SUPERCOM LTD. SUBSCRIPTION AGREEMENT
SUBSCRIPTION
AGREEMENT (βSubscription
Agreementβ)
made
as of this 16th
day of
November, 2006 between SuperCom Ltd., a company organized under the laws of
the
State of Israel (the βCompanyβ), and the undersigned (the βSubscriberβ).
WHEREAS,
the Company desires to issue an aggregate of $2,500,000 of units (βUnitsβ)
in a
private placement (the βOfferingβ)
on the
terms and conditions set forth herein, and the Subscriber desires to acquire
the
number of Units set forth on the signature page hereof; and
WHEREAS,
each Unit is being sold at a price of $2,500,000 per Unit (the "Purchase
Price")
and
shall consist of: (i) one convertible bond (the "Convertible
Bond"
and
collectively, the "Convertible
Bonds")
currently convertible into 2,941,176 shares (the βConvertible
Bond Sharesβ)
of the
Company's ordinary shares, NIS 0.01 nominal value each (the "Ordinary
Shares"),
in
the form attached hereto as Exhibit
A,
and
(ii) a 5-year warrant (the βWarrantβ,
and
collectively, the "Warrants")
to
purchase 625,000 Ordinary Shares (the βWarrant
Sharesβ)
at a
current exercise price of $0.85 per Warrant Share, in the form of Exhibit
B
attached
hereto; and
NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto do hereby agree as
follows:
| Β |
I.
|
SUBSCRIPTION
FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF
SUBSCRIBER
|
1.1Β Subscription
for Units.
Subject
to the terms and conditions hereinafter set forth, the Subscriber hereby
subscribes for and agrees to purchase from the Company such whole dollar amount
of Units as is set forth upon the signature page hereof, at a total price of
$2,500,000, and the Company agrees to sell such Units to the Subscriber for
said
purchase price, subject to the Companyβs right, in its sole discretion, to
reject this subscription, in whole or in part, at any time prior to the Closing
(as defined below) with respect to this subscription. The purchase price is
payable at the Closing by wire transfer of funds to the following
account:
ABA#
000000000
Credit
Bank: Citibank N.A.
Credit
Account: 00000000
Credit
Account Name: Citigroup Global Markets Inc.
For
Further Credit to: Supercom Ltd.
Account
062-09431-18-447
The
consummation of the sale of Units contemplated hereby and the delivery of the
Convertible Bonds and the Warrants to the Subscriber (the βClosingβ),
shall
occur on November 17, 2006, unless such date is extended by mutual agreement
of
the Company and the Subscriber (the βClosing
Dateβ).
1.2Β Reliance
on Exemptions.
The
Subscriber acknowledges that the Offering has not been reviewed by the United
States Securities and Exchange Commission (the βSECβ)
or any
state agency because it is intended to be a nonpublic offering exempt from
the
registration requirements of the Securities Act of 1933, as amended (the
β1933
Actβ),
and
state securities laws. The Subscriber understands that the Company is relying
in
part upon the truth and accuracy of, and the Subscriberβs compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
the Subscriber set forth herein in order to determine the availability of such
exemptions and the eligibility of the Subscriber to acquire the
Units.
1.3Β Investment
Purpose.
The
Subscriber represents that the Convertible bonds and the Warrants comprising
the
Units are being purchased for its own account and for its own benefit, for
investment purposes only and not for distribution or resale to others in
contravention of the registration requirements of the 1933 Act. The Subscriber
agrees that it will not sell or otherwise transfer the Units, the Convertible
Bonds, the Convertible Bond Shares, the Warrants or the Warrant Shares
(collectively, the βSecuritiesβ)
unless
they are registered under the 1933 Act or unless an exemption from such
registration is available.
1.4Β Accredited
Investor.
The
Subscriber represents and warrants that it is an βaccredited investorβ as such
term is defined in Rule 501 of Regulation D promulgated under the 1933 Act,
and
that it is able to bear the economic risk of any investment in the
Units.
1.5Β Risk
of Investment.
The
Subscriber recognizes that the purchase of Units involves a high degree of
risk
in that: (a) an investment in the Company is highly speculative and only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Securities; (b) transferability of the
Securities is limited; and (c) the Company may require substantial additional
funds to operate its business and there can be no assurance that any other
funds
will be available to the Company.
1.6Β Prior
Investment Experience.
The
Subscriber acknowledges that it has prior investment experience, including
investment in non-registered securities, and that it recognizes the highly
speculative nature of this investment.
1.7Β Information.
The
Subscriber acknowledges careful review of: (a) this Subscription Agreement,
(b)
the Companyβs Registration Statement on Form 20-F filed with the SEC on July
24th,
2006,
as amended and the Companyβs Registration Statement on Form F-1 filed with the
SEC on September 26th,
2006,
as amended (the βSEC
Documentsβ),
including the section entitled βRisk Factorsβ contained therein, which has been
delivered to Subscriber as Exhibit
C
to this
Agreement and which can be also accessed at xxxx://xxx.xxx.xxx,
and (c)
all exhibits, schedules and appendices which are part of the Subscription
Agreement (collectively, the βOffering
Documentsβ),
and
hereby represents that: (i) the Subscriber has been furnished by the Company
during the course of this transaction with all information regarding the Company
which it has requested, (ii) that the Subscriber has been afforded the
opportunity to ask questions of, and receive answers from, duly authorized
officers of the Company concerning the terms and conditions of the Offering,
and
any additional information which it has requested, and (iii) that the Subscriber
has agreed that the information that the Company has furnished or will furnish
to the Subscriber in connection with this Agreement and the transactions
contemplated hereby shall be limited and confined to public information and
that
in no event shall any information furnished by the Company to the Subscriber
include material insider or material nonpublic information.
Β
Β
1.8Β No
Representations.
The
Subscriber hereby represents that, except as expressly set forth in the Offering
Documents, no representations or warranties have been made to the Subscriber
by
the Company or any agent, employee or affiliate of the Company, and in entering
into this transaction the Subscriber is not relying on any information other
than that contained in the Offering Documents and the results of independent
investigation by the Subscriber.
1.9Β Tax
Consequences.
The
Subscriber acknowledges that the Offering may involve tax consequences and
that
the contents of the Offering Documents do not contain tax advice or information.
The Subscriber acknowledges that it must retain his own professional advisors
to
evaluate the tax and other consequences of an investment in the
Units.
1.10Β Transfer
or Resale.
Subject
to Section 3.3 hereof, the Subscriber acknowledges that there is, and will
be, a
limited public market for the Ordinary Shares and there can be no assurance
that
a more active public market for the Ordinary Shares will ever develop. The
Subscriber understands that Rule 144 (the βRuleβ)
promulgated under the 1933 Act requires, among other conditions, a one-year
holding period for non-affiliates (and a longer holding period for affiliates)
prior to the resale (in limited amounts) of securities acquired in a non-public
offering without having to satisfy the registration requirements under the
1933
Act. The Subscriber consents that the Company may, if it desires, permit the
transfer of the Securities out of the Subscriberβs name only when the
Subscriberβs request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the 1933 Act or any applicable state βblue
skyβ laws.
1.11Β No
Hedging Transactions.
The
Subscriber hereby agrees not to engage in any Hedging Transaction for such
period as in which such hedging activity would constitute a violation or default
under any applicable provision of federal, state, or local statute, rule, or
regulation including, without limitation, any rule, regulation or instruction
of
any stock exchange or other public market on which the Company's shares are
listed for trading and of any authority governing such stock exchange or public
market. βHedging Transactionβ means any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from the Companyβs Ordinary Shares or any rights, warrants,
options or other securities that are convertible into, or exercisable or
exchangeable for, Ordinary Shares.
1.12Β Legends.
The
Subscriber understands that the certificates representing the Shares, until
such
time as they have been registered under the 1933 Act, shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such certificates or other instruments):
Β
Β
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
(B)
AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS, OR (II) UNLESS
SOLD
PURSUANT TO RULE 144 UNDER SAID ACT.
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Shares upon which such
legend is stamped, if (a) such Shares are being sold pursuant to a registration
statement under the 1933 Act, (b) such holder delivers to the Company an opinion
of counsel, in a reasonably acceptable form, to the Company that a disposition
of the Shares is being made pursuant to an exemption from such registration,
or
(c) such holder provides the Company with reasonable assurance (to be determined
in the sole discretion of the Company) that a disposition of the Shares may
be
made pursuant to the Rule without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.
1.13Β No
General Solicitation.
The
Subscriber represents that the Subscriber was not induced to invest by any
form
of general solicitation or general advertising including, but not limited to,
the following: (a) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over the
news
or radio; and (b) any seminar or meeting whose attendees were invited by any
general solicitation or advertising.
1.14Β Validity;
Enforcement.
If the
Subscriber is a corporation, partnership, trust or other entity, the Subscriber
represents and warrants that: (a) it is authorized and otherwise duly qualified
to purchase and hold the Units, and (b) that this Subscription Agreement has
been duly and validly authorized, executed and delivered and constitutes the
legal, binding and enforceable obligation of the undersigned. If the Subscriber
is an individual, the Subscriber represents and warrants that this Subscription
Agreement has been duly and validly executed and delivered and constitutes
the
legal, binding and enforceable obligation of the undersigned.
1.15Β Address.
The
Subscriber hereby represents that the address of the Subscriber furnished by
the
Subscriber at the end of this Subscription Agreement, is the undersignedβs
principal residence, if the Subscriber is an individual, or its principal
business address, if it is a corporation or other entity.
1.16Β Foreign
Subscriber.
