EXHIBIT 10.23
CONVERTIBLE LOAN AGREEMENT
This convertible loan agreement (the "AGREEMENT") is entered into as of the 1
day of August 2001, by and between Emony Ltd., an Israeli private company (Reg.
No. 51-260506-4) (the "COMPANY"); and the Lenders specified in ANNEX A hereto
(each a "LENDER" and collectively, the "LENDERS").
WHEREAS the Lenders are the holders of Series B Preferred Shares, par
value NIS 0.01 each of the Company (the "PREFERRED B SHARES"), pursuant to a
certain Share Purchase and Shareholders Agreement, dated October 10th, 2000 (the
"SERIES B AGREEMENT"); and
WHEREAS The parties wish that the Lenders shall grant the Company a
convertible loan in the amount of US$2,150,000 (two million one hundred and
fifty thousand U.S. Dollars) (the "LOAN AMOUNT"), all in accordance with and
subject to the terms and conditions set forth in this Agreement below.
NOW, THEREFORE, the parties agree as follows:
1. LOAN.
a) On the later of August 1, 2001 or four business days following
fulfillment of the conditions precedent specified in Section 2
of this Agreement (the "CONDITIONS PRECEDENT"), or such other
date, time and place as the Company and the Lenders shall
mutually agree ("CLOSING DATE"), each Lender shall grant the
Company the portion of the Loan Amount as set forth opposite
such Lender's name in Annex A hereto (each such portion a
"LENDER'S LOAN AMOUNT").
b) Payment of the Loan Amount shall be effected by way of bank
transfer of the Loan Amount to the bank account the details of
which are set forth below (the "ACCOUNT"), in U.S. dollars.
First International Bank Branch #125
Account # : 409-004200
c) Notwithstanding the provisions of Section 1(b) above, an amount
of US$1,000,000 (one million US Dollars) out of the Loan Amount
shall be transferred by the Lenders (according to each Lender's
portion in such US$1,000,000 amount as set forth opposite such
Lender's name in Annex A hereto), to a new bank account to be
opened by the Company for such purpose (the "SPECIAL ACCOUNT"),
the details of which shall be provided to the Lenders prior to
such transfer. Signatory rights in the Special Account shall be
one signatory from Group A together with one signatory from
Group B together with the stamp or the printed name of the
Company:
Group A Group B
------- -------
Xxxx Xxxxxxxx Xxxxxxx Xxx-Xxxxx
Xxxx Xxxxxxx Eyal Drami
d) The Loan Amount shall bear interest at the rate of LIBOR for 6
month loans as quoted by Bank Leumi LeIsrael Ltd. plus 1.5% (one
and a half percent) per annum, compounded monthly, commencing at
the date of grant of the Loan Amount to the Company. Interest
will be computed on the basis of a 365-day year
2
for the actual number of days elapsed (the "INTEREST". The Loan
Amount plus any accrued Interest shall be hereinafter referred
to as the "LOAN").
2. CONDITIONS PRECEDENT.
As condition precedent to the grant of the Loan, the Company shall
deliver to the Lenders the following documents:
a) True and correct copy of a written resolutions of all the
Company's shareholders in the form attached as ANNEX 2(a/1)
hereto, resolving to: (i) create a new class of shares - Series
B1 preferred Shares of NIS 0.01 each, with such rights as
described in the New Articles (as defined below) ("SERIES B1
PREFERRED SHARES"), by way of converting 2,500,000 ordinary
shares of NIS 0.01 each into 2,500,000 Series B1 preferred
Shares; (ii) replace the Articles of Association of the Company
(the "ARTICLES") with new Articles in the form attached as ANNEX
2(a/2) hereto ("NEW ARTICLES"), to reflect the creation of
Series B1 Preferred Shares; together with duly complete notices
to the Israeli Companies Registrar (the "REGISTRAR"), acceptable
for immediate filing, of the resolutions described in this
Section 2(a) in the form attached as ANNEX 2(a/3) hereto; (iii)
dully approve this Agreement and any issuance of Series B1
preferred Shares pursuant to conversion of the Loan or any part
thereof; In addition, the minutes of such meeting shall confirm
that the audited financial statements as of the year ended
December 31, 2000 have been presented to the shareholders of the
Company.
b) True and correct copies of resolutions of the Company's Board of
Directors (the "BOARD") in the form attached as ANNEX 2(b)
hereto, resolving to: (i) duly approve this Agreement; (ii) open
the Special Account in accordance with the provisions of Section
1(c) above and (iii) approve the audited financial statements as
of the year ended December 31, 2000, and the non-audited but
reviewed Q1/2001 financial statements as of March 31, 2001.
c) A certificate duly executed by, the controller of the Company,
dated as of the Closing Date, in the form attached hereto as
ANNEX 2(c) (the "COMPLIANCE CERTIFICATE");
d) An Opinion of Eitan, Pearl, Xxxxxx & Xxxxx-Xxxxx, Law Offices,
counsel to the Company, in the form attached as ANNEX 2(d)
hereto (the "OPINION"), duly signed and dated as of the Closing
Date;
e) A written waiver by the shareholders of the Company of any
pre-emption, first refusal, anti-dilution and any other right
they might have with respect to this Agreement and all
transactions contemplated hereby, including without limitation,
issuance of warrants and Series B1 preferred Shares,
substantially in the form set forth as ANNEX 2(e);
3
f) A written consent of all parties to a certain Registration
Rights Agreement dated October 10th, 2000 (the "REGISTRATION
RIGHTS AGREEMENT"), that the provisions of the Registration
Rights Agreement shall apply to any Series B1 Preferred Shares
issued pursuant to conversion of the Loan or any part hereof,
substantially in the form set forth as ANNEX 2(f);
g) Promissory Notes in the form attached as ANNEX 2(g) hereto; and
h) Warrants in the form attached as ANNEX 2(h) hereto.
i) The approval of the Office of the Chief Scientist of the
Ministry of Industry and Trade of the State of Israel and of the
Investment Center.
3. DISCHARGE OF REPAYMENT OBLIGATIONS
The Loan shall be repaid by the Company to the Lenders in accordance
with the following provisions:
a) Unless converted pursuant to Section 3(b) below, the Loan shall
be repaid to the Lenders in full (i.e. to each Lender the
Lender's Loan Amount plus all accrued Interest) on September 30,
2002 (unless postponed with the prior written consent of the
Lenders). The Loan shall not be pre-payable in whole or in part
by the Company without prior written consent of the Lenders.
b) Immediately prior to the closing of a Qualifying Investment (as
defined below) the outstanding portion of the Loan at such time
shall be automatically converted into Series B1 Preferred Shares
of the Company at a conversion price of US$1.034 (one US Dollar
three cents and four tenths of a cent) per share (the
"CONVERSION PRICE") and subject to adjustments in price as a
result of stock splits and/or distribution of bonus shares
and/or other events as set hereunder. Until the eve of closing
of a Qualifying Investment (as defined below), each Lender shall
be entitled at any time through exercise of the warrant issued
to such Lender pursuant to Section 2(h) above, to demand that
the outstanding portion of the Loan shall be converted into
Series B1 Preferred Shares of the Company at the Conversion
Price and subject to adjustments in price as a result of stock
splits and/or distribution of bonus shares and/or as other
events as set hereunder.
The Series B1 Preferred Shares issuable hereunder, when issued
and allotted in accordance with this Agreement, and the Ordinary
Shares issuable upon conversion of such shares, will be duly
authorized, validly issued, fully paid, non-assessable and free
of preemptive or similar rights; will have the rights,
preferences and privileges set forth in the New Articles; will
be free and clear of any pledges, liens, claims, encumbrances or
third party rights of any kind, and duly registered in the name
of the Lenders in the Company's shareholders register. The
Company undertakes to maintain sufficient number of un-issued
Series B1 Preferred Shares in order to comply with its
obligations hereunder and to perform all actions required for
the issuance to the Lenders of such
4
Series B1 Preferred Shares within 14 days from receipt by the
Company of each of the Lenders' written demand to such effect.
Any other provision of this Agreement to the contrary
notwithstanding, in the event that the Company closes one or
more issuances of equity securities prior to a Qualifying
Investment on terms more favorable to the investors than the
terms of the conversion herein (including, without limitation,
as to price and rights attached to such equity securities), then
the Lenders shall be entitled to such more favorable terms as to
the conversion hereunder. For avoidance of doubt, the shares
issued following conversion of the Loan hereunder shall have all
such favorable terms.
In the event of a merger or sale of all or substantially all of
the shares or assets of the Company prior to a Qualifying
Investment or as part thereof, the Lenders shall be entitled
(but not obliged) to convert the Loan into Series B1 Preferred
Shares at a price per share to be based on a pre-money valuation
of the Company equal to the lower of: (i) the pre-money
valuation for purposes of the merger or sale of all or
substantially all the shares or assets of the Company, or (ii) a
conversion price of U.S.$1.034 (one U.S. Dollar and three cents
and four tenths of a cent) per share.
For purposes of this Agreement the term Qualifying Investment
shall mean the closing of one or more investment transactions
with aggregate net cash proceeds to the Company (excluding the
amount of the conversion hereunder and excluding the amount of
any other debt converted at such time into equity) of at least
five million U.S. dollars ($5,000,000), at a price per share of
at least the Conversion Price.
4. DEFAULT AND ACCELERATION
Without derogating from the Lenders' rights under this Agreement or
under any law to other or additional remedies it is hereby agreed that:
a) Any amount due to any Lender from the Company under this
Agreement (including, without limitation, interest accrued by
such date) which shall not be paid on its due date for payment
under this Agreement, shall bear default interest at a rate of
LIBOR for 6 month loans as quoted by Bank Leumi LeIsrael Ltd.
plus 8% (eight percent) per annum, compounded monthly.
b) The Loan (including, without limitation, interest accrued by
such date) shall be due and payable at any time without any
demand, immediately upon (i) the insolvency of the Company; (ii)
the commission of any act of bankruptcy by the Company (iii) the
execution by the Company of a general assignment for the benefit
of creditors; (iv) the appointment of a receiver or trustee to
take possession of a substantial portion of the property or
assets of the Company; (v) the Company has entered into any
insolvency, liquidation, receivership, arrangement with
creditors or similar proceedings, or an attachment order was
issued on all or a substantial part of the Company's assets,
(vi) the Company is in at least 7 days delay in any of the
repayments of the Loan set forth in Section 4(a) above, or (vii)
the Company otherwise breaches any of its material
5
obligations under this Agreement and does not cure such breach
within 7 (seven) days from the Lenders' written notice to the
Company of such breach.
c) Payment of the Loan is secured by promissory notes substantially
in the form attached as Annex 2(f) hereto, until the earlier of
repayment in full or conversion in full of the entire Loan, in
accordance with the terms of this Agreement.
5. REPRESENTATIONS AND WARRANTIES
a) The Company hereby represents and warrants to each of the
Lenders that since the closing of the Series B Agreement there
has not been any adverse material change in the Company's
condition and that the representations and warranties detailed
in Section 4 of the Series B Agreement are true and correct in
all material aspects as of the date hereof, except for such
changes as detailed in the Schedule of Exception, attached as
ANNEX 5 hereto.
b) The performance of this Agreement by the Company does not
violate the provisions of any applicable law, and will not
result in any breach of, or constitute a default under, any
agreement or instrument to which the Company is a party or by
which the Company is bound.
c) No consents, authorizations or approvals of any kind of any
governmental authority or other third party, which were not
obtained prior to execution hereof, are required in connection
with the execution or performance of this Agreement.
d) The execution and performance of this Agreement by the Company
have been duly authorized by all necessary action, and this
Agreement has been duly executed and delivered by it. This
Agreement is the legal, valid, and binding obligation of the
Company, and is enforceable as to the Company in accordance with
its terms.
e) Each of the Lenders hereby represents and warrants to the
Company that its respective representations and warranties
detailed in Section 5 of the Series B Agreement are true and
correct in all material aspects as of the date hereof.
6. COVENANTS OF THE COMPANY
a) The Company shall use the proceeds of the Loan hereunder for
working capital purposes, research and development and general
corporate purposes, all in accordance with the Company's budget,
as approved from time to time by its Board.
b) So long as any principal or interest remains outstanding on the
Loan, or until the Closing of a Qualifying Investment, the
Company shall not, without the prior written consent of the
Majority of the Lenders (as defined below): (i) take any of the
actions specified in Article 10(b) of the New Articles; (ii)
Take any loans in an aggregate amount of US$10,000 during each
12 months period from the Closing Date.
6
7. MISCELLANEOUS
a) Governing Law and Jurisdiction. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of
Israel, and the competent courts in Tel-Aviv-Jaffa shall have
sole and exclusive jurisdiction.
b) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with regard to the subject matter
hereof and supersedes any previous agreement among the parties
with respect to such subject matter. However, it is expressly
stated that this Agreement does not amend, replace or supersede
the Series B Agreement with respect to the subject matter
thereof.
c) Amendment. Any term of this Agreement may be amended, terminated
or waived only by the Company and the Majority of the Lenders,
as evidenced by a document in writing specifically referring to
this Agreement. For purposes of this Agreement, the term
"MAJORITY OF THE LENDERS" means Lenders whose aggregate Lender's
Loan Amount is more than 50% of the Loan Amount.
d) Assignment. This Agreement and all the provisions hereof shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns, except that
neither this Agreement nor any rights or obligations hereunder
shall be assigned or delegated by the Company without the prior
written consent of the Majority of the Lenders. Any Lender shall
be entitled to assign any of its rights, privileges and
obligations hereunder to (i) any other Lender; (ii) any entity
which controls, is controlled by, or is under common control
with such Lender; (iii) as to any Lender which is a general or
limited partnership, to its partners and to affiliated
partnerships managed by the same management company or managing
general partner or by an entity which controls, is controlled
by, or is under common control with such management company or
managing general partner, and (iv) to any fund (or shareholder
or partner of any such fund), or any beneficiary of a trust or
an account or other arrangement, managed by such Lender or by
the general partner or managing entity(ies) of such Lender or to
an affiliate thereof. As condition precedent to any assignment
as set in this Section 7(d) above, the assignee shall undertake
in writing towards the Company all of such Lender's obligations
under this Agreement and shall send a copy thereof to the
Company and to the other Lenders.
e) Taxes and Expenses. Each of the parties shall bear and pay the
taxes and levies imposed on it (if at all) under any law in
relation with this Agreement and the transactions contemplated
therein, provided, however, that the Company shall bear and pay
any stamp duty imposed in relation with the issuance of the
Promissory Notes hereunder and upon conversion - the issuance of
the respective Series B1 Preferred Shares and all transaction
costs including without limitation legal fees of the Lenders.
7
f) Notices. All notices and other communications made pursuant to
this Agreement shall be in writing, addressed to each relevant
party at its address set in Annex A hereto, and shall be
conclusively deemed to have been duly given if: (i) delivered by
hand, on the next business day; or (ii) in the case of delivery
by recognized overnight courier, freight prepaid, four (4)
business days after delivery; or (iii) in the case of a notice
given by facsimile transmission, on the next business day after
delivery if delivered by confirmed facsimile transmission.
g) Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or
interpreting this Agreement.
[Intentionally left blank]
8
IN WITNESS WHEREOF, the undersigned have hereunto set their hands to this
Agreement as of the day and year first above written.
/s/ XXXXXX XXXXX
--------------------------------------
Emony Ltd.
By: XXXXXX XXXXX
----------------------------------
Title: CTO
----------------------------------
/s/ XXXX XXXXXXX /s/ XXXXXXX XXXXXX /s/ XXXX XXXXXXX /s/ XXXXXXX XXXXXX
-------------------------------------- --------------------------------------
Carmel Software Fund (Israel) LP Carmel Software Fund (Cayman) LP
By: Xxxx Xxxxxxx Xxxxxxx Xxxxxx By: Xxxx Xxxxxxx Xxxxxxx Xxxxxx
---------------------------------- -----------------------------------
Title: GP Title: G.P.
------------------------------- -------------------------------
/s/ XXXX XXXXXXX /s/ XXXXXXX XXXXXX /s/ XXXX XXXXXXX /s/ XXXXXXX XXXXXX
-------------------------------------- --------------------------------------
Carmel Software Fund (Delaware) LP Carmel VC Ltd. (for Siemens Venture
Capital GmbH)
By: Xxxx Xxxxxxx Xxxxxxx Xxxxxx By: Xxxx Xxxxxxx Xxxxxxx Xxxxxx
----------------------------------- -----------------------------------
Title: G.P. Title: G.P.
-------------------------------- --------------------------------
/s/ XXXX XXXXXXX /s/ XXXXXXX XXXXXX
-------------------------------------- --------------------------------------
Xxxx Xxxxx Carmel Software Fund GbR
By: Xxxx Xxxxxxx Xxxxxxx Xxxxxx
----------------------------------
Title: G.P.
-------------------------------
-------------------------------------- --------------------------------------
Clal Electronics Ltd. (for SPR Infinity Backweb Technologies Ltd.
U Funds)
By: By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------- -----------------------------------
Title: Title: CEO
-------------------------------- --------------------------------
9
IN WITNESS WHEREOF, the undersigned have hereunto set their hands to this
Agreement as of the day and year first above written.
--------------------------------------
Emony Ltd.
By:
----------------------------------
Title:
----------------------------------
-------------------------------------- --------------------------------------
Carmel Software Fund (Israel) LP Carmel Software Fund (Cayman) LP
By:
---------------------------------- -----------------------------------
Title: Title:
------------------------------- -------------------------------
-------------------------------------- --------------------------------------
Carmel Software Fund (Delaware) LP Carmel VC Ltd. (for Siemens Venture
Capital GmbH)
By: By:
----------------------------------- -----------------------------------
Title: Title:
-------------------------------- --------------------------------
-------------------------------------- --------------------------------------
Xxxx Xxxxx Carmel Software Fund GbR
By:
----------------------------------
Title:
-------------------------------
-------------------------------------- --------------------------------------
FBR Infinity II Ventures (Israel) L.P. Backweb Technologies Ltd.
By:
-----------------------------------
Title:
--------------------------------
By: FBR Infinity II Venture Partners Ltd.
(general partner of the general
partner)
/s/ [SIGNATURE ILLEGIBLE]
--------------------------------------
FBR Infinity II Ventures L.P.
By: FBR Infinity II Venture Partners Ltd.
