000)000-0000;
Fax:(000)000-0000;
Email:xxxx@xxxxxx-xxx.xxx
------------------------------------------ ---------------- ------------- --------------
Xxxxx Xxxxxx
00 Xxxxxx Xxxx Xxxx $75,000 150,000 75,000
Xxxxxxx, XX 00000.
Phone 000-000-0000
Fax 000-000-0000.
Email:xxxxx@xxxxxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
OZF Ltd. $250,000 500,000 250,000
Tropic Isle Building
Wickhams Cay, P.O. Box 964
Road Town, Tortola, British Virgin
Islands
c/o Tis Prager, Prager Dreifuss,
Xxxxxxxxxxxxx. 0, XX-0000 Xxxxxx,
Xxxxxxxxxxx
Fax: x00 0 000 00 00
Email: xxxx@xxxxxx-xxxxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
Clarenville Ltd.
Xxxx Xxxxx 00, XX-0000 $250,000 500,000 000,000
Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
Attn: Xxxxxx Xxxxxxxxx
Tel: x0 000 000 0000
Fax: x0 000 000 0000
Email: xxxxxxxxxx@xxxxx.xxx;
xxxxx@xxxxxxx-xxx.xxx
Attn: Mr. Elikos Xxxx
Tel: 000 0 0000000
Fax: 000 0 0000000
Email: xxxxxx.xxxx@xx.xxx.xxx
------------------------------------------ ---------------- ------------- --------------
Xxxxxxx X. Straight
000 xxxxxxxxx xxxxxx $50,000 100,000 50,000
------------------------------------------ ---------------- ------------- --------------
------------------------------------------ ---------------- ------------- --------------
xxxxx xxxx, xx 00000
email: xxx.xxxxxxxx@xxxxxxxxx.xxx
fax - 000-000-0000
phone - 000-000-0000
------------------------------------------ ---------------- ------------- --------------
Hawkeye Ventures, Inc.
C/o Zysman, Aharoni, Xxxxx $50,000 100,000 50,000
00X Xxxxxxxx Xxxxxx
Xxx Xxxx
Tel: 00-0000000
Fax 00-0000000
Email: XxxxxxX@xxx-xxx.xx.xx
------------------------------------------ ---------------- ------------- --------------
Compugen Systems Ltd.
00 Xxxx Xxxxxxxx $75,000 150,000 75,000
Xxxxxxxx Xxxx, XX Xxxxxx X0X0X0
tel: 000 000-0000, 0-000-000-0000;
fax: (000) 000-0000 Email:
xxxxxx@xxxxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
Xxxxx Xxxxxxxx
000 Xxxxxxxxx Xxxx Xxxxxxx, XX 00000 $50,000 100,000 50,000
Phone: 000-000-0000
Fax: 000-000-0000
Email: xxxx000@xxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
Delta Capital Ltd.
000-000 Xxxxxxxx Xxxx $50,000 100,000 50,000
Xxxxxx, XX000XX
Fax 00-00-00000000
Email: Xxxxx@xxxxxxxx.xxxxx.xx.xx
xxxxxx@xxxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
KKB Ventures LLC
Attn: Xxx Xxxxx $50,000 100,000 50,000
000 Xxxxxxxxxxx Xx. Xxxxxxx, Xx. 00000
Tel: 000 000-0000
Fax: none
Email: xxxxxxx@xxxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
Chen Bardichev
Ein Vered, $75,000 150,000 75,000
00000
Xxxxxx
Tel - x000-00-000000
Fax - 000-0-0000000
Email - xxxxxxx@xxxxx.xxx.xx
------------------------------------------ ---------------- ------------- --------------
Xxxxx Bardichev
Ein Vered, $75,000 150,000 75,000
00000
Xxxxxx
Tel - x000-00-000000
Fax - x000-0-0000000
Email - none
------------------------------------------ ---------------- ------------- --------------
2
------------------------------------------ ---------------- ------------- --------------
Shem Basum Ltd.
8 Xxxxx Xxxxxx St. $40,000 80,000 40,000
Kfar-Sava 00000
Xxxxxx.
