EXHIBIT 99.2
LOAN AGREEMENT
This Loan Agreement (this "AGREEMENT") is dated as of September 8, 2008,
between Metalink Ltd., an Israeli corporation (the "COMPANY"), and each lender
identified on the signature pages hereto (each, including its successors and
assigns, a "LENDER" and collectively the "LENDERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to borrow and, each Lender, severally and not jointly,
desires to lend the Company, an aggregate of up to $8,000,000 as more fully
described in this Agreement.
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "SECURITIES ACT"), in consideration of such loans from the
Lenders, the Company desires to issue to each Lender, the common stock purchase
warrants, as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Lender agree as
follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
"ACQUIRING PERSON" shall have the meaning ascribed to such in Section
4.5.
"ACTION" shall have the meaning ascribed to such term in Section
3.1(j).
"AFFILIATE" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule
405 under the Securities Act.
"BOARD OF DIRECTORS" means the board of directors of the Company.
"BUSINESS DAY" means any day except Saturday, Sunday, any day which is
a federal legal holiday in the United States or any day on which banking
institutions in the State of New York or Israel are authorized or required
by law or other governmental action to close.
"CLOSING(S)" means the closing(s) of the transaction pursuant to
Section 2.1 and any reference to "Closing" or "Closings" shall be construed
to include the First Closing and the Second Closing unless only one such
closing is expressly referred to.
"CLOSING DATES" means, collectively, the First Closing Date and the
Second Closing Date.
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"CLOSING STATEMENT" means the Closing Statement in the form ANNEX A
attached hereto.
"COMMISSION" or "SEC" means the United States Securities and Exchange
Commission.
"COMMON STOCK" means the ordinary shares, NIS 0.1 par value per share
of the Company, and any other class of securities into which such
securities may hereafter be reclassified or changed into.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"COMPANY COUNSEL" means (i) Xxxxxxxxx Xxxxxxx LLP, the Company's U.S.
counsel, with offices located at 0000 Xxxxxxxxx XxxxxxxXxxxxxx, XX 00000
("COMPANY U.S. COUNSEL") and (ii) the Company's Israeli counsel, Goldfarb,
Levy, Eran, Meiri, Tzafrir & Co., with offices located at 0 Xxxxxxxx Xxxxxx
Xxx Xxxx 00000, Xxxxxx ("COMPANY ISRAELI COUNSEL").
"DISCLOSURE SCHEDULES" means the Disclosure Schedules of the Company
delivered concurrently herewith.
"DISCUSSION TIME" shall have the meaning ascribed to such term in
Section 3.2(e).
"EVALUATION DATE" shall have the meaning ascribed to such term in
Section 3.1(r).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXEMPT ISSUANCE" means the issuance of (a) shares of Common Stock or
options (including shares issued pursuant to the exercise of such options)
to employees, officers, directors or bona fide consultants of the Company
(or any of its Subsidiaries) pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the
Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon
the exercise or exchange of or conversion of or as payment of interest on
any Securities or Notes issued hereunder or upon exercise of warrants
issued to the placement agent specified in the Prospectus Supplement,
pursuant to the anti-dilution provisions contained within such securities
and/or other securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to
decrease the exercise, exchange or conversion price of such securities, (c)
securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors of the Company,
provided that any such issuance shall only be to a Person which is, itself
or through its subsidiaries, an operating company in a business synergistic
with the business of the Company and in which the Company receives benefits
in addition to the investment of funds, but shall not include a transaction
in which the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing in
securities, (d) Common Stock or Common Stock Equivalents in conjunction
with any stock split, stock dividend or recapitalization of the Company,
(e) securities in lieu of cash payments for engineering or design services,
materials, production management or similar services, provided that such
securities are not and will not be registered on a registration statement,
provided, that such issuances after the date hereof shall not be in an
aggregate amount greater than 5% of the Company's issued and outstanding
shares of Common Stock outstanding on the date hereof, (f) securities in
connection with the settlement of pending or threatened litigation or
similar proceeding, and provided that such securities are not and will not
be registered on a registration statement, provided, that such issuances
after the date hereof shall not be in an aggregate amount greater than 5%
of the Company's issued and outstanding shares of Common Stock outstanding
on the date hereof, and (g) securities in connection with underwritten
public offerings of the Company's securities.
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"FWS" means Xxxxxxx Xxxxxxxxx & Xxxxx LLP with offices located at 000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
"INDEBTEDNESS" shall have the meaning ascribed to such term in Section
3.1(z).
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed to such
term in Section 3.1(o).
"ISRAELI SECURITY AGREEMENT" means the Security Agreement, dated the
date hereof, among the Company, its Subsidiaries and the Lenders, in the
Form of EXHIBIT E.
"ISA" means the Israel Securities Authority established under the
Securities Law 5728-1968.
"LENDER PARTY" shall have the meaning ascribed to such term in Section
4.8.
"LIENS" means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other similar restriction.
"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to such term
in Section 3.1(b).
"MATERIAL PERMITS" shall have the meaning ascribed to such term in
Section 3.1(m).
"MAXIMUM RATE" shall have the meaning ascribed to such term in Section
5.17.
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"NOTES" means the 10% Senior Secured Promissory Notes due, subject to
the terms therein, one year from the First Closing Date, issued by the
Company to the Lenders hereunder, in the form of EXHIBIT A attached hereto.
"PARTICIPATION MAXIMUM" shall have the meaning ascribed to such term
in Section 4.13(a).
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"PRE-NOTICE" shall have the meaning ascribed to such term in Section
4.13(b).
"PRO RATA PORTION" shall have the meaning ascribed to such term in
Section 4.13(e).
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the final prospectus filed for the Registration
Statement.
"PROSPECTUS SUPPLEMENT" means the supplement to the Prospectus
complying with Rule 424(b) of the Securities Act that is filed with the
Commission and delivered by the Company to each Lender at the applicable
Closing.
"REGISTRATION STATEMENT" means the effective registration statement
with Commission file No. 333-152119 which registers the issuance of the
Warrants and the Warrant Shares to the Lenders.
"REQUIRED APPROVALS" shall have the meaning ascribed to such term in
Section 3.1(e).
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC REPORTS" shall have the meaning ascribed to such term in Section
3.1(h).
"SECURITIES" means the Warrants and the Warrant Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SECURITY AGREEMENT" means the US Security Agreement, dated the date
hereof, among the Company and the Lenders, in the form of EXHIBIT C
attached hereto and the Israeli Security Agreement, dated the date hereof,
among the Company and the Lenders, in the form of EXHIBIT E attached
hereto.