(general partner of the general
partner)
ANNEX A
-------------------------------------------------------------------------------------------------------------------
Lender Address Lender's Loan Amount
-------------------------------------------------------
Amount Amount Total Amount
transferred to transferred to
ordinary account Special Account
-------------------------------------------------------------------------------------------------------------------
Carmel Software Fund Delta House, $ 224,283.00* $ 195,030.00 $ 419,313.00
(Israel) LP* 00 Xxxxxxx Xxx.,
Xxxxxxxxx 00000
-------------------------------------------------------------------------------------------------------------------
Carmel Software Fund c/o Carmel Software $ 276,967.00 $ 240,841.00 $ 517,808.00
(Cayman) LP Fund (Israel) LP
-------------------------------------------------------------------------------------------------------------------
Carmel Software Fund c/o Carmel Software $ 120,949.00 $ 105,173.00 $ 225,122.00
(Delaware) LP Fund (Israel) LP
-------------------------------------------------------------------------------------------------------------------
Carmel VC Ltd. (for c/o Carmel Software $ 39,852.00 $ 34,653.00 $ 74,505.00
Siemens Venture Fund (Israel) LP
Capital GmbH)
-------------------------------------------------------------------------------------------------------------------
Carmel Software Fund GbR c/o Carmel Software $ 19,925.00 $ 17,327.00 $ 37,252.00
Fund (Israel) LP
-------------------------------------------------------------------------------------------------------------------
FBR Infinity II $ 106,449.00 $ 92,564.00 $ 199,013.00
Ventures (Israel) LP
-------------------------------------------------------------------------------------------------------------------
FBR Infinity II $ 94,133.00 $ 81,854.00 $ 175,987.00
Ventures LP
-------------------------------------------------------------------------------------------------------------------
Backweb Technologies Ltd. 0000 Xxxxxxx Xxxxx, $ 267,442.00 $ 232,558.00 $ 500,000.00
Xxxxx 000, Xxx Xxxx,
XX 00000, XXX
===================================================================================================================
Total $1,150,000.00 $1,000,000.00 $2,150,000.00
-------------------------------------------------------------------------------------------------------------------
All notices and communications to the Company made pursuant to the Agreement
shall be addressed to:
Emony Ltd. With a copy to:
00 Xxxx Xx., Xxxx Xxxxxxxxxx Xxxx Eitan, Pearl, Xxxxxx & Xxxxx-Xxxxx
Xxxx Xx'xxxx 00000, Xxxxxx 7 Shenkar St., 2 Gav Yam Center
Facsimile: 000-0-0000000 Herzeliya, Israel
Attn.: Xxxxx Xxxxxxxx Attn.: Xx. Xxxx Xxxxxxx
* an amount of US$200,000 was already transferred by Carmel Software Fund
(Israel) LP to the Company on July 31, 2001 and shall be deemed part of such
Lender's Loan Amount.
ANNEX 2(a/1)
EMONY LTD.
NO. 00-000000-0
UNANIMOUS WRITTEN RESOLUTION OF
THE ORDINARY MEETING OF
THE SHAREHOLDERS OF THE COMPANY
The undersigned being all shareholders of Emony Ltd. (the "COMPANY"), having
waived their right for a prior notice, do consent to the following written
resolutions in lieu of a meeting in accordance with Article 51 of the Articles
of Association of the Company.
IT WAS UNANIMOUSLY RESOLVED:
APPROVAL OF LOAN AGREEMENT
1. Resolved, to approve and ratify the resolution of the Board of Directors
to enter into and execute the Convertible Loan Agreement between the
Company and certain shareholders of the Company, substantially in the
form attached as EXHIBIT A hereto (the "LOAN AGREEMENT") and all other
agreements, documents and transactions contemplated thereby.
ARTICLES OF ASSOCIATION AND SHARE CAPITAL
2. Resolved, to replace the Company's Articles of Association with the
Restated Articles of Association attached as EXHIBIT B hereto (the
"RESTATED ARTICLES"), and thereby create a new class of shares - Series
B1 Preferred Shares, par value NIS 0.01 each, bearing such rights as
described in the Restated Articles.
3. Resolved, to convert 2,500,000 Ordinary Shares, par value NIS 0.01 each,
to 2,500,000 Series B1 Preferred Shares, par value NIS 0.01 each,
bearing such rights as described in the Restated Articles.
4. Further resolved, that upon conversion of the Loan Amount according to
the Loan Agreement, into Series B1 Preferred Shares of the Company, the
Company shall be authorized to issue to the Lenders (as described in the
Loan Agreement) such amount of Series B1 Preferred Shares as derived
from the terms of the Loan Agreement and the Restated Articles. Upon
such issuance, the Preferred B1 Shares shall be dully and fully paid,
non-assessable, free of preemptive or similar rights and free and clear
of any pledges, liens, claims, encumbrances or third party's rights of
any kind and duly registered in the Company's shareholders register.
FINANCIAL STATEMENTS AND ACCOUNTANTS
5. To approve that the Company's audited financial statements for the
fiscal year ending December 31, 2000, attached as EXHIBIT C hereto, were
presented to the shareholders.
1
6. To file an annual report with the Registrar of Companies, as required by
the New Companies Law 5759-1999, and to authorize Xxxx Xxxxxxx to
execute the required documentation to give effect to this resolution.
7. To appoint the firm of Xxxx, Xxxxx & Xxxxxx to serve as accountants of
the Company for the fiscal year ending December 31, 2001 and to
authorize the Board of Directors to fix remuneration of said accountants
in accordance with the volume and nature of their services as customary
within the Company's field of operation.
This written resolution may be executed in counterparts and all of them together
shall constitute one and the same instrument. This resolution is executed
effective as of the last date set forth below.
[Signature Pages Follow]
2
[Signature Page of Written Resolution of the Ordinary General Meeting of Emony
Ltd.]
------------------------------------ ------------------------------------
Carmel Software Fund (Israel) LP Carmel Software Fund (Cayman) LP
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------- -------------------------------
------------------------------------ ------------------------------------
Carmel Software Fund (Delaware) LP Carmel VC Ltd.
(for Siemens Venture Capital GmbH)
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------- -------------------------------
------------------------------------
Carmel Software Fund GbR
By: Carmel Software L.P.
(Its General Partner)
By: Carmel Software Ltd.
(Its General Partner)
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
------------------------------------ ------------------------------------
XXXX XXXXX Backweb Technologies Ltd.
Date: By:
------------------------------- ---------------------------------
Title:
------------------------------
Date:
------------------------------
------------------------------------ ------------------------------------
XXXXXX XXXXX XXXXX B.V.
Date: By:
------------------------------- ---------------------------------
Title:
------------------------------
Date:
------------------------------
3
[Signature Page of Written Resolution of the Ordinary General Meeting of Emony
Ltd.]
------------------------------------ ------------------------------------
XXXX XXXXX Jerusalem Hi-Tech Founders Ltd.
Date: By:
------------------------------- ---------------------------------
Title:
------------------------------
Date:
------------------------------
------------------------------------ ------------------------------------
Clal Electronics Ltd. KH Trustees Ltd.
(for SPR Infinity II Funds)
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------- -------------------------------
4
ANNEX 2(a/2)
A COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION OF
EMONY LTD.
PRELIMINARY
1. In these Articles of Association, unless the context otherwise requires the
following expressions shall have the meaning which appears beside them:
ARTICLES - shall mean the Articles of Association of the Company as shall be in
force from time to time.
CARMEL VENTURE FUNDS ENTITIES - shall mean any of the Carmel Venture Funds
entities which is a part to the Share Purchase Agreement or to the Convertible
Loan Agreement or any related entity which qualifies as a Permitted Transferee
(as such term is defined in Article 26(d)), and holds Shares of the Company.
COMPANY - shall mean EMONY LTD.
CONVERTIBLE LOAN AGREEMENT - shall mean the Convertible Loan Agreement dated
July __, 2001 by and between the Company and Preferred B Holders.
FOUNDERS - shall mean Xxxx Xxxxx and Xxxxxx Xxxxx.
INFINITY VENTURE FUNDS ENTITIES - shall mean any of the Infinity Venture Funds
entities which is a part to the Share Purchase Agreement or to the Convertible
Loan Agreement or any related entity which qualifies as a Permitted Transferee
(as such term is defined in Article 26(d)), and holds Shares of the Company.
LAW - shall mean the Companies Law 5759-1999, as shall be in effect from time to
time and any other law that shall be in effect from time to time with respect to
companies and that shall apply to the Company.
OFFICE - shall mean the registered office of the Company as it shall be from
time to time.
ORDINARY RESOLUTION - shall mean a resolution that requires a majority of more
than fifty percent (50%) of the votes of the shareholders of the Company,
present (in person or by proxy) at a shareholders meeting and entitled to vote,
or, as the case may be, of the votes of the directors of the Company present (in
person or by proxy) at a board of directors meeting and entitled to vote.
PREFERRED A HOLDERS - shall mean holders of Preferred A Shares of the Company.
2
PREFERRED A SHARES - shall mean the Series A Preferred Shares issued or to be
issued by the Company.
PREFERRED B HOLDERS - shall mean holders of Preferred B Shares under the Share
Purchase Agreement.
PREFERRED B SHARES - shall mean the Series B Preferred Shares issued or to be
issued by the Company.
PREFERRED B1 HOLDERS - shall mean holders of Preferred B1 Shares pursuant to the
Convertible Loan Agreement.
PREFERRED B1 SHARES - shall mean the Series B1 Preferred Shares issued or to be
issued by the Company.
PREFERRED HOLDERS - shall mean the Preferred A Holders, the Preferred B Holders
and the Preferred B1 Holders.
PREFERRED SHARES - shall mean the Preferred A Shares, the Preferred B Shares and
the Preferred B1 Shares.
QUALIFIED IPO - shall mean an underwritten initial public offering of the
Company's Ordinary Shares, in which the net cash proceeds to the Company are at
least twenty million U.S. dollars ($20,000,000), at a price per share of at
least US $5.16957 (subject to adjustments as a result of splits, distribution of
bonus shares and other recapitalization).
SHARES - shall mean Ordinary Shares and Preferred Shares.
SHARE PURCHASE AGREEMENT - shall mean the Share Purchase and Shareholders
Agreement dated October 10th, 2000 by and between the Company, Founders,
Preferred A Holders and Preferred B Holders.
Words and expressions defined in the Memorandum of Association of the Company
shall have the meanings defined therein.
In these Articles, subject to this Article 1 and unless the context otherwise
requires, expressions defined in the Law, or any modification thereof in force
at the date at which these Articles become binding on the Company, shall have
the meanings so defined; and words importing the singular shall include the
plural, and vice versa, and words importing the masculine gender shall include
the female, and words importing persons shall include bodies corporate. The
titles of the articles are not part of the articles.
In the event that an article has been added to these Articles which contradicts
an original article found in these Articles - the article added shall have
precedence.
PRIVATE COMPANY
2. The Company is a private Company as defined under the Law, and
accordingly -
3
(a) the right to transfer the shares of the Company shall be restricted
in the manner hereinafter appearing;
(b) the number of the members of the Company (not including persons who
are in the employment of the Company, and persons who, having been formerly in
the employment of the Company were while in that employment and have continued
after the termination of that employment to be members of the Company) shall be
limited to fifty, provided that, for the purposes of this provision, where two
or more persons hold one or more shares in the Company jointly they shall be
treated as a single member; and
(c) no invitation shall be issued to the public to subscribe for any
shares or debentures or debenture stocks of the Company.
LIMITED LIABILITY
3. The liability of the shareholders for the Company's obligations is
limited to the payment of the nominal value of the Company's shares, all subject
to Sections 181 and 304 of the Law.
OFFICE
4. The registered office of the Company shall be at such place as the directors
shall from time to time appoint.
THE CAPITAL
5. The share capital of the Company is comprised of NIS 175,000 divided into
8,932,000 Ordinary Shares, 1,068,000 Preferred A Shares, 5,000,000 Preferred B
Shares and 2,500,000 Preferred B1 Shares, all of nominal value NIS 0.01 per
share.
RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED SHARES
6. The rights, preferences, privileges, and restrictions granted to and imposed
on the Preferred Shares, are as set forth below.
7. DIVIDEND PREFERENCE.
The Preferred B1 Shares and Preferred B Shares shall confer upon the holders
thereof a preference over holders of all other equity securities of the Company
(including Preferred A Shares) in the event dividends are being distributed, to
receive for each Preferred B1 Share and each Preferred B Share an amount to be
accrued, from the date of issuance thereof until the date of distribution of
such dividends, at the rate of eight (8) percent per annum, compounded annually,
calculated on the USD$ price per share paid for each such Preferred B1 Share and
Preferred B Share (subject to appropriate adjustments for recapitalizations and
similar events). Thereafter, dividend distributions shall be effected on a
pro-rata and pari passu basis, among the Company's Ordinary and Preferred
Shareholders (on an as-converted basis).
4
8. LIQUIDATION.
Until a Qualified IPO, if the Company should be wound-up, in bankruptcy,
liquidation, dissolution or similar proceeding, then subject to applicable law,
all the assets of the Company available for distribution among its shareholders
shall be distributed to them in the following order and preference:
(a) First, each of the holders of Preferred B1 Shares shall be entitled
to a per share distribution in the amount equal to five (5) times the price per
share paid by each such holder, adjusted for share combinations or subdivisions
or other recapitalizations of the Company's shares (the "PREFERENCE B1"), plus
an amount equal to the amount of any cash dividends declared by the Company but
not distributed to the holders of Preferred B1 Shares prior to the distribution
of the Preference B1. In the event that the assets of the Company available for
distribution shall be insufficient to make such per share distributions, all of
such assets shall be distributed pro rata among the holders of Preferred B1
Shares in proportion to the full Preference such holders would otherwise be
entitled to receive hereunder. In the event that a closing of one or more
investment transactions, with aggregate net cash proceeds to the Company
(excluding the amount of any conversion pursuant to the Convertible Loan
Agreement and excluding the amount of any other debt converted at such time into
equity) of at least five million U.S. dollars ($5,000,000) at a price per share
of at least US$1.034 (one US Dollar three cents and four tenths of a cent)
(subject to adjustments as a result of splits, distribution of bonus shares and
other recapitalization), the Preference B1 shall be reduced and become the same
as the Preference B (as defined below).
(b) Second, each of the holders of Preferred B Shares shall be entitled
to a per share distribution in the amount equal to two (2) times the price per
share paid by each such holder, adjusted for share combinations or subdivisions
or other recapitalizations of the Company's shares (the "PREFERENCE B"), plus an
amount equal to the amount of any cash dividends declared by the Company but not
distributed to the holders of Preferred B Shares prior to the distribution of
the Preference B. In the event that the assets of the Company available for
distribution (after distribution of Preference B1) shall be insufficient to make
such per share distributions, all of such assets (after distribution of
Preference B1) shall be distributed pro rata among the holders of Preferred B
Shares in proportion to the full Preference such holders would otherwise be
entitled to receive hereunder.
(c) Third, after payment of the Preference B1 pursuant to Article 8(a)
above and the Preference B pursuant to Article 8(b) above, the holders of
Preferred A Shares shall be entitled to receive, in US dollars, the amount equal
to the price per share paid for each Preferred A Share (as adjusted for any
bonus shares, combinations or splits with respect to such shares) (the
"PREFERENCE A"). In the event that the assets of the Company available for
distribution (after distribution of Preference B1 and Preference B) shall be
insufficient to make such per share distributions, all of such assets (after
distribution of Preference B1 and Preference B) shall be distributed pro rata
among the holders of Preferred A Shares in proportion to the full Preference
such holders would otherwise be entitled to receive hereunder.
(d) Forth, after payment of the Preference B1 pursuant to Article 8(a)
above, the Preference B pursuant to Article 8(b) above and the Preference A
pursuant to Article 8(c) above, the holders of Preferred Shares (on an as
converted basis) and the holders of the Ordinary Shares shall be entitled to a
per share distribution in proportion to the respective percentage holdings of
all of the Ordinary Shares (on an as converted basis) (in addition to the
amounts stipulated in Articles 8(a), 8(b) and 8(c)); provided, however, that the
maximum
5
amount to be distributed for each Preferred B1 Share (excluding the Preference
B1) shall be the higher of (i) five (5) times the purchase price per such
Preferred B1 Share, or (ii) the amount which would be distributed per Preferred
B1 Share if the provisions of this Article 8 were disregarded and all assets
were distributed in proportion to the respective holdings of all of the Ordinary
Shares (on an as-converted basis); provided, further, that the maximum amount to
be distributed for each Preferred B Share (excluding the Preference B) shall be
the higher of (i) two (2) times the purchase price per such Preferred B Share,
or (ii) the amount which would be distributed per Preferred B Share if the
provisions of this Article 8 were disregarded and all assets were distributed in
proportion to the respective holdings of all of the Ordinary Shares (on an
as-converted basis); and provided, further, that the maximum amount to be
distributed for each Preferred A Share (excluding the Preference A) shall be the
higher of (i) the purchase price per such Preferred A Share, or (ii) the amount
which would be distributed per Preferred A Share if the provisions of this
Article 8 were disregarded and all assets were distributed in proportion to the
respective holdings of all of the Ordinary Shares (on an as-converted basis).
(e) Deemed Liquidation. For purposes of this Article 8, in addition to
any liquidation, dissolution, or winding up of the Company under applicable law,
the Company shall be deemed to be liquidated in the event of a consolidation,
merger or reorganization of the Company with or into, or a sale of all or
substantially all of the Company's assets, or substantially all of the Company's
issued and outstanding share capital, to any other company, or any other entity
or person, or in the event of a change in control (as defined below)
(collectively, "DEEMED LIQUIDATION"). Upon any Deemed Liquidation of the Company
as described in this Article 8(e), at the closing of the transaction at which
the Company is deemed for purposes of this Article 8(e) to be liquidated, the
holders of Preferred B1 Shares shall be paid in cash, securities or a
combination thereof, an amount equal to the amount per Preferred B1 Share which
would be payable thereto pursuant to this Article 8 if all consideration
received by the Company and its shareholders in connection with such transaction
was distributed in a liquidation of the Company and only thereafter, the holders
of Preferred B Shares shall be paid in cash, securities or a combination
thereof, an amount equal to the amount per Preferred B Share which would be
payable thereto pursuant to this Article 8 if all consideration received by the
Company and its shareholders in connection with such transaction was distributed
in a liquidation of the Company. For the purpose of this Article 8(e), "CONTROL"
shall mean having 50% or more of the voting rights or having the right to
appoint 50% or more of the directors of the Company.
9. CONVERSION.
The holders of the Preferred Shares shall have conversion rights as follows (the
"CONVERSION RIGHTS"):
(a) Optional Conversion. Each Preferred Share shall be convertible at
the option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Company, into one fully paid and non assessable
Ordinary Share (subject to adjustment as set herein) of the same par value.
(b) Automatic Conversion of Preferred A Shares. Each Preferred A Share
shall automatically be converted into one fully paid and non assessable Ordinary
Share (subject to adjustment as set herein), upon the following: (i) at the
election of holders of a majority of
6
the then outstanding Preferred A Shares voting as a class, or (ii) the
conversion into Ordinary Shares of the Preferred B Shares.
(c) Automatic Conversion of Preferred B Shares. Each Preferred B Share
shall automatically be converted into one fully paid and non assessable Ordinary
Share (subject to adjustment as set herein), upon the following: (i) at the
election of holders of a majority of the then outstanding Preferred B Shares
voting as a class, or (ii) the consummation of a Qualified IPO.
(d) Automatic Conversion of Preferred B1 Shares. Each Preferred B1 Share
shall automatically be converted into one fully paid and non assessable Ordinary
Share (subject to adjustment as set herein), upon the following: (i) at the
election of holders of a majority of the then outstanding Preferred B1 Shares
voting as a class, or (ii) the consummation of a Qualified IPO.