Phone 00-0000000 or 00-0000000
Fax 00-0000000 or 00-0000000
E-mail Xxxx@xxxxxxxxxxxxxxx.xxx or
xxxx@xxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
JoRon Management
C/o Seed Capital Partners $50,000 100,000 50,000
Key Center
00 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
Email: xxx@xxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
Xxxxx Xxxxx
00 Xxxxxx Xx. $50,000 100,000 50,000
Raanana 00000 Xxxxxx
Phone: x000-00 00 00 00
Fax: x000-0-0000000
email: xxxxx@xxxxxxxxx.xxx
------------------------------------------ ---------------- ------------- --------------
Xxxxx Xxxxxx
0 Xxxxxxx Xx., #00 $100,000 200,000 100,000
Xxx Xxxx, Xxxxxx 00000
Tel: 00-0000000
Fax: 00-0000000 (Attn: Xxxx Xxxxxx)
Email: xxxx@xxxx.xxx and xxxxxx@xxxx.xxx
------------------------------------------ ---------------- ------------- --------------
3
Exhibit B
Form of Warrant
Issued _______, 200_
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN. "THIS WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE COMPANY MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE THAT SUCH
REGISTRATION IS NOT REQUIRED.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
Void after ________, 200_
COMMTOUCH SOFTWARE LTD.
WARRANT TO PURCHASE UP TO ________ [ORDINARY] SHARES
----------
THIS CERTIFIES THAT, for value received, _____________, a ________ company
("_______" or "Holder"), is entitled at any time prior to expiration of this
Warrant to subscribe for and purchase up to __________ shares of the fully paid
and nonassessable ordinary shares, nominal value NIS 0.05, of Commtouch Software
Ltd., an Israeli company (the "Company"), at the price per share equal to
___________ (such price and such other price as may result, from time to time,
from the adjustments/restrictions specified in paragraph 4 hereof are
collectively referred to herein as the "Warrant Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth. As used
herein, "Shares" shall mean the ordinary shares of the Company; "Warrant Shares"
shall mean the Shares issued or issuable upon exercise of the Warrants; and
"Date of Grant" shall mean ___________, 200_.
4
1. TERM.
This Warrant is exercisable, in whole or in part, at any time and from time to
time on and after the Date of Grant through ______, 200__[fifth anniversary of
Date of Grant].
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) The purchase right represented by this Warrant may be exercised by
the holder hereof, in whole or in part, by the surrender of this Warrant (with
the notice of exercise form attached hereto as Exhibit A duly executed) at the
principal office of the Company and (i) by the payment to the Company, by check,
of an amount equal to the Warrant Price per Share multiplied by the number of
Shares then being purchased.
(b) In the event of any exercise of the purchase right represented by
this Warrant, certificates for the Shares so purchased shall be delivered to the
holder hereof within ten business days of the effective date of such purchase
and, unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the securities, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof within such ten-day period. Upon the effective date of such purchase, the
holder shall be deemed to be the holder of record of the securities,
notwithstanding that certificates representing the securities shall not then be
actually delivered to such holder or that such securities are not then set forth
on the stock transfer books of the Company.
(c) In lieu of exercising this Warrant by payment of cash or check, and
provided that applicable law so allows, the Holder may elect to receive shares
equal to the value of this Warrant (or the portion thereof being exercised) at
any time after the date hereof during the term hereof, by surrender of this
Warrant at the principal executive office of the Company, together with the
Notice of Conversion in the form of Exhibit B annexed hereto, in which event the
Company shall issue to Holder a number of Shares in accordance with the
following formula:
Y(A-B)
------
X = A
Where, X = the number of Shares to be issued to Holder;
Y = the number of Shares for which the Warrant is
being exercised;
A = the fair market value of one Share; and
B = the Exercise Price.
For purposes of this Section 2(c), the fair market value of the Shares shall
mean the price determined by the Company's Board of Directors, acting in good
faith, upon a review of all relevant factors; provided, however, that (i) where
there exists a public market for the Company's Shares at the time of such
exercise, the fair market value per Share shall be the average of the closing
bid and asked prices of the Shares quoted
5
in the Over-The-Counter- Market Summary or the last reported sale price of the
Shares or the closing price quoted on the Nasdaq SmallCap or National Market on
which the Shares are listed for the five (5) days prior to the date of
determination of fair market value, or (ii) upon the exercise of this Warrant
concurrently with the closing of the sale, lease, distribution or other
disposition of all or substantially all of the assets of the Company or all or
substantially of the Company's share capital including a merger or consolidation
of the Company with or into any other entity or entities, or any other corporate
reorganization, where the shareholders of record as constituted immediately
prior to such event do not retain, immediately after such event, as a result of
or in exchange for their equity in the Company at least a fifty percent (50%)
interest in the successor entity (a "Sale"), the per share price to be received
by the holders of Shares. Exercise of this Warrant concurrently with the closing
of a Sale, made be made conditional on the closing of such Sale.
