EXHIBIT 4.11
PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
TEFRON LTD.
AND
BRITTANY CAPITAL MANAGEMENT LIMITED
Dated as of
March 9, 2004
THIS PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 9th day of
March, 2004 (this "AGREEMENT"), by and between BRITTANY CAPITAL FUND LIMITED, a
company organized and existing under the laws of the Bahamas ("INVESTOR"), and
TEFRON LTD., a corporation organized and existing under the laws of Israel (the
"COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase, up to Fifteen
Million Dollars ($15,000,000) of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("SECTION 4(2)") of the Securities Act of 1933, Regulation D, and
the rules and regulations promulgated thereunder (the "SECURITIES ACT"), and/or
upon such other exemption from the registration requirements of the Securities
Act as may be available with respect to any or all of the investments in Common
Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS as used in this Agreement, the following terms
shall have the following meanings specified or indicated (such meanings to be
equally applicable to both the singular and plural forms of the terms defined)
"AGREEMENT" shall have the meaning specified in the preamble
hereof.
"ARTICLES AND/OR MEMORANDUM" shall have the meaning specified in
Section 4.8.
"BID PRICE" shall mean the closing price of the Common Stock on
the Principal Market.
"BLACKOUT NOTICE" shall have the meaning specified in the
Registration Rights Agreement.
"BLACKOUT PERIOD" shall have the meaning specified in the
Registration Rights Agreement.
"CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).
"CLOSING" shall mean one of the closings of a purchase and sale of
shares of Common Stock pursuant to Section 2.3.
"CLOSING DATE" shall mean, with respect to a Closing, the thirteenth
(13th) Trading Day following the Put Date related to such Closing, or such
earlier date as the Company and Investor shall agree, provided all conditions to
such Closing have been satisfied on or before such Trading Day.
"COMMITMENT PERIOD" shall mean the period commencing on the Effective
Date, and ending on the earlier of (i) the date on which Investor shall have
purchased Put Shares pursuant to this Agreement for an aggregate Purchase Price
of the Maximum Commitment Amount, (ii) the date this Agreement is terminated
pursuant to Section 2.5 or 2.7, or (iii) the date occurring thirty-six (36)
months from the date of commencement of the Commitment Period.
"COMMON STOCK" shall mean the Company's ordinary shares, NIS 1.0 par
value per share, and any shares of any other class of common shares whether now
or hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean any securities that are
convertible into or exchangeable for Common Stock or any options or other rights
to subscribe for or purchase Common Stock or any such convertible or
exchangeable securities.
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"CONDITION SATISFACTION DATE" shall have the meaning specified in
Section 7.2.
"DAMAGES" shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of expert witnesses and investigation).
"DISCOUNT" shall mean six (6%) percent.
"DISPUTE PERIOD" shall have the meaning specified in Section 9.3(a).
"DTC" shall the meaning specified in Section 2.3.
"DWAC" shall the meaning specified in Section 2.3.
"EFFECTIVE DATE" shall mean the date on which the SEC first declares
effective a Registration Statement registering resale of the Registrable
Securities as set forth in Section 7.2(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder.
"FAST" shall the meaning specified in Section 2.3.
"FLOOR PRICE" shall have the meaning specified in Section 2.1
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"INDEMNIFIED PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNIFYING PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNITY NOTICE" shall have the meaning specified in Section 9.3(b).
"INVESTMENT AMOUNT" shall mean the dollar amount (neither less than the
Minimum Put Amount nor more than the Maximum Put Amount) to be invested by
Investor to purchase Put Shares with respect to any Put Date as notified by the
Company to Investor in accordance with Section 2.2.
"INVESTOR" shall have the meaning specified in the preamble to this
Agreement.
"LEGEND" shall have the meaning specified in Section 8.1.
"MARKET PRICE" on any given date shall mean the average of the lowest
Bid Price (not necessarily consecutive) for any four (4) Trading Days during the
ten (10) Trading Day period immediately following the Put Date.
"MAXIMUM COMMITMENT AMOUNT" shall mean the lesser of Fifteen Million
($15,000,000.00) Dollars or 2,470,021 shares of Stock (the number of shares
equal to 19.9% of the Company's issued and outstanding ordinary shares at the
time of the execution of this Agreement (not including 997,400 ordinary shares
held by a wholly-owned subsidiary of the Company)).
"MATERIAL ADVERSE EFFECT" shall mean any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability
of the Company to enter into and perform its obligations under any of (a) this
Agreement and (b) the Registration Rights Agreement.
"MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the greater of
(a) $1,000,000.00, or (b) Two Hundred Fifty (250%) percent of the Weighted
Average Volume for the ten (10) Trading Days immediately preceding each of the
Put Date.
"MINIMUM PUT AMOUNT" shall mean, with respect to any Put, Twenty-Five
Thousand Dollars ($25,000).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.
"OUTSTANDING" shall mean, with respect to the Common Stock, at any date
as of which the number of shares of Common Stock is to be determined, all issued
and outstanding shares of Common Stock, including all shares of Common Stock
issuable in respect of outstanding convertible securities, scrip or any
certificates representing fractional interests in shares of Common Stock;
provided, however, that Outstanding shall not include any shares of Common Stock
then directly or indirectly owned or held by or for the account of the Company.
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
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"PRINCIPAL MARKET" shall mean the New York Stock Exchange, Nasdaq
National Market, Nasdaq SmallCap Market, American Stock Exchange, Over the
Counter Market or such other national securities exchange or market, whichever
is at the time the principal trading exchange or market for the Common Stock.