If the
Subscriber is not a United States person, as that term is defined in Regulation
S under the 1933 Act, such Subscriber hereby represents that it has satisfied
itself as to the full observance of the laws of its jurisdiction in connection
with any invitation to subscribe for the Securities comprising the Units or
any
use of this Subscription Agreement, including: (a) the legal requirements within
its jurisdiction for the purchase of the Units; (b) any foreign exchange
restrictions applicable to such purchase; (c) any governmental or other consents
that may need to be obtained; and (d) the income tax and other tax consequences,
if any, that may be relevant to the purchase, holding, redemption, sale or
transfer of the Securities comprising the Units. Such Subscriberβs subscription
and payment for, and its continued beneficial ownership of the Securities,
will
not violate any applicable securities or other laws of the Subscriberβs
jurisdiction.
1.17Β NASD
Member.
The
Subscriber acknowledges that if it is a Registered Representative of a NASD
member firm, the Subscriber must give such firm notice required by the NASDβs
Rules of Fair Practice, receipt of which must be acknowledged by such firm
on
the signature page hereof.
1.18Β Entity
Representation.
If the
undersigned Subscriber is a partnership, corporation, trust or other entity,
such partnership, corporation, trust or other entity further represents and
warrants that it was not formed for the purpose of investing in the
Company.
Β
| II. |
REPRESENTATIONS
AND WARRANTIES OF THE
COMPANY
|
2.1Β Representations
and Warranties.
The
Company represents and warrants to the Subscriber as follows:
(a)Β The
Company is a corporation duly organized and validly existing under the laws
of
the State of Israel, and has all requisite corporate power and authority to
(i)
carry on its business as now conducted and (ii) accept and deliver this
Subscription Agreement and to consummate the transactions contemplated hereby.
The Company does not presently own or control, directly or indirectly, any
interest in any other corporation, association, or other business entity except
as disclosed in the SEC Documents (each, a βSubsidiaryβ
and
collectively, the βSubsidiariesβ).
Unless the context requires otherwise, all references herein to the βCompanyβ
shall refer to the Company and its Subsidiaries. The Company and the
Subsidiaries are duly qualified to transact business in each jurisdiction in
which the failure so to qualify would have a material adverse effect (financial
or otherwise) on the business, property, prospects, assets or liabilities of
the
Company and its Subsidiaries taken as a whole (βMaterial
Adverse Effectβ).
(b)
All
corporate action on the part of the Company necessary for the authorization,
execution, and delivery of this Subscription Agreement, the Convertible Bond
and
the Warrant (collectively, the βTransaction
Documentsβ),
the
performance of all obligations of the Company hereunder and thereunder and
the
authorization, issuance (or reservation for issuance) and delivery of the
Securities, has been taken or will be taken prior to the Closing, and the
Transaction Documents constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except
(i)Β as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditorsβ rights generally, (ii)Β as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii)Β to the extent the indemnification provisions contained
in the Transaction Documents may be limited by applicable federal or state
laws.
There is no legal requirement, or any requirement pursuant to the Company's
Memorandum of Association or Articles of Association or any other corporate
document or agreement to which the Company is a party or by which it is bound,
that this Agreement or the transactions contemplated hereby (including, without
limitation, the issuance of the Convertible Bond Shares and the Warrant Shares)
shall be brought before or be approved by the Company's general meeting of
shareholders.
(c)
The
Company is not in violation or default of any provisions of its Memorandum
of
Association or Articles of Association, or, to its knowledge, of any instrument,
judgment, order, writ, decree, mortgage, indenture, lease, license or contract
to which it is a party or by which it is bound or, to its knowledge, of any
provision of federal, state, or local statute, rule, or regulation applicable
to
the Company, including, without limitation, any rule, regulation or instruction
of any stock exchange or other public market on which the Company's shares
are
listed for trading and of any authority governing such stock exchange or public
market, except as would not reasonably be expected, singly or in the aggregate,
to have a Material Adverse Effect. The negotiation, execution, delivery, and
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby will not result in any such violation or
be in
conflict with or constitute, with or without the passage of time and giving
of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract, or an event which results in the creation of any
lien,
charge, or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or non-renewal of any material permit,
license, authorization, or approval applicable to the Company, its business
or
operations, or any of its assets or properties, except as would not reasonably
be expected, singly or in the aggregate, to have a Material Adverse Effect.
(d)
Neither the Company nor any Subsidiary is required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
govern-mental authority or other Person in connection with the execu-tion,
delivery and performance by the Company of the Transaction Documents, other
than
(i) a
proper Form D in accordance with Regulation D
promulgated under the 1933 Act, and applicable Blue Sky filings and (ii) in
all
other cases where the failure to obtain such consent, waiver, authorization
or
order, or to give such notice or make such filing or registration could not
have
or result in, individually or in the aggregate, a Material Adverse Effect.
Except as required by applicable law, regulation or legal process (including,
without limitation, in order to comply with an express request or requirement
by
a governmental entity having jurisdiction over the Company or any Subsidiary)
or
except as otherwise waived by the Subscriber (including upon the waiver by
the
Subscriber of the protective provisions contained in either Section 12 of the
Convertible Bonds or Section 10 of the Warrants pertaining to the 5% beneficial
ownership percentages), neither the Company nor the Subsidiary shall include,
in
any filing, announcement, or other form of public communication, the name of
the
Subscriber or any particular information that would result in revealing the
Subscriber's identity.
(e)
The
Convertible Bonds and Warrants, when issued and delivered in accordance with
the
terms hereof, will be duly and validly issued, fully paid and non-assessable,
and, based in part upon the representations of the Subscriber in this
Subscription Agreement, will be issued in compliance with all applicable federal
and state securities laws. The Convertible Bond Shares issuable upon conversion
of the Convertible Bonds have been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Convertible Bonds, shall
be
duly and validly issued, fully paid and non-assessable, and issued in compliance
with all applicable securities laws, as presently in effect, of the United
States and each of the states whose securities laws govern the issuance of
the
Ordinary Shares hereunder. The Warrant Shares issuable upon exercise of the
Warrants have been duly and validly reserved for issuance and, upon issuance
in
accordance with the terms of the Warrants and upon payment of the exercise
price
as required by the Warrants, shall be duly and validly issued, fully paid and
non-assessable, and issued in compliance with all applicable securities laws,
as
presently in effect, of the United States and each of the states whose
securities laws govern the issuance of the Ordinary Shares hereunder.
(f)Β
Except
as set forth in the Capitalization Table attached hereto as Exhibit
D,
there
are no outstanding shares of share capital, preemptive rights, convertible
securities, outstanding warrants, options or other rights to subscribe for
any
securities of the Company, and there are not any agreements or commitments
providing for the issuance of, or the granting of the same. Except
as disclosed in Exhibit E, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
(g)Β Except
as
set forth in the SEC Documents, there is no action, suit, proceeding, claim
or
investigation pending or, to the knowledge of the Company, currently threatened
against the Company which questions the validity of the Transaction Documents,
or the right of the Company to enter into any of them, or to consummate the
transactions contemplated thereby, or which might result, either individually
or
in the aggregate, in any Material Adverse Effect, nor is the Company aware
that
there is any basis for the foregoing.
(h)Β The
Company has all material franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted
by
it, the lack of which could have a Material Adverse Effect and believes it
can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted. The Company is not in default in
any
material respect under any of such franchises, permits, licenses, or other
similar authority.
(i)
Except as set forth in the SEC Documents, the Company has sufficient title
and
ownership of, or has otherwise acquired rights with respect to, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
inventions, proprietary rights, and processes necessary for its business as
now
conducted without, to the Companyβs knowledge, any conflict with or infringement
of the rights of others. The Company is not aware that any of its employees
or
officers are obligated under any contract (including licenses, covenants, or
commitments of any nature) or other agreement, or subject to any judgment,
decree, or order of any court or administrative agency, that would interfere
with the use of such employeeβs or officerβs commercially reasonable efforts to
promote the interests of the Company or that would conflict with the Companyβs
business as conducted. Neither the carrying on of the Companyβs business by the
employees of the Company, nor the conduct of the Companyβs business, will, to
the Companyβs knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant, or instrument under which any of such employees or officers are now
obligated.
(j)Β To
the
Companyβs knowledge, the financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto
as in
effect at the time of filing. Such financial statements have been prepared
in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (βGAAPβ),
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position
of
the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. Except as set forth in the SEC Documents, since December
31,
2005 (a)Β there has been no event, occurrence or development that has had or
that could reasonably be expected to have or result in a Material Adverse
Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) liabilities incurred in the ordinary course of
business consistent with past practice and (y) liabilities not required to
be
reflected in the Companyβs financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC, (c) the Company has not altered
its
method of accounting or the identity of its auditors and (d) the Company has
not
declared or made any payment or distribution of cash or other property to its
shareholders or officers or directors (other than in compliance with existing
Company stock or stock option plans) with respect to its share capital, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares
of
its share capital.
(k)Β Except
as
disclosed in the SEC Documents, the Company is not indebted in excess of
$50,000, directly or indirectly, to any of its employees, officers or directors
or to their respective spouses or children, in any amount whatsoever other
than
in connection with expenses or advances of expenses incurred in the ordinary
course of business or relocation expenses of employees, officers and directors,
nor is the Company contemplating such indebtedness as of the date of this
Agreement. Except as otherwise disclosed in the SEC Documents, none of said
employees, officers or directors, or any member of their immediate families,
is
directly or indirectly indebted to the Company or have any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship or any firm
or
corporation which competes with the Company, nor is the Company contemplating
such indebtedness as of the date of this Agreement, except that employees,
officers, directors and/or shareholders of the Company may own stock in publicly
traded companies (not in excess of 1% of the outstanding capital stock thereof)
which may compete with the Company.
