EXHIBIT 10.1
AMENDMENT, EXCHANGE AND PURCHASE AGREEMENT
AMENDMENT, EXCHANGE AND PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
April 8, 2008, by and between InkSure Technologies Inc., a Delaware corporation,
with headquarters located at 0000 X.X. 00xx Xxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx
00000 (the "COMPANY"), and [Smithfield Fiduciary LLC][OTHER INVESTORS] (the
"INVESTOR").
WHEREAS:
A. The Company, the Investor and certain other investors (the "OTHER
INVESTORS", and collectively with the Investor, the "INVESTORS") are parties to
that certain Securities Purchase Agreement, dated as of September 30, 2005 (the
"EXISTING SECURITIES PURCHASE AGREEMENT"), pursuant to which, among other
things, the Investors purchased from the Company senior convertible notes (the
"EXISTING NOTES"), which are convertible into shares of the Company's common
stock, par value $0.01 per share (the "COMMON STOCK") (the Existing Notes as
converted, the "EXISTING CONVERSION SHARES").
B. In connection with the execution and delivery of the Existing Securities
Purchase Agreement, the Company entered into that certain Registration Rights
Agreement, dated September 30, 2005 (the "REGISTRATION RIGHTS AGREEMENT"), by
and among the Company and the Investors, pursuant to which the Company agreed to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Existing Registration Rights Agreement) under the Securities
Act of 1933, as amended (the "1933 ACT"), and the rules and regulations
promulgated thereunder, and applicable state securities laws.
C. The Company and the Investor desire to enter into this Agreement,
pursuant to which, among other things, (I) (i) the Company and the Investor
shall amend and restate all of such Investor's Existing Notes for (a) the senior
secured convertible notes of the Company in the form attached hereto as EXHIBIT
A (the "AMENDED NOTES") in the aggregate principal amount set forth opposite
such Investor's name in column (3) on the Securities Schedule attached hereto,
which shall be convertible into shares of Common Stock (the "AMENDED AND
RESTATED CONVERSION SHARES") and (b) warrants (the "SERIES B-1 WARRANTS") to
acquire that number of shares of Common Stock set forth opposite such Investor's
name in column (6) on the Securities Schedule (as exercised, collectively, the
"SERIES B-1 WARRANT SHARES") and (ii) and the Company shall pay to the Investor,
in cash, the interest payable under such Investor's Existing Notes through the
Closing Date (the "2008 INTEREST PAYMENT") in the amount set forth opposite the
Investor's name in column (11) of the Securities Schedule attached hereto and
(II) the Investor wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate principal
amount of senior secured convertible notes of the Company in the form attached
hereto as EXHIBIT A (the "NEW NOTES", and together with the Amended and Restated
Notes, the "NOTES") set forth opposite the Investor's name in column (4) on the
Securities Schedule attached hereto (which aggregate amount for the Investor and
the Other Investors shall be $3,000,000), which shall be convertible into shares
of Common Stock (the "NEW CONVERSION SHARES", and together with the Amended and
Restated Conversion Shares, the "CONVERSION SHARES"), (ii) warrants, in
substantially the form attached hereto as EXHIBIT B (the "SERIES A WARRANTS"),
to acquire up to that number of additional shares of Common Stock set forth
opposite such Investor's name in column (5) of the Securities Schedule attached
hereto (as exercised, collectively, the "SERIES A WARRANT SHARES") and (iii)
warrants in substantially the form attached hereto as EXHIBIT C (the "SERIES B-2
WARRANTS" and together with the Series A Warrants and the Series B-1 Warrants,
the "WARRANTS") to acquire that number of shares of Common Stock set forth
opposite such Investor's name in column (7) on the Securities Schedule (as
exercised, collectively, the "SERIES B-2 WARRANT SHARES" and together with the
Series A Warrant Shares and the Series B-1 Warrant Shares, the "WARRANT
SHARES").
D. The amendment and restatement of the Existing Notes for the Amended and
Restated Notes and the Series B-1 Warrants is being made in reliance upon the
exemption from registration provided by Section 3(a)(9) of the Securities Act of
1933, as amended (the "1933 ACT").
E. The Notes will rank senior to all outstanding and future indebtedness of
the Company and its Subsidiaries (as hereinafter defined) and will be secured by
a first priority perfected security interest, in all of the assets of the
Company and the stock and assets of each Subsidiary, as evidenced by (i) a
security agreement, in the form attached hereto as EXHIBIT D (as amended or
modified from time to time in accordance with its terms, the "SECURITY
AGREEMENT"), and (ii) the guarantees of the Subsidiaries of the Company in the
form attached hereto as EXHIBIT E (as amended or modified from time to time in
accordance with its terms, the "GUARANTEES").