"PURCHASE PRICE" shall mean, with respect to a Put, the Market Price on
the applicable Put Date (or such other date on which the Purchase Price is
calculated in accordance with the terms and conditions of this Agreement) less
the product of the Discount and the Market Price.
"PUT" shall mean each occasion that the Company elects to exercise its
right to tender a Put Notice requiring Investor to purchase shares of Common
Stock, subject to the terms and conditions of this Agreement.
"PUT DATE" shall mean the Trading Day during the Commitment Period that
a Put Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE" shall mean a written notice, substantially in the form of
Exhibit B hereto, to Investor setting forth the Investment Amount with respect
to which the Company intends to require Investor to purchase shares of Common
Stock pursuant to the terms of this Agreement.
"PUT SHARES" shall mean all shares of Common Stock issued or issuable
pursuant to a Put that has been exercised or may be exercised in accordance with
the terms and conditions of this Agreement.
"REGISTRABLE SECURITIES" shall mean the (a) Put Shares and (b) any
securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (i) a Registration
Statement has been declared effective by the SEC and such Registrable Securities
have been disposed of pursuant to a Registration Statement, (ii) such
Registrable Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 are met, (iii) such time as such Registrable
Securities have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to Investor, such Registrable Securities
may be sold without registration under the Securities Act including a sale
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights
agreement in substantially the form of Exhibit A hereto.
"REGISTRATION STATEMENT" shall mean a registration statement on Form F-2
(if use of such form is then available to the Company pursuant to the rules of
the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement
and the Registration Rights Agreement and in accordance with the intended method
of distribution of such securities), for the registration of the resale by
Investor of the Registrable Securities under the Securities Act.
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"REGULATION D" shall mean Regulation D under the Securities Act.
"RULE 144" shall mean Rule 144 under the Securities Act or any similar
provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECTION 4(2)" shall have the meaning specified in the recitals of this
Agreement.
"SECURITIES ACT" shall have the meaning specified in the recitals of
this Agreement.
"SEC DOCUMENTS" shall mean, as of a particular date, all reports and
other documents filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act since the beginning of the Company's then most recently completed
fiscal year as of the time in question (provided that if the date in question is
within ninety days of the beginning of the Company's fiscal year, the term shall
include all documents filed since the beginning of the second preceding fiscal
year).
"SUBSCRIPTION DATE" shall mean the date on which this Agreement is
executed and delivered by the Company and Investor.
"THIRD PARTY CLAIM" shall have the meaning specified in Section 9.3(a).
"TRADING DAY" shall mean any day during which the Principal Market shall
be open for business.
"TRANSACTION DOCUMENTS" means this Private Equity Credit Agreement, the
Registration Rights Agreement, the Closing Certificate, in substantially the
form of Exhibit D hereto and the Transfer Agent Instructions in substantially
the form of Exhibit E hereto.
"TRANSFER AGENT" shall mean the transfer agent for the Common Stock (and
to any substitute or replacement transfer agent for the Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent).
"UNDERWRITER" shall mean any underwriter participating in any
disposition of the Registrable Securities on behalf of Investor pursuant to a
Registration Statement.
"VALUATION EVENT" shall mean an event in which the Company at any time
during a Valuation Period takes any of the following actions:
(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common Stock or makes any
other distribution of shares of Common Stock, except
for dividends paid with respect to the Preferred
Stock;
(c) issues any options or other rights to subscribe for or
purchase shares of Common Stock and the price per
share for which shares of Common Stock may at any
time thereafter be issuable pursuant to such options
or other rights shall be less than the Bid Price in
effect immediately prior to such issuance, except for
options issued in accordance with the Company's then
existing option plans or incentive plans;
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(d) issues any securities convertible into or exchangeable
for shares of Common Stock and the consideration per
share for which shares of Common Stock may at any
time thereafter be issuable pursuant to the terms of
such convertible or exchangeable securities shall be
less than the Bid Price in effect immediately prior to
such issuance, except for options issued in accordance
with the Company's then existing option plans or
incentive plans;
(e) issues shares of Common Stock otherwise than as
provided in the foregoing subsections (a) through
(d), at a price per share less, or for other
consideration lower, than the Bid Price in effect
immediately prior to such issuance, or without
consideration, except for options issued in accordance
with the Company's then existing option plans or
incentive plans;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of Common Stock as a
dividend in liquidation or by way of return of capital
or other than as a dividend payable out of earnings
or surplus legally available for dividends under
applicable law or any distribution to such holders
made in respect of the sale of all or substantially
all of the Company's assets (other than under the
circumstances provided for in the foregoing
subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding
Common Stock, other than an action described in any of
the foregoing subsections (a) through (f) hereof,
inclusive, which in the opinion of the Company's Board
of Directors, determined in good faith, would have a
materially adverse effect upon the rights of Investor
at the time of a Put.
"VALUATION PERIOD" shall mean the period of ten (10) Trading Days
immediately following the date on which the applicable Put Notice is deemed to
be delivered and during which the Purchase Price of the Common Stock is valued;
provided, however, that if a Valuation Event occurs during any Valuation Period,
a new Valuation Period shall begin on the Trading Day immediately after the
occurrence of such Valuation Event and end on the tenth (10th) Trading Day
thereafter.
`WEIGHTED AVERAGE VOLUME" for any period shall mean an amount
obtained by (i) aggregating the Weighted Volume for each Trading Day during the
relevant period and (ii) dividing this sum by the number of Trading Days during
the relevant period.
"WEIGHTED VOLUME" for any Trading Day shall mean the product of (a)
the Closing Bid Price for that Trading Day times (b) the volume on the Principal
Market on that Trading Day.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS.