(e) Before any holder of Preferred Shares shall be entitled (in the case
of a conversion at such holder's option) to convert the same into Ordinary
Shares, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company, and shall give written notice by mail,
postage prepaid, to the Company at its principle corporate office, of the
election to convert the same and shall state therein the name or names of any
nominee for such holder in which the certificate or certificates for Ordinary
Shares are to be issued. Such conversion (in the case of a conversion at such
holder's option) shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the certificate representing
the Preferred Shares to be converted, and the person or persons entitled to
receive the Ordinary Shares issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Ordinary Shares as of such
date. If the conversion is in connection with a Qualified IPO, then the
conversion shall be deemed to have taken place automatically regardless of
whether the certificates representing such shares have been tendered to the
Company, but from and after such conversion any such certificates not tendered
to the Company shall be deemed to evidence solely the Ordinary Shares received
upon such conversion and the right to receive a certificate for such Ordinary
Shares. If the conversion is in connection with a Qualified IPO, the conversion
may, at the option of any holder tendering Preferred Shares for conversion, be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Ordinary Shares issuable upon such conversion of the Preferred Shares shall not
be deemed to have converted such Preferred Shares until immediately prior to the
closing of such offer of securities. The Company shall, as soon as practicable
after the conversion and tender of the certificate for the Preferred Shares
converted, issue and deliver at such office to such holder of Preferred Shares
or to the nominee or nominees of such holder of Preferred Shares, a certificate
or certificates for the number of Ordinary Shares to which such holder shall be
entitled as aforesaid.
(f) The conversion rate of the Preferred Shares will be appropriately
adjusted to the extent necessary for the holder thereof to maintain its
proportionate equity interest in the Company on a fully diluted basis
("PROPORTIONATE ADJUSTMENT") in the event that the Company:
(1) declares a dividend, or otherwise makes a distribution, only for
the outstanding Ordinary Shares;
7
(2) splits or otherwise reclassifies the outstanding shares into a
greater or lesser number of shares;
(3) is a party to any transaction (including, without limitation, a
merger, consolidation, sale of substantially all of the company's assets,
liquidation, or recapitalization of the shares) where the Shares are to be
changed into or exchanged for different securities of the Company or ordinary
shares/common stock or other securities of another corporation.
(g) The Preferred B1 Holders and the Preferred B Holders shall be
entitled to "full ratchet" anti dilution protection in accordance with the
following provisions:
Upon each issuance (or deemed issuance, as described below), at any time prior
to a Qualified IPO, by the Company of any Additional Shares (as defined herein)
at a price per share lower than the original price per share of the Preferred B1
Shares and the Preferred B Shares (the "INITIAL CONVERSION PRICE") ("LOW PRICE
OFFERING"), as adjusted for share combinations or subdivisions or other
recapitalizations of the Company's shares, or as otherwise adjusted hereunder,
the Initial Conversion Price of the Preferred B1 Shares and the Preferred B
Shares shall automatically and without further action be adjusted (such adjusted
Initial Conversion Price, as it shall be from time to time, shall hereinafter be
termed the "ADJUSTED CONVERSION PRICE"), so that upon conversion of the
Preferred B1 Shares or the Preferred B Shares, as the case may be, each holder
thereof shall be entitled to be issued a number of additional Ordinary Shares
(the "COVER SHARES"), according to the following formula:
X = Y(A - B)
--------
B
Where:
X = The number of Cover Shares to
be issued to the holders of Preferred B1
Shares and the Preferred B Shares, as
applicable
Y = The number of Shares held by
the holders of Preferred B1 Shares and
Preferred B Shares, as applicable
A = The Initial Conversion Price.
B = The price of each Additional Share.
(h) No fractional shares will be issued in connection with any
issuance of Cover Shares according to Articles 9(a)(b)(c)(d)(f).
(i) The consideration for the issuance of Additional Shares shall be
deemed to be the amount of cash (including value of freely transferable
securities traded on a recognized stock exchange) received therefor.
(j) In the case of the issuance of options to purchase or rights to
subscribe for Ordinary
8
Shares, or securities by their terms convertible into or exchangeable for
Ordinary Shares or options to purchase or rights to subscribe for such
convertible or exchangeable securities, the aggregate maximum number of Ordinary
Shares deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential anti-dilution adjustments) of such options to
purchase or rights to subscribe for Ordinary Shares, or upon the exchange or
conversion of such security, shall be deemed to have been issued at the time of
the exercise of such options, rights or securities, at a consideration equal to
the consideration (determined in the manner provided in Articles 9(i) and 9(k),
received by the Company upon the issuance of such options, rights or securities
plus any additional consideration payable to the Company pursuant to the term of
such options, rights or securities (without taking into account potential
anti-dilution adjustments) for the Ordinary Shares covered thereby.
(k) For the purposes of this Article 9, the consideration for any
Additional Shares shall be taken into account, at the U.S. Dollar equivalent
thereof, on the day such Additional Shares are issued or deemed to be issued
pursuant to Article 9(j).
(l) "ADDITIONAL SHARES" shall mean any Ordinary Shares or Preferred
Shares issued, or deemed to have been issued pursuant to Article 9(j), by the
Company other than:
(1) up to 1,653,000 (one million, six hundred fifty three
thousand) Ordinary Shares, or such larger amount as approved by the
Board, issued upon exercise of options granted to employees,
consultants, officers and directors of the Company pursuant to stock
purchase or stock option plans approved by the Board (including options
granted prior to the date of closing of the Share Purchase Agreement);
(2) any shares issuable under the Share Purchase Agreement to
Preferred B Holders, including shares issuable to BackWeb Technologies
Ltd. ("BACKWEB") and shares issuable upon exercise of any warrants
pursuant to the Share Purchase Agreement ("WARRANTS");
(3) any shares issuable under the Convertible Loan Agreement and
upon exercise of the warrants issued thereunder;
(4) any subdivision or combination of shares;
(5) any distribution of bonus shares to all the shareholders of
the company;
(6) any Ordinary Shares issued upon conversion of Preferred
Shares;
(7) up to 105,000 Preferred A Shares issued to Xxxxxx Xxxxxxxx
upon exercise of the warrant issued by the Company on October 20, 1999
provided that concurrently with such issuance an equal number of
ordinary shares held by Xxxx Xxxxx shall be converted into Deferred
Shares.
9
(m) In the event of a Low Price Offering, prior to the exercise or
expiry, as the case may be, of the Warrants, the Company's valuation for the
purposes of determining the exercise price of the Warrants shall be adjusted
downwards proportionally to reflect the new price per share determined in the
Low Price Offering (the "LOW PRICE PER SHARE"), according to the following
formula:
X = Y*A
-----
B
Where:
X = Company's new valuation for the
purposes of exercise of the Warrants.
Y = Company's valuation for the
purposes of exercise of the Warrants
pursuant to Section 3 of the Share
Purchase Agreement.
A = The Low Price Per Share.
B = The original price per Preferred B Share.
(n) No shareholder of the Company shall have any rights of first
refusal, preemptive rights, anti-dilution, blocking or any other rights with
respect to the issuance of the Cover Shares. In the event any such rights are
nevertheless exercised, the number of Cover Shares to be issued to the Preferred
B1 Holders and to the Preferred B Holders shall be increased by such number as
is required to give such holders the full economic value of Articles 9(a)-(d),
9(f) or 9(g), as applicable.
(o) The Company will not, by amendment of these Articles or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue 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 in this Article 9 by this Company, but will at all times
in good faith assist in the carrying out of all the provisions of this Article 9
and in taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Preferred Shares against
impairment.
(p) Upon the occurrence of each adjustment or readjustment of the
Conversion Price or the Adjusted Conversion Price pursuant to this Article 9,
the Company, at is expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder entitled to adjustment or readjustment a certificate setting forth each
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment or
readjustment, (B) the Adjusted Conversion Price, as the case may be, at the time
in effect, and (C) the number of Ordinary Shares and the amount, if any, of
other property which at the time would be received upon the conversion of a
Preferred Share.
10
(q) In the event of any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (including a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of any class or any other securities or property, or to receive any other
right, the Company shall mail to each holder of Preferred Shares, at least
twenty (20) days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(r) The Company shall at all times reserve and keep available out of its
authorized but unissued Ordinary Shares, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of its Ordinary Shares as shall
from time to time be sufficient to effect the conversion of all issued and
outstanding Preferred Shares; and if at any time the number of authorized but
unissued Ordinary Shares shall not be sufficient to effect the conversion of all
then outstanding Preferred Shares, in addition to such other remedies as shall
be available to the holders of such Preferred Shares, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued Ordinary Share capital to such number of shares as
shall be sufficient for such purposes.
10. VOTING RIGHTS; PROTECTIVE PROVISIONS.
(a) In all shareholders' meetings, the holders of any of the classes of
Preferred Shares shall vote together with the holders of Ordinary Shares, and
not as separate classes, except as provided by Article 10(b) below or as
required otherwise by law. The holder of each share of Preferred Shares shall
have the right to one vote for each share of Ordinary Shares into which such
Preferred Shares could then be converted (with any fractional share determined
on an aggregate conversion basis being rounded to the nearest whole share), and
with respect to such vote, such holder shall have full voting rights and powers
equal to the voting rights and powers of the holders of Ordinary Shares, and
shall be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with these Articles, and shall be entitled
to vote, together with holders of Ordinary Shares, with respect to any question
upon which holders of Ordinary Shares have the right to vote.
(b) Until the consummation of a Qualified IPO, any action or resolution
of the Company's general meeting or of the Company's Board of Directors (or any
committee thereof), as applicable, regarding any of the following issues, shall
require the consent of the majority of the holders of the then outstanding
Preferred B1 Shares and the majority of the holders of the then outstanding
Preferred B Shares: (1) amending the Memorandum, Articles of Association or
other action which would have the affect of amending the rights, preferences or
privileges of the Preferred B1 Shares or of the Preferred B Shares, as
applicable; without derogating from the generality of the above, the provisions
of this Sub-Article 10(b)(1) shall apply, amongst others, to amendment or
cancellation of Articles 7, 8, 9, 10, 11, 12, 26, 27, 28, 31, 32, 52, 61(b); (2)
the issuance of Ordinary Shares or any further Preferred Shares or other
securities with rights equal to or superior to the rights of the Preferred B1
Shares or of the Preferred B Shares, as applicable; (3) the merger of the
Company or sale of substantially all the Company's assets; (4) increase in the
number of the Company's directors to more than five; (5) declaration or payment
of any dividend or other distribution of cash, shares, or other assets; (6)
interested party transactions; (7) making any loans or advances to employees
other than in ordinary course of business; (8) making any
11
guarantee in excess of US$ 200,000 or not in the ordinary course of business;
(9) mortgaging, pledging or creating a security interest ("PLEDGE") on all or
substantially all of the assets of the Company or a subsidiary, or on any of
their material assets; (10) formation of or investment in any entity which is
not wholly owned by the Company; (11) appointment and removal of executive
management, including the CEO, and their employment terms; (12) making any
material changes in the nature of the Company's business; (13) the appointment
and removal of the Company's auditors; (14) any sale, transfer, license, or
pledge or similar transaction (including waiver of rights) in relation to the
Company's (including any subsidiary's) intellectual property, which is not made
in the ordinary course of its business; and (15) approval of the annual
operating plan and budget.
11. PREEMPTIVE RIGHTS.
(a) Until a Qualified IPO, the Preferred Holders shall be entitled to
preemptive rights to purchase, pro-rata, all of New Securities (as defined
below) that the Company may, from time to time, propose to sell and issue. The
pro rata share of the holders of Preferred Shares shall be the ratio of the
respective number of Ordinary Shares held by each of them (on an as-converted
basis) at the date of the Rights Notice (as defined below), to the sum of the
total number of Ordinary Shares (on an as-converted basis) as of such date. The
preemptive right herein shall be subject to the following provisions:
(b) "NEW SECURITIES" shall mean any Ordinary Shares or preferred shares
of any kind of the company, whether now or hereafter authorized, and rights,
options, or warrants to purchase said Ordinary Shares or preferred shares, and
securities of any type whatsoever that are, or may become, convertible into said
Ordinary Shares or Preferred Shares; provided, however, that New Securities
shall not include: (i) Ordinary Shares or Preferred Shares issued in connection
with any stock split, stock dividend, recapitalization, reclassification or
similar event by the Company; (ii) up to 1,653,000 Ordinary Shares, or such
larger amount as approved by the Board, issued pursuant to a share purchase or
share option plan approved by the Board; (iii) Preferred B1 Shares issued
pursuant to conversion under the Convertible Loan Agreement (iv) Preferred B
Shares issued to BackWeb or to Carmel Venture Funds Entities pursuant to BackWeb
Option under the Share Purchase Agreement (v) Ordinary Shares issued upon
conversion of Preferred Shares; (vi) shares issued upon exercise of the
Warrants; and (vii) up to 105,000 Preferred A Shares issued to Xxxxxx Xxxxxxxx
upon exercise of the warrant issued by the Company on October 20, 1999.
(c) If the Company proposes to issue New Securities, it shall give the
Preferred Holders written notice (the "RIGHTS NOTICE") of its intention,
describing the New Securities, the price, the general terms upon which the
Company proposes to issue them, and the number of shares that each of the
Preferred Holders has the right to purchase under this Article 11. Each of
Preferred Holders shall have twenty one (21) days from delivery of the Rights
Notice (the "EXERCISE PERIOD") to agree to purchase all but not less than all of
its pro-rata share of such New Securities, for the price and upon the general
terms specified in the Rights Notice. Within three (3) days from the termination
of the Exercise Period, the Company shall give the Preferred Holders who
exercise their preemptive right set forth herein (the "EXERCISING HOLDERS"), a
written notice of the number of New Securities which remains unexercised by the
other holders of Preferred Shares. Each of the Exercising Holders shall have
seven (7) days from delivery of such notice to agree to purchase all or any part
of the pro-rata shares of any such non-exercising shareholders, to the extent
remaining unexercised by such shareholders, in each case for the price and upon
the general
12
terms specified in the Rights Notice, by giving written notice to the Company
setting forth the amount of New Securities to be purchased. If the Exercising
Holders elect to purchase, in the aggregate, all but not less than all of the
New Securities, then such New Securities shall be sold to such Exercising
Shareholders in accordance with the respective amounts requested by each
Exercising Shareholder; If the Exercising Holders who elect to purchase their
full pro- rata shares also elect to purchase, in the aggregate, more than the
number of the New Securities, then such New Securities shall be sold to the
Exercising Shareholders pro-rata amongst themselves, provided that no Exercising
Shareholder shall be forced to purchase more than the number of New Securities
requested by it.
(d) If the Preferred Holders fail to exercise the right of preemption
for the entire amount of the proposed New Securities within the period or
periods specified in Article 11(c), the New Securities may be sold by the
Company within one hundred and eighty (180) days after delivery of the Rights
Notice, at a price and upon general terms no more favorable to the purchasers
thereof than specified in the Rights Notice. If the Company has not sold the New
Securities within the said one hundred eighty (180) day period, the Company
shall not thereafter issue or sell any New Securities without first offering
such securities to the Preferred Holders in the manner provided above.
12. DELIVERY OF FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION.
The Company shall deliver to any holder of Preferred Shares (provided that the
Carmel Venture Funds Entities as a group, Infinity Venture Capital Funds
Entities as a group and BackWeb and its affiliates as a group, may be
considered, each such group, as one holder for the purpose of this Article 12)
holding at least five (5) percent of the outstanding share capital of the
Company (on an as-converted basis) (in this Article 12, a "HOLDER") financial
statements and additional information as follows:
(a) As soon as practicable, but in any event within sixty (60) days
after the end of each fiscal year of the Company, a consolidated balance sheet
of the Company as of the end of such year, and statements of income and
statements of cash flow of the Company for such year, setting forth in each case
in comparative form the figures for the previous fiscal year, all in reasonable
detail, United States dollar-denominated, prepared in accordance with GAAP,
audited by a firm of Independent Certified Public Accountants in the State of
Israel forming part of the "big 5" CPA firms who are members of the Israeli
Institute of Certified Public Accountants, and accompanied by an opinion of such
firm, in the customary form, which opinion shall state that such balance sheet
and statements of income and cash flow have been prepared in accordance with
GAAP applied on a basis consistent with that of the preceding fiscal year
(unless required otherwise by a governmental authority), and present fairly and
accurately the financial position of the Company as of their date, and that the
audit by such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing principles.
(b) As soon as practicable, but in any event within forty-five (45) days
after the end of each of the first three (3) quarters of each fiscal year of the
Company, an unaudited (but reviewed) consolidated balance sheet of the Company
as at the end of each such period and unaudited (but reviewed) consolidated
statements of: (i) income; and (ii) cash flow of the Company for such period and
for the period from the beginning of the current fiscal year to the end of such
quarterly period, setting forth in each case in comparative form the figures for
the corresponding period of the previous fiscal year, all in reasonable detail,
United
13
States dollar-denominated, and certified by the chief financial officer (or if
none, by the chief executive officer) of the Company, that such financial
statements were prepared in accordance with GAAP applied on a basis consistent
with that of preceding periods and, except as otherwise stated therein, fairly
present the financial position of the Company as of their date. As soon as
practicable, but in any event within forty-five (45) days after the end of each
quarter of each fiscal year of the Company, the Company shall provide the
Preferred B Holders and the Preferred B1 Holders quarterly management reports.
(c) Within thirty (30) days after the end of each month, the Company
shall provide each Holder monthly reports in the form of a statement of revenues
and expenses, as shall be determined by the Board.
(d) The Company will permit an authorized representative of each Holder
full and free access, at all reasonable times, and upon reasonable coordination,
to any of the properties of the Company, including its books and records, and to
discuss its affairs, finances and accounts with the Company's officers and
auditor. In addition, the Company will make available to any Holder, with
reasonable promptness, such other information and data with respect to the
Company, as a Holder may from time to time reasonably request. This Article 12
shall not be in limitation of any rights which the Preferred B Holders, the
Preferred B1 Holders or the director(s) designated by the Preferred B Holders or
the Preferred B1 Holders may have under applicable law. In addition, and not as
a limitation on any of the foregoing, the Company will provide reasonable
disclosure and information regarding the Company's affairs at meetings of the
Board, annual general meetings of the shareholders, and extraordinary general
meetings of the shareholders.
(e) The Company's obligation to deliver the financial statements and
other information under Articles 12(a), 12(b) and 12(c) hereof, shall terminate
and shall be of no further force or effect upon the closing of a Qualified IPO.
Following an IPO, the Company shall deliver to any Holder, and any of its
assignees or transferees, copies of all filings with the Securities and Exchange
Commission promptly after filing, and such financial information as the Company
from time to time provides to other holders of its securities.
(f) Any Preferred B Holder and Preferred B1 Holder which is subject to
disclosure duties under applicable securities laws shall have the right to make
any disclosure of the Company's information provided to it hereunder only to the
extent required under such laws.
(g) A Holder will be withheld from exercising its rights set forth in
this Article 12 in relation to any matters which the Board of Directors of the
Company shall determine, by a majority of the directors, may give rise to a
conflict of interest between the Company, its business, operations and or
potential or proposed transactions thereof and such Holder.
RIGHTS AND RESTRICTIONS OF DEFERRED SHARES
12A. Deferred Shares shall be entitled to receive the par value thereof in an
event of liquidation or winding up of the Company, and shall not be entitled to
any other rights or privileges. Any shareholder's right and/or privilege as set
forth in these Articles shall only apply to the holders of Preferred Shares
and/or Ordinary Shares, as the case may be, and any reference to "shareholder"
or "member" shall be deemed as reference to Preferred Shares and/or Ordinary
Shares, as the case may be.