3. SHARES FULLY PAID; RESERVATION OF SHARES.
(a) All securities which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be fully paid and
nonassessable, and free from all taxes, liens, preemptive rights and charges
with respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of Shares to
provide for the exercise of the rights represented by this Warrant.
(b) The Company will not, by amendment of its memorandum or association
or articles of association, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, willfully avoid or seek to avoid the observance or performance of any of
the terms hereof, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of Warrant Holder under the Warrants
against such willful actions. Without limiting the generality of the foregoing,
the Company: (i) will not set nor increase the par or nominal value of any
Warrant Shares above the amount payable therefor upon such exercise, and (ii)
will take all actions that are necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of the Warrants.
4. ADJUSTMENTS.
The maximum number of Warrant Shares issuable upon exercise of this Warrant and
the Warrant Price shall be adjusted if any of the following events occur before
the holder's exercise of this Warrant:
(a) Distributions, Share Dividends and Splits.
(i) In case the Company declares a dividend (whether ordinary
or extraordinary) or other distribution payable in Shares or subdivides its
Shares into a greater number of Shares, the Warrant Price in effect immediately
prior to such declaration or subdivision shall be proportionately decreased and
the number and kind
6
of Shares purchasable upon exercise of this Warrant shall be adjusted so that
the holder thereof shall be entitled to receive the kind and number of shares or
the other securities of the Company that the holder would have owned or have
been entitled to receive after the happening of any of the events described in
this paragraph (a)(i) had the Warrant Shares been issued immediately prior to
the happening of such event or any record date with respect thereto.
(ii) In the case of any reclassification or change of the
outstanding securities of the Company or of any reorganization of the Company
after the date hereof, or in case, after such date, the Company shall
consolidate with or merge with or into another corporation or convey all or
substantially all of its assets to another corporation or other entity, then, in
each such case, Warrant Holder, upon any exercise of this Warrant, at any time
after the consummation of such reclassification, change, reorganization,
consolidation, merger, or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon the exercise of this
Warrant prior to such consummation, the stock or other securities or property to
which such Warrant Holder would have been entitled upon the consummation of such
reclassification, change, reorganization, consolidation, merger or conveyance if
Warrant Holder had exercised the Warrants immediately prior thereto, all subject
to further adjustment as provided in this Section, and the successor or
purchasing corporation or other entity in such reclassification, change,
reorganization, consolidation, merger or conveyance (if not the Company) shall
duly execute and deliver to Warrant Holder a supplement hereto acknowledging
such corporation's or entity's obligations under the Warrants; and in each such
case, the terms of the Warrants (including the exercisability, transfer and
adjustment provisions of the Warrants) shall be applicable to the shares of
stock or other securities or property receivable upon the exercise of the
Warrants after the consummation of such reclassification, change,
reorganization, consolidation, merger or conveyance.
(iii) An adjustment made pursuant to this paragraph (a) shall
become effective immediately after the record date in the case of a dividend or
distribution and shall become immediately effective after the effective date in
the case of a subdivision. If, as a result of an adjustment made pursuant to
this paragraph (a), the holder after exercise shall become entitled to receive
shares of two or more classes of capital stock or Shares and any other class of
capital stock of the Company, the Board of Directors of the Company (whose
determination shall be conclusive and shall be described in a written notice to
the holder promptly after such adjustment) shall determine the allocation of the
adjusted Warrant Price between or among shares of such classes of capital stock
or Shares and such other classes of capital stock.
(iv) In the case of any adjustment in the number of Warrant
Shares receivable upon the exercise of the Warrants pursuant to the terms
hereof, the chief financial officer of the Company shall promptly thereafter
compute such adjustment in accordance with the terms hereof and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based. The Company will provide copies of such
certificate to Warrant Holder in the manner provided for notices hereunder.