(a) PUTS. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII), on any Put Date
the Company may exercise a Put by the delivery of a Put Notice. The number of
Put Shares that Investor shall receive pursuant to such Put shall be determined
by dividing the Investment Amount specified in the Put Notice by the Purchase
Price with respect to such Put Date.
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(b) FLOOR PRICE. The Company may, at its option, specify in each
such Put Notice a minimum Market Price ("Floor Price"), which in no event shall
be less than seventy-five percent (75%) of the Market Price on the Trading Day
prior to the Put Date. In the event that during a Valuation Period, the Bid
Price on a Trading Day is below the Floor Price, the Investor shall be under no
obligation to fund one tenth of the Investment Amount specified in the Put
Notice (the "Put Amount")for each such Trading Day and the Put Amount shall be
deemed reduced by such amount that the Investor has no obligation to fund. In
the event that during a Valuation Period, the Bid Price on any four (4) Trading
Days - not necessarily consecutive - is below the Floor Price, the balance of
the Investor's obligation for the Put Amount under such Put Notice shall
terminate on the last of such Trading Days, and the Put Amount shall be deemed
reduced to include only one-tenth of the Put Amount for each Trading Day during
the Valuation Period prior to such termination that the Bid Price equals or
exceeds the Floor Price.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time during the Commitment Period, the
Company may deliver a Put Notice to Investor, subject to the conditions set
forth in Section 7.2; provided, however, the Investment Amount for each Put as
designated by the Company in the applicable Put Notice shall be neither less
than the Minimum Put Amount nor more than the Maximum Put Amount.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by
Investor if such notice is received on or prior to 12:00 noon New York time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon New York time on a Trading Day or at anytime on a day
which is not a Trading Day.
Section 2.3 CLOSINGS. On or prior to each Closing Date for a Put, (a)
the Company shall deliver to Escrow Agent , pursuant to the Escrow Agreement
substantially in the form of EXHIBIT G one or more certificates, at Investor's
option, representing the Put Shares to be purchased by Investor pursuant to
Section 2.1 herein, registered in the name of Investor and (b) Investor shall
deliver to the Escrow Agent the Investment Amount specified in the Put Notice by
wire transfer of immediately available funds to an account designated by the
Escrow Agent on or before the Closing Date. In lieu of delivering physical
certificates representing the Common Stock issuable in accordance with clause
(a) of this Section 2.3, and provided that the Transfer Agent then is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of Investor, the Company shall use its
commercially reasonable efforts to cause the Transfer Agent to electronically
transmit, on or prior to the Closing Date, the Put Shares by crediting the
account of the holder's prime broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system and provide proof satisfactory to the Escrow
Agent of such delivery. In addition, on or prior to such Closing Date, each of
the Company and Investor shall deliver to the Escrow Agent all documents
necessary to comply with the conditions set forth in Article VII hereof .On the
Closing Date and provided all conditions to Closing have been satisfied by the
Company, the Escrow agent shall wire transfer to the Company, the Investment
Amount, less any applicable fees and expenses of the Escrow Agent.
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Section 2.4 [INTENTIONALLY OMITTED]
Section 2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation of
Investor pursuant to this Agreement to purchase shares of Common Stock shall, at
Investor's option, terminate permanently (including with respect to a Closing
Date that has not yet occurred) in the event that (a) there shall occur any stop
order or suspension of the effectiveness of any Registration Statement for an
aggregate of sixty (60) days following any Closing prior to the resale by
Investor of all of the shares acquired at such Closing, for any reason other
than deferrals or suspension during a Blackout Period in accordance with the
Registration Rights Agreement, as a result of a Potential Material Event (as
defined in the Registration Rights Agreement) or as a result of the updating of
Company financial information to be disclosed on a Form 20-F or a Form 6-K, (b)
as provided in Section 2 (b) of the Registration Rights Agreement or (c) the
Company shall at any time fail to comply with the requirements of Section 6.3,
6.4, or 6.6 and such failure shall continue for more than sixty (60) days
following any Closing prior to the resale by Investor of the shares acquired at
such Closing.
Section 2.6 TERMINATION AT OPTION OF COMPANY. Subject to Section 10.6
of this Agreement, all obligations of the Company under this Agreement and the
Registration Rights Agreement shall terminate at the discretion of the Company
upon delivery of a written notice from the Company to Investor stating the
Company's desire to terminate; PROVIDED, HOWEVER, that the Company's obligations
under the Registration Rights Agreement shall continue with respect to the
Common Stock issued to Investor, but not yet resold by Investor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 INTENT. Investor is entering into this Agreement for its
own account for investment purposes and Investor has no present arrangement
(whether or not legally binding) at any time to sell the Common Stock to or
through any person or entity; provided, however, Investor reserves the right to
dispose of the Common Stock at any time in accordance with federal and state
securities laws applicable to such disposition.
Section 3.2 SOPHISTICATED INVESTOR. Investor is, and on each Closing
Date it will be, a sophisticated investor (as described in Rule 506(b)(2)(ii) of
Regulation D) and an accredited investor (as defined in Rule 501 of Regulation
D), and Investor has such knowledge and experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment
in the Common Stock. Investor acknowledges that an investment in the Common
Stock is speculative and involves a high degree of risk, and Investor
acknowledges that it is able to bear the economic risk of such investment.