14
ALLOTMENT OF SHARES
13. Subject to the provisions of Article 14, the unissued shares shall be under
the control of the Board of Directors, who shall have the power to allot shares
or otherwise dispose of them to such persons, on such terms and conditions
(including inter-alia terms relating to calls as set forth in Article 29
hereof), and either at nominal value or at a premium, or, subject to the
provisions of the Law, at a discount, and at such times, as the Board of
Directors may think fit, and the power to give any person the option to acquire
from the Company any shares, either at nominal value or at premium, or, subject
as aforesaid, at a discount, during such time and for such consideration as the
Board of Directors may think fit.
REGISTERED HOLDER
14. (a) If two or more persons are registered as joint holders of a share
they shall be jointly and severally liable for any calls or any other liability
with respect to such share. However with respect to voting, power of attorney
and furnishing notices, the one registered first in the register of members
shall be deemed to be the sole owner of the share, insofar as all the registered
joint holders shall not notify the Company in writing to relate to another one
of them as the sole owner of the share, as aforesaid.
(b) In the case that two or more persons are registered together as
holders of a share, each one of them shall be permitted to give receipts binding
all the joint holders for dividends or other monies in connection with the share
and the Company shall be permitted to pay all the dividends or other monies due
with respect to the share to one or more of the joint holders, as it shall
choose.
SHARE CERTIFICATE
15. (a) A member shall be entitled to receive from the Company without
payment, one certificate that shall contain that number of shares registered in
the name of such member, their class and serial numbering. However, in the event
of joint holders holding a share, the Company shall not be obligated to issue
more than one certificate to all of the joint holders, and the delivery of such
a certificate to one of the joint holders shall be deemed to be a delivery to
all of the joint holders.
(b) Each certificate shall carry the signature or signatures of those
persons appointed by the Board for this purpose and the rubber stamp or the seal
of the Company.
(c) If a share certificate is defaced, lost or destroyed, it may be
replaced upon payment of such fee, if any, and on such terms, if any, as to
evidence and indemnity as the Board of Directors may think fit.
MODIFICATIONS OF SHARE RIGHTS
16. Without derogating from the provisions of Articles 10 (b), if at any time
the share capital is divided into different classes of shares (unless otherwise
provided for by the terms
15
of issue of the shares of that class), the Board shall be permitted to change,
convert, broaden, add or vary in any other manner the rights, advantages,
restrictions and provisions attached at that time to one or more of the classes,
after receiving the written consent of the holders of more than fifty (50)
percent of the issued shares of that class, or with the sanction of an Ordinary
Resolution passed at a separate general meeting of the holders of the shares of
that class. The provisions of these Articles relating to general meetings shall
apply, mutatis-mutandis, to every such separate general meeting. Any holder of
shares of that class present, either personally or by proxy, may request a
secret ballot.
PLEDGE
17. (a) The Company shall have a lien and first pledge on all the shares, not
fully paid, registered in the name of any member (whether registered in his name
only or together with another or others) for any amount still outstanding with
respect to that share, whether presently payable or not. Such a pledge shall
exist whether the dates of payment or fulfillment or execution of the
obligations, debts or commitments have become due or not, and shall apply to all
dividends that shall be decided upon from time to time in connection with these
shares. No benefit shall be created with respect to such share based upon the
rules of equity which shall frustrate such pledge; however, the directors may
declare at any time with respect to any share that it is released, wholly or in
part, temporarily or permanently, from the provisions of this Article.
(b) The Company may sell, in such manner and at such time as the Directors think
fit, any of the pledged shares, but no sale shall be made unless the date of
payment of the monies or a part thereof has arrived, or the date of fulfillment
and performance of the obligations and commitments in consideration of which the
pledge exists has arrived, and after a written request has been furnished to the
member or person who has acquired a right in the shares, which sets out the
amount or obligation or commitment due from him and which demands their payment,
fulfillment or execution, and which informs the person of the Directors' desire
to sell the shares in the event of non-fulfillment of the notice, and the person
has not fulfilled his obligation pursuant to the notice within seven days after
the notice had been sent to him.
(c) The net proceeds of such sale shall be applied in payment of such sum due to
the Company or to the fulfillment of the obligation or commitment, and the
remainder (if there shall be any) shall be paid to the member or to the person
who has acquired a right in the share sold pursuant to the above.
(d) After execution of a sale as aforesaid, the Directors shall be permitted to
sign or to appoint someone to sign a deed of transfer of the sold shares and to
register the buyer's name in the register of members as the owner of the sold
shares and it shall not be the obligation of the buyer to supervise the
application of monies nor will his right in the shares be affected by a defect
or illegality in the sale proceedings after his name has been registered in the
register of members with respect to those shares.
The sole remedy of any person aggrieved by the sale shall be in damages only and
against the Company exclusively.
16
TRANSFER OF SHARES
18. Subject to the rights of first refusal, co-sale provisions, no-sale
provisions and bring along provisions set forth in these Articles, each
shareholder may freely transfer his shares; provided, however, that in the event
that the intended transferee is a direct competitor of the Company, such
transfer shall be contingent on the approval of such transfer by the Company's
Board of Directors following receipt of notification to that effect from the
transferor. In the event of receipt of such notification, the Board of Directors
shall approve or refuse such transfer within fourteen (14) days thereafter.
Failure of the Board of Directors to refuse such transfer within said time
period shall be deemed an approval of such transfer by the Board of Directors.
19. Each transfer of shares shall be made in writing in the form appearing
herein below, or in a similar form, or in any form as to be determined upon by
the Directors from time to time, such form shall be delivered to the office
together with the transferred share certificates and any other proof the
directors shall require, if they shall so require, in order to prove the title
of the transferor.
Deed of Transfer of Shares
I, _________ of _______________, in consideration of the sum of NIS ____ (New
Israeli Shekels) paid to me by __________, of _____________ (hereinafter called
the "TRANSFEREE") do hereby transfer to the said transferee ________ share(s)
having par value of NIS __ each one numbered _____ until _____ inclusive in
Emony Ltd., to hold unto the transferee, his executors, administrators, and
assigns, subject to the several conditions on which I held the same at the time
of the execution hereof; and I, the transferee, do hereby agree to take the said
share (or shares) subject to the conditions aforesaid. As witness we have
hereunto set our hands the ___ day of _____, 200_.
---------------------------- ----------------------------
Transferee Transferor
---------------------------- ----------------------------
Address & Profession Address & Profession
---------------------------- ----------------------------
Witness to the Witness to the
Transferee's Signature Transferor's Signature
---------------------------- ----------------------------
Address of Witness Address of Witness
20. The deed of share transfer shall be executed both by the transferor and
transferee, and the transferor shall be deemed to remain a holder of the share
until the name of the transferee is entered into the register of members in
respect thereof.
21. The Board shall be permitted to demand a fee for registration of transfer,
in a reasonable rate as to be determined by the directors from time to time.
22. The register may be closed at such dates and for such other periods as
determined by the directors from time to time, upon the condition that the
register shall not be closed for more than thirty (30) days every year.
23. Upon the death of a member the remaining holders (in the event that the
deceased was a joint holder in a share) or the administrators or executors or
heirs of the deceased (in the event the deceased was the sole holder of the
share or was the only one of the joint holders of the share to remain alive)
shall be recognized by the Company as the sole holders of any
17
title to the shares of the deceased. However, nothing aforesaid shall release
the estate of a joint holder of a share from any obligation with respect to the
share that he held jointly with any other holder.
24. Any person becoming entitled to a share in consequence of the death or
bankruptcy or liquidation of a member shall, upon such evidence being produced
as may from time to time be required by the Directors, have the right, either to
be registered as a member in respect of the share upon the consent of the
Directors (who have the right to refuse pursuant to Article 25 above) or,
instead of being registered himself, to transfer such share to another person,
subject to the provisions contained in these Articles with respect to transfers.
25. A person becoming entitled to a share because of the death of a member shall
not be entitled to receive notices with respect to Company meetings or to
participate or vote therein with respect to that share, or aside from the
aforesaid, to use any right of a member, until he has been accepted as a member
with respect to that share.
26. RIGHT OF FIRST REFUSAL; RIGHT OF CO-SALE.
(a) In the event that any of the shareholders of the Company (in this
Article, a "SELLING SHAREHOLDER"), proposes to transfer all or any of its
securities other than to a Permitted Transferee, as defined below (the "OFFERED
SECURITIES"), such Selling Shareholder shall first offer such Offered Securities
to each of the other shareholders of the Company holding at least one (1) per
cent of the then issued and outstanding share capital of the Company (the "OTHER
SHAREHOLDERS") by delivering to each one a written notice of such proposal (the
"OFFER"). The Offer shall state the identity of the Selling Shareholder, the
identity of the proposed transferee(s) and the proposed terms of sale of the
Offered Securities. Each of the Other Shareholders may accept the Offer, on a
pro rata basis among the Other Shareholders, in respect of all of the Offered
Securities, by giving such Selling Shareholder and the Company notice to that
effect within thirty (30) days after receiving the Offer (the "ACCEPTANCE
PERIOD"). In the event that the Other Shareholders accept the Offer, then they
shall acquire all the Offered Securities, on the terms set forth in the Offer,
and on a pro-rata basis among themselves (determined for each of them as the
result of the multiplication of the number of Offered Securities by a fraction
the numerator of which is the number of ordinary shares held by such holder (on
as converted basis), and the denominator of which is the aggregate number of all
Ordinary Shares held by all Other Shareholders (on an as converted basis)). In
the Event the Other Shareholder do not accept the Offer in full, then, within 3
(three) days from the termination of the Acceptance Period, the Selling
Shareholders shall give the Other Shareholders who exercise their right of first
refusal set forth herein (the "ACCEPTING SHAREHOLDERS") and the Company, a
written notice of the number of Offered Securities which remains unexercised by
the Other Shareholders (the "REMAINING SHARES"). Each of the Accepting
Shareholders shall have 7 (seven) days from delivery of such notice to agree to
purchase the Remaining Shares on a pro rata basis among the Accepting
Shareholders. The calculation of the pro rata basis with respect to the
Remaining Shares shall be according to the calculation set herein above mutatis
mutandis. In the event that the Other Shareholders do not accept the Offer in
full then the Selling Shareholder shall, at the expiration of the aforementioned
seven (7) day period, be entitled to transfer all of the Offered Securities to
the proposed transferee(s) identified in the Offer; provided, however, that in
no event shall the Selling Shareholder transfer any of the Offered Securities to
any transferee other than the Accepting Shareholders or such proposed
transferee(s), or transfer the same on terms more favorable to the buyer(s) than
those stated
18
in the Offer; and provided, further, that any of the Offered Securities not
transferred within one hundred and twenty (120) days after the expiration of
such seven (7) day period shall again be subject to the provisions of this
Article 26(a).
(b) Except to the extent that the first refusal rights set forth in
Article 26(a) above are exercised by Other Shareholders, if any Founder receives
one or more bona fide offers (a "PURCHASE OFFER") from any person or entity
other than shareholders of the Company (the "THIRD PARTY"), to purchase from
such Founder any or all of its securities in the Company (the "FOUNDER
SECURITIES"), the holders of Preferred B1 Shares and the holders of Preferred B
Shares shall have the right to participate in the Founder's sale of securities
on a pro rata basis, in accordance with this Article 26(b), pursuant to the
specified terms and conditions of such Purchase Offer. Upon receipt of a
Purchase Offer, the Founder shall promptly notify the holders of Preferred B1
Shares and the holders of Preferred B Shares in writing of the name and address
of the Third Party and the terms and conditions of such Purchase Offer (the
"ARTICLE 26(b) NOTICE"). Each of the holders of Preferred B1 Shares and of
Preferred B Shares shall be entitled, upon written notice to such Founder within
thirty (30) business days after receipt of the Article 26(b) Notice (the
"PARTICIPATION NOTICE"), to sell to the Third Party up to that number of the
securities in the Company owned by such holders of Preferred B1 Shares and of
Preferred B Shares (the "EQUITY SHARES") which is determined by multiplying the
number of Founder Securities by a fraction the numerator of which is the number
of Ordinary Shares owned by such holders of Preferred B1 Shares and of Preferred
B Shares on an as-converted basis, as applicable, and the denominator of which
is the total number of Ordinary Shares owned by such Founder plus the number of
Ordinary Shares held by such holders of Preferred B1 Shares and of Preferred B
Shares on an as-converted basis, as applicable, plus the number of Ordinary
Shares held by all other shareholders entitled to similar rights of co-sale (on
an as-converted basis). Such Participation Notice shall indicate, subject to the
terms of this Article 26(b), the number of Equity Shares that the holders of
Preferred B1 Shares and of Preferred B Shares, as applicable, intend to transfer
to the Third Party. At the closing of the sale of securities to the Third Party,
the Founder shall transfer its shares to the Third Party only if the Third Party
concurrently therewith purchases, on the same terms and conditions specified in
the Article 26(b) Notice, all of the Equity Shares as to which the Participation
Notice has been delivered.
(c) if the Founders sell in one or more transactions more than fifty
(50) percent of their shares in the Company, then in any subsequent sale the
holders of the Preferred B1 Shares and the holders of Preferred B Shares will
have a right of co-sale to sell all of their shares along with and prior to any
additional sale by the Founders.
(d) Notwithstanding anything in this Article 26 to the contrary, the
foregoing first refusal and co-sale rights shall not apply (i) to the transfer
of securities by a shareholder to a Permitted Transferee (as defined below);
(ii) the transfer of up to 60,241 shares of the Company from Xxxxxx Xxxxx to
Xxxxxx Xxxxxxxx and the transfer of up to 60,241 shares of the Company from
Xxxxxx Xxxxx to Adv. Xxxxx Xxxxxxxxx; and (iii) the transfers of up to 150,000
and up to 30,000 shares of the Company, respectively, from Xxxx Xxxxx and Xxxxxx
Xxxxx to Xxx Xxxxxxxxx.
As a condition precedent to any transfer to a Permitted Transferee, such
Permitted Transferee shall undertake in writing towards the Company and its
shareholders all of the transferor's obligations under this Agreement and shall
send a copy thereof to the Preferred B Holders, the Preferred B1 Holders and to
the Company.
19
In these Articles, a "PERMITTED TRANSFEREE" means with respect to any
shareholder (i) any person or entity, directly or indirectly, that controls or
is controlled by or is under common control with the respective transferor (ii)
any fund (or shareholder or partner of any such fund) or any beneficiary of a
trust or an account or other arrangement, or any fund managed by the general
partner or managing entity(ies) of the Preferred Holders and - the general or
limited partner(s) or managing entity(ies) of such Preferred Holders or fund, or
any affiliate of such funds, shareholder or partner under common or related
management or control with the transferor, including, without limitation
transfers by a Carmel Venture entity among Carmel Venture entities and with
respect to the Carmel Venture entities - including but not limited to - Siemens
Venture Capital GmbH, or any affiliate thereof; (iii) Immediate family of the
transferor, including spouse, parents, brothers and sisters, and children of
such shareholder in the event that shares are held by individuals; and in
respect to each Preferred B1 Holders and Preferred B Holders also to other
Preferred B1 Holders and Preferred B Holders, and (iv) with respect to Clal
Electronics Ltd., any of the SPR INFINITY II Fund entities. In addition a
"Permitted Transferee" shall mean a shareholder (or a former shareholder of the
Company), when such transfer is made by a Permitted Transferee to such
shareholder (or former shareholder) who originally transferred the shares to
such Permitted Transferee.
(e) The first refusal and co-sale rights granted in this Article 26
shall terminate upon a Qualified IPO.
27. RESTRICTIONS ON SALE BY FOUNDERS.
Notwithstanding anything contained herein to the contrary, none of the Founders
shall be permitted to sell, pledge, transfer or make other dispositions of any
of his shares, prior to an Initial public offering of the Ordinary Shares or to
a merger of the Company. Notwithstanding the aforesaid, (i) each Founder shall
be permitted to sell up to fifteen (15) percent of the number of shares of the
Company held by such Founder; (ii) the Founders shall be permitted to sell all
of their shares as part of a sale of all or substantially all of the shares of
the Company to a third party; (iii) the Founders shall be permitted to sell all
of their shares to their Permitted Transferees; and (iv) Xxxxxx Xxxxx shall be
permitted to sell such number of his shares as required to comply with the terms
of repayment of that certain loan stipulated in the Loan Agreement between the
Company and Xxxxxx Xxxxx, dated October 16, 2000, and not before 30 days prior
to the date of repayment.
28. BRING-ALONG RIGHT.
(a) At any time prior to a Qualified IPO, in the event that holders of at least
seventy five (75) percent of the Company's outstanding shares (the "PROPOSING
SHAREHOLDERS") shall accept in writing a detailed offer by any person or
persons, to purchase all of the Company's securities or shares, as the case may
be (the "PURCHASE OFFER"), then all remaining shareholders (in this Article the
"REMAINING SHAREHOLDERS"), shall be compelled to sell their securities in the
Company pursuant to the terms of the Purchase Offer.
(b) At the closing of the proposed transaction (which date, place and time shall
be designated by the Proposing Shareholders and provided to such Remaining
Shareholders in writing at least five (5) business days prior thereto), each
such Remaining Shareholders shall (if required by the Proposing Shareholders or
the Company), deliver certificates evidencing all his or her securities, duly
endorsed, or accompanied by written instruments of transfer in
20
form satisfactory to the proposed purchaser, duly executed by such holder, free
and clear of any liens, against delivery of the purchase price therefor.
CALLS
29. (a) A member shall not be entitled to receive dividends nor to use any right
a member has, unless he has paid all the calls that shall be made from time to
time, with respect of money unpaid on all of his shares, whether he is the sole
holder or holds the shares together with another person, in addition to interest
and expenses if there shall be any.
(b) The Directors may, subject to the provisions of these Articles, make calls
upon the members from time to time in respect of any moneys unpaid on their
shares, as they shall determine proper, upon the condition that there shall be
given prior notice of fourteen (14) days on every call and each member shall be
obligated to pay the total amount requested from him, or the installment on
account of the call (if there shall so be) at the times and places to be
determined by the Directors.
(c) The calls for payment shall be deemed to have been requested from the date
the Directors shall have decided upon the calls for payment.
(d) The joint holders of a share shall be jointly and severally liable to pay
the calls for payment in full and the installment on account, in connection with
such calls.
(e) If a sum called in respect of a share is not duly paid, the holders of the
share or the person to whom it has been issued shall be liable to pay interest
and linkage differentials (the "INTEREST") upon the amount of the call or the
payments on account, as determined by the Board of Directors, commencing from
the day designated for the payment thereof to the time of actual payment, but
the Directors shall be at liberty to waive payment of that Interest, in whole or
in part.
(f) Any amount that according to the condition of issuance of a share must be
paid at the time of issuance or at a fixed date, whether on account of the
nominal value of the share or as premium, shall be deemed for the purposes of
these Articles to be a call of payment that was duly made and the date of
payment shall be the date designated for payment. In the event of non-payment of
such amount, all of the Articles herein dealing with payment of interest,
expenses, forfeiture, pledge and the like and all the other Articles connected
therewith, shall apply, as if this sum had been duly requested and notice had
been given, as aforesaid.