F. The New Notes also are to be secured by the balance contained from time
to time in the Cash Collateral Account (as defined in Section 4(g) below)
pursuant to an Account Control Agreement (as defined in Section 4(g) below, and
together with the Security Agreement and the Guarantees, the "SECURITY
DOCUMENTS").
G. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings ascribed to them in the Existing Securities
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and the Investor hereby agree as
follows:
1. AMENDMENT AND RESTATEMENT OF EXISTING NOTES; PURCHASE AND SALE OF NEW
NOTES AND WARRANTS.
(a) AMENDMENT AND RESTATEMENT OF EXISTING NOTES; INTEREST PAYMENT.
Subject to satisfaction (or waiver) of the conditions set forth in Sections
5 and 6 below, at the closing contemplated by this Agreement (the
"CLOSING"), (i) the Investor shall surrender to the Company its Existing
Notes and the Company shall issue and deliver to the Investor (or as
directed by the Investor) Notes in the principal amount set forth opposite
the Investor's name in column (3) of the Securities Schedule attached
hereto and Series B-1 Warrants to acquire up to that number of Series B-1
Warrant Shares as is set forth opposite the Investor's name in column (6)
on the Securities Schedule attached hereto and (ii) the Company shall pay
to the Investor an amount in cash equal to the Investor's 2008 Interest
Payment, as set forth opposite such Investor's name in column (11) on the
Securities Schedule attached hereto.
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(b) PURCHASE OF NEW NOTES AND WARRANTS. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 5 and 6 below, at the
Closing, the Company agrees to issue and sell to the Investor, and the
Investor severally, but not jointly with any Other Investor, shall purchase
from the Company, (x) the principal amount of New Notes as is set forth
opposite the Investor's name in column (4) on the Securities Schedule
attached hereto, (y) Series A Warrants to acquire up to that number of
Series A Warrant Shares as is set forth opposite the Investor's name in
column (5) on the Securities Schedule attached hereto and (z) Series B-2
Warrants to acquire up to that number of Series B-2 Warrant Shares as is
set forth opposite the Investor's name in column (7) on the Securities
Schedule attached hereto.
(c) PURCHASE PRICE.
(i) The purchase price for the Investor of the New Notes and the
Warrants to be purchased by the Investor at the Closing shall be the
amount set forth opposite the Investor's name in column (7) of the
Securities Schedule attached hereto (the "PURCHASE PRICE"). The
Investor shall pay $1.00 for each $1.00 of principal amount of New
Notes and the related Warrants to be purchased at the Closing.
(ii) The Investor and the Company agree that the New Notes and
the related Warrants constitute an "investment unit" for purposes of
Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended
(the "CODE"). The Investor and the Company mutually agree that the
allocation of the issue price of such investment unit between the New
Notes and the Warrants in accordance with Section 1273(c)(2) of the
Code and Treasury Regulation Section 1.1273-2(h) shall be an aggregate
amount of $10,000 allocated to the related Warrants and the balance of
the Purchase Price allocated to the New Notes, and neither the
Investor nor the Company shall take any position inconsistent with
such allocation in any tax return or in any judicial or administrative
proceeding.
(d) CLOSING DATE. The date and time of the Closing (the "CLOSING
DATE") shall be 10:00 a.m., New York City time, on the date hereof, subject
to notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Sections 5 and 6 below (or such other time and date as
is mutually agreed to by the Company and the Investor). The Closing shall
occur on the Closing Date at the offices of Xxxxxxx Xxxx & Xxxxx LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(e) FORM OF PAYMENT. On the Closing Date, (i) the Investor shall pay
the Purchase Price to the Company for the New Notes and the related
Warrants to be issued and sold to the Investor at the Closing (1) by wire
transfer of immediately available funds in accordance with the Company's
written wire instructions the amount set forth opposite the Investor's name
in column (9) of the Securities Schedule attached hereto less the
Collateral Account Amount (as defined below) and (2) by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions the amount set forth opposite the Investor's name on column
(10) of the Securities Schedule attached hereto (the "COLLATERAL ACCOUNT
AMOUNT") into the Cash Collateral Account and (ii) the Company shall
deliver to the Investor (or as directed by the Investor) (A) the New Notes
(in the principal amounts as set forth opposite the Investor's name in
column (4) on the Securities Schedule) which the Investor is then
purchasing and (B) the Warrants (in the amounts as set forth opposite the
Investor's name in columns (5) and (7) on the Securities Schedule) which
the Investor is purchasing, in each case duly executed on behalf of the
Company and registered in the name of the Investor or its designee.
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2. AMENDMENTS TO TRANSACTION DOCUMENTS.