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Section 3.3 AUTHORITY. (a) Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement and the
Registration Rights Agreement and the transactions contemplated hereby and
thereby in accordance with their respective terms; (b) the execution and
delivery of this Agreement and the Registration Rights Agreement by Investor,
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action and no further consent or
authorization of Investor or its partners is required; and (c) this Agreement
and the Registration Rights Agreement have been duly authorized and validly
executed and delivered by Investor and are valid and binding agreements of
Investor enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 NOT AN AFFILIATE. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 ORGANIZATION AND STANDING. Investor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the Cayman Islands, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Investor is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a material adverse
effect on Investor.
Section 3.6 ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby by Investor,
and the consummation of the transactions contemplated hereby and thereby, and
compliance with the requirements hereof and thereof, do not and will not (a)
violate any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on Investor, (b) violate any provision of any indenture,
instrument or agreement to which Investor is a party or is subject, or by which
Investor or any of its assets is bound, or conflict with or constitute a
material default thereunder, (c) result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by Investor to any third party,
or (d) require the approval of any third-party (that has not been obtained)
pursuant to any material contract, instrument, agreement, relationship or legal
obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor has received
all documents, records, books and other information pertaining to Investor's
investment in the Company that has been requested by Investor. Investor has
reviewed or received copies of the SEC Documents.
Section 3.8 MANNER OF SALE. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 FINANCIAL CAPABILITY. Investor presently has the financial
capacity and the necessary capital to perform its obligations hereunder.
Section 3.10 (a) OFFSHORE TRANSACTION.
(i) Investor is not a U.S. person as that term is
defined under Regulation S of the Rules and
Regulations of the Securities Exchange Act.
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(ii) Investor is outside the United States as of the
date of the execution and delivery of this
Agreement.
Investor is purchasing the Put Shares for its own
account and not on behalf of any U.S. person, and has not pre-arranged any
sale with purchaser in the United States.
Investor represents and warrants and hereby agrees
that all offers and sales of the Common Stock prior to the expiration of a
period commencing on the date of the transaction and ending after the
Distribution Compliance Period shall only be made in compliance with the safe
harbor contained in Regulation S, pursuant to registration of securities under
the Securities Act of 1933 or pursuant to an exemption from registration, and
all offers and sales after the expiration of the Distribution Compliance Period
shall be made only pursuant to such registration or to such exemption from
registration.
Investor understands that in the view of the SEC the
statutory basis for the exemption claimed for this transaction would not be
present if the offering of Securities, although in technical compliance with
Regulation S, is part of a plan or scheme to evade the registration provisions
of the 1933 Act. Investor is acquiring the Securities for investment purposes
and has no present intention to sell the Shares in the United States or to a
U.S. Person or for the account or benefit of a U.S. Person either now or after
the expiration of the Distribution Compliance Period.
(vi) Investor is not an underwriter of, or dealer
in, the Securities, and Investor is not
participating, pursuant to a contractual
agreement, in the distribution of Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that, except as
disclosed in the SEC Documents:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation
duly organized and validly existing, and has all requisite power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted. Except as set forth in the Company's Form 20-F for the year
ended December 31, 2002 and for Macro Clothing Ltd., the Company does not own
more than fifty percent (50%) of the outstanding capital stock of or control any
other significant business entity. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not reasonably be expected to have a Material Adverse Effect.
Section 4.2 AUTHORITY. (a) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and to issue the Put Shares; (b)
the execution and delivery of this Agreement and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required; and (c) each of this Agreement
and the Registration Rights Agreement has been duly executed and delivered by
the Company and constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
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[DRAFT - 12/19/03]
Section 4.3 CAPITALIZATION. As of December 29, 2003, the authorized
capital stock of the Company consisted of 49,995,500 ordinary shares and 4,500
deferred shares, of which 13,409,566 ordinary shares were issued and outstanding
(including 997,400 in treasury) and 4,500 deferred shares were issued and
outstanding. Except for options to purchase approximately 1,809,323 shares of
Common Stock with exercises prices ranging between $3.50 and $15.00 per share,
there were no options, warrants, or rights to subscribe to, securities, rights
or obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company. All of the outstanding
shares of Common Stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable.
Section 4.4 COMMON STOCK. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and, except as provided on
Schedule 4.4, the Company has maintained all requirements for the continued
listing or quotation of the Common Stock, and such Common Stock is currently
listed or quoted on the Principal Market. As of the date of this Agreement, the
Principal Market is the New York Stock Exchange.
Section 4.5 SEC DOCUMENTS. The Company has delivered or made available
to Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). To the best of
Company's knowledge, the Company has not provided to Investor any information
that, according to applicable law, rule or regulation, should have been
disclosed publicly prior to the date hereof by the Company, but which has not
been so disclosed. As of their respective dates, (i) the SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and other federal, state and local laws, rules
and regulations applicable to such SEC Documents, and (ii) none of the SEC
Documents 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 light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except (a) as may be otherwise indicated in
such financial statements or the notes thereto or (b) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
11
Section 4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. To the best
of Company's knowledge, the sale and issuance of the Put Shares, in accordance
with the terms and on the bases of the representations and warranties set forth
in this Agreement, may and shall be properly issued by the Company to Investor
pursuant to Section 4(2), Regulation D and/or Regulation S.. When issued and
paid for as herein provided, the Put Shares shall be duly and validly issued,
fully paid, and nonassessable. Neither the sales of the Put Shares pursuant to,
nor the Company's performance of its obligations under, this Agreement or the
Registration Rights Agreement shall (a) result in the creation or imposition of
any liens, charges, claims or other encumbrances upon the Put Shares or any of
the assets of the Company, or (b) entitle the holders of Outstanding Common
Stock to preemptive or other rights to subscribe to or acquire the Common Stock
or other securities of the Company. The Put Shares shall not subject Investor to
personal liability by reason of the ownership thereof.