(l)Β The
Company shall use the proceeds received from the Subscriber in good faith and
in
accordance with purposes set forth in the Companyβs Business Plan and budget as
shall be approved by the Company's board of directors from time to time.
(m)Β The
Company has no, and shall not allow create without the prior written consent
of
the Subscriber, indebtedness that is superior to the indebtedness towards the
Subscriber pursuant to the Convertible Bonds (βSenior Indebtednessβ). For
avoidance of doubt, the parties hereto agree and acknowledge that any loan
or
financing obtained by the Company which is secured primarily by the ordinary
shares of On Track Innovations Ltd. (the "OTI Shares") received by the Company
pursuant to that certain asset purchase agreement dated November 7, 2006 (the
"OTIΒ Transaction")
shall not be deemed to be Senior Indebtedness for purposes of this
Agreement.
(n)Β To
the
best of the Company's knowledge as of the date of this Subscription Agreement,
other than any announcement relating to the transactions contemplated herein
or
previously disclosed or contemplated in the SEC Documents, there are currently
no planned announcements to be released within the 30 days following the date
hereof, which may reasonably be expected to materially effect the market price
of the Company's registered shares.
(o)Β The
avoidance from voluntary disclosure of the Subscriber's identity to any
governing entity, and from any public announcement, as contemplated in the
provisions of this Subscription Agreement, does not, to the best of the
Company's knowledge, constitute a violation or default under any applicable
federal, state, or local statute, rule, or regulation, including, without
limitation, any rule, regulation or instruction of any stock exchange or other
public market on which the Company's shares are listed for trading and of any
authority governing such stock exchange or public market; provided,
however,
the
Subscriber shall not have waived the protective provisions contained in either
Section 12 of the Convertible Bonds or Section 10 of the Warrants pertaining
to
the 5% beneficial ownership percentages).
(p)Β The
Company has not provided the Subscriber with any material insider or material
nonpublic information.
| Β |
III.
|
TERMS
OF SUBSCRIPTION
|
3.1Β Certificates.
The
Subscriber hereby authorizes and directs the Company, at the Closing, to deliver
the Convertible Bonds and the Warrants to be issued to such Subscriber pursuant
to this Subscription Agreement to the Subscriberβs address indicated on the
signature page of this Agreement.
3.2Β Return
of Funds.
The
Subscriber hereby authorizes and directs the Company to return any funds for
unaccepted subscriptions to the same account from which the funds were
drawn.
3.3Β Registration
of Securities.
On the
Closing Date, the Company and the Subscriber shall enter into a registration
rights agreement, substantially in the form attached hereto as Annex
I.
Β
3.4Β Preemptive
Rights.
(a)Β Except
to
the extent the right to receive such offer has been waived in writing by the
Subscriber, and except for the issuance of (i) shares of the Company issuable
upon exercise of options, warrants or convertible securities outstanding on
the
date hereof (including, without limitation, the Units); (ii) securities issued
to employees, consultants or directors of the Company pursuant to any share
option plan or share purchases or share bonus arrangement approved by the Board
of Directors of the Company; and (iii) securities issued pursuant to share
split, recapitalization, reclassification or payment of any dividend or
distribution with respect to the Companyβs issued and outstanding share capital;
if the Company proposes at any time before the fifteen-month anniversary of
the
Closing Date any issuance of share capital of the Company, whether or not now
authorized, and rights, options or warrants to purchase shares, or securities
of
any type whatsoever that are, or may become, convertible into share capital
("New
Securities"),
it
shall
enable the Subscriber to purchase its proportionate share of such New
Securities, based on its proportionate share holdings in the share capital
of
the Company resulting solely from this offering, on an as if converted and
exercised basis, prior to the issuance of the New Securities, in accordance
with
the provisions of subsection (b) below.
(b)Β In
the
event the Company undertakes an issuance of New Securities, it shall give the
Subscriber written notice thereof, no less than two (2) business days prior
to
such issuance. Such notice of offer shall state the price and other terms of
the
proposed allotment, and offer to the Subscriber such number of New Securities,
at such price and on such other terms, as is necessary for the Subscriber to
retain the proportion of the Company's share capital resulting solely from
this
offering which it held immediately prior to such issuance (on an as if converted
and if exercised basis), and the Subscriber may accept such offer, as to all
or
any part of the shares so offered to it, by giving the Company written notice
of
acceptance within fourteen (14) days after being served with such notice of
offer (the βOffer Periodβ). For avoidance of doubt, the Company and the
Subscriber agree and acknowledge that the closing of the issuance of New
Securities to the proposed purchaser may take place prior to the end of the
Offer Period. In the event the Subscriber accepts the offer to participate
in
accordance with this Section 3.4(b), the closing of the additional issuance
to
the Subscriber shall take place within seven (7) days after the end of the
Offer
Period.
Β
| Β |
IV.
|
MISCELLANEOUS
|
4.1Β Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Subscription Agreement must be in writing and
will
be deemed to have been delivered: (a) upon receipt, when delivered personally,
(b) upon receipt, when sent by email or facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the
sending party), or (c) one (1) business day after deposit with an overnight
courier service, or (d) three (3) business days after sent by registered mail,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If
to the
Company:
Β
0
Xx'Xxxxxx Xx., X.X.X. 0000
Xx'Xxxxxx
Xxxxxxxxxx Xxxx
Xxxxxx
00000, Xxxxxx
Telephone:
x000-0-0000000
Facsimile:
x000-0-0000000
Attention:
Chief Financial Officer
With
copies to:
Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Chrysler
Center
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
X.X.X.
Telephone:
000-000-0000
Facsimile:
212-983-3115
Attention:
Xxxxxxx Xxxx, Esq.
Β
Xxxxx
Xxxxxxx, Arad & Co., Advocates
3
Xxxxxx
Xxxxxx Xxxxxx
Xxx
Xxxx
00000
Xxxxxx
Telephone:
00-000-0000
Facsimile:
00-000-0000
Attention:
Xxxxxx Xxxxx, Adv.
If
to the Subscriber:
to
its
address and facsimile number set forth at the end of this Subscription
Agreement, or to such other address and/or facsimile number and/or to the
attention of such other person as specified by written notice given to the
Company five (5) days prior to the effectiveness of such change.
With
copies to:
Barak-Git
Law Offices
1
Azrieli
Center (the Xxxxx Xxxxx-00xx
Xxx)
Xxx
Xxxx
00000
Xxxxxx
Telephone:
00-000-0000
Facsimile:
03-608-1758
Attention:
Xxxxx Xxxxxxx, Adv.
Email:
xxxxx@xxxxx-xxx.xx.xx
Written
confirmation of receipt (a) given by the recipient of such notice, consent,
waiver or other communication, (b) mechanically or electronically generated
by
the senderβs facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission, or (c) provided
by
an overnight courier service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (a), (b) or (c) above, respectively.
4.2Β Entire
Agreement; Amendment.
This
Subscription Agreement supersedes all other prior oral or written agreements
between the Subscriber, the Company, their affiliates and persons acting on
their behalf with respect to the matters discussed herein, and this Subscription
Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
the
Subscriber makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Subscription Agreement may be
amended or waived other than by an instrument in writing signed by the Company
and the holders of at least a majority of the Units then outstanding (or if
prior to the Closing, the Subscribers purchasing at least a majority of the
Units to be purchased at the Closing). No such amendment shall be effective
to
the extent that it applies to less than all of the holders of the Units then
outstanding.
4.3Β Severability.
If any
provision of this Subscription Agreement shall be invalid or unenforceable
in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Subscription Agreement
in
that jurisdiction or the validity or enforceability of any provision of this
Subscription Agreement in any other jurisdiction.
4.4Β Governing
Law and Venue.
This
Subscription Agreement and all actions arising out of or in connection herewith
shall be exclusively governed by, and construed in accordance with, the laws
of
the State of Israel, without regard to the conflict of laws provisions thereof.
Any original suit, action or other legal proceeding by the Subscriber against
the Company and/or by the Company against the Subscriber may be brought before,
and only
before,
a court of competent jurisdiction sitting in Tel Aviv.
4.5Β Headings.
The
headings of this Subscription Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Subscription
Agreement.
4.6Β Successors
and Assigns.
This
Subscription Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. The Company shall not
assign this Subscription Agreement or any rights or obligations hereunder
without the prior written consent of the holders of at least a majority of
the
Securities then outstanding, except by merger or consolidation. The Subscriber
shall not assign its rights or obligations hereunder without the consent of
the
Company, which consent shall not be unreasonably withheld. Nothing in the
aforementioned shall restrict the Subscriber's right to transfer any of the
Securities, in accordance with their terms.
4.7Β No
Third Party Beneficiaries.
This
Subscription Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person.
4.8Β Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Subscription Agreement and the consummation of the transactions contemplated
hereby.
4.9Β No
Strict Construction.
The
language used in this Subscription Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
4.10Β Legal
Representation.
The
Subscriber acknowledges that: (a) it has read this Subscription Agreement and
the exhibits and attachments hereto; (b) it understands that the Company has
been represented in the preparation, negotiation, and execution of this
Subscription Agreement by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. P.C.
and by Xxxxx Xxxxxxx, Arad & Co., counsel to the Company; (c) it has either
been represented in the preparation, negotiation and execution of this
Subscription Agreement by legal counsel of its own choice, or has chosen to
forego such representation by legal counsel after being advised to seek such
legal representation; and (d) it understands the terms and consequences of
this
Subscription Agreement and is fully aware of its legal and binding
effect.
4.11Β Confidentiality.
(a)
The
Subscriber acknowledges that the Offering is of a confidential nature and that
the Subscriber shall treat it in a confidential manner, and that it will not,
directly or indirectly, disclose or permit, if applicable, its affiliates or
representatives to disclose any of such information to any other person or
e-mail or reproduce any of the terms of this Subscription Agreement until such
information has been publicly disclosed by the Company, in whole or in part,
without the prior written consent of the Company.