(a) RATIFICATIONS. Except as otherwise expressly provided herein, the
Existing Securities Purchase Agreement and each other Transaction Document
is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects, except that on and after the
Closing Date (i) all references in the Existing Securities Purchase
Agreement to "this Agreement", "hereto", "hereof", "hereunder" or words of
like import referring to the Securities Purchase Agreement shall mean the
Existing Securities Purchase Agreement as amended by this Agreement, (ii)
all references in the other Transaction Documents to the "Securities
Purchase Agreement", "thereto", "thereof", "thereunder" or words of like
import referring to the Securities Purchase Agreement shall mean the
Existing Securities Purchase Agreement as amended by this Agreement, and
(iii) all references in the other Transaction Documents to the
"Registration Rights Agreement", "thereto", "thereof", "thereunder" or
words of like import referring to the Registration Rights Agreement shall
mean the Registration Rights Agreement as amended by this Agreement.
(b) AMENDMENT TO TRANSACTION DOCUMENTS. Each of the Transaction
Documents are hereby amended as follows:
(i) All references to "Notes" shall be amended to include
additionally the Notes as defined in this Agreement.
(ii) All references to "Conversion Shares" shall be amended to
include additionally the Conversion Shares as defined in this
Agreement.
(iii) The defined term "Transaction Documents" is hereby amended
to include this Agreement; the Warrants, each of the Security
Documents and the Lock-Up Agreements.
(c) AMENDMENT OF EXISTING SECURITIES PURCHASE AGREEMENT.
(i) The defined term "Securities" is hereby amended to include
the Warrants and the Warrant Shares.
(ii) The first sentence of Section 4(o)(iii) of the Existing
Securities Purchase Agreement is hereby amended and restated in its
entirety as follows:
"From the date hereof until the date that the Notes are no longer
outstanding, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4(o)(iii).
(d) Section 4(o)(iii)(1) of the Existing Securities Purchase Agreement
is hereby amended and restated in its entirety as follows:
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"The Company shall deliver to each Buyer a written notice (the "OFFER
NOTICE") of any proposed or intended issuance or sale or exchange (the
"OFFER") of the securities being offered (the "OFFERED SECURITIES") in a
Subsequent Placement, which Offer Notice shall (w) identify and describe
the Offered Securities, (x) describe the price and other terms upon which
they are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (y) identify the
persons or entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with such Buyers at least fifty percent (50%)
of the Offered Securities, allocated among such Buyers (a) based on such
Buyer's pro rata portion of the aggregate principal amount of Notes
purchased hereunder (the "BASIC AMOUNT"), and (b) with respect to each
Buyer that elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of other Buyers as
such Buyer shall indicate it will purchase or acquire should the other
Buyers subscribe for less than their Basic Amounts (the "UNDERSUBSCRIPTION
AMOUNT")."
(e) WARRANTS AND WARRANT SHARES. The Company and the Investor agree
that the provisions of the Existing Securities Purchase Agreement
concerning the Notes and Conversion Shares shall apply to the Warrants and
the Warrant Shares issued hereunder including, without limitation, that the
certificates or other instruments representing the Warrants and the Warrant
Shares shall be subject to Section 2(g) of the Existing Securities Purchase
Agreement.
(f) TERMINATION OF REGISTRATION OBLIGATIONS UNDER THE REGISTRATION
RIGHTS AGREEMENT. The registration obligations in Section 2 of the
Registration Rights Agreement are hereby terminated and the Company and the
Investor agrees that the Investor and the Company shall be relieved of
their respective obligations under Section 2 of the Registration Rights
Agreement. Except as modified by the provisions hereof, the Registration
Rights Agreement shall remain in full force and effect in accordance with
its terms.
3. REPRESENTATIONS AND WARRANTIES
(a) INVESTOR BRING DOWN. The Investor hereby represents and warrants
to the Company with respect to itself only as set forth in Section 2 of the
Existing Securities Purchase Agreement (other than Section 2(k)) as to this
Agreement as if such representations and warranties were made as of the
date hereof and set forth in their entirety in this Agreement. Such
representations and warranties to the transactions thereunder and the
securities issued thereby are hereby deemed for purposes of this Agreement
to be references to the transactions hereunder and the issuance of the
securities hereby.
(b) COMPANY BRING DOWN. Except as set forth on the Amended and
Restated Schedules attached hereto, which shall amend and restate the
Schedules attached to the Existing Securities Purchase Agreement, the
Company represents and warrants to the Investor as set forth in Section 3
(other than Sections 3(l), 3(r) and 3(dd)) of the Securities Purchase
Agreement as if such representations and warranties were made as of the
date hereof and set forth in their entirety in this Agreement. Such
representations and warranties to the transactions thereunder and the
securities issued thereby are hereby deemed for purposes of this Agreement
to be references to the transactions hereunder and the issuance of the
securities hereby, references therein to "Closing Date" being deemed
references to the Closing Date as defined in Section 1(d) above, and
references to "the date hereof" being deemed references to the date of this
Agreement.