Section 4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf has conducted or will conduct any general solicitation
(as that term is used in Rule 502(c) of Regulation D) or general advertising
with respect to any of the Put Shares .
Section 4.8 CORPORATE DOCUMENTS. The Company has furnished or made
available to Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof , and the Company's
Memorandum of Association, as amended and in effect on the date hereof
("Articles and/or Memorandum").
Section 4.9 NO CONFLICTS. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Put Shares do not and will not (a) result in a violation of the Articles and
Memorandum or (b) conflict with, or constitute a material default (or an event
that with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar material agreement to which
the Company is a party, or (c) result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company or
by which any property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect) nor is the Company otherwise in
violation of, conflict with or in default under any of the foregoing; provided,
however, that for purposes of the Company's representations and warranties as to
violations of foreign law, rule or regulation referenced in clause (c), such
representations and warranties are made only to the best of the Company's
knowledge insofar as the execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby are or may be affected by the status of Investor under or
pursuant to any such foreign law, rule or regulation. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for possible violations that either singly or
in the aggregate do not and would not reasonably be expected to haven a Material
Adverse Effect. The Company is not required under federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Common Stock in accordance with the terms hereof (other than any
SEC, New York Stock Exchange, NASD or state securities filings that may be
required to be made by the Company in connection with any Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval required by the rules applicable to companies whose common stock trades
on the New York Stock Exchange ); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of Investor herein.
12
Section 4.10 NO MATERIAL ADVERSE CHANGE. Since October 1, 2003, no
event has occurred that would reasonably expected to have a Material Adverse
Effect on the Company, except as disclosed in the SEC Documents.
Section 4.11 NO UNDISCLOSED LIABILITIES. The Company has no liabilities
or obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents, reflected on the Company's financial
statements in accordance with generally accepted accounting principles or
otherwise publicly announced, other than those incurred in the ordinary course
of the Company's businesses and which, individually or in the aggregate, do not
or would not reasonably be expected to have a Material Adverse Effect on the
Company.
Section 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since January 1,
2003, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.13 NO INTEGRATED OFFERING. Other than as set forth on
Schedule 4.13, neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf has, within the last six months directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 LITIGATION AND OTHER PROCEEDINGS. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the best knowledge of the Company threatened, against the Company, nor has the
Company received any written notice of any such action, suit, proceeding or
investigation, which would reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which would
reasonably be expected to have a Material Adverse Effect.
Section 4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company has not
made, at any time, any oral communication in connection with the offer or sale
of the Put Shares which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
Section 4.16 a. OFFSHORE TRANSACTION. Other than discussions with
representatives of Southridge Capital Management LLC, the Company has not
offered the Put Shares to any person in the United States or to any U.S. person
as that term is defined in Regulation S.
b. NO DIRECTED SELLING EFFORTS. In regard to this transaction,
other than discussions with representatives of Southridge Capital Management
LLC, the Company has not conducted any "direct selling efforts" as that term is
defined in Rule 902 of Regulation S nor has Company conducted any general
solicitation relating to the offer and the sale of the Put Shares to persons
resident within the United States.
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c. FILINGS. The Company undertakes and agrees pursuant to the
sale of its securities under Regulation S to make all necessary filings in
connection with the sale of its securities as required by the laws and
regulations of all appropriate jurisdictions.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW. Investor's trading activities with
respect to shares of the Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules and
regulations of the NASD and the Principal Market on which the Common stock is
listed.
Section 5.2 TRADING IN SECURITIES. The Investor, its affiliates,
agents and representatives shall not engage in, or cause others to engage in,
any direct or indirect short sales or hedging transactions in the Common Stock
in any manner whatsoever. Sales of Common Stock by the Investor subsequent to
delivery of a Put Notice shall not be deemed a short sale hereunder. The
Investor shall make available to the Company the records of its trading
activities in a timely and transparent manner; provided however, that the
Company shall retain and treat all such information in as confidential. The
Investor, its affiliates, agents and representatives shall not engage in any
transaction in the Common Stock on any Trading Day during the Valuation Period
after 3:30 p.m. New York time.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company agrees to the following during the effectiveness of this
Agreement:
Section 6.1 REGISTRATION RIGHTS. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. As of the date hereof, the
Company has available and the Company shall reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Put Shares such
amount of shares of Common Stock to be reserved shall be calculated based upon a
minimum Purchase Price of $2.90 (50% of Current Price) for the Put Shares under
the terms and conditions of this Agreement . The number of shares so reserved
from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered hereunder.
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Section 6.3 LISTING OF COMMON STOCK. The Company will use its
reasonabale commercial efforts to cause the Put Shares to be listed on the
Principal Market. The Company further shall, if the Company applies to have the
Common Stock traded on any other Principal Market, include in such application
the Put Shares, and shall take such other action as is necessary or desirable in
the reasonable opinion of Investor to cause the Common Stock to be listed on
such other Principal Market as promptly as possible. The Company shall use its
commercially reasonable efforts to continue the listing and trading of the
Common Stock on the Principal Market (including, without limitation, maintaining
sufficient net tangible assets) and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company shall take all
commercially reasonable steps to cause the Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said Act, and will not take any action
or file any document (whether or not permitted by said Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section 6.5 LEGENDS. The certificates evidencing the Put Shares shall
be free of legends, except as provided for in Article VIII.
Section 6.6 CORPORATE EXISTENCE. The Company shall take all
commercially reasonable steps necessary to preserve and continue the corporate
existence of the Company.