(b)
The
Company acknowledges that it will not disclose, and will not include in any
public announcement, the name of the Subscriber or any particular information
that would result in revealing the Subscriber's identity, unless expressly
agreed to by the Subscriber (including upon the waiver by the Subscriber of
the
protective provisions contained in either Section 12 of the Convertible Bonds
or
Section 10 of the Warrants pertaining to the 5% beneficial ownership
percentages) or unless required by applicable law, regulation or legal process
(including, without limitation, in order to comply with an express request
or
requirement by a governmental entity having jurisdiction over the Company or
any
Subsidiary).
4.12Β Expenses.
The
Company and the Holder shall each bear its own respective costs and expenses,
including any legal or other fees, in connection with the negotiation and
preparation of this Subscription Agreement and related exhibits, annexes and
schedules (including, without limitation, the Convertible Bond, the Warrant
and
the Registration Rights Agreement), except that the Company shall pay the legal
fees and expenses of counsel to the Subscriber, up to a maximum of
$15,000.
4.13Β Counterparts.
This
Subscription Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party; provided
that a
facsimile signature shall be considered due execution and shall be binding
upon
the signatory thereto with the same force and effect as if the signature were
an
original, not a facsimile signature.
4.14Β Currency.
The
term "dollars" or the symbol "$" appearing in this Subscription Agreement shall
mean the legal currency of the United States of America.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties have executed this Subscription Agreement as of
the
day and year first written above.
|
______________________________________
Β
[Signature
of Subscriber]
Β
|
Β |
|
Β
Β
[Name
of Subscriber]
[please
print]
|
Β |
|
Β
Β
Β
Β
[Address
of Subscriber]
|
Β |
|
Β
Β
$2,500,000
Β
[Dollar
Amount of Units Subscribed For]
Β
|
Β |
| Β |
Β
Subscription
Accepted:
Β
Β
|
|
By:
Β
Β
Β
[authorized
officer]
|
Β
By:
Β
Name:
Xxxx Xxxxxxx
Title:
CEO
Β
Name:
Xxxxx Xxxxxx
Title:
CFO
|
ANNEX
I
[Registration
Rights Agreement]
EXHIBIT
A
Form
of Convertible Bond
THIS
CONVERTIBLE BOND HAS BEEN, AND THE ORDINARY SHARES ISSUABLE PURSUANT HERETO
MAY
BE, ACQUIRED SOLELY FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE U.S.
FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR
ANY APPLICABLE STATE OR COMPARABLE SECURITIES LAW OF A U.S. OR NON-U.S.
JURISDICTION. THIS BOND AND SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER,
PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE OR COMPARABLE SECURITIES
LAW
OF A U.S. OR NON-U.S. JURISDICTION.
Convertible
Bond
No.Β Β Β Β Β Β Β Β Β $2,500,000
Date:
November 16th,
2006
SuperCom
Ltd., a company duly organized and existing under the laws of Israel (the
"Company),
for
value received, hereby promises to pay to _________________________, or his
permitted transferee (the "Holder"),
the
principal sum of $2,500,000 (the "Principal
Amount"),
and
to pay interest on the outstanding Principal Amount at the net annual rate
of
8%, pursuant to the terms and conditions hereinafter set forth.
1.Β Payment
of Principal Amount.
The
Company shall pay to the Holder on the outstanding Principal Amount on November
15th,
2009
(the "Maturity
Date").
2.Β Interest.
The
outstanding Principal Amount of this Bond shall bear interest from the date
hereof at an annual rate of eight percent (8%) (the "Interest"),
computed on the basis of a 365-day year and actual days elapsed. Interest
accrued shall be paid semi-annualy, in arrears, on the last day of the
applicable calendar quarter, with the first such payment becoming due and
payable on March 31, 2007. Notwithstanding the aforementioned, all remaining
accrued Interest which is payable on the Maturity Date, shall be paid together
with the outstanding Principal Amount at same date.
Any
withholding and other taxes payable with respect to the Interest shall be
grossed up and be payable by the Company, and the payment of the full rate
of
the Interest shall be net of any tax.Β
3.Β Manner
of Payment.
All
payments hereunder shall be made by the Company in US dollars. All such payments
shall be made by wire transfer, in accordance with details for wire transfer
to
be provided by the Holder post Closing. The Company shall bear all costs and
fees relating to the performance of such payments.
4.Β Conversion
to Shares.
At the
option of the Holder, this Bond, or any portion of the outstanding Principal
Amount which equals $100,000 or any integral multiple thereof, may be converted
at any time from the date hereof until the full repayment of the outstanding
Principal Amount, into a number of fully paid Ordinary Shares of the Company,
of
NIS 0.01 nominal value each (the "Convertible
Bond Shares"),
that
is equal to the quotient obtained by dividing such Principal Amount by the
Conversion Price, as defined below, in effect at the time of
conversion.
The
price
at which each Convertible Bond Share shall be issued upon conversion (the
"Conversion
Price") shall
be
$0.85.
The
Conversion Price shall be subject to proportionate adjustment in the event
that
issuance of bonus shares, stock dividends, stock splits, combinations,
reclassifications, or similar capitalization events are affected by the Company
after the date hereof and before the conversion, by multiplying the Conversion
Price by
a
fraction, of which the numerator shall be the number of Convertible
Bond Shares
receivable upon the conversion of this
Bond
immediately prior to such adjustment, and of which the denominator shall be
the
number of Convertible
Bond Shares
so
receivable immediately thereafter.
Whenever
the Conversion Price shall be adjusted pursuant to the provisions hereof, the
Company shall provide written notice to the Holder setting forth, in reasonable
detail, the event requiring the adjustment, the method by which such adjustment
was calculated, and the new Conversion Price after giving effect to such
adjustment (the "Adjustment Certificate"). The Adjustment Certificate shall
be
signed, and the accuracy of the adjustment of the Conversion Price confirmed,
by
the Company's Chief Executive Officer and an independent firm of certified
public accountants of recognized international standing the Company selects
at
its own expense.
In
order
to exercise the conversion right, the Holder shall surrender this Convertible
Bond, duly endorsed in blank, at the Company's office, accompanied by a written
notice to the Company, in the form attached hereto as Attachment
A,
of his
election to convert this Convertible Bond or, if less than the entire Principal
Amount hereof then outstanding is to be converted, the portion thereof to be
converted.
As
promptly as practicable after surrendering this Convertible Bond as aforesaid,
but in any event within five (5) business days, the Company shall issue to
the
Holder the Convertible Bond Shares issuable upon such conversion, together
with
payment in lieu of any fraction of a share which shall not be issued. In the
case this Convertible Bond is converted in part only, the Company shall also
issue to the Holder a new convertible bond, identical in all respects to the
surrendered Convertible Bond, except for the Principal Amount thereof which
shall be equal to the unconverted portion of the Principal Amount of the
surrendered Convertible Bond. The certificate underlying the Convertible Bond
Shares or the proof of their issuance (as the case may be), payment and new
convertible bond, as the case may be, shall be sent by registered mail to the
address of the Holder as designated by him, from time to time, in a written
notice to the Company. Subject to the provisions of Section 5 below, in the
event that the Convertible Bond Shares shall be registered for trade upon their
issuance, unless otherwise requested by the Holder, the Convertible Bond Shares
will be issued in the name of the Holder.
The
Holder, as such, shall not be entitled to any rights of a shareholder of the
Company by virtue of this Convertible Bond, including, without limitation,
the
right to vote at general meeting or to receive dividends or other
distributions.
5.Β Registration
of Convertible Bond Shares.
The
Company's issued Ordinary Shares are publicly traded on Euronext Brussels Stock
Exchange and the OTC Bulletin Board in the United States, and the Company may
not register its shares for trading on any other public markets without prior
written consent of the Holder, which consent shall not be unreasonably delayed
or withheld. The Company's obligations with respect of registration of the
Convertible Bond Shares are as set forth in Section 3.3 of the Subscription
Agreement.
6.Β General
Protection.
The
Company will not by amendment of its Articles or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, avoid, or seek to avoid, the
observance or performance of any of the terms to be observed or performed
hereunder, but will at all times in good faith assist in the carrying out of
all
provisions hereof and in taking of all such actions and making all such
adjustments as may be necessary or appropriate in order to protect the rights
of
the Holder against any impairment.
7.Β Information
Rights.
So long
as this Convertible Bond is outstanding:
7.1Β The
Holder shall be entitled to receive from the Company: (1) audited financial
statements within ninety (90) days after the end of each fiscal year, and (2)
un-audited, but reviewed, quarterly financial statements within sixty (60)
days
after the end of each financial quarter; and
7.2Β Without
derogation from Section 5 above, and to the extent that the information stated
hereunder was publicly published prior to the time scheduled hereunder, the
Company shall inform the Holder in writing: (1) at least twenty one (21) days
prior to the consummation of any secondary offering of the Companyβs securities;
(2) at least ten (10) days prior to a merger of the Company with or into another
entity; (3) at least ten (10) days prior to any transaction involving the sale
of all or substantially all of the Companyβs shares or assets; (4) within five
(5) days after it receives any indication of an intention to suspend or strike
the Companyβs shares from trade on stock exchange or other public market on
which the Company's shares are then listed for trading.
8.Β Representations
and Warranties of the Company.
The
Company represents and warrants to the Holder as follows:
(a)Β The
Company is a public company, duly organized and validly existing under the
laws
of the State of Israel, with full power and authority to execute and deliver
this Convertible Bond and to consummate the transactions contemplated
hereby.