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"SECURITY DOCUMENTS" shall mean the Security Agreement, the Subsidiary
Guarantees, the Israeli Security Agreement and any other documents and
filing required thereunder in order to grant the Lenders a first priority
security interest in the assets of the Company and the Subsidiaries as
provided in the Security Agreement and Israeli Security Agreement,
including all UCC-1 filing receipts.
"SHORT SALES" means all "short sales" as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include
the location and/or reservation of borrowable shares of Common Stock).
"LOAN AMOUNT" means, as to each Lender, the aggregate amount loaned by
such Lender to the Company pursuant to the Notes as specified below such
Lender's name on the signature page of this Agreement and next to the
heading "Loan Amount," in United States dollars and in immediately
available funds.
"SUBSEQUENT FINANCING" shall have the meaning ascribed to such term in
Section 4.13(a).
"SUBSEQUENT FINANCING NOTICE" shall have the meaning ascribed to such
term in Section 4.13(b).
"SUBSIDIARY" means any subsidiary of the Company as set forth on
SCHEDULE 3.1(A), and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the date
hereof.
"SUBSIDIARY GUARANTEE" means the Subsidiary Guarantee, dated the date
hereof, by each Subsidiary in favor of the Lenders, in the form of EXHIBIT
D attached hereto.
"TRADING DAY" means a day on which the New York Stock Exchange is open
for trading.
"TRADING MARKET" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market, the New York Stock Exchange, the
OTC Bulletin Board or the Tel Aviv Stock Exchange ("TASE").
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants, the Notes,
the Israeli Security Agreement, the U.S. Security Agreement, the Subsidiary
Guarantee and any other documents or agreements executed in connection with
the transactions contemplated hereunder.
"TRANSFER AGENT" means American Stock Transfer & Trust Company , the
current transfer agent of the Company, with a mailing address of 00 Xxxxxx
Xxxx, Xxx Xxxx, X.X. 00000 and a facsimile number of 000-000-0000, and any
successor transfer agent of the Company.
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"VARIABLE RATE TRANSACTION" shall have the meaning ascribed to such
term in Section 4.14(b).
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted for trading as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin Board
is not the then Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are
then reported in the "Pink Sheets" published by Pink OTC Markets, Inc. (or
a similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good
faith by the Lenders of a majority in interest of the Shares then
outstanding and reasonably acceptable to the Company, the fees and expenses
of which shall be paid by the Company.
"WARRANTS" means, collectively, the Common Stock purchase warrants
delivered to the Lenders at the applicable Closing in accordance with
Section 2.2(a) hereof, which Warrants shall be exercisable immediately and
have a term of exercise equal to 5 years, in the form of EXHIBIT B attached
hereto.
"WARRANT SHARES" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
LOAN AND ISSUANCE
2.1 CLOSING. On each Closing Date, upon the terms and subject to the
conditions set forth herein, the Company agrees to borrow, and the Lenders,
severally and not jointly, agree to extend loans, up to an aggregate of
$8,000,000 in principal amount represented by the Notes, and the Company shall
issue Warrants as described in Sections 2.2 below. Each Lender shall deliver to
the Company via wire transfer or a certified check of immediately available
funds equal to its Loan Amount as to the applicable Closing (as set forth on
such Lender's signature page to this Agreement) and the Company shall deliver to
each Lender its respective Note and a Warrant, as determined pursuant to Section
2.2(a), and the Company and each Lender shall deliver the other items set forth
in Section 2.2 deliverable at each Closing. The Closings shall take place in two
stages as set forth below (respectively, the "First Closing" and the "Second
Closing"). Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, each Closing shall occur at the offices of FWS or such
other location as the parties shall mutually agree.
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(a) FIRST CLOSING. The First Closing shall be for $3,500,000 and shall
occur on, or as soon as reasonably practicable following, the date hereof.
(b) SECOND CLOSING. The Second Closing shall be for up to $4,500,000
and shall occur within 5 Business Days following written notice from the
Company to the Lenders with respect thereto (which notice shall set forth
the total amount determined to be drawn by the Company and the applicable
Loan Amount) (the "SECOND CLOSING NOTICE"); provided that such Second
Closing Notice is delivered (i) not prior to 80 days after the First
Closing Date and (ii) not later than 110 days after the First Closing Date,
and provided further that (i) the conditions set forth in Section 2.3
herein have been satisfied and (ii) each Lender shall have delivered such
Lender's Loan Amount for the Second Closing to the Company. For the sake of
clarity, the Company has sole discretion as to whether to deliver the
Second Closing Notice.
2.2 DELIVERIES.
(a) On or prior to each Closing Date (except as noted), the Company
shall deliver or cause to be delivered to each Lender the following:
(i) as to the First Closing only, this Agreement duly executed by
the Company;
(ii) a duly certified copy of the resolutions of the Board of
Directors of the Company approving the Transaction Documents in form
and substance reasonably acceptable to the Lenders;
(iii) a legal opinion of Company U.S. Counsel and Company Israeli
Counsel, substantially in the forms of EXHIBIT B-1 and EXHIBIT B-2
attached hereto, respectively;
(iv) as to the First Closing, a Warrant registered in the name of
such Lender to purchase up to a number of shares of Common Stock equal
to such Lender's pro-rata portion (based on such Lender's Loan Amount
hereunder and the aggregate Loan Amount of all Lenders) of 1,000,000
shares, with an exercise price equal to $0.01, subject to adjustment
therein;
(v) as to the First Closing, a Warrant registered in the name of
such Lender to purchase up to a number of shares of Common Stock equal
to such Lender's pro-rata portion (based on such Lender's Loan Amount
hereunder and the aggregate Loan Amount of all Lenders) of 1,000,000
shares, with an exercise price equal to $0.50, subject to adjustment
therein;
(vi) as to the Second Closing, a Warrant registered in the name
of such Lender to purchase up to a number of shares of Common Stock
equal to such Lender's pro-rata portion (based on the amount actually
drawn by the Company of the $4,500,000 maximum amount borrowable and
such Lender's Loan Amount hereunder and the aggregate Loan Amount of
all Lenders) of 1,870,000 shares, with an exercise price equal to
$0.01, subject to adjustment therein;
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(vii) as to the Second Closing, a Warrant registered in the name
of such Lender to purchase up to a number of shares of Common Stock
equal to such Lender's pro-rata portion (based on such Lender's Loan
Amount hereunder and the aggregate Loan Amount of all Lenders) of
330,000 shares, with an exercise price equal to $0.50, subject to
adjustment therein;
(viii) as to the First Closing, the Security Agreement, duly
executed by the Company and each applicable Subsidiary, along with all
of the Security Documents, including the Subsidiary Guarantee, duly
executed by the parties thereto;
(ix) a Note with a principal amount equal to such Lender's Loan
Amount (in the applicable Closing), registered in the name of such
Lender; and
(x) the Prospectus and Prospectus Supplement (which may be
delivered in accordance with Rule 172 under the Securities Act) as to
the Warrants.