Section 6.7 ADDITIONAL SEC DOCUMENTS. The Company shall deliver to
Investor, promptly after the originals thereof are submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall
promptly notify Investor upon the occurrence of any of the following events in
respect of a registration statement or related prospectus in respect of an
offering of Registrable Securities: (a) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the registration statement in connection
with amendments or supplements to the registration statement or related
prospectus; (b) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings for that purpose;
(c) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (d) the happening of any event that to the
knowledge of the Company makes any statement made in such Registration Statement
or related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the registration statement, related prospectus or documents so
that, in the case of a Registration Statement, it 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
that in the case of the related prospectus, it 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, in the light of the
circumstances under which they were made, not misleading; and (e) the Company's
determination that a post-effective amendment to the registration statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. During the
continuation of any of the events set forth in Section 3(d)(ii), (iii), (v) or
(vi) of the Registration Rights Agreement, the Company shall not deliver to
Investor any Put Notice.
15
Section 6.10 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to Investor
such shares of Common Stock and/or securities as Investor is entitled to receive
at such time pursuant to this Agreement.
Section 6.11 ISSUANCE OF PUT SHARES. The sale of the Put Shares shall
be made in accordance with the provisions and requirements of Regulation D and
any applicable state law.
Section 6.12 REIMBURSEMENT. If (i) Investor, other than by reason of
its gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if Investor is
impleaded in any such action, proceeding or investigation by any person, or (ii)
Investor, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
the federal securities laws, becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Investor for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Investor is a named party, the Company will pay to
Investor the charges, as reasonably determined by the Company and the Investor,
for the time of any officers or employees of Investor devoted to appearing and
preparing to appear as witnesses, assisting in preparation for hearings, trials
or pretrial matters, or otherwise with respect to inquiries, hearing, trials,
and other proceedings relating to the subject matter of this Agreement. The
reimbursement obligations of the Company under this section shall be in addition
to any liability which the Company may otherwise have, shall extend upon the
same terms and conditions to any affiliates of Investor that are actually named
in such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of Investor and
any such affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, Investor
and any such affiliate and any such person
Section 6.13 DILUTION. The number of shares of Common Stock issuable as
Put Shares may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading price of the
Common Stock declines during the period between the Effective Date and the end
of the Commitment Period. The Company has studied and fully understands the
nature of the transactions contemplated by this Agreement and recognize that
they have a potential dilutive effect. The board of directors of the Company has
concluded, in its good faith business judgment, that such issuance is in the
best interests of the Company. The Company specifically acknowledges that its
obligation to issue the Put Shares upon the terms set forth in this Agreement is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
16
Section 6.15 CERTAIN AGREEMENT. (a) (i) The Company covenants and
agrees that it will not, without the prior written consent of the Investor, sell
Common Stock or Common Stock Equivalents to any third party on any date which is
fifteen (15) days prior to, or five (5) days subsequent to, any l Closing Date.
(ii) The provisions of subparagraph 6.15(i) will not apply to (w) an
underwritten public offering of shares of Common Stock or Preferred Stock; (x),
sales under any existing stock option or warrant plan or issued under any
employee compensation agreement , (y) any sale of Securities which will not be
freely tradeable for at least 90 days subsequent their issuance or (z) the
issuance of securities (other than for cash) in connection with an acquisition,
merger, consolidation, sale of assets, disposition or the exchange of the
capital stock for assets, stock or other joint venture interests.
(iii) In the event the Company breaches the provisions of this Section,
the Discount (as defined in shall be amended to be equal to (x)110% of the
Discount set forth herein and the Investor may terminate its obligations under
this Agreement and demand such amounts as may be owing under Section 2.1.
(b) The Company covenants and agrees that it will not, without the
prior written consent of the Investor, enter into any subsequent or further
private equity credit line agreement similar to this Agreement (denominated in
whatever currency) with any third party during the Commitment Period.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
ISSUE AND SELL COMMON STOCK. The obligation hereunder of the Company to issue
and sell the Put Shares to Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time, except for changes that would
reasonably be expected to prohibit or otherwise materially interfere with the
ability of the Company or Investor to enter into and perform its obligations
under any of (a) this Agreement and (b) the Registration Rights Agreement.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by
Investor at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO
DELIVER A PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The
right of the Company to deliver a Put Notice and the obligation of Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on (a) the date of delivery of such Put Notice and (b) the
applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of each of the
following conditions:
17
(a) EFFECTIVE REGISTRATION STATEMENT. As set forth in the Registration
Rights Agreement, a Registration Statement shall have previously become
effective for the resale by Investor of the Registrable Securities subject to
such Put Notice and such Registration Statement shall remain effective on each
Condition Satisfaction Date and (i) neither the Company nor Investor shall have
received notice that the SEC has issued or intends to issue a stop order with
respect to such Registration Statement or that the SEC otherwise has suspended
or withdrawn the effectiveness of such Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action), and (ii) no other
suspension of the use or withdrawal of the effectiveness of such Registration
Statement or related prospectus shall exist.
(b) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) except for such changes as would not reasonably be expected to
have a Material Adverse Effect.
(c) POTENTIAL MATERIALEVENTS. The Company shall not be aware of any
event with respect to the Company or its business at the time of Closing that
would require disclosure in the Registration Statement (or in the SEC Documents)
and has not been so disclosed in the Registration Statement or in the SEC
Documents.
(d) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights Agreement
to be performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
adopted by any court or governmental authority of competent jurisdiction that
prohibits any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that is reasonably likely to have the
effect of prohibiting any of the transactions contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the Company's most
recent SEC Document, no event has occurred that had or is reasonably likely to
have a Material Adverse Effect.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The
trading of the Common Stock shall not have been suspended by the SEC, the
Principal Market or the NASD and the Common Stock shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market.