(v) In case, at any time during the term of this Warrant, the
Company shall declare a cash dividend upon its Ordinary Shares payable otherwise
than out of earnings or earned surplus or shall distribute to holders of its
Ordinary
7
Shares, shares of its share capital (other than Ordinary Shares), or other
securities of other persons, evidences of indebtedness issued by the Company or
other persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Ordinary
Shares or other securities of the Company convertible into or exchangeable for
Ordinary Shares), then, in each such case, immediately following the record date
fixed for the determination of the holders of Ordinary Shares entitled to
receive such dividend or distribution, the Warrant Price in effect thereafter
shall be determined by multiplying the Warrant Price in effect immediately prior
to such record date by a fraction of which the numerator shall be an amount
equal to the difference of (x) the Current Market Price of one share of Ordinary
Shares minus (y) the fair market value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the amount of cash,
stock, securities, evidences of indebtedness, assets, options or rights, as the
case may be, so distributed in respect of one Ordinary Share, and of which the
denominator shall be such Current Market Price. For the purpose of any
computation pursuant to this Section, the Current Market Price at any date of
one Ordinary Share shall be deemed to be the average of the daily closing prices
for the 15 consecutive business days ending on the last business day before the
day in question (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such 15 business day period). The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sales took place on such day, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Ordinary Shares is listed or admitted
to trading or as reported by Nasdaq (or if the Ordinary Shares is not at the
time listed or admitted for trading on any such exchange or if prices of the
Ordinary Shares are not reported by Nasdaq then such price shall be equal to the
average of the last reported bid and asked prices on such day as reported by The
National Quotation Bureau Incorporated or any similar reputable quotation and
reporting service, if such quotation is not reported by The National Quotation
Bureau Incorporated); provided, however, that if the Ordinary Shares are not
traded in such manner that the quotations referred to in this clause (v) are
available for the period required hereunder, the Current Market Price shall be
determined in good faith by the Board of Directors of the Company or, if such
determination cannot be made or if Holder disputes in writing any determination
so made by the Company's Board of Directors within 30 days of being informed of
such determination, by a nationally recognized independent investment banking or
accounting firm selected by the Board of Directors of the Company (or if such
selection cannot be made, by a nationally recognized independent investment
banking or accounting firm selected by the American Arbitration Association in
accordance with its rules).
(b) Record Date. In case the Company shall take a record of the holders
of its Shares for the purpose of determining holders entitled to receive a
dividend or other distribution payable in Shares, then such record date shall be
considered to be the date of the issue or sale of the Shares related to such
dividend or distribution.
(c) Stock Combinations. In case the Company shall combine all of the
outstanding Shares into a smaller number of Shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased and the
number of Warrant Shares shall be proportionately decreased.
8
(d) Fractional Shares. No fractional Warrant Shares shall be issued
upon the exercise hereof. Upon exercise by any holder, such holder shall be
entitled to receive the aggregate full number of Shares which the holder may
receive upon exercise.
(e) The adjustment to the number of Shares issuable upon the exercise
hereof and the adjustments to the Warrant Price described in this Section 4
shall be made each time any event listed in this Section 4 occurs.
(f) If any event occurs of the type contemplated by the provisions of
this Section 4, but not expressly provided for by such provisions or definition,
then the Company's Board of Directors in its reasonable judgment shall make an
appropriate adjustment in the number of Warrant Shares obtainable upon exercise
of this Warrant so as to protect the rights of the Warrant Holder.
5. COMPLIANCE WITH SECURITIES ACT; RESTRICTIONS ON TRANSFER; REPRESENTATIONS.
Holder hereby represents and warrants that:
(a) Purchase Entirely for Own Account. This Warrant and the Warrant
Shares issuable upon exercise hereof (collectively, the "Securities") will be
acquired for investment for Holder's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and Holder
has no present intention of selling, granting any participation in or otherwise
distributing the same, provided that nothing in this section shall constitute an
agreement by the Holder to hold or refrain from disposing of the Warrant Shares
for any amount of time, provided that any transfer, sale or other disposition of
the Warrant Shares shall comply in all respects with the requirements of the
Securities Act and similar provisions of state law. Holder does not presently
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to any person with respect to any of the
Securities.
(b) Investment Experience. Holder acknowledges that it is able to fend
for itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in this Warrant. Holder also represents
it has not been organized for the purpose of acquiring this Warrant.
(c) Accredited Investor. Holder is (a) an "accredited investor" within
the meaning of Rule 501 of Regulation D of the Securities and Exchange
Commission (the "SEC"), as presently in effect.
(d) Restricted Securities. Holder understands that the Securities are
characterized as "restricted securities" under the federal securities laws in as
much as they are being acquired from the Company in a transaction not involving
a public offering, and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act of 1933,
as amended ("the Securities Act") only in certain limited circumstances. In this
connection, Holder represents that it is familiar with SEC Rule 144 promulgated
under the Securities Act,
9
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
(e) Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Holder further agrees not to make any
disposition of all or any portion of the Warrant Shares: (i) unless and until
there is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement, or (ii) pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
securities act. The Company may require an opinion of counsel in form and
substance reasonably acceptable that such registration is not required.