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(c) NO EVENT OF DEFAULT. The Company represents and warrants to the
Investor that after giving effect to the terms of this Agreement and the
Other Agreements (as defined below), no Event of Default (as defined in the
Notes) shall have occurred and be continuing as of the date hereof.
(d) KEY EMPLOYEES. The Company represents and warrants that each
employee or group of employees of the Company and any of its Subsidiaries
that is a key to its operations is party to an employment agreement with
the Company or such Subsidiary which may not be terminated prior to the
twelve (12) month anniversary of the date hereof. The Company does not have
a present intention, or know of a present intention of its Subsidiaries, to
terminate the employment of any officer, key employee or group of
employees, nor does the Company or any of its Subsidiaries know of a
present intention of any officer, key employee or group of employees to
terminate their employment.
(e) SHELL COMPANY STATUS. The Company has complied with all of the
requirements set forth in Rule 144(i)(2).
(f) ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3(L),
since the date of Company's most recently filed audited financial
statements contained in an Annual Report on Form 10-K, there has been no
material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise),
results of operations or prospects of the Company. Except as disclosed in
SCHEDULE 3(L), since the date of Company's most recently filed audited
financial statements contained in an Annual Report on Form 10-K, the
Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the
ordinary course of business or (iii) had capital expenditures, individually
or in the aggregate, in excess of $100,000. The Company has not taken any
steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings or any actual knowledge of
any fact which would reasonably lead a creditor to do so. The Company is
not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the applicable Closing, will not be
Insolvent (as defined below). For purposes of this Section 3(f),
"INSOLVENT" means (i) the present fair saleable value of the Company's
assets is less than the amount required to pay the Company's total
Indebtedness (as defined in Section 3(s) of the Existing Securities
Purchase Agreement), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur
or believes that it will incur debts that would be beyond its ability to
pay as such debts mature or (iv) the Company has unreasonably small capital
with which to conduct the business in which it is engaged as such business
is now conducted and is proposed to be conducted.
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(g) EQUITY CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Common
Stock, of which as of the date hereof, 16,274,768 are issued and
outstanding, 3,152,884 shares are reserved for issuance pursuant to the
Company's stock option and purchase plans and 1,974,118 shares are reserved
for issuance pursuant to securities (other than the Notes) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii)
10,000,000 shares of preferred stock, $0.01 par value per share, of which
as of the date hereof, none is issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable. Except as disclosed in SCHEDULE 3(R): (i)
none of the Company's capital stock is subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by
the Company; (ii) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, or exercisable or
exchangeable for, any capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may become bound to
issue additional capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any capital stock of the Company
or any of its Subsidiaries; (iii) there are no outstanding debt securities,
notes, credit agreements, credit facilities or other agreements, documents
or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may
become bound; (iv) there are no financing statements securing obligations
in any material amounts, either singly or in the aggregate, filed in
connection with the Company or any of its Subsidiaries; (v) there are no
agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act; (vi) there are no outstanding securities or instruments
of the Company or any of its Subsidiaries which contain any redemption or
similar provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is or may
become bound to redeem a security of the Company or any of its
Subsidiaries, except to the extent that a cashless exercise feature in
options or warrants may be treated as a redemption; (vii) there are no
securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; (viii) the
Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement; and (ix) the Company
and its Subsidiaries have no liabilities or obligations required to be
disclosed in the SEC Documents but not so disclosed in the SEC Documents,
other than those incurred in the ordinary course of the Company's or its
Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company
has furnished to the Buyer true, correct and complete copies of the
Company's Certificate of Incorporation, as amended and as in effect on the
date hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's Bylaws,
as amended and as in effect on the date hereof (the "BYLAWS"), and the
terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in respect thereto.
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4. CERTAIN COVENANTS AND AGREEMENTS; WAIVER
(a) BEST EFFORTS. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in
Sections 5 and 6 of this Agreement.
(b) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. On or
before 8:30 a.m., New York City time, on the first Business Day following
the date of this Agreement, the Company shall issue a press release and
file a Current Report on Form 8-K describing the terms of the transactions
contemplated by this Agreement in the form required by the 1934 Act and
attaching the material Transaction Documents not previously filed
(including, without limitation, this Agreement, the Security Documents, the
Lock-Up Agreements (as defined below), the form of the Notes and the form
of the Warrants) (including all attachments, the "8-K FILING"). From and
after the filing of the 8-K Filing with the SEC, the Investor shall not be
in possession of any material, nonpublic information received from the
Company, any of its Subsidiaries or any of its respective officers,
directors, employees or agents, that is not disclosed in the 8-K Filing.