(b)
All
corporate actions on the part of the Company necessary for the issuance of
this
Convertible Bond and the Convertible Bond Shares issuable hereunder and the
performance of the Company's obligations pursuant hereto have been taken and
are
effective as of the date hereof. The Company undertakes that all additional
corporate actions on the part of the Company as may be required in connection
with an adjustment pursuant hereto will be taken as promptly as
practicable.
Β
(c)
No
provisions of the Company's Memorandum of Association or Articles, nor of any
agreement to which the Company is a party or by which it is bound, nor of any
applicable law, regulation, decree, or judgment of any court or any governmental
authority, have been or will be violated by the execution and delivery of this
Convertible Bond or by the consummation of the transactions contemplated hereby,
other than any violation which shall not have a material adverse effect on
the
Company or its business.
(d)
No
authorization, approval or consent of, or filing with, any governmental body,
official authority or any other third party, other than as specified herein, is
required of the Company in connection with the execution and delivery of this
Convertible Bond or the consummation of the transactions contemplated
hereby.
(e)
All
of the Convertible Bond Shares issuable upon the conversion of this Convertible
Bond will, upon issuance, be fully paid and free from all liens, charges and
third party rights. At all times when this Convertible Bond may be converted,
the Company shall have authorized and reserved for issuance sufficient Ordinary
Shares, free from pre-emptive rights, to provide for the exercise of the
conversion rights represented by this Convertible Bond, so that this Convertible
Bond may be exercised without additional authorization of share capital, after
giving effect to all other convertible securities.
(f)Β Except
as
set forth in the Capitalization Table attached hereto as Attachment
B,
there
are no outstanding shares or share capital, preemptive rights, convertible
securities, outstanding warrants, options or other rights to subscribe for
any
securities of the Company, and there are not any agreements or commitments
providing for the issuance of, or the granting of the same (together,
βSecuritiesβ). If the conversion and the exercise were made on the date hereof,
the number of Convertible Bond Shares issuable upon conversion of the Principal
Amount would constitute 10.21% of the Companyβs issued share capital, assuming
the issuance, conversion and exercise of all Securities outstanding on the
date
hereof.
Β
| 9.Β Β |
Acceleration.
Notwithstanding the above, to the extent permitted by applicable
law, the
outstanding Principal Amount and all accrued Interest that would
have been
due up to the Maturity Date will immediately become due and payable
in
cash, (i) at the Holderβs sole discretion as shall be indicated in a
written notice provided by it to the Company, upon the occurrence
of any
of the events mentioned in subsections 9.3, 9.4, 9.5 9.6 9.7, 9.8,
9.9,
9.10, 9.11 or 9.12 herein prior to the conversion or repayment of
the
Principal Amount, and (ii) automatically upon the occurrence of any
of the
events mentioned in subsections 9.1 or 9.2 herein prior to the conversion
or full repayment of the Principal Amount, without presentment, protest
or
notice of any kind, all of which are hereby expressly waived by the
Company. The Company shall provide immediate notice to the Holder
upon
occurrence of any of the events mentioned in subsections 9.1 through
9.12
herein.
|
| 9.1 |
The
commencement by the Company or third party of any liquidation proceedings,
the adoption of a winding up resolution, the appointment of a receiver
or
trustee over all, or substantially all, of Company's assets, the
filing of
a request for freezing proceedings by creditors against the Company
or the
calling by the Company of a meeting of creditors in order to enter
into a
scheme of arrangement, if such liquidation proceedings or appointment
of a
receiver or trustee have not been cancelled, stayed or removed within
thirty (30) days.
|
| 9.2 |
The
levy of an attachment or the institution of execution proceedings
against
all or substantially all, of Company's assets, if such attachment
or
proceedings have not been cancelled, stayed or removed within thirty
(30)
days.
|
Β
Β
| 9.3 |
Failure
by the Company to pay any Principal Amount when and as the same shall
become due and payable, whether at its stated maturity, by acceleration
or
otherwise.
|
| 9.4 |
Failure
by the Company to pay any payment of Interest when and as the same
shall
become due and payable, whether at its stated maturity, by acceleration
or
otherwise.
|
| 9.5 |
Any
other material breach by the Company of any of its material undertakings
or obligations herein, provided that the Company was afforded in
writing
fourteen (14) days to cure such breach (only to the extent such breach
is
reasonably curable) and failed to
cure.
|
| 9.6 |
Upon
or after the occurrence of a default with respect to any other outstanding
indebtedness of the Company for borrowed money the holder thereof
declares
all obligations with respect to such indebtedness to be due and payable
prior to the stated maturity at regularly scheduled dates of payment
with
respect to such indebtedness.
|
| 9.7 |
The
cessation or suspension for a period of more than forty five (45)
consecutive days of trade in the Companyβs securities on any stock
exchange or other public market in which the Companyβs securities were
registered for trade.
|
| 9.8 |
The
Company shall cease to operate all, or substantially all, of its
business
for a period of more than ten (10) consecutive business days, other
than
in consequence of merger, acquisition and the like.
|
| 9.9 |
the
consummation of a transaction or a series of transactions, including,
without limitation, merger, consolidation or issuance of shares,
whereby,
or as a result thereof, the Company's shareholders prior thereto
hold 50%
or less of the voting power of the Company, the surviving entity
or the
new entity (as the case may be) or no longer have the power or the
right
to elect or appoint more than fifty (50%) percent of the members
of the
board of directors of the Company or such
entity.
|
| 9.10 |
Other
than the sale of certain assets to On Track Innovations Ltd. pursuant
to
the Asset Purchase Agreement dated November 7, 2006, the sale or
disposition by the Company in a single transaction, or a series of
related
transactions, of assets for consideration that is greater than $1,500,000
(βQualified Saleβ); provided,
however,
that notwithstanding the first sentence of this Section 9, upon the
occurrence of a Qualified Sale, this Bond shall be accelerated only
up to
two-thirds (2/3) of the consideration received from such Qualified
Sale.
In case such consideration shall be in any form other than cash,
the
valuation of such consideration shall be as determined by an appraiser
to
be appointed upon mutual consent of the Holder and the Company (or,
in
lack of such consent, by the President of the Institute of Certified
Public Accountants in Israel).
|
| 9.11 |
The
failure by the Company to meet, according to its audited financial
statements, any of the following EBITDA in any of the following fiscal
periods:
|
2007:
($1M)
2008:
$1M
2009
(1st
half):
$1M
Β
| 9.12 |
A
tender offer or other broad solicitation by the Company or a third
party
to purchase 100% of the Companyβs publicly held Ordinary Shares, or to
otherwise obtain a controlling interest in the
Company.
|
| 10.Β Β |
Negative
Covenant.Β So
long as the Holder is the holder of convertible bonds of the Company
in
the aggregate principal amount of $1,250,000 or more, the Company
shall
not create a floating charge, a fixed charge or any other charges
on its
assets without the prior written consent of the Subscriber.
Notwithstanding the abovementioned, the Holder hereby agrees that
a charge
on the OTI Shares received by the Company pursuant to the OTI Transaction
as the primary security for a loan or financing obtained by the Company
as
part of the OTI Transaction, shall not constitute a breach of the
provisions of this Section 10, provided,
that, upon 7 days after the registration of the OTI Shares and as
long as
the Holder is the holder of convertible bonds of the Company in the
aggregate principal amount of $1,250,000 or more, OTI shares of market
value $3,000,000 shall be free of any charge or
encumbrance.
|
| 11.Β |
Optional
Redemption.
|
Β
Β Β Β Β Β Β Β Β Β Β Β
(a)Β Beginning
on February 10, 2008 and ending on February 16, 2008, which is the 15-month
anniversary of the Closing Date (the βRedemption Periodβ), the Company may call
and redeem 100% of this Bond at a price equal to (i) the Principal Amount plus
(ii) a redemption premium equal to fifteen percent (15%) of the Principal Amount
plus (iii) any accrued but unpaid interest on the Principal Amount, calculated
through the date of the redemption in accordance with Section 2 above
(βRedemption
Priceβ),
upon
notice to the Holder at any time (the βRedemption
Noticeβ).
Β Β Β Β
Β
(b)Β Within
seven (7) days after the Redemption Notice shall have been given by the Company
pursuant to Section
11(a)
above,
the Holder may convert up to 50% of the remaining principal amount of this
Bond
pursuant to the terms hereof. After the Redemption Period, the Holder shall
have
no further rights under this Bond, except to receive, upon surrender of this
Bond, the Redemption Price and any Convertible Bond Shares due upon conversion
of up to 50% of the remaining principal amount of this Bond.
| 12. |
Beneficial
Ownership.
Notwithstanding
anything to the contrary contained herein, at
any time that any of the Companyβs equity securities are registered under
Section 12 of the Securities and Exchange Act of 1934, as amended
(the
βExchange Actβ), the
number of Ordinary Shares that may be acquired by the Holder upon
conversion of this Bond (or otherwise in respect hereof) shall be
limited
to the extent necessary to insure that, following such conversion
(or
other issuance), the total number of Ordinary Shares then beneficially
owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of the Companyβs Ordinary Shares would be aggregated
with the Holder's for purposes of Section 13(d) of the Exchange Act,
does
not exceed 4.999% (the β5%
Maximum Percentageβ)
of the total number of the Companyβs issued and outstanding Ordinary
Shares (including for such purpose the Ordinary Shares issuable upon
such
conversion). For such purposes, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules
and
regulations promulgated thereunder. The Company shall, instead of
issuing
Ordinary Shares in excess of the limitation referred to in this Section
12, suspend its obligation to issue shares in excess of the foregoing
limitation until such time, if any, as such Ordinary Shares may be
issued
in compliance with such limitation. Additionally, byΒ 61
days prior written notice to the Company, the Holder may waive the
provisions of this Section 12 or increase or decrease the 5% Maximum
Percentage to any other percentage specified in such notice.