(g) The Directors may make arrangements at the time of issue of shares for a
difference between the holders with respect to the amount of calls to be paid
and the times of payment, and the rate of Interest.
(h) The Directors may, if they think fit, receive from any member willing to pay
in advance all of the monies or a part thereof that shall be due on account of
his shares, in addition to any amounts for which payment has been requested, and
they shall be permitted to pay such member interest at the rate the Directors
and such member shall agree upon, for the amounts paid in advance as aforesaid,
or upon the part thereof which is in excess of the amounts for which payment was
at the time requested on account of his shares, in addition
21
to paying dividends that will be paid for that part of the shares which has been
paid in advance.
FORFEITURE OF SHARES
30. Subject to the provisions of Section 181 of the Law:
(a) If a member fails to pay any call or installment of a call on the day
designated for payment thereof, the Directors may, at any time thereafter during
such time as any part of such call or installment remains unpaid, serve a notice
on such member requiring payment of that portion of the call or installment as
is unpaid, together with any interest which may have accrued and any expenses
that were incurred as a result of such non-payment.
(b) The notice shall name a specified day, not earlier than the expiration of
seven (7) days from the date of the notice, on or before which the amount of the
call or installment or a part thereof is to be made together with interest and
any expenses incurred as a result of such non-payment. The notice shall also
state the place the payment is to be made and that in the event of non-payment,
at or before the time appointed, the shares in respect of which the call was
made will be liable to be forfeited.
(c) If the requirements of any such notice as aforesaid are not complied with,
any share in respect of which the notice has been given may at any time
thereafter, before the payment required by the notice has been made, be
forfeited by a resolution of the Directors to that effect. The forfeiture shall
include those dividends that were declared but not yet distributed, with respect
to the forfeited shares.
(d) A share so forfeited shall be deemed to be the property of the Company and
can be sold or otherwise disposed of, on such terms and in such manner as the
directors think fit. At any time before such sale or disposition, the forfeiture
may be canceled on such terms as the directors think fit.
(e) A person whose shares have been forfeited shall cease to be a member in
respect of the forfeited shares, but shall notwithstanding remain liable to pay
to the Company all monies which, at the date of forfeiture, were presently
payable by him to the Company in respect of the shares, but his liability shall
cease if and when the Company receives payment in full of the nominal amount of
the shares.
(f) The forfeiture of a share shall cause, at the time of forfeiture, the
cancellation of all rights in the Company or any claim or demand against it with
respect to that share and the other rights and obligations between the share
owner and the Company attached to the share, except for those rights and
obligations not included in such a cancellation according to these Articles or
that the Law imposes upon former members.
(g) The provisions of these Articles as to forfeiture shall apply in the case of
non-payment of any sum which, by the terms of issue of a share, becomes payable
at a fixed time, whether on account of the nominal value of the share, or by way
of premium, as if the same had been payable by virtue of a call duly made and
notified.
22
MODIFICATION OF CAPITAL
31. Subject to Article 10 hereof, the Company may, from time to time, by
Ordinary Resolution:
(a) consolidate and divide all or any of its issued or unissued share
capital into shares of larger nominal value than its existing shares;
(b) cancel any shares which have not been taken or agreed to be taken by
any person;
(c) by subdivision of its existing shares, or any of them, divide the
whole, or any part, of its share capital into shares of smaller amounts than is
fixed in Article 5 above; subject, however, to the provisions of the Law, and in
a manner enabling the Company in the division resolution, with respect to the
shares created as a result of such division, to grant to one or more shares a
preferable right or advantage with respect to dividend, capital, voting or
otherwise over the remaining share or other similar shares;
(d) reduce its share capital and any fund reserved for capital
redemption in the manner that it shall deem to be correct, all in accordance
with the provisions of the Law.
INCREASE OF SHARE CAPITAL
32. The Company shall be permitted, subject to the provisions of Article 10,
from time to time, by an Ordinary Resolution, to increase its share capital by
the creation of new shares - whether or not all its shares have been issued, and
whether or not the shares issued have been paid in full. Such new capital shall
be in such an amount, divided into such number of shares, have such preferable
or deferred or other special rights (subject always to the special rights
conferred upon an existing class of share), and be subject to such conditions
and restrictions with respect to dividends, return of capital, voting or
otherwise, as shall be directed by the general meeting in its resolution
sanctioning the increase of the share capital.
33. Subject to any decision to the contrary in the resolution sanctioning the
increase in share capital, and pursuant to these Articles, the new share capital
shall be deemed to be part of the original share capital of the Company and
shall be subject to the same provisions with respect to payment of calls, liens,
title, forfeiture, transfer and otherwise as apply to the original share
capital.
GENERAL MEETINGS
34. A general meeting shall be held once every year, at such time being not more
than fifteen (15) months after the holding of the preceding general meeting, and
at such place as may be prescribed by the directors. The above-mentioned general
meetings shall be called "ORDINARY MEETINGS". All other general meetings shall
be called "EXTRAORDINARY GENERAL MEETINGS". An Annual Meeting or an
Extraordinary Meeting of the shareholders shall be referred to as a "GENERAL
MEETING". A meeting of holders of a class of shares shall be referred to as a
"CLASS MEETING" or "CATEGORY MEETING".
35. Subject to the provisions of these Articles and to the provisions of the
Law, the function of the Ordinary Meeting shall be to receive and to discuss
profit and loss statements, balance sheets, ordinary reports and accounts of the
directors and auditors, and to declare dividends, to appoint auditors and to fix
their salaries and to transact any other
23
business which under these Articles or under the Law are to be transacted at a
shareholders' meeting, all as shall be determined by the Board of Directors of
the Company from time to time.
36. The Directors may, whenever they think fit, and upon a request in writing as
provided for in Section 63 of the Law, will be required to, convene an
Extraordinary General Meeting. Every such request shall include the objects for
which a meeting should be convened, shall be signed by the persons making the
request and shall be sent to the registered office of the Company. If the Board
of Directors does not convene a meeting within twenty-one (21) days from the
date of the submission of the request as aforesaid, the persons making the
request may convene by themselves a meeting, in accordance with the provisions
of Section 64 of the Law. However, the meeting which was so convened shall not
be held after three (3) months have passed since the date of the submission of
the request.
NOTICE OF GENERAL MEETINGS
37. (a) A prior notice of at least seven (7) days but not more than forty-five
(45) days shall be given with respect to the place, date and hour of the
meeting, and a description of the general nature of each item to be acted upon
therein. The notice shall be given, as provided below, to the members entitled
to receive notices from the Company pursuant to these Articles. If, by chance, a
notice as aforesaid was not given or not received by a member, this shall not
amount to a disqualification of the resolution passed or disqualification of the
proceedings held at that meeting. With the consent of all the members who are
entitled, at that time, to receive notices, the Company shall be permitted to
convene all meetings and to resolve all types of resolutions, upon a shorter
advance notice or without any notice and in such manner, generally, as shall be
approved by the members.
(b) Without prejudice and subject to the provisions of Article 12, until
otherwise decided by the Board of Directors, the Company will not send copies of
the financial reports to the Company's shareholders prior to the Ordinary
Meeting. If one of the issues on the agenda of a shareholder's meeting is a
transaction between the Company and a controlling shareholder as described in
Section 270(4) of the Law, then each shareholder shall notify the Company prior
to that meeting, whether or not he has a personal interest in such transaction.
Votes of shareholders who did not notify the company whether they have such
personal interest, shall not be counted.
QUORUM
38. No deliberation shall be commenced with respect to any matter at the general
meeting unless there shall be present a quorum at the time when the general
meeting proceeds to deliberate. In any meeting a quorum shall be formed when
there are present personally or by proxy not less than two (2) members who hold
or represent together more than 50% of the voting rights of the issued share
capital of the Company.
39. If within half an hour from the time appointed for the meeting a quorum is
not present, the meeting shall stand adjourned to the same day in the next week
at the same place and time, or any other day and/or any other hour and/or any
other place as the Directors shall notify the shareholders, and, if at the
second meeting a quorum is not present within half an
24
hour from the time appointed for the meeting, any two (2) members present
personally or by proxy shall be a quorum, and shall be entitled to deliberate
and to resolve in respect of the matters for which the meeting was convened.
However, if the meeting was convened upon a request made in accordance with
Sections 63 and 64 of the Law, then the adjourned meeting shall only be held if
the number of shareholders participating in such meeting constitute the minimum
number of shareholders as required in accordance with the provisions of Sections
63 and 64 of the Law. No business shall be transacted at any adjourned meeting,
except business which might lawfully have been transacted at a meeting as
originally called.
40. Shareholders may participate by means of telephone conference call or other
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and subject to a confirmation of attendance to
the Chairman made by the Secretary, such participation in the meeting shall
constitute attendance in person at the meeting.
CHAIRMAN
41. Subject to the provisions of the Law, the chairman of the Board of Directors
shall preside as chairman at all general meetings. If there is no chairman or he
is not present within fifteen (15) minutes from the time appointed for the
meeting or if he shall refuse to preside over the meeting, the members present
shall elect one of the Directors to act as chairman, and if only one Director is
present, he shall act as chairman. If no Directors are present or if they all
refuse to preside over the meeting, the members present shall elect one of the
members present to preside over the meeting. The Chairman shall have no special
voting or other rights or privileges, except as stipulated in these Articles.
POWER TO ADJOURN
42. The chairman may, with the consent of any meeting at which a quorum is
present, and shall if so directed by the meeting, adjourn the meeting from time
to time and from place to place, as the meeting shall decide. If the meeting
shall be adjourned for ten (10) days or more, a notice shall be given of the
adjourned meeting as in the case of an original meeting. Except as aforesaid, no
member shall be entitled to receive any notice of an adjournment or of the
business to be transacted at the adjourned meeting. At an adjourned meeting no
matters shall be discussed except for those allowed to be discussed at that
meeting which decided upon the adjournment.
ADOPTION OF RESOLUTIONS
43. At every meeting, a resolution put to the vote of the meeting shall be
decided upon by a show of hands, unless before or upon the declaration of the
result of the show of hands a secret ballot in writing be demanded by the
chairman (if he is entitled to vote) or by any member present, in person or by
proxy, and entitled to vote at the meeting. Except if a secret vote is demanded
as aforesaid, the declaration of the chairman that the resolution has been
adopted or adopted unanimously or by a particular majority, or rejected, or not
adopted by a particular majority, shall be final, and an entry to that effect in
the minute book of the Company, shall be conclusive evidence of the fact without
the necessity of proving the number or proportion of the votes recorded in favor
or against such a resolution. Except where otherwise stated in these Articles, a
resolution shall be deemed to be passed at a general meeting if it received the
majority required to pass an Ordinary Resolution.
25
44. If a secret ballot is duly demanded, it shall be taken in such manner as the
chairman directs, whether immediately or after an adjournment or in a postponed
manner or otherwise, and the results of the ballot shall be deemed to be a
resolution of the meeting wherein the secret ballot was demanded. The persons
requesting a secret ballot can withdraw their request at any time before the
secret ballot is held. A secret ballot demanded on the election of a chairman or
on a question of adjournment, shall be taken forthwith. A secret ballot demanded
on any other question shall be taken at such time as the chairman of the meeting
directs. A demand for a secret ballot shall not prevent the continuation of the
meeting with respect to the transaction of any other business, except for the
matter with respect to which the secret ballot was demanded.
VOTES OF MEMBERS
45. Subject to and without derogating from the right or preference rights or
restrictions existing at that time with respect to a certain classes of shares
forming part of the capital of the Company, each member present at a meeting,
personally or by proxy, shall be entitled, whether at a vote by show of hands or
by secret ballot, to one vote for each share held by him, provided that no
member shall be permitted to vote at a general meeting or appoint a proxy to
vote therein except if he has paid all calls for payment and all monies due to
the Company from him with respect to his shares.
46. In the case of joint holders the vote of the senior who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the votes
of the other joint holders; and for the purpose of this article seniority shall
be determined by the order in which the names stand in the register of members.
Joint holders of a share of which one of them is present at a meeting shall not
vote by proxy. The appointment of a proxy to vote on behalf of a share held by
joint holders shall be executed by the signature of the senior of the joint
holders.
PROXIES
47. (a) In every vote a member shall be entitled to vote either personally
or by proxy. A proxy present at a meeting shall also be entitled to request a
secret ballot. A proxy need not be a member of the Company.
(b) A member of the Company that is a corporation or partnership shall
be entitled by decision of its Board of Directors or by a decision of a person
or other body, according to its articles, to appoint a person who it shall deem
fit to be its representative at every meeting of the Company. The
representative, appointed as aforesaid, shall be entitled to perform on behalf
of the corporation he represents all the powers that the corporation itself may
use just as if it was a person.
48. (a) A vote pursuant to an instruction appointing a proxy shall be valid
notwithstanding the death of the appointor or the appointor becoming of unsound
mind or the cancellation of the proxy or its expiration in accordance with any
law, or the transfer of the shares with respect to which the proxy was given,
unless a notice in writing was given of such an event, and was received at the
office before the meeting took place.
26
(b) A member is entitled to vote by a separate proxy with respect to
each share held by him, provided that each proxy as aforesaid shall have a
separate letter of appointment containing the serial number of the shares with
respect to which the proxy is entitled to vote. If a specific share is included
by the holder in more than one letter of appointment, that share shall not
entitle any of the holders of such instrument to a vote.
INSTRUMENT OF APPOINTMENT
49. A letter of appointment of a proxy or power of attorney or other certificate
(if there shall be such) pursuant to which the appointee is acting, shall be in
writing, and the signature of the appointor shall be confirmed by an advocate or
public notary or bank or in any other manner acceptable to the Directors, and
such instrument or a copy thereof confirmed as aforesaid shall be deposited in
the office, or in another place in Israel or abroad - as the Directors shall
direct from time to time generally or with respect to a particular case, no
later than twenty-four (24) hours prior to the commencement of the meeting or
adjourned meeting wherein the person referred to in the instrument is appointed
to vote, otherwise that person shall not be entitled to vote that share. An
instrument appointing a proxy and which is not limited in time shall not be
valid twelve (12) months after the date of its execution. If the appointment
shall be for a limited period, the instrument shall be valid for the period
contained therein.
50. An instrument appointing a proxy (whether for a specific meeting or
otherwise) may be in the following form or in any other similar form which the
circumstances shall permit:-
"I, ________, of __________, a member holding shares in ______ and entitled to
___ votes hereby appoint _________, of ________, or in his place _________, of
_______, to vote in my name and in my place at the general meeting (regular,
extraordinary, adjourned - as the case may be) of the Company to be held on the
____ day of ______, 200__ and at any adjournment thereof.
In witness whereof, I have hereby affixed my signature the __ day of _____,
200__.
-----------------------------------
Appointor's Signature
I hereby confirm that the foregoing
instrument was signed by the appointer.
-----------------------------------
(name, profession and address)
RESOLUTION IN WRITING
51. A resolution in writing signed by all members of the Company then entitled
to attend and vote at shareholders meetings or to which all such members have
given their written consent (by letter or facsimile) shall be deemed to have
been unanimously adopted by a shareholders meeting duly convened and held.
DIRECTORS
52. (a) The Company's Board of Directors shall be comprised of up to seven (7)
directors, as follows:
27
(i) two (2) directors shall be appointed by the Founders and the
Preferred A Holders as a group,
(ii) one (1) director shall be the Company's CEO;
(iii) three (3) directors shall be appointed by the holders of
the majority of the Preferred B1 Holders and the Preferred B Holders. However,
(1) as long as the Carmel Venture Funds Entities shall hold at least 16%
(sixteen percent) of the outstanding share capital of the Company (on as
converted basis), the majority of the Share holders of the Carmel Venture Funds
Entities shall be entitled to appoint two (2) directors, and as long as they
shall hold at least 8% (eight percent) of the outstanding share capital of the
Company (on as converted basis), the majority of the Share holders of the Carmel
Venture Funds Entities shall be entitled to appoint one (1) director; and (2) as
long as the Infinity Venture Capital Entities shall hold at least 8% (eight
percent) of the outstanding share capital of the Company (on as converted
basis), the majority of the Share holders of the Infinity Venture Capital
Entities shall be entitled to appoint one (1) director; and
(iv) one (1) director shall be a person with relevant industry
experience and shall be appointed by consent between the majority of the
Preferred B1 Holders, Preferred B Holders and the Founders.
(b) Each director appointed hereunder shall enter into a
non-disclosure agreement in a form customarily used by the Company.
(c) A director appointed hereunder shall not, during the time of
serving as a member of the company's Board of Directors, serve as a director,
officer or otherwise as an employee of a company which directly competes with
the business of the company, as shall be from time to time. The determination
whether or not such competition exists shall be made by a resolution of the
Board of Directors of the Company, in which such director shall not participate.
(d) Notwithstanding anything in these Articles to the contrary, any
increase in the number of members of the Board of Directors over seven (7)
members, shall require the consent at least seventy five (75) percent of the
votes of the issued and outstanding share capital, present or otherwise
represented at the relevant shareholders meeting, and entitled to vote thereon.
53. The right to appoint a person to the Board of Directors shall include the
right to remove and replace such Director. Appointments, removals and
replacements shall be effected by furnishing written notification to the
Company. Any notice regarding the appointment, removal or replacement of a
Director shall be delivered to the Company in writing, and shall become
effective on the date fixed in such notice, or upon the delivery thereof to the
Company, whichever is later. Where any person, entity or group loses the right
to appoint one or more directors, the office of the directors appointed by such
person, entity or group shall automatically terminate and be vacated.
ALTERNATE DIRECTOR
54. (a) A director may by a written notice to the Company appoint any
person, to serve as a substitute director provided such substitute director is
qualified to be appointed as a director, and provided further that such
substitute director does not already serve as a director or a substitute
director in the Company.
28
(b) A substitute director shall have, subject to the provisions of the
instrument by which he was appointed, all the powers and authorities that the
director for whom he is serving as director has, provided, however, that he may
not in turn appoint a substitute for himself and shall have no standing at any
meeting of the Board of Directors or any committee thereof while the director
who appointed him is present.
(c) The provision of these Articles with respect to the appointment of a
director shall apply with respect to an appointment of a substitute director.
(d) The office of a substitute director shall be automatically vacated
if his appointment is terminated by the director who appointed him in accordance
with these provisions, or upon the occurrence of one of the events described in
sections (i)-(vi) of Article 64 or, if the office of the member of the Board of
Directors with respect to whom he serves as a substitute director shall be
vacated for any reason whatsoever.
(e) The substitute director has the right to receive notice of convening
of a Board of Directors meeting and may participate or vote at such meeting only
if the director appointing said substitute director is absent from said meeting.