(b) On or prior to each Closing Date (except as noted), each Lender
shall deliver or cause to be delivered to the Company the following:
(i) as to the First Closing, this Agreement duly executed by such
Lender;
(ii) such Lender's Loan Amount as to the applicable Closing by
wire transfer to the account as specified in writing by the Company;
(iii) as to the First Closing, the Security Agreement duly
executed by each Lender; and
(iv) each non-Israeli Lender who will, upon exercise of the
Warrant, beneficially own more than 5% of the Company's outstanding
shares shall deliver to the Company an executed undertaking towards
the Office of the Chief Scientist of the Israeli Ministry of Industry,
Trade & Labor in the form of EXHIBIT G attached hereto.
2.3 CLOSING CONDITIONS.
(a) The obligations of the Company hereunder in connection with the
Closings are subject to the following conditions being met or waived by the
company:
(i) the accuracy in all material respects on each Closing Date of
the representations and warranties of the Lenders contained herein;
(ii) all obligations, covenants and agreements of each Lender
required to be performed at or prior to the applicable Closing Date
shall have been performed; and
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(iii) the delivery by each Lender of the items set forth in
Section 2.2(b) of this Agreement.
(b) The respective obligations of the Lenders hereunder in connection
with the Closings are subject to the following conditions being met or
waived by each Lender:
(i) the accuracy in all material respects on each Closing Date of
the representations and warranties of the Company contained herein,
provided however, that representations and warranties that are made as
of a particular date or period shall be accurate only as of such date
or period;
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the applicable Closing Date
shall have been performed;
(iii) the Israeli Security Agreement shall be reasonably
acceptable in form and substance to Lenders;
(iv) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
(v) the Registration Statement shall have been declared effective
by the Commission and remained effective through the First Closing (as
to the First Closing) or Second Closing (as to the Second Closing);
(vi) as to the Second Closing only, such Closing shall occur not
prior to 80 days after the First Closing Date and not later than 110
days after the First Closing Date;
(vii) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof; and
(viii) from the date hereof to the applicable Closing Date,
trading in the Common Stock shall not have been suspended by the
Commission or the Company's principal Trading Market (except for any
suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the applicable Closing),
and, at any time prior to the applicable Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been
suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service,
or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
each Lender, makes it impracticable or inadvisable to extend the loans
evidenced by the Notes at the applicable Closing.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or warranty otherwise made herein to
the extent of the disclosure contained in the corresponding section of the
Disclosure Schedules (unless it is reasonably apparent from the disclosure made
that a qualification is being made to other sections), the Company hereby makes
the following representations and warranties to each Lender:
(a) SUBSIDIARIES. All of the direct and indirect subsidiaries of the
Company are set forth on SCHEDULE 3.1(A). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and
outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities. If the Company has no
subsidiaries, then all other references to the Subsidiaries or any of them
in the Transaction Documents shall be disregarded.
(b) ORGANIZATION AND QUALIFICATION. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and, where such concept is applicable, in good standing under the
laws of the jurisdiction of its incorporation or organization, with the
requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor
any Subsidiary is in violation nor default of any of the provisions of its
respective certificate or articles of incorporation, memorandum of
association, or bylaws or other organizational or charter documents. Each
of the Company and the Subsidiaries is duly qualified to conduct business
and, where such concept is applicable, is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing,
as the case may be, could not have or reasonably be expected to result in:
(i) a material adverse effect on the legality, validity or enforceability
of any Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company's ability to perform in any material respect
on a timely basis its obligations under any Transaction Document, provided,
however, that in no event shall any of the following, alone or in
combination, be deemed to constitute a Material Adverse Effect: (A) any
change in the Company's stock price or trading volume in and of itself (but
not excluding the underlying cause of any such change pursuant to this
clause (A)); (B) any change or effect that results from changes, events or
circumstances affecting general economic conditions (which changes, events
or circumstances do not disproportionately affect the Company); or (C) any
change or effect that results from any action or inaction taken by the
Lenders (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT") and , to
the Company's knowledge, no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
or curtail such power and authority or qualification.
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(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part of the Company and no further action is required by the Company, the
Board of Directors or the Company's stockholders in connection therewith
other than in connection with the Required Approvals. Each Transaction
Document to which it is a party has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation
of the Company enforceable against the Company in accordance with its
terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally,
(ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by
applicable law.
(d) NO CONFLICTS. The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Notes,
the Securities and the consummation by it to which it is a party of the
other transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, memorandum of association, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any
of the properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt
or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to obtaining the Required
Approvals and assuming the accuracy of the representations made in Section
3.2, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including US federal and state and Israeli securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii)
and (iii), such as could not have or reasonably be expected to result in a
Material Adverse Effect. Without limiting the generality of the foregoing,
the Company is not in violation of any of the rules, regulations or
requirements of the Trading Markets and has no knowledge of any facts or
circumstances currently existing with respect to the Company that would
reasonably lead to delisting or suspension of the Common Stock by the
Trading Markets in the foreseeable future. In the past 2 years: (a) trading
in the Common Stock has not been suspended by the SEC, the ISA or any
Trading Market, and (b) the Company has received no communication, written
or oral, from the SEC, the ISA or any Trading Market regarding the
suspension or delisting of the Common Stock from the applicable Trading
Markets.
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(e) FILINGS, CONSENTS AND APPROVALS. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other Israeli, US
federal, state, local or other domestic or foreign governmental authority
or other Person in connection with the execution, delivery and performance
by the Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.4 of this Agreement, (ii) the filing with
the Commission of the Prospectus Supplement, (iii) application(s) to each
applicable Trading Market for the listing of the Warrant Shares for trading
thereon in the time and manner required thereby; and (iv) such filings as
are required to be made under applicable state securities laws
(collectively, the "REQUIRED APPROVALS").