(h) LEGAL OPINION. The Company shall have caused to be delivered to
Investor, within five (5) Trading Days of the effective date of the Initial
Registration Statement and each subsequent Registration Statement, an opinion of
the Company's legal counsel in the form of Exhibit C hereto, addressed to
Investor.
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(i) [INTENTIONALLY OMITTED]
(j) FIVE PERCENT LIMITATION. On each Closing Date, the number of Put
Shares then to be purchased by Investor shall not exceed the number of such
shares that, when aggregated with all other shares of Registrable Securities
then owned by Investor beneficially or deemed beneficially owned by Investor,
would result in Investor owning no more than 4.99% of all of such Common Stock
as would be outstanding on such Closing Date, as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 7.2(j), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Put Notice associated with such Closing Date is given, the
amount of Common Stock outstanding on such Closing Date shall govern for
purposes of determining whether Investor, when aggregating all purchases of
Common Stock made pursuant to this Agreement would own more than 4.99% of the
Common Stock following such Closing Date.
(k) [INTENTIONALLY OMITTED]
(l) SHAREHOLDER VOTE. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the shareholder
approval requirements of the Principal Market.
(m) OTHER. On each Condition Satisfaction Date, Investor shall have
received a certificate in substantially the form and substance of Exhibit D
hereto, executed by an executive officer of the Company and to the effect that
all the conditions to such Closing shall have been satisfied as at the date of
each such certificate.
Section 7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC
INFORMATION.
(a) The Company shall make available for inspection and review by
Investor, advisors to and representatives of Investor and who are reasonably
acceptable to the Company), and any Underwriter, any Registration Statement or
amendment or supplement thereto or any blue sky, NASD or other filing, all
financial and other records of the Company, all SEC Documents and other filings
with the SEC, and all other corporate documents and properties of the Company as
may be reasonably necessary for the purpose of a due diligence review in
connection with the Registration Statement, and cause the Company's officers,
directors and employees to supply all such information reasonably requested by
Investor or any such representative, advisor or Underwriter in connection with
such Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of such
Registration Statement. This terms of this Section 7.3(a) are subject to SEC
Regulation FD.
(b) Each of the Company, its officers, directors, employees and agents
shall in no event disclose material non-public information to Investor, advisors
to or representatives of Investor.
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(c) Nothing herein shall require the Company to disclose material
non-public information to Investor or its advisors or representatives, and the
Company represents that it does not disseminate material non-public information
to any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts; provided, however, that
notwithstanding anything herein to the contrary, the Company shall be obligated
to fulfull its obligations under Section 3(d)(vi) of the Registration Rights
Agreement
ARTICLE VIII
LEGENDS
Section 8.1 LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend (the
"LEGEND"):
The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or qualified under
applicable state securities laws. These securities may
not be offered, sold, pledged, hypothecated, transferred
or otherwise disposed of except pursuant to (I) an
effective registration statement and qualification in
effect with respect thereto under the Securities Act and
under any applicable state securities law, (ii) to the
extent applicable, Rule 144 under the Securities Act,
or (iii) an opinion of counsel reasonably acceptable to
the Company that such registration and qualification is
not required under applicable federal and state
securities laws."
As soon as practicable after the execution and delivery hereof, the Company
shall issue to the Transfer Agent Instructions in substantially the form of
Exhibit E hereto. Such instructions shall be irrevocable by the Company except
as otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
Transfer Agent to issue to Investor certificates evidencing shares of Common
Stock incident to a Closing, free of the Legend, without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the Transfer Agent by or from
the Company or its counsel or Investor; provided that (a) a Registration
Statement shall then be effective, (b) Investor confirms to the Transfer Agent
and the Company that it has or intends to sell such Common Stock to a third
party which is not an affiliate of Investor or the Company and Investor agrees
to redeliver the certificate representing such shares of Common Stock to the
Transfer Agent to add the Legend in the event the Common Stock is not sold, and
(c) if reasonably requested by the transfer agent or the Company, Investor
confirms to the transfer agent and the Company that Investor has complied or
will comply with the prospectus delivery requirement under the Securities Act.
Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII or as
provided in the Transfer Agent Instructions.
20
Section 8.3 COVER. Other than due to the failure of the holder's
broker to initiate the FAST process, if the Company fails for any reason to
deliver the Put Shares on such Closing Date or within two business days
thereafter, and the holder of the Put Shares (a "Investor") purchases, in an
open market transaction or otherwise, shares of Common Stock (the "Covering
Shares") in order to make delivery in satisfaction of a sale of Common Stock by
such Investor (the "Sold Shares"), which delivery such Investor anticipated to
make using the Put Shares (a "Buy-In"), then the Company shall pay to such
Investor, in addition to all other amounts contemplated in other provisions of
the Transaction Documents, and not in lieu thereof, the Buy-In Adjustment Amount
(as defined below). The "Buy-In Adjustment Amount" is the amount equal to the
excess, if any, of (x) such Investor's total purchase price (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by such Investor from the sale of the
Sold Shares. The Company shall pay the Buy-In Adjustment Amount to such Investor
in immediately available funds immediately upon demand by such Investor. By way
of illustration and not in limitation of the foregoing, if such Investor
purchases Covering Shares having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock
that it sold for net proceeds of $10,000, the Buy-In Adjustment Amount that the
Company will be required to pay to such Investor will be $1,000.