55. Subject to the provisions of these Articles or to the provisions of an
existing contract, the tenure of the Director shall automatically by
terminated:-
(i) if he was declared bankrupt, and if he is a corporate body - if it
has voluntarily decided upon liquidation or if a liquidation order has
been issued against it;
(ii) if he is declared mentally incompetent;
(iii) if he has resigned by an instrument in writing to the Company;
(iv) if his successor is appointed pursuant to Article 70 above;
(v) with his death;
(vi) with the liquidation of the Company;
REMUNERATION OF DIRECTORS
56. Members of the Board of Directors, not being employees of the Company or
professionals providing special professional services for consideration to its
members, shall not receive a salary from funds of the Company unless the general
meeting has so decided and in the amount that the general meeting shall decide
upon. The Directors and their substitutes shall be entitled to receive expenses,
in customary amounts, for travel expenses, board and lodging that have been
expended for or during the performance of their duties as Directors, including
travel expenses to the Directors' meetings and return. If pursuant to a decision
of the Directors, one of the Directors shall perform services or tasks in
addition to his regular duties as a Director, whether as a result of his
particular profession or by a trip or stay abroad or otherwise, the Directors
may decide to pay him a special wage in addition to his regular salary, and such
a wage shall be paid by way of salary, commission, participation
29
in profits or otherwise and this wage shall be in addition to his regular
salary, if there shall be any, or will be in place thereof, as shall be decided.
POWERS AND DUTIES OF DIRECTORS
57. The business of the Company shall be managed by the Directors. They shall be
entitled to exercise all the powers and authorities that the Company has and to
perform in its name all the acts that it is entitled to do according to its
Memorandum and/or Articles and/or under law, except for those which are by law
or under these Articles vested in the general meeting of the Company, subject to
any provisions in the law or in these Articles or the regulations that the
Company shall adopt in its general meeting (insofar as they do not contradict
the law or these Articles). However any article adopted by the Company in its
general meeting shall not affect the legality of any prior act of the Directors
that would be legal and valid, if not for such an article.
58. A Director shall not be required to hold qualifying shares.
CONFLICT OF INTEREST
59. Subject to Article 10, a Director shall not be prohibited from fulfilling
his rights and duties under these Articles or from entering into contracts with
the Company whether as a seller, buyer or otherwise, and no such contract or
arrangement which shall be made on behalf of the Company or in its name wherein
the Director is or will be an interested party, either directly or indirectly,
shall be void, provided however that:
(a) any transaction between a director and the Company must be approved
in accordance with the provisions of Sections 268 through 284 of the Law; and
(b) under certain circumstances, all as described in Section 278 of the
Law, the interested Director may not participate or vote at the Board of
Directors Meeting at which approval is sought; and
(c) the interested Director must disclose all information as required
under Section 269 of the Law in connection with the substance of his interest in
the transaction for which approval is sought, and must further disclose any
material facts and documents relating thereto, all as set forth in the Law.
The provisions of this Article shall apply also to a substitute or alternate
Director, as applicable.
60. Subject to the provisions of the Law, a Director may hold another paid
position or function in the Company or in any other Company of which the Company
is a shareholder or in which it has some other interest, together with his
position as a Director (except an auditor) upon those conditions with respect to
salary and other matters as decided by the Directors.
30
FUNCTIONS OF THE DIRECTORS
61. (a) The Directors may meet in order to transact business, to adjourn their
meetings or to organize them otherwise as they shall deem fit and to determine
the legal quorum necessary to conduct business.
(b) If it shall not be otherwise decided by seventy five (75) percent of the
members of the Board of Directors, and without derogating from the protective
provisions under Article 10, the quorum of a meeting of the Directors shall be a
majority of the Directors then in office, present personally or represented by
their substitute.
CHAIRMAN
62. The Directors may from time to time elect a chairman, and decide the period
of time he shall hold such an office, and he shall preside at the meetings of
the Board of Directors. However, if such a chairman is not elected or if he is
not present at any meeting, Directors may choose one of their number to serve as
chairman of that meeting. The Chairman shall have no rights or privileges other
than those granted to Directors.
MEETINGS
63. Subject to any contrary resolution adopted by the Board of Directors, a
member of the Board of Directors may at any time call a Board of Directors'
meeting, and the Secretary shall be required on the request of such member to
convene such a meeting. The Board will convene at least five (5) times per year.
At least once per year, no later than December 31, the Board will be presented
with an operating budget for the Company for the subsequent year, with monthly
breakdowns.
64. (a) Any notice of a Board of Directors' meeting can be given orally, by
telephone, in writing, or by telegram, telex, or facsimile provided that the
notice is given ten (10) days before the time appointed for the meeting, unless
all the members of the Board of Directors shall agree to such a shorter notice.
(b) Prior and timely notice of the convening of a Board of Directors'
meeting shall be given to all Directors.
(c) Without derogating from the protective provisions under Article 10,
if applicable, all acts and determinations of the Board of Directors shall be
determined by a simple majority of the Directors attending the meeting.
(d) Members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute attendance in
person at the meeting.
DELEGATION OF POWER
65. (a) Notwithstanding anything in these Articles of Association to the
contrary, the Board of Directors may not delegate any of their executive powers
to committee(s) without receiving the affirmative consent of the majority of the
members of the Board of Directors in office at such time. The Board of Directors
may appoint committees, comprised of
31
Directors, to discuss and generate recommendations regarding issues set forth by
the Board of Directors, but such committee(s) shall not have executive powers
whatsoever, except in the event such appointment is effected as aforesaid in
this Article 65(a).
(b) In the exercise of any power delegated to them by the Board of
Directors, all committees shall conform to any regulations that may be imposed
upon them by the Directors, if there shall be any such regulation. Subject to
Sub-article (a) above, if no such regulations are adopted by the Board of
Directors or if there are no complete and encompassing regulations, the
committees shall act pursuant to these Articles dealing with organization of
meetings, meetings and functions of the Board of Directors, mutatis mutandis,
insofar as no provision of the Board of Directors shall replace it pursuant to
this Article.
66. All actions performed in a bona fide fashion by the Board of Directors or by
a committee of the Board of Directors, or by any person acting as a Director or
as a substitute shall be as valid, even if at a later date a flaw shall be
discovered in the appointment of such a Director or such a person acting as
aforesaid, or that all or some of them were unfit as if each and every one of
those persons shall have been duly appointed and fit to serve as a Director or
substitute as the case may be.
MANAGEMENT
67. Subject to the provisions of the Law:
(a) The Directors may from time to time appoint one or more persons,
whether or not he is a member of the Board of Directors, as the president and/or
CEO and/or the General Manager of the Company, either for a fixed period of time
or without limiting the time that he or they will stay in office, and the
Directors may from time to time (subject to any provision in any contract
between him or them and the company) release him or them from their office and
appoint another or others in his or their place.
(b) The Board of Directors may from time to time grant to and vest in
the president and/or CEO, at that time, those powers and authorities that it
exercises pursuant to these Articles, as it shall deem fit, and may grant those
powers and authorities for such period, and to be exercised for such objectives
and purposes and in such time and conditions, and on such restrictions, as it
shall decide; and it may grant such authorities whether concurrently with the
Board of Directors' powers in that area, or in excess of them, or in place
thereof or any one of them, and it can from time to time revoke, repeal, or
change any one or all of those authorities.
(c) The wages of the president and/or CEO shall be determined from time
to time by the Board of Directors (subject to any provision in any contract
between him and the Company) and it may be paid by way of a fixed salary or
commission or dividends, or a percentage of profits or turnover of the Company
or of any other entity that the Company has an interest in, or by participation
in such profits, or in one or more of the aforementioned methods.
32
MINUTES
68. (a) The Directors shall cause minutes to be taken of all general meetings of
the Company, of the appointments of officials of the Company, of Board of
Directors' meetings and of committee meetings that shall include the following
items, if applicable:
(1) names of the members present;
(2) matters discussed at the meeting;
(3) results of votes and resolution adopted; and
(4) directives given in the meeting to the committees.
(b) The minutes of any meeting, signed or appearing to be signed by the chairman
of the meeting or by the chairman of the meeting held immediately after that
meeting, shall serve as a prima facie proof as to the facts in the minutes.
RESOLUTION IN WRITING
69. A resolution in writing signed by all the members of the Board of Directors
or of a committee, or such a resolution that all the members of the Board of
Directors or a committee have agreed to in writing by letter or facsimile, shall
be valid for every purpose as a resolution adopted at a Board of Directors' or a
committee's meeting, as the case may be, that was duly convened and held. In
place of a Director such resolution may be signed and delivered by his
substitute.
STAMP AND SIGNATURES
70. (a) The Company shall have at least one rubber stamp. The Directors
shall ensure that such a stamp is kept in a safe place.
(b) The Board of Directors may designate and authorize any person or
persons (even if they are not members of the Board of Directors) to act and to
sign in the name of the Company, and the acts and signatures of such a person or
persons shall bind the Company, insofar as such person or persons have acted and
signed within the limits of their aforesaid authority.
(c) The printing of the name of the Company by a typewriter or by hand
next to the signatures of the authorized signatories of the Company, pursuant to
Sub-article (b) above, shall be valid as if the rubber stamp of the Company was
affixed.
BRANCH REGISTERS
71. The Company may, subject to the provisions of the Law, keep in every other
country where those provisions shall apply, a register or registers of members
living in that other country as aforesaid, and to exercise any other powers
referred to in the laws with respect to such branch registers.
33
SECRETARY, OFFICERS AND ATTORNEYS
72. (a) The Board of Directors may appoint a secretary of the Company upon
the conditions that they seem fit. The Directors may as well, from time to time,
appoint an associate secretary who shall be deemed to be the secretary for the
period of his appointment.
(b) The Board of Directors may, from time to time appoint to the
Company, officers, workers, agents and functionaries to permanent, temporary or
special positions, as they shall, from time to time, see fit and set
compensation for them.
(c) The Directors may, at any time and from time to time, authorize any
company, firm, person or group of people, whether this authorization is made by
the Directors directly or indirectly, to be the attorneys in fact of the Company
for those purposes and with those powers and discretion which shall not exceed
those conferred upon the Board of Directors or that the Board of Directors can
exercise pursuant to these Articles - and for such a period of time and upon
such conditions as the Directors deem proper, and every such authorization may
contain such directives as the Board of Directors deems proper for the
protection and benefit of the persons dealing with such attorneys.
DIVIDEND
73. Subject to the provisions of these Articles (including Articles 7 and 10)
and subject to any rights or conditions of Preferred Shares and other rights and
conditions attached at that time to any share in the capital of the Company
granting preferential, special or deferred rights or not granting any rights
with respect to dividends, the profits of the Company shall be distributable to
the members of the Company according to the proportion of the nominal value paid
up on account of the shares held by them at the date so appointed by the
Company, without regard to the premium paid in excess of the nominal value.
Actual distribution, setting aside or declaration of dividend requires a
decision of the Board of Directors.
74. The Board of Directors may issue any share upon the condition that a
dividend shall be paid at a certain date or that a portion of the declared
dividend for a certain period shall be paid, or that the period for which a
dividend shall be paid shall commence at a certain date, or a similar condition,
all as decided by the Board of Directors. In every such case - subject to the
provision mentioned in the beginning of this Article - the dividend shall be
paid in respect of such a share in accordance with such a condition.
75. At the time of declaration of a dividend, the Company may decide that such a
dividend shall be paid in part or in whole, by way of distribution of certain
properties, especially by way of distribution of fully paid up shares or
debentures or debenture stock of the Company, or by way of distribution of fully
paid up shares or debentures or debenture stock of any other company or in one
or more of the aforesaid ways. For purposes of any such distribution, the
outstanding Preferred Shares shall be deemed to have been converted into
Ordinary Shares as of the time appointed by the Company for the purpose of
determining entitlement to participate in such distribution.
76. The directors may, from time to time, pay to the members on account of the
forthcoming dividend such interim dividend as shall be deemed just with regard
to the situation of the Company, subject to and in accordance with the
provisions of Sections 301 through 307 of the Law.
34
77. The Board of Directors may put a lien on any dividend on which the Company
has a charge, and it may use it to pay any debts, obligations or commitments
with respect to which the charge exists.
78. A transfer of shares shall not transfer the right to a dividend which has
been declared after the transfer but before the registration of the transfer.
The person registered in the register as a member on the date appointed by the
Company for that purpose shall be the person entitled to receive a dividend.
79. The Company may declare a dividend to be paid to the members, at a general
meeting, according to their rights and benefits in the profits and to decide the
time of payment. A dividend in excess of that proposed by the Board of Directors
shall not be declared. However, the Company may declare at a general meeting a
smaller dividend.
80. A notice of the declaration of a dividend, whether an interim dividend or
otherwise, shall be given to the members registered in the register, in the
manner provided for in these Articles.
81. If no other provision is given, the dividend may be paid by check or payment
order to be mailed to the registered address of a member or person entitled
thereto in the register or, in the case of registered joint owners, to the
addresses of one of the joint owners as registered in the register. Every such
check shall be made out to the person it is sent to. The receipt of the person
who, on the date of declaration of dividend, is registered as the holder of any
share or, in the case of joint holders, of one of the joint holders, shall serve
as a release with respect to payments made in connection with that share.
82. Subject to the provisions of the Law relating to the distribution of
dividends:
(a) If at any time the share capital shall be divided into different classes of
shares, the distribution of fully paid up shares shall be made in one of the two
following manners as to be decided upon by the Directors:
(i) In such a manner so that all the holders of a share entitled to
fully paid up shares shall receive one uniform class of shares; or
(ii) In such manner so that each holder of shares entitled to fully
paid up shares as aforesaid shall receive shares of the class of shares held by
him and entitling him to fully paid up shares, as aforesaid.
(b) In order to give effect to any resolution in connection with
distribution of dividends, or distribution of property, fully paid-up shares or
debentures, the Board of Directors may resolve any difficulty that shall arise
with distribution as it shall deem necessary, especially to issue certificates
for fractional shares and to determine the value of certain property for
purposes of distribution, and to decide that payment in cash shall be made to
the member on the basis of the value decided for that purpose, or that fractions
the value of which is less than one New Israeli Shekel shall not be taken into
account for the purpose of coordinating the rights of all the parties. The Board
of Directors shall be permitted, in this regard, to grant cash or property to
trustees in escrow for the benefit of persons entitled thereto, as the Directors
shall see beneficial. Wherever required, an
35
agreement shall be submitted to the registrar of companies and the Directors may
appoint a person to execute such an agreement in the name of the persons
entitled to a dividend, property, fully paid up shares or debentures as
aforesaid, and such an appointment shall be valid.
(c) The Company shall not be obligated to pay interest on a dividend,
unless as set forth in Article 7 herein above.
(d) The Board of Directors may, with respect to all dividends not
collected within one year after their declaration, invest or use them in another
way for the benefit of the Company, until they shall be demanded. The Company
shall not pay interest for dividends or interest not collected.
ACCOUNTS AND AUDIT
83. The Directors shall cause correct accounts to be kept in accordance with the
provisions of the Law or any other applicable law, including but not limited to:
(a) of the assets and liabilities of the Company;
(b) of any amount of money received or expended by the Company and
the matters for which such sum of money is expended or received; and
(c) of all purchases and sales made by the Company.
The account books shall be kept in the office or at such other place as the
Directors deem fit and they shall also be open for inspection by the Directors.
84. The Company shall prepare financial reports that shall include a balance
sheet as of December 31 of each year, and a profit and loss account for the
preceding financial year. In addition, the Company shall prepare any additional
financial reports as shall be required by accepted book keeping rules, and as it
shall undertake to do in any agreement.
85. The Company shall prepare annual financial reports within nine (9) months
following the end of each fiscal year. At least once in every fiscal year the
accounts of the Company shall be audited and the correctness of the profit and
loss account and balance sheet certified by one or more duly qualified auditors.
86. The appointment, authorities, rights and duties of the auditor(s) of the
Company, shall be regulated by applicable law, provided however, that in
exercising its authority to fix the remuneration of the auditor(s), the
shareholders in a general meeting may by an Ordinary Resolution, act (and in
absence of any action in connection therewith shall be deemed to have so acted)
to authorize the Board of Directors to fix such remuneration subject to such
criteria and standards as may be provided in such Ordinary Resolution, and if no
such criteria and standards are so provided, such remuneration shall be fixed in
an amount commensurate with the volume and nature of the services rendered by
such auditor(s).
36
NOTICES
87. (a) A notice or any other document may be served by the Company upon
any member either personally or by sending it by telegram, or telex or facsimile
addressed to such member at his address, wherever situated, as appearing in the
register of members.
(b) All notices directed to be given to the members shall, with respect
to any shares to which persons are jointly entitled, be given to one of the
joint holders, and any notice so given shall be sufficient notice to the holders
of such share.
(c) Prior and timely notice of the convening of a shareholders meeting
shall be given to each shareholder, wherever situated, at the last address
provided by the shareholder. Any member registered in the register who shall,
from time to time, furnish the Company with an address at which notices may be
served, shall be entitled to receive all notices he is entitled to receive
according to these Articles at that address.
(d) A notice may be given by the Company to the persons entitled to a
share in consequence of the death or bankruptcy of a member by sending it by
mail in a prepaid letter or postcard or telegram, telex or facsimile addressed
to them by name, at the address, if any, in Israel furnished for the purpose by
the persons claiming to be so entitled or, until such an address has been so
furnished, by giving the notice in any manner in which the same might have been
given if the death or bankruptcy had not occurred.
(e) Any notice or other document if served or sent by mail shall be
deemed to have been served or delivered ten (10) days after the time when the
letter or telegram or telex or facsimile containing the same was delivered at
the post office or at such time as the telex or facsimile was sent, and in
proving such service it shall be sufficient to prove that the letter or telegram
or telex or facsimile containing the notice was properly addressed and delivered
at the post office or sent by telex or facsimile. Any list kept in the ordinary
manner in any mail list of the Company or any copy of any telex or facsimile in
the Company's possession shall be prima facie proof of the delivery.
(f) In any case where it is necessary to give prior notice of a certain
number of days or a notice valid for a certain period, the date of delivery
shall be taken into account in the number of days or period.
(g) In addition to the furnishing of a notice pursuant to the preceding
Article, the Company may furnish a notice to the shareholders entitled to
receive notice, or to part of them, by publication of a notice in a newspaper
distributed in the area where the office is located, or any other place, in
Israel or abroad, as the Directors shall determine from time to time.
REORGANIZATION OF THE COMPANY
88. Subject to Article 10, at the time of sale of the Company's material assets
the Board of Directors may, or at the time of liquidation the liquidators may,
if authorized by a Resolution of the general meeting of the Company by a
majority of 75% of the votes of the shareholders who are participating and
voting, receive shares paid in full or in part, debentures or other securities
of any other company, whether already existing at that time or whether about to
be established for the purpose of acquiring the property of the Company, or a
part thereof. The Board of Directors (if the profits of the Company so permit)
or the liquidators (at the time of liquidation) may distribute among the members
the shares or aforesaid securities or any other property of the Company without
realizing them, or deposit
37
them with trustees for the shareholders, and every Ordinary Resolution can
resolve as to the distribution or the setting aside of cash, the shares or other
securities and the rights or property of the Company in a manner not entirely
consistent with the legal rights of the members of the Company, or its
participants, and such a resolution may value the securities or property
aforesaid at such price and in such manner as the meeting shall decide. All
shareholders shall be required to accept all valuation or distribution decided
as aforesaid and to waive all their rights in this regard, except, in the case
where the Company is at a liquidation stage or in the process of liquidation,
with respect to such legal rights (if any) which according to the provisions of
the law cannot be altered or renounced.