(f) ISSUANCE OF THE SECURITIES; REGISTRATION. The Warrants are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The
Warrant Shares, when issued in accordance with the terms of the Warrants,
will be validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company. The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to the Warrants. The Company has prepared and filed the
Registration Statement in conformity with the requirements of the
Securities Act, which became effective on August 26, 2008 (the "EFFECTIVE
DATE"), including the Prospectus, and such amendments and supplements
thereto as may have been required to the date of this Agreement. The
Registration Statement is effective under the Securities Act and no stop
order preventing or suspending the effectiveness of the Registration
Statement or suspending or preventing the use of the Prospectus has been
issued by the Commission and no proceedings for that purpose have been
instituted or, to the knowledge of the Company, are threatened by the
Commission. The Company, if required by the rules and regulations of the
Commission, proposes to file the Prospectus, with the SEC pursuant to Rule
424(b). At the time the Registration Statement and any amendments thereto
became effective, at the date of this Agreement and at each Closing Date,
the Registration Statement and any amendments thereto conformed and will
conform in all material respects to the requirements of the Securities Act
and did not and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading; and the Prospectus and any
amendments or supplements thereto, at time the Prospectus or any amendment
or supplement thereto was issued and at each Closing Date, conformed and
will conform in all material respects to the requirements of the Securities
Act and did not and will not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
12
(g) CAPITALIZATION. The capitalization of the Company is as set forth
on SCHEDULE 3.1(G), which SCHEDULE 3.1(G) shall also include the number of
shares of Common Stock owned, to the knowledge of the Company,
beneficially, and of record, by Affiliates of the Company as of the date
hereof. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant
to the exercise or grant of employee stock options under the Company's
stock option plans, the issuance of shares of Common Stock to employees
pursuant to the Company's employee stock purchase plans and pursuant to the
conversion and/or exercise of Common Stock Equivalents outstanding as of
the date of the most recently filed periodic report under the Exchange Act.
No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except for the Warrants or as
set forth in SCHEDULE 3.1(G), there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible
into or exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common
Stock or Common Stock Equivalents. The issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Lenders) and will not result in a
right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. All of
the outstanding shares of capital stock of the Company are validly issued,
fully paid and nonassessable, have been issued in compliance with all US
federal and state and Israeli securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar rights
to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others is
required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company's capital stock to which the Company is a party or,
to the knowledge of the Company, between or among any of the Company's
stockholders.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports, schedules, forms, statements and other documents required to be
filed by the Company under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, together with the Prospectus and the Prospectus
Supplement, being collectively referred to herein as the "SEC REPORTS") on
a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates (or if amended or superseded, as of
the date of such amendment or superseded filing), the SEC Reports complied
in all material respects with the requirements of the Securities Act and
the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. The Company has never been an issuer subject to
Rule 144(i) under the Securities Act. The financial statements of the
Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and
fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and, as to the annual reports only, cash
flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
13
(i) MATERIAL CHANGES; UNDISCLOSED EVENTS, LIABILITIES OR DEVELOPMENTS.
Since the date of the latest audited financial statements included within
the SEC Reports, except as specifically disclosed in a subsequent SEC
Report filed prior to the date hereof, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected
to result in a Material Adverse Effect, (ii) the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting (other than as required by GAAP or applicable laws and disclosed
in such financial statements), (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any
shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending
before the Commission any request for confidential treatment of
information. Except for the issuance of the Securities contemplated by this
Agreement or as set forth on SCHEDULE 3.1(I), no event, liability or
development has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or
financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made or
deemed made that has not been publicly disclosed at least 1 Trading Day
prior to the date that this representation is made.
(j) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "ACTION") which (i)
adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or (ii) could, if there
were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under US federal or state or
Israeli securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission and/or ISA involving the
Company or any current or former director or officer of the Company.
Neither the Commission nor ISA has issued any stop order or other order
suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
14
(k) LABOR RELATIONS. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company, which could reasonably be expected to result in a Material
Adverse Effect. None of the Company's or its Subsidiaries' employees is a
member of a union that relates to such employee's relationship with the
Company or such Subsidiary, and neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relationships with their
employees are good. No executive officer, to the knowledge of the Company,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or agreement
or any restrictive covenant in favor of any third party, and the continued
employment of each such executive officer does not subject the Company or
any of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in compliance with
all Israeli and U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours and the Company has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries and
other payments to its employees, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(l) COMPLIANCE. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body or (iii) is or has been in violation of any statute, rule
or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws applicable to its business and
all such laws that affect the environment, except in each case as could not
have or reasonably be expected to result in a Material Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not reasonably be expected to result
in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company
nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(n) TITLE TO ASSETS. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good
and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case
free and clear of all Liens, except for Liens as do not materially affect
the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes,
the payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases with which the Company and the Subsidiaries are in compliance in all
material respects.
15
(o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses and other intellectual property rights and similar
rights necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a
notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights
of any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(p) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance coverage at least equal to
$5,000,000. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to
or from, or otherwise requiring payments to or from any officer, director
or such employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$120,000 other than for (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company.
16
(r) XXXXXXXX-XXXXX; INTERNAL ACCOUNTING CONTROLS. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of each Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that: (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company
has established disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to
be disclosed by the Company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission's rules and forms. The Company's
certifying officers have evaluated the effectiveness of the Company's
disclosure controls and procedures as of the end of the period covered by
the Company's most recently filed annual report under the Exchange Act
(such date, the "EVALUATION DATE"). The Company presented in its most
recently filed annual report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the Company's internal
control over financial reporting (as such term is defined in the Exchange
Act) that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
(s) CERTAIN FEES. Except as set forth in the Prospectus Supplement, no
brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. The Lenders shall
have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in
this Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(t) INVESTMENT COMPANY. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act of 1940, as amended.
(u) REGISTRATION RIGHTS. No Person has any right to cause the Company
to effect the registration under the Securities Act of any securities of
the Company.
17
(v) LISTING AND MAINTENANCE REQUIREMENTS. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act and are
listed for trading on NASDAQ and on TASE and satisfy all requirements for
the continuation of such listing, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
the Israeli Securities Act, nor has the Company received any notification
that the Commission and/or ISA is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date
hereof, received notice from any Trading Market on which the Common Stock
is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in
the foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
(w) APPLICATION OF TAKEOVER PROTECTIONS. The Company and the Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's certificate of incorporation
(or similar charter documents) or the laws of its state of incorporation
that is or could become applicable to the Lenders as a result of the
Lenders and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including without limitation as a
result of the Company's issuance of the Securities and the Lenders'
ownership of the Securities.
(x) DISCLOSURE. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents,
the Company confirms that neither it nor any other Person acting on its
behalf has provided any of the Lenders or their agents or counsel with any
information that it believes constitutes or might constitute material,
non-public information which is not otherwise disclosed in the Prospectus
or the Prospectus Supplement. The Company understands and confirms that the
Lenders will rely on the foregoing representation in effecting transactions
in securities of the Company. All disclosure furnished by or on behalf of
the Company to the Lenders regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to
this Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The press releases disseminated
by the Company during the twelve months preceding the date of this
Agreement taken as a whole do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made and when made, not misleading.