(f) Authorization. If the holder is not a natural person, the holder
hereby represents that its acceptance of this Warrant has been authorized on its
behalf by all appropriate limited liability company, corporate or partnership
action.
(h) Legend. This Warrant and all Shares issued upon exercise of this
Warrant(unless registered under the Securities Act) shall be stamped or
imprinted with a legend in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE COMPANY MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE THAT SUCH
REGISTRATION IS NOT REQUIRED.
The Company need not register a transfer of this Warrant or the Warrant Shares
unless the conditions specified in such legend are satisfied. Subject to the
foregoing transfer restrictions set forth in this Section, this Warrant is
transferable, in whole or in part, on the books of the Company, upon surrender
of this Warrant to the Company, together with a written assignment duly executed
by the Holder.
(i) Notwithstanding the foregoing, the restrictions imposed upon the
transferability of this Warrant and the Warrant Shares shall cease and terminate
as to this Warrant or any particular shares of capital stock when, (i) such
Warrant or Warrant Shares shall have been effectively registered under the 1933
Act and sold by the holder thereof in accordance with such registration or (ii)
counsel for Holder provides an opinion, in form and substance reasonably
satisfactory to the Company (or in lieu of an opinion of counsel, Holder
provides the Company with other evidence satisfactory to the Company), that such
restrictions are no longer required in order to ensure compliance with the 1933
Act. If and whenever the restrictions imposed hereunder shall terminate as to
this Warrant (or to any Warrant Shares) as
10
hereinabove provided, Holder may and the Company shall, as promptly as
practicable upon the request of Holder and at the Company's expense, cause to be
stamped or otherwise imprinted upon this Warrant or such shares of capital stock
a legend in substantially the following form:
"The restrictions on the transferability of [this] [these] [Warrant]
[securities] terminated on _______________, _____, and are of no
further force or effect"
or take such other action as to effectively remove the restrictions on the
transferability of the Warrant and the Warrant Shares.
Any Warrant issued upon the split-up, combination, exchange, substitution,
transfer or loan of the Warrants entitled to bear such legend shall have a
similar legend endorsed thereon. Whenever the restrictions imposed hereunder
shall terminate as to any Warrant or as to any shares of capital stock, as
hereinabove provided, the Holder thereof shall be entitled to receive from the
Company without expense, a new Warrant or new shares of capital stock not
bearing the restrictive legend set forth hereon or above, respectively.
(j) The Company shall cause all Warrant Shares covered by a valid
registration statement to be listed on any securities exchange upon which the
Shares are then listed.
6. RIGHTS OF SHAREHOLDERS.
No holder of the Warrant or Warrants shall be entitled to vote or receive
dividends or be deemed the holder of Shares, nor shall anything contained herein
be construed to confer upon the holder of this Warrant, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings, or to receive dividends until the
Warrant or Warrants shall have been exercised and the Shares shall have become
deliverable, as provided herein.
7. PIGGY-BACK REGISTRATION RIGHTS
(a) The Company shall notify Warrant Holder in writing at least fifteen
(15) days prior to filing any registration statement under the 1933 Act for
purposes of effecting a public offering of securities of the Company (including,
but not limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any
employee benefit plan or a corporate reorganization) and will afford Warrant
Holder an opportunity to include in such registration statement all or any part
of the Warrant Shares issued or reserved for issuance to Warrant Holder upon
exercise of this Warrant. If Warrant Holder desires
11
to include in any such registration statement all or any part of such Warrant
Shares, Warrant Holder shall, within ten (10) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Warrant Shares Warrant
Holder wishes to include in such registration statement. If Warrant Holder
decides not to include all of the shares of Ordinary Shares issued or reserved
for issuance to Warrant Holder upon the exercise of this Warrant in any
registration statement thereafter filed by the Company, Warrant Holder shall
nevertheless continue to have the right to include any such Warrant Shares any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein. The Company will cooperate with Warrant Holder to
facilitate its distribution of Warrant Shares pursuant to any such registration
statement.