The Company shall not, and shall cause each of its Subsidiaries and its and
each of their respective officers, directors, employees and agents, not to,
provide the Investor with any material, nonpublic information regarding the
Company or any of its Subsidiaries from and after the filing of the 8-K
Filing with the SEC without the express written consent of the Investor. If
the Investor has, or believes it has, received any such material, nonpublic
information regarding the Company or any of its Subsidiaries, it shall
provide the Company with written notice thereof. The Company shall, within
five (5) Trading Days (as defined in the Notes) of receipt of such notice,
make public disclosure of such material, nonpublic information. In the
event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in
the Transaction Documents, the Investor shall have the right to make a
public disclosure, in the form of a press release, public advertisement or
otherwise, of such material, nonpublic information without the prior
approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. The Investor shall not
have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any
such disclosure. Subject to the foregoing, neither the Company, its
Subsidiaries nor the Investor shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Investor, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity
with the 8-K Filing and contemporaneously therewith and (ii) as is required
by applicable law and regulations (provided that in the case of clause (i)
the Investor shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of the Investor, neither the Company nor any of its
Subsidiaries or affiliates shall disclose the name of the Investor in any
filing, announcement, release or otherwise other than in connection with
the 8-K Filing, unless such disclosure is required by law, regulation or
the Principal Market.
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(c) FEES AND EXPENSES. [INSERT IN SMITHFIELD AGREEMENT ONLY: The
Company shall reimburse the Investor for its legal and due diligence fees
and expenses in connection with the preparation and negotiation of this
Agreement and transactions contemplated thereby by paying any such amount
to Xxxxxxx Xxxx & Xxxxx LLP (the "INVESTOR COUNSEL EXPENSE"). The
Investor Counsel Expense shall be paid by the Company whether or not the
transactions contemplated by this Agreement are consummated.] Except as
otherwise set forth in this Agreement, 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.
(d) USE OF PROCEEDS. The Company will use the proceeds from the sale
of the New Notes and Warrants for working capital purposes, and not for (A)
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (B) redemption or repurchase of any of its or its
Subsidiaries' equity securities.
(e) PUBLIC INFORMATION. At any time during the period commencing on
the six (6) month anniversary of the Closing Date (as defined in the
Existing Securities Purchase Agreement) and ending at such time that all of
the Securities can be sold without the requirement to be in compliance with
Rule 144(c)(1) and otherwise without restriction or limitation pursuant to
Rule 144, including, if applicable, Rule 144(i), if a registration
statement is not available for the resale of all of the Securities and the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144 (a "PUBLIC INFORMATION FAILURE") then, as
partial relief for the damages to any holder of Securities by reason of any
such delay in or reduction of its ability to sell the Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each such holder an amount in cash equal
to two percent (2.0%) of the aggregate Purchase Price of such holder's
Securities on the day of a Public Information Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days)
thereafter until the earlier of (i) the date such Public Information
Failure is cured and (ii) such time that such public information is no
longer required pursuant to Rule 144 (assuming that no holder is an
"affiliate" of the Company, as defined in Rule 144(a)(1)). The payments to
which a holder shall be entitled pursuant to this Section 4(e) are referred
to herein as "PUBLIC INFORMATION FAILURE PAYMENTS." Public Information
Failure Payments shall be paid on the earlier of (I) the last day of the
calendar month during which such Public Information Failure Payments are
incurred and (II) the third Business Day after the event or failure giving
rise to the Public Information Failure Payments is cured. In the event the
Company fails to make Public Information Failure Payments in a timely
manner, such Public Information Failure Payments shall bear interest at the
rate of 1.5% per month (prorated for partial months) until paid in full.
(f) LOCK-UP.
(i) The Company shall not amend or waive any provision of any of
the Lock-Up Agreements (as defined below) or the Attias Lock-Up
Agreement (as defined below) except to extend the term of the lock-up
period.
(ii) The Company shall use best efforts to obtain a fully
executed lock up agreement from Xxxxxx Xxxxxx, in the form attached
hereto as EXHIBIT J (the "ATTIAS LOCK-UP AGREEMENT").
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(g) CASH COLLATERAL ACCOUNT.
(i) For purposes of this Section 4(g), the following definitions
shall apply.
(1) "COLLATERAL ACCOUNT ALLOCATION" means, for each Holder,
an amount calculated by multiplying $750,000.00 by the quotient
determined by dividing (A) the principal amount of Notes issued
to the applicable Holder on the Closing Date by (B) the aggregate
principal amount of all Notes issued to all Holders on the
Closing Date. In the event that any Holder shall sell or
otherwise transfer any of such Holder's Notes, the transferee
shall be allocated a pro rata portion of such Holder's Collateral
Account Allocation.
(2) "HOLDER" means a holder of Notes (collectively, the
"HOLDERS").
(3) "PRO RATA AMOUNT" means, for each Holder, an amount
equal to the sum of (x) the product of (I) the Holder's
Collateral Account Allocation and (II) a fraction the numerator
of which is the principal amount of the Holder's Notes being
converted or redeemed, as applicable, and the denominator of
which is the aggregate principal amount of Notes issued to the
Holder on the Closing Date and (y) any interest earned on such
amount calculated in (x) pursuant to the terms of the Cash
Collateral Account.