The Company acknowledges and agrees that no Lender makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.
18
(y) NO INTEGRATED OFFERING. Assuming the accuracy of the Lenders'
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of any applicable shareholder
approval provisions of any Trading Market on which any of the securities of
the Company are listed or designated.
(z) SOLVENCY. Based on the consolidated financial condition of the
Company as of each Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the First Tranche Notes hereunder,
(i) the fair saleable value of the Company's assets exceeds the amount that
will be required to be paid on or in respect of the Company's existing
debts and other liabilities (including known contingent liabilities) as
they mature, (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business as now conducted and as proposed to be
conducted during the next four months including its capital needs taking
into account the particular capital requirements of the business conducted
by the Company, and projected capital requirements and capital availability
thereof, and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
Assuming receipt of the proceeds from the sale of First and Second Tranche
Notes, the Company has no knowledge of any facts or circumstances which
lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one
year from the First Closing Date. SCHEDULE 3.1(Z) sets forth as of the date
thereof all outstanding secured and unsecured Indebtedness of the Company
or any Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement, "INDEBTEDNESS" means (x)
any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of
business), (y) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same
are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business; and (z) the present value of any lease payments in excess of
$50,000 due under leases required to be capitalized in accordance with
GAAP. Neither the Company nor any Subsidiary is in default with respect to
any Indebtedness.
(aa) TAX STATUS. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary has filed all necessary
Israeli and US federal, state and foreign income and franchise tax returns
and has paid or accrued all taxes shown as due thereon, and the Company has
no knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
19
(bb) FOREIGN CORRUPT PRACTICES. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed
to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (v) violated in any
respect any provision of the Israeli Law for the Prevention of Money
Laundering 2000, as amended, and (vi) violated in any respect Section 291A
of the Criminal Law 1977 prohibiting the corruption/bribery of a foreign
government officials.
(cc) ACCOUNTANTS. The Company's accounting firm is set forth on
SCHEDULE 3.1(CC) of the Disclosure Schedules. To the knowledge and belief
of the Company, such accounting firm (i) is a registered public accounting
firm as required by the Exchange Act and (ii) shall express its opinion
with respect to the financial statements to be included in the Company's
Annual Report for the year ending December 31, 2008.
(dd) SENIORITY. Except as set forth in SCHEDULE 3.1(DD), as of each
Closing Date, no Indebtedness or other claim against the Company is senior
to the Notes in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness secured
by purchase money security interests (which is senior only as to underlying
assets covered thereby) and capital lease obligations (which is senior only
as to the property covered thereby).
(ee) NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS. To the Company's
knowledge, there are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the Company and
the Company is current with respect to any fees owed to its accountants and
lawyers which could adversely affect the Company's ability to perform any
of its obligations under any of the Transaction Documents.
(ff) ACKNOWLEDGMENT REGARDING LENDERS' EXTENSION OF THE LOANS
EVIDENCED BY THE NOTES. The Company acknowledges and agrees that each of
the Lenders is acting solely in the capacity of an arm's length lender with
respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Lender is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated
thereby and any advice given by any Lender or any of their respective
representatives or agents in connection with the Transaction Documents and
the transactions contemplated thereby is merely incidental to the Lenders'
purchase of the Securities. The Company further represents to each Lender
that the Company's decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation
of the transactions contemplated hereby by the Company and its
representatives.
20
(gg) ACKNOWLEDGEMENT REGARDING LENDER'S TRADING ACTIVITY. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding (except
for Sections 3.2(e) and 4.14 hereof), it is understood and acknowledged by
the Company that: (i) none of the Lenders have been asked by the Company to
agree, nor has any Lender agreed, to desist from purchasing or selling,
long and/or short, securities of the Company, or "derivative" securities
based on securities issued by the Company or to hold the Securities for any
specified term; (ii) that past or future open market or other transactions
by any Lender, specifically including, without limitation, Short Sales or
"derivative" transactions, before or after the closing of this or future
private placement transactions, may negatively impact the market price of
the Company's publicly-traded securities; (iii) that any Lender, and
counter-parties in "derivative" transactions to which any such Lender is a
party, directly or indirectly, presently may have a "short" position in the
Common Stock, and (iv) that each Lender shall not be deemed to have any
affiliation with or control over any arm's length counter-party in any
"derivative" transaction. The Company further understands and acknowledges
that (y) one or more Lenders may engage in hedging activities at various
times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Warrant Shares
deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that
the hedging activities are being conducted. The Company acknowledges that
such aforementioned hedging activities do not constitute a breach of any of
the Transaction Documents.
(hh) REGULATION M COMPLIANCE. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased,
or, paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any Person any compensation
for soliciting another to purchase any other securities of the Company,
other than, in the case of clauses (ii) and (iii), compensation paid to the
Company's placement agent in connection with the placement of the
Securities.
(ii) APPROVED ENTERPRISE STATUS. The Company is entitled to certain
tax benefits, based on its status as an Approved Enterprise under the Law
for the Encouragement of Capital Investments 5744-1984. The Company has
complied, in all material respects, with the terms and provisions of its
Approved Enterprise status and applicable laws and regulations in order to
retain its status as an Approved Enterprise.
(jj) OCS GRANTS. The Company has received grants in support of its
research and development through the OCS as set out in the SEC Reports (the
"GRANTS"). The Company is in compliance, in all material respects, with the
terms and conditions of the Grants, and has duly fulfilled, in all material
respects, all the undertakings relating thereto. The Company is not aware
of any event or other set of circumstances which might lead to the
revocation or material modification of any of the Grants.
21
3.2 REPRESENTATIONS AND WARRANTIES OF THE LENDERS. Each Lender, for itself
and for no other Lender, hereby represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Lender is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization with full right, corporate or partnership power and
authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and performance by
such Lender of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate or similar action on the part of
such Lender. Each Transaction Document to which it is a party has been duly
executed by such Lender, and when delivered by such Lender in accordance
with the terms hereof, will constitute the valid and legally binding
obligation of such Lender, enforceable against it in accordance with its
terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by
applicable law.
(b) OWN ACCOUNT. Such Lender is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling
such Securities or any part thereof in violation of the Securities Act or
any applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities Act or
any applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute or
regarding the distribution of such Securities (this representation and
warranty not limiting such Lender's right to sell the Securities pursuant
to the Registration Statement or otherwise in compliance with applicable
federal and state securities laws) in violation of the Securities Act or
any applicable state securities law. Such Lender is acquiring the
Securities hereunder in the ordinary course of its business.