(b) The Company agrees to indemnify and hold harmless Warrant Holder
and its directors, officers, employees, agents, partners, members, controlling
persons and affiliates from and against any expenses, losses, claims, damages or
liabilities they may incur arising out of any untrue or alleged untrue statement
of material fact contained in such registration statement, or any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of any
violation of the 1933 Act or the Securities Exchange Act of 1934, as amended, in
connection therewith, provided, however, that the Company will not be liable in
any such case to the extent that any such expense, loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
or amendment thereto in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of the Holder specifically
for use in the preparation thereof. Provided that Warrant Holder is entitled to
indemnification hereunder, the Company will reimburse Warrant Holder and its
directors, officers, employees, agents, controlling persons and affiliates for
any legal or other expenses reasonably incurred in connection with investigating
or defending any such action or claim as such expenses are incurred.
(c) All expenses incurred by the Company in complying with Section 7(a)
(other than the underwriter's discounts and commissions), including, without
limitation, all registration and filing fees (including all expenses incident to
filing with the National Association of Securities Dealers, Inc.), fees and
expenses of complying with securities and blue sky laws (except for blue sky
expenses required by law to be borne by sellers), expense allowances of the
underwriters, printing expenses, fees and disbursements of counsel or other
advisor to the Company, and of the accountants to Company, are herein called
"Registration Expenses." All fees and expenses of counsel for any selling
Warrant Holder and all underwriting discounts and commissions applicable to the
eligible securities covered by any such registration, are herein called "Selling
Expenses."
(d) The Company shall pay all Registration Expenses in connection with
each registration pursuant to Section 7(a). All Selling Expenses and blue sky
expenses required by law to be borne by sellers in connection with each
registration pursuant to Section 7(a) shall be borne by the seller or sellers
therein in proportion to
12
the number of eligible securities included by each in such registration or in
such other proportions as they may agree upon. In the event of any dispute as to
how Selling Expenses are allocated, the Company shall be entitled to apportion
the expenses in a reasonable manner between the various sellers.
(e) The piggy-back registration rights granted in this Section 6 are in
addition to, and not in lieu of, any other registration rights the Holder may
have by virtue of other contractual arrangements with the Company.
8. GOVERNING LAW.
The terms and conditions of this Warrant shall be governed by and construed in
accordance with the laws of the State of California.
9. MISCELLANEOUS.
The headings in this Warrant are for purposes of convenience and reference only,
and shall not be deemed to constitute a part hereof. Neither this Warrant nor
any term hereof may be changed, waived, discharged or terminated orally but only
by an instrument in writing signed by the Company and the registered holder
hereof. All notices and other communications from the Company to the holder of
this Warrant shall be mailed by first-class registered or certified mail or
recognized commercial courier service, postage prepaid, to the address furnished
to the Company in writing by the last holder of this Warrant who shall have
furnished an address to the Company in writing.
_______, 200_ COMMTOUCH SOFTWARE LTD.
------------------------------------
Xxxxxx Xxxxxx, Chief Executive Officer
13
EXHIBIT A
NOTICE OF EXERCISE
TO: COMMTOUCH SOFTWARE LTD.
1. The undersigned hereby elects to purchase ___________ Shares of
Commtouch Software Ltd. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such Shares in full, together
with all applicable transfer taxes, if any.
2. The undersigned represents that the Shares are being acquired for
the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing
or reselling such shares.
3. Please issue a certificate or certificates representing said Shares
in the name of the undersigned or in such other name as is specified below:
---------------------------------
(Name)
---------------------------------
---------------------------------
(Address)
-----------------------------------
Name of Warrant holder
-----------------------------------
Signature of Authorized Signatory
-----------------------------------
Print Name and Title
-----------------------------------
Date
EXHIBIT B
NOTICE OF CONVERSION
TO: COMMTOUCH SOFTWARE LTD.
1. The undersigned hereby elects to convert the attached Warrant into such
number of Ordinary Shares (the "Shares") of Commtouch Software Ltd. as is
determined pursuant to Section 2(c) of such Warrant, which conversion shall be
effected pursuant to the terms of the attached Warrant.
2. Please issue a certificate or certificates representing the Shares in the
name of the undersigned or in such other name as is specified below:
-----------------------------------
(Print Name)
-----------------------------------
(Address)
-----------------------------------
(Address)
3. The undersigned represents that the Shares are being acquired for the account
of the undersigned for investment and not with a view to, or for resale in
connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares.
(Date) (Signature)
(Print Name)
Schedule 3.1(b)
-----------------------------------------
-----------------------------------------
-----------------------------------------