(ii) On or prior to the Closing, the Company shall establish with
a bank acceptable to the Collateral Agent (as defined in Section 4(h))
(the "CASH COLLATERAL BANK") a deposit account (together with all
monies on deposit in such deposit account and all certificates and
instruments, if any, representing or evidencing such deposit account,
the "CASH COLLATERAL ACCOUNT"), and shall cause the Cash Collateral
Bank to enter to an account control agreement with the Collateral
Agent, substantially in the form of EXHIBIT F (the "ACCOUNT CONTROL
AGREEMENT"). Upon establishing the Cash Collateral Account, the
Company shall prepay all fees payable to the Cash Collateral Bank
pursuant to Section 16 of the Account Control Agreement through the
Maturity Date (as defined in the Notes). Upon the request of the
Collateral Agent, the Company shall also execute and deliver such
other customary agreements and instruments necessary to grant the
Collateral Agent, for the benefit of the Investor, a first priority
perfected security interest in the Cash Collateral Account to secure
the New Notes. The Company agrees that it shall not permit the Cash
Collateral Account to be subject to any lien, pledge, charge, security
interest or other encumbrance other than as provided in the
immediately preceding sentence and except for the Lien of the Cash
Collateral bank subject to the terms of the Account Control Agreement.
The Cash Collateral Account shall be closed not earlier than the
Maturity Date, unless the Cash Collateral Account shall have been
reduced to zero in accordance with the terms contained in this Section
4(g) prior to such date. The funds in the Cash Collateral Account
shall be distributed as set forth below:
(1) On or before each Interest Date (as defined in the
Notes), the Company shall deliver written instructions,
countersigned by the Collateral Agent, to the Cash Collateral
Bank directing the release of the Interest payment due to each
Holder from the Cash Collateral Account to each Holder (each such
written instruction, a "CASH COLLATERAL RELEASE NOTICE");
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(2) Upon an Event of Default (as defined in the New Notes),
the Collateral Agent shall deliver written instructions to the
Cash Collateral Bank directing the release of the balance of any
amount remaining in the Cash Collateral Account to each of the
Holders of the New Notes (allocated pro rata among the Holders
based on the principal amount of the New Notes originally issued
each Holder);
(3) On each Mandatory Conversion Date (as defined in the
Notes), the Company shall deliver written instructions,
countersigned by the Collateral Agent, to the Cash Collateral
Bank directing the release from the Cash Collateral Account to
each of the Holders of an amount equal to each Holder's Pro Rata
Amount;
(4) On each Conversion Date (as defined in the Notes), the
Company shall deliver written instructions, countersigned by the
Collateral Agent, to the Cash Collateral Bank directing the
release from the Cash Collateral Account to each of the Holders
of an amount equal to each Holder's Pro Rata Amount;
(5) On each Company Optional Redemption Date and each Cash
Transaction Election Redemption Date (each as defined in the
Notes), the Company shall deliver written instructions,
countersigned by the Collateral Agent, to the Cash Collateral
Bank directing the release from the Cash Collateral Account to
each of the Holders of an amount equal to each Holder's Pro Rata
Amount; and
(6) If any balance remains in the Cash Collateral Account on
the Maturity Date, the Company shall deliver written
instructions, countersigned by the Collateral Agent, to the Cash
Collateral Bank directing it to release to (i) the Holders
(allocated pro rata among the holders based on the principal
amount of the Notes held by each holder) such amount as is
necessary to pay to the Holder any outstanding principal, accrued
interest and late charges on the Notes and any such amount shall
be deemed a payment of such outstanding principal, accrued
interest and late charges on the Notes and (ii) the Company any
balance that remains in the Cash Collateral Account after giving
effect to the release contemplated in clause (i).