Section 8.4 INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall
affect in any way Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
ARTICLE IX
NOTICES
Section 9.1 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (a) personally served,
(b) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, or facsimile, addressed as set
forth below or to such other address as such party shall have specified most
recently by written notice given in accordance herewith. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company: Tefron Ltd.
00 Xxxxx Xxxxxx
Xxxx-Xxxx, Xxxxxx
Telecopier No.:
Attn: T. Rotem Fortus, Adv.
21
with a copy (which shall not constitute notice) to:
Gross Kleinhendler Halevy, Esqs.
One Azrieli Center
Tel Aviv, Israel
Telecopy: 972-3 -607 4422
ATTN: Xxxxxxx Xxxx, Adv.
if to Investor:
Brittany Capital Fund Limited
c/o Lion Corporate Services Limited
Xxxxxxxxxx Xxxxx
00 Xxxxxxxxx Xxxxxx
P.O. Box N-10818
Nassau, The Bahamas
Telephone No.: 000-000-0000
Telecopier No. 000-000-0000
ATTN: Xx. Xxxxx Xxxxxx
with a copy (which shall not constitute notice) to:
Xxxxxxx & Prager, LLP
Xxxxx 0000
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 9.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to the principles of conflicts of law, and by the Israeli
Companies Act (1999) as to internal corporate matters. Each of the Company and
Investor hereby submit to the exclusive jurisdiction of the United States
Federal and state courts located in the borough of Manhattan, City of New York
with respect to any dispute arising under this Agreement, the agreements entered
into in connection herewith or the transactions contemplated hereby or thereby.
Section 10.2 JURY TRIAL WAIVER. The Company and the Investor hereby
waive a trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other in respect of any matter arising
out of or in connection with the Transaction Documents.
22
Section 10.3 SPECIFIC ENFORCEMENT. The Company and the Investor
acknowledge and agree that irreparable damage would occur to the Investor in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Investor shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity.
Section 10.4 ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the Company and Investor and their respective successors and
permitted assigns. Neither this Agreement nor any rights of Investor or the
Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any transferee of any of the Common
Stock purchased or acquired by Investor hereunder with respect to the Common
Stock held by such person, and (b) Investor's interest in this Agreement may be
assigned at any time, in whole but not in part, to any affiliate of Investor.
Section 10.5 THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the Company and Investor 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.
Section 10.6 TERMINATION. This Agreement shall terminate at the end of
Commitment Period or as otherwise provided herein (unless extended by the
agreement of the Company and Investor); provided, however, that the provisions
of (i) Section 6.2, shall survive termination of this Agreement, but only with
respect to Common Stock set forth in a Put Notice and not yet issued by the
Company, (ii) Sections 6.3, 6.4 and 6.6 shall survive termination of this
Agreement for a period of 90 days; and (iii) Sections 6.14, 8.1, 8.2, 10.1,
10.2, and 10.3 shall survive the termination of this Agreement.
Section 10.7 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and
the instruments referenced herein contain the entire understanding of the
Company and Investor with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by the party to be charged with
enforcement.
Section 10.8 FEES AND EXPENSES. Each of the Company and Investor agrees
to pay its own expenses in connection with the preparation of this Agreement and
performance of its obligations hereunder, except that the Company shall pay
Xxxxxxx & Prager, LLP a fee not to exceed $15,000 for this transaction. Such
legal fees will be based on the number of hours worked and billed at the
counsel's customary hourly fees In addition, the Company shall pay all
reasonable fees and expenses incurred by the Investor in connection with any
amendments, modifications or waivers of this Agreement or the Registration
Rights Agreement or incurred in connection with the enforcement of this
Agreement and the Registration Rights Agreement, including, without limitation,
all reasonable attorneys fees and expenses. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
23
Section 10.9 NO BROKERS. Each of the Company and Investor represents
that it has had no dealings in connection with this transaction with any finder
or broker who will demand payment of any fee or commission from the other party.
The Company, agrees to indemnify the Investor against and hold the other
harmless from any and all liabilities to any persons claiming brokerage
commissions or finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section 10.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the parties so delivering this
Agreement.
Section 10.11 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the Company hereto shall survive each Closing
hereunder for a period of six (6) monthsthereafter. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that such severability
shall be ineffective if it materially changes the economic benefit of this
Agreement to any party.
Section 10.12 FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 10.13 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section 10.15 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.16 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg L.P. or any successor thereto. The written mutual consent of Investor
and the Company shall be required to employ any other reporting entity.
24
Section 10.17 PUBLICITY. The Company and Investor shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and no party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other party with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of Investor without the prior written consent of such Investor, except to the
extent required by law. Investor acknowledges that this Agreement and all or
part of the Transaction Documents may be deemed to be "material contracts" as
that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company
may therefore be required to file such documents as exhibits to reports or
registration statements filed under the Securities Act or the Exchange Act.
Investor further agrees that the status of such documents and materials as
material contracts shall be determined solely by the Company, in consultation
with its counsel.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
TEFRON LTD.
By: /s/ Xxxxx Xxxxxx / /s/ Xxx Xxxxx
---------------------------------
Name: Xxxxx Xxxxxx / Xxx Xxxxx
------------------------------
Title: CEO / CFO
--------------
BRITTANY CAPITAL MANAGEMENT LIMITED
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Name: Xxxxx X. Xxxxxx
------------------------
Title: President.
---------------
26
EXHIBITS
--------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Put Notice
EXHIBIT C Opinion
EXHIBIT D Closing Certificate
EXHIBIT E Transfer Agent Instructions
EXHIBIT F Schedule 4.3
EXHIBIT G Escrow Agreement
27