This Section 12 shall not restrict the number of Ordinary
Shares
which a Holder may receive or beneficially own in order to determine
the
amount of securities or other consideration that such Holder may
receive
or may become entitled to pursuant to the terms of this Bond. In
addition,
this provision shall not in any way limit any other adjustment to
be made
herein. As used herein, the term "Affiliate"
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule
144; and
"Person"
means an individual or corporation, partnership, trust, incorporated
or
unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision thereof)
or
other entity of any kind.
|
Β
Β
Β
| 13. |
Notices.
All notices and other communications required or permitted hereunder
shall
be in writing
and shall be telecopied (faxed) or mailed by registered mail, postage
prepaid, or delivered by hand
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Convertible Bond must
be in
writing and will be deemed to have been delivered: (a) upon receipt,
when
delivered personally, (b) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated
and kept on file by the sending party), (c) one (1) business day
after
deposit with an overnight courier service, or (d) five (5) business
days
after sent by registered mail, in each case properly addressed to
the
party to receive the same.
|
Β
If
to the
Company:
0
Xx'Xxxxxx Xx., X.X.X. 0000
Xx'Xxxxxx
Xxxxxxxxxx Xxxx
Xxxxxx
00000, Xxxxxx
Telephone:
x000-0-0000000
Facsimile:
x000-0-0000000
Attention:
Chief Financial Officer
With
copies to:
Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Chrysler
Center
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
X.X.X.
Telephone:
000-000-0000
Facsimile:
212-983-3115
Attention:
Xxxxxxx Xxxx, Esq.
Xxxxx
Xxxxxxx, Arad & Co., Advocates
3
Xxxxxx
Xxxxxx Xxxxxx
Xxx
Xxxx
00000
Xxxxxx
Telephone:
00-000-0000
Facsimile:
00-000-0000
Attention:
Xxxxxx Xxxxx, Adv.
Β
Β If
to the Subscriber:
to
its
address and facsimile number set forth at the end of this Subscription
Agreement, or to such other address and/or facsimile number and/or to the
attention of such other person as specified by written notice given to the
Company five (5) days prior to the effectiveness of such change.
With
copies to:
Barak-Git
Law Offices
1
Azrieli
Center (the Xxxxx Xxxxx-00xx
Xxx)
Xxx
Xxxx
00000
Xxxxxx
Telephone:
00-000-0000
Facsimile:
03-608-1758
Attention:
Xxxxx Xxxxxxx, Adv.
Email:
xxxxx@xxxxx-xxx.xx.xx
Written
confirmation of receipt (a) given by the recipient of such notice, consent,
waiver or other communication, (b) mechanically or electronically generated
by
the senderβs facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission, or (c) provided
by
an overnight courier service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (a), (b) or (c) above, respectively.
| 14. |
Governing
Law and Venue.
This Convertible Bond and all actions arising out of or in connection
herewith shall be exclusively governed by, and construed in accordance
with, the laws of the State of Israel, without regard to the conflict
of
laws provisions thereof.. Any original suit, action or other legal
proceeding by the Holder against the Company and/or by the Company
against
the Holder may be brought before, and only
before, a court of competent jurisdiction sitting in Tel
Aviv.
|
| 15. |
Partial
Invalidity.
If any provision of this Convertible Bond is held by a court of competent
jurisdiction to be invalid or unenforceable under applicable law,
then
such provision shall be excluded from this Convertible Bond and the
remainder of this Convertible Bond shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance
with its
terms; provided,
however,
that in such event this Convertible Bond shall be interpreted so
as to
give effect, to the greatest extent consistent with and permitted
by
applicable law, to the meaning and intention of the excluded provision
as
determined by such court of competent jurisdiction.
|
Β
Β
| 16. |
Currency.
The term "dollars" or the symbol "$" appearing in this Convertible
Bond
shall mean the legal currency of the United States of
America.
|
Β
| 17. |
Transferability.
The Holder shall be entitled to freely transfer this Convertible
Bond, in
its entirety, without requiring the consent of the Company, provided
that
(i) any transfer by the Holder hereunder shall be subject to, and
comply
with, the restrictions on transfers set forth in the legend appearing
at
the top of this Convertible Bond, and (ii) a copy of duly signed
instrument of transfer, in the form attached hereto as Attachment
C,
shall be promptly delivered to the Company. No partial transfer or
assignment by the Holder may be affected without the prior written
consent
of the Company, which shall not be unreasonably withheld.
|
| 18. |
Third
Party Rights.
This Convertible Bond confers no right on any person other than the
Holder
or the transferee thereof to enforce any of the rights conferred
hereby or
any other term of this Convertible
Bond.
|
| 19. |
Entire
Agreement.
This Convertible Bond, including all attachments hereto and documents
incorporated herein, constitutes the entire agreement between the
Company
and the Holder pertaining to the transactions contemplated hereby
and
embodies all terms binding upon such parties in respect thereof and
supersedes all prior agreements, understandings and negotiations
whether
written or oral. The Company shall not be liable or bound in any
manner by
prior or contemporaneous, express or implied, representation, warranty,
statement, promise, covenant or agreement pertaining to said transactions
made by, or on behalf of, the Company unless same is expressly and
specifically set forth or referred to herein.
|
IN
WITNESS WHEREOF,
the
Company has caused this instrument to be duly executed as of the date first
above appearing.
By:Β _____________
Title:
___________
Β
Β
ATTACHMENT
A
Form
of
Conversion Notice
____________
Gentlemen,
CONVERSION
NOTICE
Reference
is made to the Convertible Bond, issued on November 16th,
2006,
by you (the "Company"),
and
surrendered herewith (the "Bond").
In
accordance with the terms of the Bond, the undersigned hereby elects to exercise
the rights to convert [the entire] [$_________ out of the] outstanding principal
amount of the Bond to Ordinary Shares of the Company.
By
executing and delivering this notice, the undersigned acknowledges that it
is
aware that the underlying Ordinary Shares for which the Bond may be converted
(the βBond
Sharesβ)
have
not been and will not be registered under the Securities Act of 1933, as amended
(the βSecurities
Actβ)
or any
state securities laws. The undersigned understands that reliance by the Company
on exemptions under the Securities Act is predicated in part upon the truth
and
accuracy of the statements made by the undersigned in this notice.
The
undersigned represents and warrants that (1) it has been furnished with all
information which it deems necessary to evaluate the merits and risks of the
purchase of the Bond Shares, (2) it has had the opportunity to ask questions
concerning the Bond Shares and the Company and all questions posed have been
answered to its satisfaction, (3) it has been given the opportunity to obtain
any additional information it deems necessary to verify the accuracy of any
information obtained concerning the Bond Shares and the Company and (4) it
has
such knowledge and experience in financial and business matters that it is
able
to evaluate the merits and risks of purchasing the Bond Shares and to make
an
informed investment decision relating thereto.
The
undersigned hereby represents and warrants that it is purchasing the Bond Shares
for its own account for investment and not with a view to the sale or
distribution of all or any part of the Bond Shares.
The
undersigned understands that because the Bond Shares have not been registered
under the Securities Act, it must continue to bear the economic risk of the
investment for an indefinite period of time and the Bond Shares cannot be sold
unless it is subsequently registered under applicable federal and state
securities laws or an exemption from such registration is
available.
The
undersigned agrees that it will in no event sell or distribute or otherwise
dispose of all or any part of the Bond Shares unless (1) there is an effective
registration statement under the Securities Act and applicable state securities
laws covering any such transaction involving the Bond Shares, or (2) the Company
receives an opinion satisfactory in all material respects to the Company of
the
undersignedβs legal counsel stating that such transaction is exempt from
registration. The undersigned consents to the placing of a legend on its
certificate for the Bond Shares stating that the Bond Shares have not been
registered and setting forth the restriction on transfer contemplated hereby
and
to the placing of a stop transfer order on the books of the Company and with
any
transfer agents against the Bond Shares until the Bond Shares may be legally
resold or distributed without restriction.
Name
of
Holder: ___________________
Signature
of Holder: ________________
Date:
___________
Β
Β
ATTACHMENT
B
Capitalization
Table
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
ATTACHMENT
C
Form
of
Instrument of Transfer
FOR
VALUE
RECEIVED the undersigned sell(s), assign(s) and transfer(s) to:
Β
(Please
print or type name and address (including postal code) of
transferee)
the
enclosed Convertible Bond (the "Bond")
and
all rights under the Bond, irrevocably authorizing SuperCom Ltd. (the
"Company")
to
record the transfer of the Bond in the register maintained by the
Company.
By
signing this form of transfer, the transferee represents and warrants to the
Company that the transferee is not a U.S. Person, as that term is defined in
Regulation S under the United States Securities Act of 1933, as amended and
that
it has read and is aware of the legend appearing at the top of the
Bond.
Signature
of transferor: __________________
Date:
_____________
Signature
of transferee: __________________
Date:
_____________
NOTE:
This
form
of transfer must be accompanied by such documents, evidence and information
as
may be required by the Company.
Β
Β
Β
EXHIBIT
B
Form
of Warrant
THIS
WARRANT HAS BEEN, AND THE WARRANT SHARES (AS DEFINED HEREIN) PURCHASABLE
PURSUANT HERETO MAY BE, ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR
ANY APPLICABLE STATE OR COMPARABLE SECURITIES LAW OF A U.S. OR NON-U.S.
JURISDICTION. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE OR COMPARABLE SECURITIES
LAW
OF A U.S. OR NON-U.S. JURISDICTION.