(h) COLLATERAL AGENT. The Investor hereby (a) appoints Smithfield
Fiduciary LLC, as the collateral agent hereunder, under the Notes and under
the other Security Documents (in such capacity, the "COLLATERAL AGENT"),
and (b) authorizes the Collateral Agent (and the officers, directors,
employees and agents of Highbridge Capital Management, LLC ("HIGHBRIDGE
CAPITAL"), its trading manager) to take such action on such Investor's
behalf in accordance with the terms hereof and thereof. Neither the
Collateral Agent nor Highbridge Capital shall have, by reason hereof or any
of the other Transaction Documents, a fiduciary relationship in respect of
any Investor. Neither the Collateral Agent, Highbridge Capital nor any of
their respective officers, directors, employees and agents shall have any
liability to any Investor for any action taken or omitted to be taken in
connection herewith or with any other Transaction Document except to the
extent caused by its own gross negligence or willful misconduct, and each
Investor agrees to defend, protect, indemnify and hold harmless the
Collateral Agent, Highbridge Capital and all of their respective officers,
directors, employees and agents (collectively, the "COLLATERAL
INDEMNITEES") from and against any losses, damages, liabilities,
obligations, penalties, actions, judgments, suits, fees, costs and expenses
(including, without limitation, reasonable attorneys' fees, costs and
expenses) incurred by such Collateral Indemnitee, whether direct, indirect
or consequential, arising from or in connection with the performance by
such Collateral Indemnitee of the duties and obligations of Collateral
Agent pursuant hereto or any of the Transaction Documents. The Collateral
Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of
the Holders of a majority in principal amount of the Notes then
outstanding, and such instructions shall be binding upon all Holders of
Notes; PROVIDED, HOWEVER, that the Collateral Agent shall not be required
to take any action which, in the reasonable opinion of the Collateral
Agent, exposes the Collateral Agent or Highbridge Capital to liability or
which is contrary to this Agreement or any other Transaction Document or
applicable law. The Collateral Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct
and to have been signed, sent or made by the proper Person, and with
respect to all matters pertaining to this Agreement or any of the other
Transaction Documents and its duties hereunder or thereunder, upon advice
of counsel selected by it.
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(i) SUCCESSOR COLLATERAL AGENT.
(i) The Collateral Agent may resign from the performance of all
its functions and duties hereunder and under the other Transaction
Documents at any time by giving at least thirty (30) Business Days'
prior written notice to the Company and each Holder of Notes. Such
resignation shall take effect upon the acceptance by a successor
Collateral Agent of appointment pursuant to clauses (ii) and (iii)
below or as otherwise provided below.
(ii) Upon any such notice of resignation, the Holders of a
majority in principal amount of the Notes then outstanding shall
appoint a successor collateral agent. Upon the acceptance of any
appointment as collateral agent hereunder by a successor agent, such
successor collateral agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
collateral agent, and the Collateral Agent shall be discharged from
its duties and obligations under this Agreement and the other
Transaction Documents. After the Collateral Agent's resignation
hereunder as the collateral agent, the provisions of this Section 4(i)
shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Collateral Agent under this Agreement and
the other Transaction Documents.
(iii) If a successor collateral agent shall not have been so
appointed within said thirty (30) Business Day period, the Collateral
Agent shall then appoint a successor collateral agent who shall serve
as the collateral agent until such time, if any, as the Holders of a
majority in principal amount of the Notes then outstanding appoint a
successor collateral agent as provided above.
(j) HOLDING PERIOD. For the purposes of Rule 144, the Company acknowledges
that the holding period of the Amended and Restated Notes (including the
corresponding Amended and Restated Conversion Shares) and the Series B-1
Warrants (including the corresponding Series B-1 Warrant Shares) may be tacked
onto the holding period of the Existing Notes, and the Company agrees not to
take a position contrary to this Section 4(j). The Company agrees to take all
actions, including, without limitation, the issuance by its legal counsel of any
necessary legal opinions, necessary to issue Amended and Restated Conversion
Shares and Series B-1 Warrant Shares that are freely tradable on an Eligible
Market (as defined in the Notes) without restriction and not containing any
restrictive legend without the need for any action by the Investor.
12
(k) REVERSE STOCK-SPLITS. For so long as any Notes remain outstanding,
the Company shall not effect a reverse stock split of any class of the
Company's Common Stock without the consent of the Required Holders (as
defined in Notes).
(l) ISRAEL OPINION. Within twenty-one (21) days of the Closing Date,
the Company shall cause Xxxxx Xxxxxxx, Arad & Co. Advocates, the Company's
Israeli Counel, to deliver to the Investor a legal opinion in substantially
the form of the EXHIBIT G-2 attached hereto.
5. CONDITIONS TO COMPANY'S OBLIGATIONS HEREUNDER.
The obligations of the Company to the Investor hereunder are subject
to the satisfaction of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing the Investor
with prior written notice thereof:
(a) The Investor shall have executed this Agreement and the Security
Documents to which it is a party and delivered the same to the Company.
(b) The Investor shall have delivered to the Company the Investor's
Existing Note.
(c) The Investor shall have delivered to the Company the Purchase
Price set forth opposite the Investor's name in column (7) of the
Securities Schedule attached hereto, less, [INSERT IN SMITHFIELD AGREEMENT:
the amounts withheld pursuant to Section 4(c), and] an amount equal to the
Investor's 2008 Interest Payment for the New Notes and the related Warrants
being purchased by the Investor at the Closing (1) by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions the amount set forth opposite the Investor's name in column
(9) of the Securities Schedule attached hereto and (2) by wire transfer of
immediately available funds for in accordance with the Company's written
wire instructions into the Cash Collateral Account the amount set forth
opposite the Investor's name in column (10) of the Securities Schedule
attached hereto.