INDEMNITY
89. Subject to the provisions of the Law, including the receipt of all approvals
as required therein or under any applicable law, the Company may indemnify any
office holder to the fullest extent permitted by the Law. The Company may
indemnify its office holders, as this term is defined in the Law, with respect
to liabilities or expenses, as listed below, provided that (a) the Board of
Directors resolves in advance those categories of events, which in the opinion
of the Board of Directors can be foreseen at the time the undertaking to
indemnify is given; (b) the Board of Directors sets a reasonable limit to the
amounts for such indemnification under the circumstances; or (c) the Board of
Directors resolves to retroactively indemnify the Company's office holder(s):
(1) a monetary liability imposed on an office holder pursuant to a
judgement in favor of another person, including a judgment imposed on such
office holder in a compromise or in an arbitration decision that was approved by
a court; and
(2) reasonable legal expenses, including attorney's fees, which the
office holder incurred or with which he was charged by a court, in a proceeding
brought against him, by the Company or by another in its name, or in a criminal
prosecution in which he was found innocent, or in a criminal prosecution in
which he was convicted of an offense that does not require proof of criminal
intent.
90. (a) Subject to the provisions of the Law, including the receipt
of all approvals required therein or under any applicable law, the Company may
enter into an agreement to insure an office holder for any liability that may be
imposed on such office holder in connection with an act performed by him by
virtue of his office, with respect to each of the following:
(1) breach of the duty of care of the office holder towards the Company or
towards another person;
(2) breach of the fiduciary duty against the Company, provided that the office
holder acted in good faith and with reasonable grounds to assume that the action
in question would not cause harm to the Company;
(3) a monetary obligation that will be imposed on the office holder for the
benefit of another person.
(b) Articles 89 and 90(a) shall not apply under any of the following
circumstances:
(1) a breach of an Office Holder's fiduciary duty, in which the Officer
Holder did
38
not act in good faith and with reasonable grounds to assume that the action in
question was in the best interest of the Company;
(2) a grossly negligent or intentional violation of an Office Holder's
duty of care;
(3) an intentional action by an Office Holder in which such Officer
Holder intended to reap a personal gain illegally; and
(4) a fine or xxxxxx levied on an Office Holder.
91. The Company may procure insurance for or indemnify any person who is not an
office holder, including without limitation, any employee, agent, consultant or
contractor, provided however, that any such insurance and/or indemnification is
in accordance with the provisions of these Articles and the Law.
92. The Board of Directors may resolve in advance to exempt an office holder
from all or part of his/her responsibility and/or liability for damages caused
to the Company due to a breach of such office holder's duty of care towards the
Company.
WINDING UP
93. If the Company be wound up, then, subject to applicable law and to the
rights of the holders of shares with special rights upon winding up as
specified, inter alia, in Article 8 above, the assets of the Company available
for distribution among the Shareholders as such shall first be distributed to
the Shareholders entitled thereto an amount equal to the paid-up capital
attributable to their respective holdings of the shares in respect of which such
distribution is being made, provided, however, that if such assets do not
suffice to make such distribution in full, such assets shall be distributed to
said Shareholders in proportion to the paid-up capital attributable to their
respective holdings of such shares. The paid-up capital attributable to any
share issued at a premium or at a lawful discount shall be the nominal value of
such share, provided, however, that if less than the full issuance price of such
share has been paid to the Company, the paid-up capital attributable thereto
shall be such proportion of the nominal value as the amount paid to the Company
bears to such full issuance price.
94. The assets, if any, remaining after the distribution pursuant to Article 93
hereof, shall, subject to applicable law and to the rights of the holders of
shares with special rights as aforesaid, be distributed to the Shareholders
entitled thereto in proportion to the nominal value of their respective holdings
of the shares in respect of which such distribution is being made, whether or
not the issuance price, or any portion thereof, has been paid.
ANNEX 2(b)
EMONY LTD.
NO. 00-000000-0
UNANIMOUS WRITTEN RESOLUTIONS OF
THE BOARD OF DIRECTORS
The undersigned being all of the directors of Emony Ltd. (the "COMPANY"), having
waived their right for a prior notice, do consent to the following written
resolutions in lieu of a meeting in accordance with Article 69 of the Articles
of Association of the Company.
IT WAS UNANIMOUSLY RESOLVED:
APPROVAL OF LOAN AGREEMENT
WHEREAS, the Company wishes to enter into a convertible loan agreement with
certain shareholders, substantially in the form attached hereto as EXHIBIT A
(the "LOAN AGREEMENT"), according to which the Company shall be granted a loan
of US$ 2,150,000, convertible into Company's securities, at the terms and
conditions set forth in the Loan Agreement; and
WHEREAS, in order to enable the transaction contemplated by the Loan Agreement,
the Company is required to amend and replace its Articles of Association,
substantially in the form attached hereto as EXHIBIT B (the "RESTATED
ARTICLES"), in which a new class of B1 Preferred Shares shall be designated;
Xx. Xxxx Xxxxxxx and Xxx. Xxxx Xxxxxxxx, members of the Company's Board of
Directors, having certain personal interests in the transaction contemplated
under the Loan Agreement, have avoided discussion or voting on this issue, all
in accordance with the new Companies Law 5759-1999.
1. Resolved, that the Company shall enter into and execute the Loan
Agreement and all other agreements and documents contemplated thereby.
2. Resolved, that the Board of Directors shall recommend to the
shareholders of the Company to adopt the Restated Articles as part of
the annual General Meeting of the Company's shareholders to be convened
as set in resolution 10 below, and approve said Restated Articles, as
required under the Loan Agreement and by Law.
3. Further resolved, that upon conversion of the Loan Amount according to
the Loan Agreement, into Series B1 Preferred Shares of the Company, the
Company shall be authorized to issue to the Lenders (as described in the
Loan Agreement) such amount of Series B1 Preferred Shares as derived
from the terms of the Loan Agreement and the Restated Articles. Upon
such issuance, the Preferred B1 Shares shall be dully and
1
fully paid, non-assessable, free of preemptive or similar rights and
free and clear of any pledges, liens, claims, encumbrances or third
party's rights of any kind and duly registered in the Company's
shareholders register.
4. Resolved, that the signature of Xx. Xxxxxx Xxxxx on the Loan Agreement
and the transaction documents contemplated thereby, accompanied by the
Company's stamp or printed name shall bind the Company; and
5. Be it further resolved that Xx. Xxxx Xxxxx be, and hereby is,
authorized, empowered and directed to negotiate the terms of the Loan
Agreement on behalf of the Company and to take any and all further
actions which may be necessary to effectuate the foregoing resolutions.
BANK ACCOUNT
6. Resolved, to open an additional bank account for the Company with the
First International Bank of Israel Ltd., Branch # 125 (the "SPECIAL
ACCOUNT"), as required by the Loan Agreement; and
7. To empower Mr. Eyal Drami to execute all documents and forms necessary
for opening said Special Account.
8. Notwithstanding any former resolution of the Board of Directors with
respect to signature rights on behalf of the Company, be it resolved
that the signature rights on behalf of the Company in the Special
Account shall be one signatory from Group A together with one signatory
from Group B, together with the Company's stamp or printed name:
Group A Group B
------------- ------------
Xxxx Xxxxxxxx Xxxxxx Xxxxx
Xxxx Xxxxxxx Eyal Drami
FINANCIAL STATEMENTS
9. Resolved, that the Company's audited financial statements for the fiscal
year ending December 31, 2000, and the non-audited (but reviewed)
Q1/2001 financial statements as of March 31, 2001 a copy of which is
attached hereto as EXHIBITS C1 AND C2 (the "FINANCIAL STATEMENTS"), are
hereby approved.
10. The Board of Directors hereby calls for an annual general meeting of the
Company's shareholders and shall issue notices of such meeting to all
shareholders. The shareholders of the Company will be presented with the
Financial Statements and the Board of Directors will recommend to the
shareholders to approve the appointment of the firm of Xxxx, Xxxxx and
Gabbay as the Company's accountants for the fiscal year ending December
31, 2001. Notwithstanding the above, the shareholders of the Company may
execute a written resolution in lieu of a meeting.
2
ALLOCATION OF OPTIONS TO EMPLOYEES
11. Resolved, to approve the allocation of options to certain employees of
the Company or of the Company's subsidiary, as specified in EXHIBIT D
hereto. Such options shall be allocated under the Company's employee
stock option plan and shall have an exercise price of $0.449 per
share.[confirmed]
TRANSFER OF SHARES
12. Resolved, (i) to approve the transfer of all shares held by Carmel VC
Ltd. for Poalim Nechasim (Menayot) Ltd. ("TRANSFEROR"), to certain
Permitted Transferees of Transferor (as specified in EXHIBIT E hereto),
in accordance with the Company's Articles of Association as currently in
effect and in accordance with the Restated Articles; and (ii) to direct
the Secretary of the Company to register said transfer in the Company's
register of shareholders.
This written resolution may be executed in counterparts and all of them together
shall constitute one and the same instrument. This resolution is executed
effective as of the last date set forth below.
-------------------------------- --------------------------------
XXXX XXXXXXX* XXXX XXXXXXXX*
Date: Date:
--------------------------- ---------------------------
--------------------------------
XXXXXX XXXXX
Date:
---------------------------
* The signatures of Xxxx Xxxxxxx and Xxxx Xxxxxxxx do not apply to resolutions
1-5 above, to the extent they have a personal interest therein.
3
Annex 2(a/3)
EMONY LTD.
(THE "COMPANY")
NO. 51-260506,4
NOTICE OF RESOLUTION
PURSUANT TO SECTION 21
OF THE COMPANIES LAW, 5759-1999
Notice is hereby given that in the ordinary meeting of the Shareholders of the
company held on the 19 day of July, 2001, it was resolved:
Articles of Association and Share Capital
1. To replace the Company's Articles of Association with the Restated Articles
of Association attached as Exhibit B thereto (the "RESTATED ARTICLES"), and
thereby create a new class of shares - Series B1 Preferred Shares, par
value NIS 0.01 each, bearing such rights as described in the Restated
Articles.
2. To convert 2,500,000 Ordinary Shares, par value NIS 0.01 each, to 2,500,000
Series B1 Preferred Shares, par value NIS 0.01 each, bearing such rights as
described in the Restated Articles.
ANNEX 2(c)
FORM OF COMPLIANCE CERTIFICATE
-------------------------------
[ ON LETTERHEAD OF EMONY LTD. ]
COMPLIANCE CERTIFICATE
To: Carmel Software Fund (Israel) L.P.
Carmel Software Fund (Cayman) L.P.
Carmel Software Fund (Delaware) L.P.
Carmel V.C. Ltd. (acting for Siemens Venture Capital GmbH)
Carmel Software Fund GbR
Clal Electronics Ltd. (for SPR Infinity II Funds)
Xxxx Xxxxx
Backweb Technologies Ltd.
Date: July __, 2001
Emony Ltd. (the "COMPANY") hereby represents and warrants as follows:
1. All representations and warranties of the Company contained in
the Convertible Loan Agreement dated July __, 2001 and all
annexes thereto (the "AGREEMENT"), by and among the Company,
Carmel Software Fund (Israel) L.P., Carmel Software Fund
(Cayman) L.P., Carmel Software Fund (Delaware) L.P., Carmel V.C.
Ltd. (acting for Siemens Venture Capital GmbH), Carmel Software
Fund GbR, Clal Electronics Ltd. (acting for SPR Infinity II
Funds), Xxxx Xxxxx, and Backweb Technologies Ltd., are true and
correct as of the date of this certificate.
2. The Company has performed and complied with all obligations and
covenants required to be performed or complied with by the
Company prior to the Closing.
Very truly yours,
Emony Ltd.
--------------------------------
By:
Annex 2(d)
[Opinion of Counsel]
[DRAFT]
[Names of Lenders - TBD]
(each a "LENDER" and collectively, the "LENDERS")
Reference is made to the Convertible Loan Agreement, dated July ___,
2001, and all Annexes thereto (the "AGREEMENT"), entered into by and between
Emony Ltd. (the "Company") and the Lenders. We have acted as Israeli counsel for
the Company in connection with certain matters related to the Agreement and are
furnishing this opinion to you pursuant to Section 2(d) of the Agreement. All
capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Agreement.
As to matters of fact relevant to our opinions set forth herein, we have
relied exclusively, without independent investigation or verification upon (i)
the Agreement and all Annexes attached thereto (the "TRANSACTION DOCUMENTS"),
(ii) the Memorandum of Association dated February 23, 1998 and Articles of
Association of the Company, in effect prior to or at Closing (the "CORPORATE
DOCUMENTS"), (iii) the corporate records of the Company, as contained in our
files, (iv) the resolutions of the Board of Directors and the Shareholders of
the Company referred to in the Agreement, (v) all documents deemed appropriate
by us for the purpose of furnishing this Opinion including an opinion of
Klienhandler & Halevy dated October 12, 2000 furnished to the Company in
conjunction with prior financing; and (vi) an officer's certificate dated as of
July ___, 2001, furnished by an officer of the Company.
In such examination we have assumed the genuineness of all signatures on
original documents(other than signature on behalf of the Company), the
authenticity and completeness of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us and the due
execution and delivery of all documents (except as to due execution and delivery
by the Company) where due execution and delivery are a prerequisite to the
effectiveness thereof.
As used in this opinion, the expressions "to our knowledge", "known to
us" or similar language with reference to matters of fact means the conscious
awareness of facts or other information by any lawyer in our firm who was
actively involved in reviewing the Transaction Documents, the Corporate
Documents and other documentation made available to us by the Company and
documentation which we deemed necessary in rendering this opinion. Further, the
expressions "to our knowledge", "known to us" or similar language with reference
to matters of fact means that after our above mentioned review and inquiries of
officers of the Company, but without any further independent factual
investigation, we find no reason to believe that the opinions expressed herein
are factually incorrect. Except to the extent expressly set forth herein or as
we otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact, and
no inference as to our knowledge of the existence or absence of any fact should
be drawn from our representation of the Company or the rendering of the opinion
set forth below.
While we have no reason to believe that the officers executing any
document on which we rely on in rendering this opinion, did not have personal
knowledge of the matters contained therein or did not accurately set out such
knowledge in such documents, we did not independently verify the matters set
forth in such documents.
For purposes of this opinion, we are assuming that the Lenders have all
requisite power and authority, and, to the extent applicable, have taken any,
and all necessary corporate or partnership action, to execute and deliver the
Agreement and all related documents, and we are assuming that the
representations and warranties made by you in the Agreement and pursuant thereto
are true and correct. We are also assuming, that the Lenders shall purchase the
Series B1 Preferred Shares to be issued to them upon conversion of the Loan, in
good faith and without notice of any adverse claim.
We are members of the Bar of the State of Israel, we express no opinion
as to any matter relating to the laws of any jurisdiction other than the laws of
the State of Israel as the same are in force the date hereof and we have not,
for the purpose of giving this opinion, made any investigation of the laws of
any other jurisdiction. In addition, we express no opinion as to any documents,
agreements or arrangements other than those subject to the laws of the State of
Israel, if any.
We express no opinion as to the legality, validity, binding nature or
enforceability of any provision of any of the Transaction Documents (i)
providing for the payment or reimbursement of costs or expenses or indemnifying
a party, to the extent such provisions may be excessive in amount or held to be
unenforceable as contrary to public policy, or (ii) regarding the Lenders'
ability to collect attorneys' fees and costs in an action involving the
Transaction Documents, if the Lenders are not the prevailing party in such
action.
We have assumed that there are no agreements or understandings between
or among the Company, any Lender or any third party entitled to rely thereon
which would expand, modify or otherwise affect the terms of the Transaction
Documents and the Corporate Documents or the respective rights or obligations of
the parties thereunder, and that the Transaction Documents correctly and
completely set forth the intent of all parties thereto.
In giving our opinion in paragraph 8 below, we have relied on those
Corporate Documents and other documentation of the Company as contained in our
files.
Based upon and subject to the foregoing, and subject to the
qualifications hereinafter appearing and to any factual matters, documents or
events not disclosed to us in our abovementioned examination, we are of the
opinion that:
1. The Company is a company duly incorporated, is validly existing under
the laws of the State of Israel, and has full corporate power and
authority to own and lease its properties, to carry on its business as
presently conducted, to bind itself under the terms of the Agreement and
to comply with all of its obligations under the Agreement. The Agreement
constitutes a valid and legally binding obligation of the Company.
2. The execution, delivery or performance by the Company of the Agreement,
the issuance of the promissory notes (Annex 2(g) of the Agreement), the
warrants (Annex 2(h) of the Agreement, and the Series B1 Preferred
Shares upon conversion of the Loan pursuant to the terms of the
Agreement, and the performance by the Company of its obligations under
the Agreement will not give rise to, or result in any violation of, and
will not conflict with, or result in a breach of any of the terms of, or
constitute a default under, (i) any provision of any Israeli law,
statute, ordinance or regulation, or (ii) the Company's Memorandum and
Articles of Association; or (iii), to our knowledge, any agreement,
obligation, commitment, mortgage, indenture, instrument, judgment,
decree or order to which the Company is a party or by which it is bound,
nor, to our best knowledge, will it cause any financial or other
obligation of the Company to become due before the day such obligation
would have otherwise become due.
3. Upon conversion of the Loan and the issuance of the Series B1 Preferred
Shares to the Lenders in accordance with the Agreement, the Series B1
Preferred Shares shall be duly authorized, validly issued, fully paid,
non-assessable and free of preemptive or similar rights. The Series B1
Preferred Shares shall have the rights, preferences and privileges set
forth in the Corporate Documents, as amended under the Agreement.
4. the Company does not require any approval or consent from any person or
entity for the execution, delivery and performance of the Agreement and
the transactions contemplated thereunder, other than those stipulated in
the Agreement.
5. Following the closing of the Agreement, the registered share capital of
the Company shall be comprised of NIS 175,000 divided into 8,932,000
Ordinary Shares, 1,068,000 Preferred A Shares, 5,000,000 Preferred B
Shares and 2,500,000 Preferred B1 Shares, all of nominal value NIS 0.01
per share, the Company's issued and outstanding share capital, the
registered holders thereof and their respective shareholdings in the
Company, all as prior to, and after giving effect to, the Closing, are
as set forth in Annex 5 of the Agreement.
6. To the best of our knowledge, there are no pending or threatened
actions, suits, claims or other proceedings (either legal or
administrative), filed or authorized by the Company. To our best
knowledge, there are no pending or threatened actions, suits, claims,
investigations, or other proceedings (either legal or administrative),
nor any court or arbitration judgment, against the Company or with
regard to the Company and its business.
7. To the best of our knowledge, there is no fact which renders the
Company's representations and warranties under the Agreement to be
untrue or incorrect in any material manner, nor is there lacking any
material fact necessary to make such representations and warranties not
misleading.
8. The Company has duly adopted the New Articles as defined in the
Agreement, and has duly taken all actions required for the
reorganization of its share capital as required under the Agreement.
Furthermore, the Company has duly taken all corporate actions required
to give effect to its obligations under the Agreement.
9. Immediately prior to the Closing, the Board of Directors of the Company
consists of Xxxxxx Xxxxx, Xxxx Xxxxxxxx and Xxxx Xxxxxxx.