(c) LENDER STATUS. At the time such Lender was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it
exercises any Warrants, it will be either: (i) an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the
Securities Act or (ii) a "qualified institutional buyer" as defined in Rule
144A(a) under the Securities Act. Such Lender is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.
(d) EXPERIENCE OF SUCH LENDER. Such Lender, either alone or together
with its representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the
merits and risks of the prospective investment in the Securities, and has
so evaluated the merits and risks of such investment. Such Lender is able
to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment. Such
Lender has been given the opportunity to ask questions of, and receive
answers from, the Company concerning the terms and conditions of the offer
of the Securities and other matters pertaining to such investment.
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(e) GENERAL SOLICITATION. To the Lender's knowledge, such Lender is
not being issued the Securities as a result of any advertisement, article,
notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general
advertisement.
(f) SHORT SALES AND CONFIDENTIALITY PRIOR TO THE DATE HEREOF. Other
than consummating the transactions contemplated hereunder, such Lender has
not, nor has any Person acting on behalf of or pursuant to any
understanding with such Lender, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the Company
during the period commencing from the time that such Lender first received
a term sheet (written or oral) from the Company or any other Person
representing the Company setting forth the material terms of the
transactions contemplated hereunder ("DISCUSSION TIME"). Notwithstanding
the foregoing, in the case of a Lender that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of
such Lender's assets and the portfolio managers have no direct knowledge of
the investment decisions made by the portfolio managers managing other
portions of such Lender's assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to extend the loans covered by
this Agreement. Other than to other Persons party to this Agreement, such
Lender has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of doubt,
nothing contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to
effect short sales or similar transactions in the future.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 WARRANT SHARES. If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the issuance or
resale of the Warrant Shares or if the Warrant is exercised via cashless
exercise, the Warrant Shares issued pursuant to any such exercise shall be
issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the
Warrant Shares) is not effective or is not otherwise available for the sale or
resale of the Warrant Shares, the Company shall immediately notify the holders
of the Warrants in writing that such registration statement is not then
effective and thereafter shall promptly notify such holders when the
registration statement is effective again and available for the sale or resale
of the Warrant Shares. The Company shall use best efforts to keep a registration
statement (including the Registration Statement) registering the issuance or
resale of the Warrant Shares effective during the term of the Warrants. Upon a
cashless exercise of the Warrants, the holding period for purposes of Rule 144
shall tack back to the original date of issuance of such Warrant.
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4.2 INTENTIONALLY OMITTED.
4.3 FURNISHING OF INFORMATION. Until the earliest of the time that (i) no
Lender owns Securities or (ii) the Warrant Shares may all be sold pursuant to
Rule 144 without the requirement that the Company be current in filing Exchange
Act reports, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act. As long as any Lender owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Lenders and make publicly available in accordance
with Rule 144(c) such information as is required for the Lenders to sell the
Securities under Rule 144, if any. The Company further covenants that it will
take such further action as any holder of Securities may reasonably request, to
the extent required from time to time to enable such Person to sell such
Securities without registration under the Securities Act within the requirements
of the exemption provided by Rule 144.
4.4 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained before the
closing of such subsequent transaction.
4.5 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, by 8:30 a.m.
(New York City time) on the Trading Day immediately following the date hereof,
issue a Current Report on Form 6-K, disclosing the material terms of the
transactions contemplated hereby, and including the Transaction Documents as
exhibits thereto. The Company and each Lender shall consult with each other in
issuing any other press releases with respect to the transactions contemplated
hereby, and neither the Company nor any Lender shall issue any such press
release nor otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of any Lender, or without the
prior consent of each Lender, with respect to any press release of the Company,
which consent shall not unreasonably be withheld or delayed, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Lender, or include the name of any Lender in any filing
with the Commission or any regulatory agency or Trading Market, without the
prior written consent of such Lender, except (a) as required by federal
securities law in connection with the filing of final Transaction Documents
(including signature pages thereto) with the Commission and (b) to the extent
such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide the Lenders with prior notice of such disclosure
permitted under this clause (b).
4.6 SHAREHOLDER RIGHTS PLAN. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any Lender
is an "Acquiring Person" under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Lender could be deemed to trigger the provisions of any
such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Lenders.
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4.7 NON-PUBLIC INFORMATION. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents (or as
may be required to comply with Section 4.13), the Company covenants and agrees
that neither it, nor any other Person acting on its behalf will provide any
Lender or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Lender
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Lender shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company.
4.8 USE OF PROCEEDS. Except as set forth on SCHEDULE 4.8 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and shall not use such proceeds for: (a) the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
(b) the redemption of any Common Stock or Common Stock Equivalents or (c) the
settlement of any outstanding litigation.
4.9 INDEMNIFICATION OF LENDERS. Subject to the provisions of this Section
4.9, the Company will indemnify and hold each Lender and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Lender (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
"LENDER PARTY") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Lender Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Lender in
any capacity, or any of them or their respective Affiliates, by any stockholder
of the Company who is not an Affiliate of such Lender, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Lender's representations, warranties or covenants
under the Transaction Documents or any agreements or understandings such Lender
may have with any such stockholder or any violations by the Lender of state or
federal securities laws or any conduct by such Lender which constitutes fraud,
gross negligence, willful misconduct or malfeasance). If any action shall be
brought against any Lender Party in respect of which indemnity may be sought
pursuant to this Agreement, such Lender Party shall promptly notify the Company
in writing, and the Company shall have the right to assume the defense thereof
with counsel of its own choosing reasonably acceptable to the Lender Party. Any
Lender Party shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Lender Party except to the extent that
(i) the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Lender Party,
in which case the Company shall be responsible for the reasonable fees and
expenses of no more than one such separate counsel. The Company will not be
liable to any Lender Party under this Agreement (y) for any settlement by a
Lender Party effected without the Company's prior written consent, which shall
not be unreasonably withheld or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any Lender
Party's breach of any of the representations, warranties, covenants or
agreements made by such Lender Party in this Agreement or in the other
Transaction Documents.
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4.10 RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue the Warrant Shares pursuant to
any exercise of the Warrants.
4.11 LISTING OF COMMON STOCK.(a) The Company hereby agrees to use
commercially reasonable best efforts to maintain the listing and quotation of
the Common Stock on a Trading Market, and as soon as reasonably practicable
following each Closing (but not later than the applicable Closing Date) to list
or quote all of the Warrant Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Trading Market, it will then include in such application all of the Warrant
Shares, and will take such other action as is necessary to cause all of the
Warrant Shares to be listed or quoted on such other Trading Market as promptly
as possible. The Company will then take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Trading Market.