SUPERCOM
LTD. (the "Company")
Date:
November 16th,
2006
VOID
AFTER November 15th,
2011
WARRANT
THIS
CERTIFIES THAT,
_______________________________ or any of its transferees (the "Holder")
is
entitled to purchase shares of the Company of such class, at such price, in
such
number and subject to such provisions and upon such terms and conditions as
set
forth in this Warrant.
1.Β Number
and Class of Warrant Shares; Exercise Price.
(a)Β Number
and class of Warrant Shares.
The
Holder shall be entitled to purchase up to 625,000 Ordinary Shares of the
Company, of NIS 0.01 each (the "Warrant
Shares") at
any
time and from time to time from and after the date hereof and through and
including November 15th,
2011.
(b)Β Exercise
Price.
The
price at which each Warrant Share shall be issued upon exercise of this
Warrant
(theΒ "Exercise
Price")
shall
be
$ 0.85.
2.Β Adjustments
to the shares.
(a)
Stock Dividends, Splits, Etc.
If the
Company (i) distributes bonus shares on its Ordinary Shares, (ii) subdivides
the
outstanding Ordinary Shares into a greater amount of Ordinary Shares or (iii)
combines or consolidates its outstanding Ordinary Shares into a smaller number
of Ordinary Shares, then upon each exercise of this Warrant, for each Warrant
Share acquired, the Holder shall be entitled to, without additional cost to
the
Holder, the total number and kind of securities to which the Holder would have
been entitled had the Holder owned the Warrant Shares of record as of the date
on which the dividend, subdivision or combination occurred.
(b)
Reclassification, Exchange or Substitution.
In the
event of any capital reorganization of the Company, any reclassification of
the
shares of the Company (other than a change in par value or from par value to
no
par value or from no par value to par value or as a result of a stock dividend
or subdivision, split-up or combination of shares), any consolidation or merger
of the Company with or into another corporation (where the Company is not the
surviving corporation or where there is a change in or distribution with respect
to the Ordinary Shares) or any sale of all or substantially all of the property,
assets or business of the Company, this Warrant shall after such reorganization,
reclassification, consolidation, or merger be exercisable for the kind and
number of shares or other securities or money or property of the Company or
of
the successor corporation resulting from such consolidation or surviving such
merger, if any, to which the holder of the number of Ordinary Shares deliverable
(immediately prior to the time of such reorganization, reclassification,
consolidation or merger) upon exercise of this Warrant would have been entitled
upon such reorganization, reclassification, consolidation or merger. The
provisions of this Section
2(b)
shall
similarly apply to successive reorganizations, reclassifications, consolidations
or mergers. The
Company shall not effect any such reorganization, reclassification,
consolidation or merger unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such reorganization,
reclassification, consolidation or merger, shall assume, by written instrument,
the obligation to deliver to the Holder such shares, securities or assets,
which, in accordance with the foregoing provisions, such Holder shall be
entitled to receive upon such conversion.
(c)
Price Adjustment.
Whenever the number of the Warrant Shares purchasable upon the exercise of
this
Warrant is adjusted as herein provided, the Exercise Price per Warrant Share
payable upon exercise of this Warrant shall be appropriately adjusted by
multiplying such Exercise Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
(d)
Notice of Adjustments.
Whenever the Exercise Price shall be adjusted pursuant hereto, the Company
shall
provide written notice to the Holder setting forth, in reasonable detail, the
event requiring the adjustment, the method by which such adjustment was
calculated, and the new Exercise Price after giving effect to such adjustment
(the "Adjustment
Certificate").
The
Adjustment Certificate shall be signed, and the accuracy of the adjustment
of
the Conversion Price confirmed, by the Company's Chief Executive Officer and
an
independent firm of certified public accountants of recognized international
standing the Company selects at its own expense.
3.Β Method
of Exercise; Payment.
(a)Β Exercise.
The
purchase rights represented by this Warrant may be exercised by the Holder,
in
whole or in part, by the surrender of this Warrant (with the Notice of Exercise
form attached hereto as AttachmentΒ AΒ duly
executed) at the offices of the Company, and by the payment to the Company,
by
cash, bank check or other method acceptable to the Company, of an amount equal
to the applicable Exercise Price multiplied by the number of the Warrant Shares
being purchased.
(b)Β Share
Certificates.
In the
event of any exercise of the rights represented by this Warrant, certificates
for the Warrant Shares so purchased shall be delivered to the Holder promptly
but in any event within 5 business days after the surrender of Warrant as
aforesaid and, if applicable, payment and a new Warrant representing the balance
of the Warrant Shares with respect to which this Warrant shall not have been
exercised shall also be issued to the Holder within such time. Subject to the
provisions of Section
7
below,
in the event that the Warrant Shares shall be registered for trade upon their
issuance, unless otherwise requested by the Holder, the Warrant Shares will
be
issued in the name of the Holder.
Β
4.Β Share
Fully Paid; Reservation of Shares.
All of
the Warrant Shares issuable upon the exercise of the rights represented by
this
Warrant will, upon issuance and receipt of the Exercise Price therefor, be
fully
paid and free from all liens and charges. At all times when this Warrant may
be
exercised, the Company shall have authorized and reserved for issuance
sufficient shares, free from pre-emptive rights, of its Warrant Shares to
provide for the exercise of the rights represented by this Warrant, so that
this
Warrant may be exercised without additional authorization of share capital,
after giving effect to all other convertible securities.
5.Β General
Protection.
The
Company will not by amendment of its Articles or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
its
securities or any other voluntary action, avoid, or seek to avoid, the
observance or performance of any of the terms to be observed or performed
hereunder, but will at all times in good faith assist in the carrying out of
all
provisions hereof and in taking of all such actions and making all such
adjustments as may be necessary or appropriate in order to protect the rights
of
the Holder against any impairment.
Β
Β
6.Β Partial
Exercise; Fractional Shares.
(a)Β This
Warrant may be partially exercised, provided that the amount payable upon each
such exercise is not less than $50,000.
(b)Β This
Warrant may not be exercised for fractional shares. In the event of fractional
shares, the Company shall round the number of Warrant Shares issuable upon
such
exercise down to the nearest whole share and shall pay an amount in cash to
the
Holder equal to any such fractional share.
7.Β Representations
and Warranties of the Company.
The
Company represents and warrants to the Holder as follows:
(a)Β The
Company is a public company, duly organized and validly existing under the
laws
of the State of Israel, with full power and authority to execute and deliver
this Warrant and to consummate the transactions contemplated
hereby.
(b)
All
corporate actions on the part of the Company necessary for the issuance of
the
Warrant and the Warrant Shares issuable hereunder and the performance of the
Company's obligations pursuant hereto have been taken and are effective as
of
the date hereof. The Company undertakes that all additional corporate actions
on
the part of the Company as may be required in connection with an adjustment
pursuant hereto will be taken as promptly as practicable.
(c)
No
provisions of the Company's Memorandum of Association or Articles, nor of any
agreement to which the Company is a party or by which it is bound, nor of any
applicable laws, regulation, decree, or judgment of any court or any govenmental
authorithy, have been or will be violated by the execution and delivery of
this
Warrant or by the consummation of the transactions contemplated hereby other
than any violation which shall not have an adverse effect on the Company and
its
business.
(d)
No
authorization, approval or consent of, or filing with, any governmental body,
official authority or any other third party, other than as specified herein,
is
required of the Company in connection with the execution and delivery of this
Warrant or the consummation of the transactions contemplated
hereby.
(e)
All
of the Warrant Shares issuable upon the exercise of this Warrant will, upon
issuance, be fully paid and free from all liens, charges and third party rights.
At all times when this Warrant may be exercised, the Company shall have
authorized and reserved for issuance sufficient Ordinary Shares, free from
pre-emptive rights, to provide for the exercise of the rights represented by
this Warrant, so that this Warrant may be exercised without additional
authorization of share capital, after giving effect to all other convertible
securities.
(f)Β Except
as
set forth in the Capitalization Table attached hereto as Attachment
B,
there
are no outstanding shares of share capital, preemptive rights, convertible
securities, outstanding warrants, options or other rights to subscribe for
any
securities of the Company, and there are not any agreements or commitments
providing for the issuance of, or the granting of the same.
8.Β Registration
of Warrant Shares.
The
holder of the Warrant Shares shall have registration rights with respect to
such
shares as set forth in Section 3.3 of the Subscription Agreement between the
Company and subscribers, dated November 16th,
2006.
Β
Β
9.Β Information
Rights.
So long
as this Warrant is outstanding, the Holder shall be entitled to receive from
the
Company such documents and information as shall be provided to the shareholders
of the Company, in accordance with their rights pursuant to any agreement,
undertaking or applicable law.
10.Β Beneficial
Ownership.
Notwithstanding anything to the contrary contained herein, at
any
time that any of the Companyβs equity securities are registered under Section 12
of the Securities and Exchange Act of 1934, as amended (the βExchange Actβ),
the
number of Ordinary Shares that may be acquired by the Holder upon exercise
of
this Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the
total
number of Ordinary Shares then beneficially owned by such Holder and its
Affiliates and any other Persons whose beneficial ownership of the Companyβs
Ordinary Shares would be aggregated with the Holder's for purposes of Section
13(d) of the Exchange Act, does not exceed 4.999% (the β5%
Maximum Percentageβ)
of the
total number of the Companyβs issued and outstanding Ordinary Shares (including
for such purpose the Ordinary Shares issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
The Company shall, instead of issuing Ordinary Shares in excess of the
limitation referred to in this Section 10, suspend its obligation to issue
shares in excess of the foregoing limitation until such time, if any, as such
Ordinary Shares may be issued in compliance with such limitation. Additionally,
byΒ 61
days
prior written notice to the Company, the Holder may waive the provisions of
this
Section 10 or increase or decrease the 5% Maximum Percentage to any other
percentage specified in such notice.