This letter shall not be deemed an undertaking to advise you of any changes in
such information occurring after the date hereof. This opinion is furnished to
you solely in connection with the execution of the Agreement and is not to be
used, circulated, quoted or otherwise referred to for any other purpose or
relied upon by any other person without our express prior written permission.
Very truly yours,
ANNEX 2(e)
3 Pages via Facsimile
Facsimile Number: 000-0-0000000
Attention: Mr. Eyal Drami
TO:
EMONY LTD.
NOTICE
Further to the letter dated July 10, 2001, and pursuant to Section 11 of the
Articles of Association of the Company, we understand that we may exercise our
Preemptive Right with respect to the issuance of Company's shares upon
conversion of any portion of the Loan into Company's securities, as provided in
the Agreement.
We hereby confirm that [Please check the box in the appropriate place and fill
in the brackets]:
[ ] We wish to extend to the Company an aggregate loan of US $[_____________],
convertible into shares of the Company.
[ ] We do not wish to purchase any portion of the shares, issued upon conversion
of any portion of the Loan Amount.
Subject to the above, we hereby waive our preemptive rights under Section 11 to
the Articles of Association of the Company, and any other first refusal, anti
dilution and any other right with respect to Agreement and all transactions
contemplated thereby, including without limitation, issuance of warrants
(pursuant to the Agreement), and shares upon conversion of the Loan.
[Signature Pages Follow]
[Signature Page of Preemptive Notice, July 10, 2001]
CARMEL SOFTWARE FUND (DELAWARE) L.P.
By: CARMEL SOFTWARE L.P.
Its General Partner
By: CARMEL SOFTWARE LTD.
Its General Partner
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
CARMEL SOFTWARE FUND (CAYMAN) L.P.
By: CARMEL SOFTWARE L.P.
Its General Partner
By: CARMEL SOFTWARE LTD.
Its General Partner
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
CARMEL SOFTWARE FUND GBR
By: CARMEL SOFTWARE L.P.
Its General Partner
By: CARMEL SOFTWARE LTD.
Its General Partner
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
[Signature Page of Preemptive Notice, July 10, 2001]
CARMEL SOFTWARE FUND (ISRAEL) L.P.
By: CARMEL V.C. LTD.
Its General Partner
By:_______________________
Name: _____________________
Title: ______________________
[CARMEL V.C. LTD.]
(acting for Poalim Nechasim (Menayot) Ltd.)
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
CARMEL V.C. LTD.
(acting for Siemens Venture Capital GmbH)
By:_______________________
Name: _____________________
Title: ______________________
CLAL ELECTRONICS LTD.
(acting for SPR Infinity II Funds)
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
XXXX XXXXX
--------------------------
[Signature Page of Preemptive Notice, July 10, 2001]
BACKWEB TECHNOLOGIES LTD.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
INMAM B.V.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
ANNEX 2(F)
FIRST ADDENDUM TO
REGISTRATION RIGHTS AGREEMENT
WHEREAS, Emony Ltd., an Israeli company (the "COMPANY") and certain
holders of the Company's Ordinary Shares, Series A Preferred Shares and Series B
Preferred Shares, have entered into a Registration Rights Agreement, dated
October 10, 2000 (the "REGISTRATION RIGHTS AGREEMENT"); and
WHEREAS, concurrent with this Agreement, the Company and certain
shareholders of the Company specified in Annex A hereto (the "LENDERS") have
entered into a Convertible Loan Agreement (the "LOAN AGREEMENT"), pursuant to
which the Company shall issue to the Lenders Series B1 Preferred Shares of the
Company, upon conversion of the Loan, all as provided in the Loan Agreement.
WHEREAS, the parties hereto wish to set forth certain terms and
conditions relating to the Ordinary Shares of the Company to which the Series B1
Preferred Shares (and shares that may be issued upon exercise of preemptive and
anti-dilution rights with respect to the Series B1 Preferred Shares) shall be
converted into (the "B1 SHARES").
NOW, THEREFORE, the parties agree as follows:
1. The provisions of the Registration Rights Agreement shall apply, mutatis
mutandis, to the B1 Shares, as described below.
2. Any reference in the Registration Rights Agreement to: (i) the
"Shareholders" shall be deemed as reference also to holders of Series B1
Preferred Shares (ii) the "Series B Preferred Shares" or "Preferred B
Shares" - shall be deemed a reference to the Series B Preferred Shares
and the Series B1 Preferred Shares; (iii) the "Shares" - shall be deemed
a reference to the Series A Preferred Shares and the Series B Preferred
Shares currently held by Xxxxx B.V. and the Investors, shares issuable
thereto upon exercise of warrants granted thereto upon signature of the
Registration Rights Agreement and shares that may be issued thereto upon
exercise of preemptive and anti-dilution rights with respect to the
above detailed shares, and the B1 Shares, all as shall be converted into
Ordinary Shares; (iv) the "Holders of Series B Preferred Shares" - shall
be deemed a reference to the holders of Series B Preferred Shares and
the holders of Series B1 Preferred Shares.
3. Any capitalized term used herein not otherwise defined, shall have the
meaning ascribed to it in the Registration Rights Agreement.
4. Except as provided herein, the provisions of the Registration Rights
Agreement shall remain unchanged. The Registration Rights Agreement
together with this Addendum constitute the entire agreement and
understanding between the Parties with respect to the subject matter
hereof.
[signature page follows]
IN WITNESS WHEREOF, the parties have executed this First Addendum to the
Registration Rights Agreement, as of this July ____, 2001.
-----------------------------------
Emony Ltd.
By:
--------------------------------
Title:
-----------------------------
------------------------------------ -----------------------------------
Carmel Software Fund (Israel) LP Carmel Software Fund (Cayman) LP
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
----------------------------------- -----------------------------------
Carmel Software Fund (Delaware) LP Carmel VC Ltd. (for Siemens Venture
Capital GmbH)
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
----------------------------------- -----------------------------------
XXXX XXXXX Carmel Software Fund GbR
By: Carmel Software L.P.
(Its General Partner)
By: Carmel Software Ltd.
(Its General Partner)
By:
--------------------------------
Title:
-----------------------------
----------------------------------- -----------------------------------
Clal Electronics Ltd. (for SPR Backweb Technologies Ltd.
Infinity II Funds)
By:
--------------------------------
Title:
-----------------------------
----------------------------------- -----------------------------------
XXXXXX XXXXX XXXXX B.V.
By:
--------------------------------
Title:
-----------------------------
----------------------------------- -----------------------------------
XXXX XXXXX Jerusalem Hi-Tech Founders Ltd.
By:
--------------------------------
Title:
-----------------------------
ANNEX 2(g)
PROMISSORY NOTE
$__________ Tel Aviv, Israel
[Date]
FOR VALUE RECEIVED, Emony Ltd., an Israeli private company (Reg. No.
51-260506-4) ("MAKER") hereby promises to pay to the order of __________________
or its successors or assigns, as the case may be ("PAYEE"), at Payee's principal
place of business, or such other place as may be specified in writing by Payee,
the principal sum of _____________________ U.S. Dollars ($__________), plus
interest on the unpaid principal balance outstanding hereon from the date hereof
at a rate of LIBOR for 6 month loans as quoted by Bank Leumi LeIsrael Ltd. plus
1.5% (one and a half percent) per annum, compounded monthly based on a three
hundred and sixty-five day year.
This note shall be due and payable on __________________ (unless postponed
with the prior written consent of the Payee).
Maker shall not have the right to prepay all or any part of this
promissory note without the prior written consent of the Payee.
Maker hereby waives presentment for payment, notice of dishonor, protest
and notice of protest and, in the event of default hereunder, Maker agrees to
pay all costs of collection, including reasonable attorney's fees.
This promissory note is issued under the terms and provisions of the
convertible loan agreement between Maker and Payee, effective August 6, 2001
(the "LOAN AGREEMENT"). The holder hereof is entitled to all of the benefits and
subject to all of the obligations provided for in said Loan Agreement, or
referred to in said Loan Agreement, including conversion hereof as provided
under Section 3 thereof. Reference is made to the Loan Agreement for a statement
of the terms and conditions under which this indebtedness was incurred
(including conversion, waiver, etc.) and the events of default under which the
due date of this promissory note may be accelerated. The provisions of the Loan
Agreement are incorporated by reference herein with the same force and effect as
if fully set forth herein.
This promissory note shall be governed by the laws of the state of Israel.
IN WITNESS WHEREOF, Maker has executed this promissory note as of the date
first above written.
Emony Ltd.
By
-----------------
Name
---------------
ANNEX 2(h)
To: (the "HOLDER")
---------------------------
---------------------------
Date: July __, 2001 Warrant No. B1-1
SERIES B1 WARRANT CERTIFICATE
to Convert a debt into Series B1 Preferred Shares of
EMONY LTD.
VOID AFTER 24:00 p.m.
On the last day of the Warrant Period (defined below)
This is to certify that the Holder is entitled to purchase by way of conversion,
subject to the provisions of this Warrant, from Emony Ltd. (the "COMPANY"),
Series B1 Preferred Shares of the Company ("PREFERRED SHARES"), at such times,
conversion rate and amounts and subject to such terms and conditions as set
forth below.
1. WARRANT PERIOD
This Warrant may be exercised at any time, in whole, from the date
hereof and until immediately prior to the closing of one or more investment
transactions with aggregate net cash proceeds to the Company (excluding the
amount of the conversion hereunder and excluding the amount of any other debt
converted at such time into equity) of at least five million U.S. dollars
(U.S.$5,000,000) at a price per share of at least the Conversion Price, as
defined below (the "QUALIFYING INVESTMENT") (such period, the "WARRANT PERIOD"):
2. WARRANT SHARES AND CONVERSION PRICE
The Holder is entitled to purchase by way of conversion, up to such
number of Preferred Shares being the outcome of DIVIDING any un-repaid amount of
a loan granted by the Holder to the Company pursuant to a certain Convertible
Loan Agreement among the Company and certain lenders (the "CONVERTIBLE LOAN
AGREEMENT"), in a principle amount of US$___________ (_____________U.S. Dollars)
("LOAN AMOUNT") bearing an interest at the rate of LIBOR for 6 month loans as
quoted by Bank Leumi LeIsrael Ltd. plus 1.5% (one and a half percent) per annum,
compounded monthly, commencing at the date of grant of the Loan Amount and
computed on the basis of a 365-day year for the actual number of days elapsed
(the "INTEREST", and together with the Loan Amount shall be referred to as the
"WARRANT AMOUNT"), by a conversion price of US$1.034 (one US Dollar three cents
and four tenths of a cent) (the "CONVERSION PRICE"), subject to adjustments in
the Conversion Price as a result of stock splits and/or distribution of bonus
shares and/or as otherwise set below (the "WARRANT SHARES").
3. EXERCISE OF WARRANT
(a) EXERCISE. Subject to the provisions hereof, this Warrant may be
exercised at any time in whole during the Warrant Period. This Warrant shall be
exercised by notice to the Company, and presentation and surrender hereof to the
Company at the principal office of the Company, accompanied by a written notice
of exercise (the "NOTICE") specifying the number of Warrant Shares subject to
the Notice and the applicable Warrant Amount and Conversion Price. Such notice
shall become effective when given (the "EFFECTIVE DATE"), provided, however that
if this Warrant is being exercised prior to a Qualifying Investment, such
exercise may be conditioned upon the occurrence of a Qualifying Investment such
that if the Qualifying Investment does not occur within 30 days thereafter such
notice of exercise shall be deemed null and void and the Warrant shall continue
in full force and effect.
2
(b) ISSUANCE OF THE WARRANT SHARES. Upon presentation and surrender
of the Notice, the Company shall issue promptly to the Holder (and no later than
14 days from receipt of a Notice) the Preferred Shares to which the Holder is
entitled thereto.
(c) Upon receipt by the Company of the Notice, the Holder shall be
deemed to be the Holder of the Preferred Shares issuable upon such exercise,
notwithstanding that the share transfer books of the Company shall then be
closed and that certificates representing such Preferred Shares shall not then
be actually delivered to the Holder. The Company shall pay all taxes and other
charges that may be payable in connection with the issuance of the Preferred
Shares and the preparation and delivery of share certificates pursuant to this
Section 3 in the name of the Holder, but shall not pay any taxes payable by the
Holder by virtue of the holding, issuance, exercise or sale of this Warrant or
the Preferred Shares by the Holder.
(d) No fractions of Preferred Shares shall be issued in connection
with the exercise of this Warrant, and the number of Preferred Shares issued
shall be rounded to the nearest whole number.
(e) The Company covenants that the Preferred Shares issuable
hereunder, when issued and allotted in accordance with this Warrant, and the
Ordinary Shares issuable upon conversion of such Preferred Shares, will be duly
authorized, validly issued, fully paid, non-assessable and free of preemptive or
similar rights; will have the rights, preferences and privileges set forth in
the Articles of Association of the Company; will be free and clear of any
pledges, liens, claims, encumbrances or third party rights of any kind, and duly
registered in the name of the Holder in the Company's shareholders register.
4. RESERVATION OF SHARES; PRESERVATION OF RIGHTS OF HOLDER
The Company hereby agrees that at all times it will maintain and
reserve, free from pre-emptive rights, such number of authorized but un-issued
Preferred Shares so that this Warrant may be exercised without additional
authorization of Preferred Shares after giving effect to all other warrants,
options, convertible securities and other rights to acquire shares of the
Company. The Company further agrees that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or performed
hereunder by the Company.
5. LOSS OF WARRANT
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not the Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
6. ADJUSTMENT
The number of Preferred Shares purchasable upon the exercise of this
Warrant and the Conversion Price shall be subject to adjustment from time to
time or upon exercise as provided in this Section 6:
(One) If, during the Warrant Period, the Company shall make a dividend
or other distribution of Company's securities to the current holders of Ordinary
Shares (i.e. bonus shares), the number of the Preferred Shares purchasable upon
exercise of this Warrant shall be increased by multiplying such number of shares
by a fraction of which the denominator shall be the number of Ordinary Shares
(on an as converted basis) outstanding at the close of business on the day
immediately preceding the date of such distribution and the numerator shall be
the sum of such number of shares and the total number of bonus shares, such
increase to become effective
3
immediately after the opening of business on the date following such
distribution, and upon the happening of such an event the Conversion Price shall
be adjusted appropriately.
(Two) If, during the Warrant Period, the outstanding Ordinary Shares
shall be subdivided into a greater number of Ordinary Shares, the number of the
Preferred Shares purchasable upon exercise of this Warrant at the opening of
business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and, conversely, if outstanding
Ordinary Shares shall be combined into a smaller number of Ordinary Shares, the
number of the Preferred Shares purchasable upon exercise of this Warrant at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately decreased, such increase or decrease,
as the case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision or combination
becomes effective, and in each case the Conversion Price shall be adjusted
appropriately.
(c) If during the Warrant Period, the Company closes one or more
issuances or equity securities on terms (including, without limitation, as to
price) more favorable to the investors than the terms of the conversion herein,
then the Holder shall be entitled to such more favorable terms as to the
conversion hereunder.
(d) In the event of a merger or sale of all or substantially all of
the shares or assets of the Company during the Warrant Period, the Holder shall
be entitled to convert the Warrant Amount into the most senior class of shares
of the Company at a price per share to be based on a pre-money valuation of the
Company equal to the lower of: (i) the pre-money valuation for purposes of the
merger or sale of all or substantially all the shares or assets of the Company,
or (ii) a conversion price of U.S.$1.04 (one U.S. Dollar and four cents) per
share.
Nothing herein shall in any way or manner limit or derogate from any
other adjustments of the conversion ratio of the Preferred Shares into Ordinary
Shares of the Company or the Warrant Shares as set forth in the Company's
Articles of Association.
7. NOTICE
Whenever the Holder shall request in writing, the Company shall promptly
compute the number of Preferred Shares purchasable hereunder and mail to the
Holder at the last address provided to the Company in writing a certificate,
signed by a principal financial officer of the Company, setting forth the number
of Preferred Shares for which this Warrant is exercisable and the Conversion
Price thereof.
8. RIGHTS OF THE HOLDER
(a) Without limiting the foregoing or any remedies available to the
Holder, the Holder will be entitled to specific performance of the obligations
hereunder, and injunctive relief against actual or threatened violations of the
obligations of any person subject to this Warrant.
(b) The Holder shall not, by virtue hereof, be entitled to any
rights of a shareholder in the Company.
(c) If at any time the Company shall adopt a resolution regarding
its liquidation, dissolution or winding up, this Warrant, at the holder's sole
discretion, shall be deemed to have been exercised, and the Warrant Shares
issued pursuant hereto, prior to such resolution.
9. REGISTRATION RIGHTS
Upon exercise of this Warrant, the Holder shall have and be entitled to
exercise the rights of registration granted under that certain Registration
Rights Agreement between the Company, the Holder and the other parties named
therein, dated October 10th, 2000, with respect to the Preferred Shares issued
on exercise of this Warrant and the Ordinary Shares obtained upon conversion of
such Preferred Shares.
10. INVESTMENT REPRESENTATION
4
Neither this Warrant nor the Warrant Shares issuable upon the exercise
of this Warrant have been registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or any other securities laws. The Holder
acknowledges by acceptance of the Warrant that (a) it has acquired this Warrant
for investment and not with a view to distribution; and (b) it is an accredited
investor as that term is defined in Regulation D promulgated under the
Securities Act. The Holder agrees that any Warrant Shares issuable upon exercise
of this Warrant will be acquired for investment and not with a view to
distribution and such Warrant Shares will not be registered under the Securities
Act and applicable state securities laws and that such Warrant Shares may have
to be held indefinitely unless they are subsequently registered or qualified
under the Securities Act and applicable state securities laws, or based on an
opinion of counsel reasonably satisfactory to the Company, an exemption from
such registration and qualification is available. The Holder, by acceptance
hereof, consents to the placement of legend(s) on all securities hereunder as to
the applicable restrictions on transferability in order to ensure compliance
with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
11. TERMINATION
This Warrant and the rights conferred hereby shall terminate (save for
the right of registration granted with respect to shares obtained on the
exercise of this Warrant pursuant to Section 9 above) at the aforementioned time
on the last day of the Warrant Period, 24:00.
12. GOVERNING LAW
This Warrant shall be governed by, and interpreted in accordance with,
the laws of the state of Israel, without giving effect to the rules respecting
conflict of law, and the parties hereto irrevocably submit to the exclusive
jurisdiction of the courts of Tel Aviv in respect of any dispute or matter
arising out of or connected with this Warrant.
13. TRANSFER AND ASSIGNMENT
This Warrant and the rights, privileges and obligations conferred hereby
shall be transferable and assignable by the Holder, at its discretion, subject
only to limitations set forth in the Company's Articles of Association and in
the Convertible Loan Agreement. If this Warrant should be transferred in part
only, the Company shall, upon surrender of this Warrant for cancellation,
together with funds sufficient to pay any required transfer tax, cause to be
delivered to the Holder and to the transferee without charge new Warrant
Certificates of like tenor with this Warrant in the respective names of the
Holder and of the transferee, evidencing, separately, the rights of the Holder
and the rights of the transferee to purchase their respective shares of the
Common Shares purchasable hereunder.
Date:
-------------------
----------
EMONY LTD.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