4.12 EQUAL TREATMENT OF LENDERS. Except as otherwise expressly required
hereunder, no consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents. For clarification purposes, this provision
constitutes a separate right granted to each Lender by the Company and
negotiated separately by each Lender, and is intended for the Company to treat
the Lenders as a class and shall not in any way be construed as the Lenders
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.
4.13 PARTICIPATION IN FUTURE FINANCING.
(a) From the date hereof until the date that the Notes are no longer
outstanding, upon any issuance by the Company or any of its Subsidiaries of
Common Stock or Common Stock Equivalents for cash consideration, (a
"SUBSEQUENT FINANCING"), each Lender shall have the right, subject to the
terms and conditions of this Section 4.13, to participate in the Subsequent
Financing up to an amount equal to 30% of the Subsequent Financing (the
"PARTICIPATION MAXIMUM") on the same terms, conditions and price provided
for in the Subsequent Financing, unless the Subsequent Financing is a
registered public offering, in which case the Company shall offer each
Lender the right to participate in such public offering when it is lawful
for the Company to do so, but no Lender shall be entitled to purchase any
particular amount of such public offering.
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(b) At least five (5) Trading Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Lender a written
notice of its intention to effect a Subsequent Financing ("PRE-NOTICE"),
which Pre-Notice shall ask such Lender if it wants to review the details of
such financing (such additional notice, a "SUBSEQUENT FINANCING NOTICE").
Upon the request of a Lender, and only upon a request by such Lender, for a
Subsequent Financing Notice, the Company shall promptly, but no later than
1 Trading Day after such request, deliver a Subsequent Financing Notice to
such Lender. The Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder and the Person or Persons through
or with whom such Subsequent Financing is proposed to be effected and shall
include a term sheet or similar document relating thereto as an attachment.
(c) Any Lender desiring to participate in such Subsequent Financing
must provide written notice to the Company by not later than 5:30 p.m. (New
York City time) on the fifth (5th) Trading Day after all of the Lenders
have received the Pre-Notice that the Lender is willing to participate in
the Subsequent Financing, the amount of the Lender's participation, and
that the Lender has such funds ready, willing, and available for investment
on the terms set forth in the Subsequent Financing Notice. If the Company
receives no notice from a Lender as of such fifth (5th) Trading Day, such
Lender shall be deemed to have notified the Company that it does not elect
to participate.
(d) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading
Day after all of the Lenders have received the Pre-Notice, notifications by
the Lenders of their willingness to participate in the Subsequent Financing
(or to cause their designees to participate) is, in the aggregate, less
than the total amount of the Participation Maximum of such Subsequent
Financing, then the Company may effect the remaining portion of such
Subsequent Financing on the terms and with the Persons set forth in the
Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading
Day after all of the Lenders have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Lenders seeking to
purchase more than the aggregate amount of the Participation Maximum, each
such Lender shall have the right to purchase its Pro Rata Portion (as
defined below) of the Participation Maximum. "PRO RATA PORTION" means the
ratio of (x) the Loan Amount in connection with the Closing Dates by a
Lender participating under this Section 4.13 and (y) the sum of the
aggregate Loan Amounts in connection with the Closing Dates by all Lenders
participating under this Section 4.13.
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(f) The Company must provide the Lenders with a second Subsequent
Financing Notice, and the Lenders will again have the right of
participation set forth above in this Section 4.13, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on terms substantially identical to those set
forth in such Subsequent Financing Notice within 30 Trading Days after the
date of the initial Subsequent Financing Notice, unless shareholder
approval is required, in which case such Subsequent Financing must be
consummated within 50 Trading Days.
(g) Notwithstanding the foregoing, this Section 4.13 shall not apply
in respect of (i) an Exempt Issuance or (ii) an underwritten public
offering of Common Stock.
4.14 SUBSEQUENT EQUITY SALES.
(a) Intentionally Omitted.
(b) From the date hereof until the Notes are no longer outstanding,
the Company shall be prohibited from effecting or entering into an
agreement to effect any Subsequent Financing involving a Variable Rate
Transaction. "VARIABLE RATE TRANSACTION" means a transaction in which the
Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion price,
exercise price or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common
Stock at any time after the initial issuance of such debt or equity
securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the
Company or the market for the Common Stock (but excluding standard
stock-split antidilution protections) or (ii) enters into any agreement,
including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price. Any Lender shall
be entitled to obtain injunctive relief against the Company to preclude any
such issuance, which remedy shall be in addition to any right to collect
damages.
(c) Notwithstanding the foregoing, this Section 4.14 shall not apply
in respect of (i) an Exempt Issuance, except that no Variable Rate
Transaction shall be deemed an Exempt Issuance and (ii) an issuance of
securities with a purchase or exercise price exceeding $1.00 (as adjusted
for stock splits etc.).
4.15 SHORT SALES AND CONFIDENTIALITY AFTER THE DATE HEREOF. Each Lender,
severally and not jointly with the other Lenders, covenants that neither it nor
any Affiliate acting on its behalf or pursuant to any understanding with it will
execute any Short Sales during the period commencing with the Discussion Time
and ending at such time the transactions contemplated by this Agreement are
first publicly announced as described in Section 4.4. Each Lender, severally and
not jointly with the other Lenders, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Lender will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Disclosure Schedules. Notwithstanding the foregoing,
no Lender makes any representation, warranty or covenant hereby that it will not
engage in Short Sales in the securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced as
described in Section 4.4. Notwithstanding the foregoing, in the case of a Lender
that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Lender's assets and the portfolio managers have
no direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Lender's assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to extend the loans covered by this
Agreement.
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ARTICLE V.
MISCELLANEOUS
5.1 TERMINATION. This Agreement may be terminated by any Lender, as to such
Lender's obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Lenders, or by the Company by
notice to each Lender, by written notice to the other parties, if the First
Closing has not been consummated on or before September 8, 2008; PROVIDED,
HOWEVER, that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
5.2 FEES AND EXPENSES. At the Closing, the Company has agreed to reimburse
Enable Capital Management, LLC ("ENABLE") the non-accountable sum of $50,000 for
its legal fees and expenses (plus VAT, if applicable), none of which has been
paid prior to the Closing. The Company shall deliver, prior to the Closing, a
completed and executed copy of the Closing Statement, attached hereto as ANNEX
A. Except as expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of any Securities
to the Lenders.
5.3 ENTIRE AGREEMENT. The Transaction Documents, together with the exhibits
and schedules thereto, the Prospectus and the Prospectus Supplement, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.