This
Section 10 shall not restrict the number of Ordinary
Shares
which a
Holder may receive or beneficially own in order to determine the amount of
securities or other consideration that such Holder may receive or may become
entitled to pursuant to the terms of this Warrant. In addition, this provision
shall not in any way limit any other adjustment to be made herein. As used
herein, the term "Affiliate"
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144; and "Person"
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
11.Β Notices.
All
notices and other communications required or permitted hereunder shall be in
writing
and shall be telecopied (faxed) or mailed by registered mail, postage prepaid,
or delivered by hand. Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Warrant must be in writing and will be deemed
to
have been delivered: (a) upon receipt, when delivered personally, (b) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party),
(c) one (1) business day after deposit with an overnight courier service, or
(d)
five (5) business days after sent by registered mail, in each case properly
addressed to the party to receive the same.
If
to the
Company:
Β
SuperCom
Ltd.
0
Xx'Xxxxxx Xx., X.X.X. 0000
Xx'Xxxxxx
Xxxxxxxxxx Xxxx
Xxxxxx
00000, Xxxxxx
Telephone:
x000-0-0000000
Facsimile:
x000-0-0000000
Attention:
Chief Financial Officer
With
copies to:
Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Chrysler
Center
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
X.X.X.
Telephone:
000-000-0000
Facsimile:
212-983-3115
Attention:
Xxxxxxx Xxxx, Esq.
Xxxxx
Xxxxxxx, Arad & Co., Advocates
3
Xxxxxx
Xxxxxx Xxxxxx
Xxx
Xxxx
00000
Xxxxxx
Telephone:
00-000-0000
Facsimile:
00-000-0000
Attention:
Xxxxxx Xxxxx, Adv.
Β If
to the Subscriber:
to
its
address and facsimile number set forth at the end of this Subscription
Agreement, or to such other address and/or facsimile number and/or to the
attention of such other person as specified by written notice given to the
Company five (5) days prior to the effectiveness of such change.
With
copies to:
Barak-Git
Law Offices
1
Azrieli
Center (the Xxxxx Xxxxx-00xx
Xxx)
Xxx
Xxxx
00000
Xxxxxx
Telephone:
00-000-0000
Facsimile:
03-608-1758
Attention:
Xxxxx Xxxxxxx, Adv.
Email:
xxxxx@xxxxx-xxx.xx.xx
Β
Written
confirmation of receipt (a) given by the recipient of such notice, consent,
waiver or other communication, (b) mechanically or electronically generated
by
the senderβs facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission, or (c) provided
by
an overnight courier service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (a), (b) or (c) above, respectively.
12.Β Governing
Law and Venue.
This
Warrant and all actions arising out of or in connection herewith shall be
exclusively governed by, and construed in accordance with, the laws of the
State
of Israel, without regard to the conflict of laws provisions thereof.. Any
original suit, action or other legal proceeding by the Holder against the
Company and/or by the Company against the Holder may be brought before, and
only
before,
a court of competent jurisdiction sitting in Tel Aviv.
13.Β Partial
Invalidity.
If any
provision of this Warrant is held by a court of competent jurisdiction to be
invalid or unenforceable under applicable law, then such provision shall be
excluded from this Warrant and the remainder of this Warrant shall be
interpreted as if such provision were so excluded and shall be enforceable
in
accordance with its terms; provided,
however,
that in
such event this Warrant shall be interpreted so as to give effect, to the
greatest extent consistent with and permitted by applicable law, to the meaning
and intention of the excluded provision as determined by such court of competent
jurisdiction.
14.Β Currency.
The
term "dollars" or the symbol "$" appearing in this Warrant shall mean the legal
currency of the United States of America.
15.Β Unregistered
Securities.
The
Holder acknowledges that this Warrant and the Warrant Shares have not been
registered under the Act and agrees not to sell, offer for sale, pledge or
hypothecate this Warrant or any Warrant Shares in the absence of (i) an
effective registration statement under the Act covering this Warrant or such
Warrant Shares and registration or qualification of this Warrant or such Warrant
Shares under any applicable βblue skyβ or state securities law then in effect,
or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required. The Company may delay issuance
of the Warrant Shares until completion of any action or obtaining of any
consent, which the Company deems necessary under any applicable law (including
without limitation state securities or βblue skyβ laws).
16.Β Transferability.
The
Holder shall be entitled to freely transfer this Warrant, in its entirety,
without requiring the consent of the Company, provided
that
(i) any transfer by a Holder hereunder shall be subject to, and comply with,
the
restrictions on transfers set forth in the legend appearing at the top of this
Warrant, and (ii) a copy of duly signed instrument of transfer, in the form
attached hereto as Attachment
C,
shall
be promptly delivered to the Company. No partial transfer or assignment by
the
Holder may be affected without the prior written consent of the Company, which
shall not be unreasonably withheld.
17.Β Third
Party Rights.
This
Warrant confers no right on any person other than the Holder to enforce any
of
the rights conferred hereby or any other term of this Warrant.
18.Β Entire
Agreement.
This
Warrant, including all exhibits hereto and documents incorporated herein,
constitutes the entire agreement between the Company and the Holder pertaining
to the transactions contemplated hereby and embodies all terms binding upon
such
parties in respect thereof and supersedes all prior agreements, understandings
and negotiations whether written or oral. The Company shall not be liable or
bound in any manner by prior or contemporaneous, express or implied,
representation, warranty, statement, promise, covenant or agreement pertaining
to said transactions made by, or on behalf of, the Company unless same is
expressly and specifically set forth or referred to herein.
IN
WITNESS WHEREOF,
the
Company has caused this instrument to be duly executed as of the date first
above appearing.
SuperCom
Ltd.
By:Β _____________
Title:
___________
Β
Β
ATTACHMENT
A
Form
of
Exercise Notice
SuperCom
Ltd.
Gentlemen,
EXERCISE
NOTICE
Reference
is made to the Warrant, issued on November 16th,
2006,
by you (the "Company"),
and
surrendered herewith (the "Warrant").
In
accordance with the terms of the Warrant, the undersigned hereby elects to
exercise the rights to purchase [insert
number ofΒ Warrant
Shares]
Ordinary Shares of the Company for [insert
total amount of purchase price].
By
executing and delivering this notice, the undersigned acknowledges that it
is
aware that the underlying Ordinary Shares for which the Warrant may be exercised
(the βWarrant
Sharesβ)
have
not been and will not be registered under the Securities Act of 1933, as amended
(the βSecurities
Actβ)
or any
state securities laws. The undersigned understands that reliance by the Company
on exemptions under the Securities Act is predicated in part upon the truth
and
accuracy of the statements made by the undersigned in this notice.
The
undersigned represents and warrants that (1) it has been furnished with all
information which it deems necessary to evaluate the merits and risks of the
purchase of the Warrant Shares, (2) it has had the opportunity to ask questions
concerning the Warrant Shares and the Company and all questions posed have
been
answered to its satisfaction, (3) it has been given the opportunity to obtain
any additional information it deems necessary to verify the accuracy of any
information obtained concerning the Warrant Shares and the Company and (4)
it
has such knowledge and experience in financial and business matters that it
is
able to evaluate the merits and risks of purchasing the Warrant Shares and
to
make an informed investment decision relating thereto.
The
undersigned hereby represents and warrants that it is purchasing the Warrant
Shares for its own account for investment and not with a view to the sale or
distribution of all or any part of the Warrant Shares.
The
undersigned understands that because the Warrant Shares have not been registered
under the Securities Act, it must continue to bear the economic risk of the
investment for an indefinite period of time and the Warrant Shares cannot be
sold unless it is subsequently registered under applicable federal and state
securities laws or an exemption from such registration is
available.
The
undersigned agrees that it will in no event sell or distribute or otherwise
dispose of all or any part of the Warrant Shares unless (1) there is an
effective registration statement under the Securities Act and applicable state
securities laws covering any such transaction involving the Warrant Shares,
or
(2) the Company receives an opinion satisfactory in all material respects to
the
Company of the undersignedβs legal counsel stating that such transaction is
exempt from registration. The undersigned consents to the placing of a legend
on
its certificate for the Warrant Shares stating that the Warrant Shares have
not
been registered and setting forth the restriction on transfer contemplated
hereby and to the placing of a stop transfer order on the books of the Company
and with any transfer agents against the Warrant Shares until the Warrant Shares
may be legally resold or distributed without restriction.
Name
of
Holder: ___________________
Signature
of Holder: ________________
Date:
_________
Β
Β
ATTACHMENT
B
Capitalization
Β
Β
Β
Β
Β
Β
Β
Β
Β
Β
ATTACHMENT
C
Form
of
Instrument of Transfer
FOR
VALUE
RECEIVED the undersigned sell(s), assign(s) and transfer(s) to:
Β
Β
(Please
print or type name and address (including postal code) of
transferee)
the
enclosed Warrant and all rights under the enclosed Warrant, irrevocably
authorizing SuperCom Ltd. (the "Company")
to
record the transfer of the enclosed Warrant in the register maintained by the
Company
By
signing this form of transfer, the transferee represents and warrants to the
Company that the transferee is not a U.S. Person, as that term is defined in
Regulation S under the United States Securities Act of 1933, as amended and
that
it has read and is aware of the legend appearing at the top of the enclosed
Warrant.
Signature
of transferor: __________________
Date:
_____________
Signature
of transferee: __________________
Date:
_____________
NOTE:
This
form
of transfer must be accompanied by such documents, evidence and information
as
may be required by the Company.
Β
Exhibit
C
SEC
Documents
Β
Β
Β
Β
Β
Β
Exhibit
D
Capitalization
Β
Β