5.4 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
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5.5 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Lenders holding at least 67% in interest of the Securities
then outstanding or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.
5.6 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Lender (other than by merger). Any
Lender may assign any or all of its rights under this Agreement to any Person to
whom such Lender assigns or transfers any Securities, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the "Lenders",
including, without limitation, Section 3.2.
5.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.
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5.9 GOVERNING LAW, ARBITRATION. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents other than
the Israeli Security Agreement shall be governed by and construed and enforced
in accordance with, and any dispute between the parties relating to or arising
from the Transaction Documents shall be governed by, the internal laws of the
State of New York, without regard to the principles of conflicts of law thereof.
Each party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents),
as well as any dispute between the parties relating to the Transaction
Documents, shall be resolved by binding arbitration in San Francisco, California
before an arbitrator with experience in commercial disputes relating to
securities. The arbitration shall be administered by JAMS pursuant to its
Comprehensive Arbitration Rules and Procedures, or, if for any reason JAMS
refuses to administer such arbitration or JAMS is no longer in business, by the
American Arbitration Association ("AAA") in accordance with its rules and
procedures. Unless the arbitrator determines that there is exceptional need for
additional discovery, discovery in the arbitration shall be limited as follows:
(1) the parties shall exchange non-privileged relevant documents including,
without limitation, all documents that the parties intend to use as evidence in
the arbitration; and (2) each party shall be entitled to take one deposition of
seven hours duration of either an opposing party or a non-party. If one party
fails to respond within 20 days after the other party mails a written list of
proposed arbitrators to that party by either agreeing to one of the proposed
arbitrators or suggesting 3 or more alternate arbitrators, the proposing party
may select the arbitrator from among its initial list of proposed arbitrators
and JAMS (or AAA if it is administering the arbitration) shall then appoint that
arbitrator to preside over the arbitration. If the parties are unable to agree
on an arbitrator, the parties shall select an arbitrator pursuant to the rules
of JAMS (or AAA if it is administering the arbitration). Where reasonable, the
arbitrator shall schedule the arbitration hearing within four (4) months after
being appointed. The arbitrator must render a decision in writing, explaining
the legal and factual basis for decision as to each of the principal
controverted issues. The arbitrator's decision will be final and binding upon
the parties. A judgment upon any award may be entered in any court of competent
jurisdiction. This clause shall not preclude the parties from seeking
provisional remedies in aid of arbitration, such as injunctive relief, from any
court of competent jurisdiction. Each party shall be responsible for advancing
one-half of the costs of arbitration, including all JAMS (or AAA) fees; provided
that, in the award, the prevailing party shall be entitled to recover all of its
costs and expenses, including reasonable attorneys' fees and costs, arbitrator
fees, JAMS (or AAA) fees and costs, and any attorneys' fees and costs incurred
in compelling arbitration. The parties are not waiving, and expressly reserve,
any rights they may have under federal securities laws, rules, and regulations,
and any such rights shall be determined in the arbitration provided for herein.
Each party hereby irrevocably agrees and submits to the jurisdiction of the
federal and state courts located in the City of San Francisco, California, for
any suit, action or proceeding enforcing this arbitration provision or entering
judgment upon any arbitral award made pursuant to this arbitration provision,
and each party hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such courts, or that such suit, action or proceeding is an
inconvenient venue. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law. This provision will be interpreted,
construed and governed according to the Federal Arbitration Act (9 U.S.C.
Sections 1 et seq.).
5.10 SURVIVAL. The representations and warranties contained herein shall
survive the Closings and the delivery of the Securities until the third
anniversary of the First Closing Date.
5.11 EXECUTION. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a ".pdf" format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or ".pdf" signature page were an original thereof.
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5.12 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
5.13 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Lender exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Lender may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights; PROVIDED,
HOWEVER, that in the case of a rescission of an exercise of a Warrant, the
Lender shall be required to return any shares of Common Stock subject to any
such rescinded exercise notice.
5.14 REPLACEMENT OF SECURITIES. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.
5.15 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Lenders and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
5.16 PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to any Lender pursuant to any Transaction Document or a Lender enforces
or exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any domestic or
foreign law (including, without limitation, any bankruptcy law, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
32
5.17 USURY. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Lender in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "MAXIMUM RATE"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Lender with respect to indebtedness
evidenced by the Transaction Documents, such excess shall be applied by such
Lender to the unpaid principal balance of any such indebtedness or be refunded
to the Company, the manner of handling such excess to be at such Lender's
election.
5.18 INDEPENDENT NATURE OF LENDERS' OBLIGATIONS AND RIGHTS. The obligations
of each Lender under any Transaction Document are several and not joint with the
obligations of any other Lender, and no Lender shall be responsible in any way
for the performance or non-performance of the obligations of any other Lender
under any Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Lender pursuant thereto, shall
be deemed to constitute the Lenders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Lenders
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. Each Lender shall
be entitled to independently protect and enforce its rights including, without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose. Each Lender
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents. For reasons of administrative
convenience only, Lenders and their respective counsel have chosen to
communicate with the Company through FWS. FWS does not represent all of the
Lenders but only Enable. The Company has elected to provide all Lenders with the
same terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Lenders.
5.19 LIQUIDATED DAMAGES. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
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5.20 SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
5.21 CONSTRUCTION. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto. In
addition, each and every reference to share prices in any Transaction Document
shall be subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock
that occur after the date of this Agreement.
5.22 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.
(SIGNATURE PAGES FOLLOW)
34
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed by their respective authorized signatories as of the date first
indicated above.
METALINK LTD. ADDRESS FOR NOTICE:
Metalink Ltd.
Xxxxx Xxxxxxxx Xxxx
Xxxxx 00000, Xxxxxx
Attn.: CFO
By:__________________________________________ Fax: x000-0-0000000
Name:
Title:
With a copy to (which shall not constitute notice):
Goldfarb, Levy, Eran, Meiri, Tzafrir & Co.
0 Xxxxxxxx Xxxxxx
Xxx Xxxx 00000, Xxxxxx
Attn: Xxx Xxxxxx, Adv.
Fax: x000-0-000-0000
Xxxxxxxxx Traurig LLP
Suite 400
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
35
[LENDER SIGNATURE PAGES TO MTLK LOAN AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Loan Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.
Name of Lender: ________________________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF LENDER: ___________________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Authorized Signatory:__________________________________________
Fax Number of Authorized Signatory: ____________________________________________
Address for Notice of Lender:
Address for Delivery of Securities for Lender (if not same as address for
notice):
Loan Amount First Closing: $_________________
Loan Amount Second Closing: $________________
Warrant Shares: __________________
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
36