(d) The representations and warranties of the Investor shall be true
and correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect,
which shall be true and correct in all respects) as of the date when made
and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which
shall be true and correct as of such specified date) and the Investor shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Investor at or prior to the
Closing Date.
6. CONDITIONS TO INVESTOR'S OBLIGATIONS HEREUNDER.
The obligations of the Investor hereunder are subject to the
satisfaction of each of the following conditions, provided that these
conditions are for the Investor's sole benefit and may be waived by the
Investor at any time in its sole discretion by providing the Company with
prior written notice thereof:
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(a) The Company shall have executed this Agreement and each of the
Security Documents to which it is a party and delivered the same to the
Investor.
(b) The Company shall have executed and delivered to the Investor the
Notes and the Warrants being issued to the Investor at the Closing.
(c) Each of the Other Investors shall have (i) executed agreements
identical to this Agreement (the "OTHER AGREEMENTS") (other than
proportional changes (the "PROPORTIONATE CHANGES") in the numbers
reflecting the different dollar amount of such Investor's Notes and the
number of Warrant Shares underlying such Investor's Warrants), (ii)
satisfied or waived all conditions to the closings contemplated by such
agreements; (iii) surrendered their Existing Notes for Notes identical to
the Notes of the Investor hereunder (other than the Proportionate Changes);
and (iv) delivered to the Company the Purchase Price set forth opposite the
Other Investors' names in column (8) of the Securities Schedule attached
hereto for the New Notes and the related Warrants being purchased by the
Other Investors at the Closing (less an amount equal to the Investor's 2008
Interest Payment) by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.
(d) The Company shall have delivered to the Company's transfer agent,
with a copy to the Investors, the Amended Irrevocable Transfer Agent
Instructions, which amends and supersedes the Irrevocable Transfer Agent
Instructions dated September 30, 2005.
(e) The Investor shall have received the opinion of Blank Rome LLP,
the Company's outside counsel, dated as of the Closing Date, in
substantially the form of EXHIBIT G-1 attached hereto.
(f) The Company shall have delivered to the Investor a certificate (or
a fax or pdf copy of such certificate) evidencing the formation and good
standing of the Company and each of its Subsidiaries in such entity's
jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction, as of a date within 10 days of the Closing
Date.
(g) The Company shall have delivered to the Investor a certificate (or
a fax or pdf copy of such certificate) evidencing the Company's
qualification as a foreign corporation and good standing issued by the
Secretary of State (or comparable office or a bring-down certificate from
Corporation Service Company) of each jurisdiction in which the Company
conducts business and is required to so qualify, as of a date within 10
days of the Closing Date.
(h) The Company shall have delivered to the Investor a certified copy
of the Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware (or a fax or pdf copy of such certificate) within
ten (10) days of the Closing Date.
(i) The Company shall have delivered to the Investor a certificate,
executed by the Secretary of the Company and dated as of the Closing Date,
as to (i) the resolutions approving the transactions contemplated hereby as
adopted by the Board in a form reasonably acceptable to the Investor, (ii)
the Certificate of Incorporation and (iii) the Bylaws, each as in effect as
of the Closing, in the form attached hereto as EXHIBIT H.
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(j) The representations and warranties of the Company hereunder and
under each other Transaction Document shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true
and correct in all respects) as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of
such specified date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by
the Company at or prior to the Closing Date and after giving effect to the
terms of this Agreement and the Other Agreements. The Investor shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Investor in the
form attached hereto as EXHIBIT I.
(k) The Common Stock (I) shall be designated for quotation or listed
on the Principal Market and (II) shall not have been suspended, as of the
Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market
have been threatened, as of the Closing Date, either (A) in writing by the
SEC or the Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market.
(l) The Company and each officer and director, other than Xxxxxx
Xxxxxx, of the Company and shall have entered into a Lock-Up Agreement in
the form attached hereto as EXHIBIT J (the "OFFICER/DIRECTOR LOCK-UP
AGREEMENTS").
(m) The Company and ICTS International, N.V. ("ICTS") and any
Affiliates of ICTS that hold securities of the Company shall have entered
into a Lock-Up Agreement in the form attached hereto as EXHIBIT K (the
"ICTS LOCK-UP AGREEMENT").
(n) The Company and Northwood Business Corporation shall have entered
into a Lock-Up Agreement in the form attached hereto as EXHIBIT L (the
"NORTHWOOD LOCK-UP AGREEMENT", and together with the Officer/Director
Lock-Up Agreements and the ICTS Lock-Up Agreements, the "LOCK-UP
AGREEMENTS").
(o) In accordance with the terms of the Security Documents, the
Company shall have delivered to the Collateral Agent (i) certificates
representing the Subsidiaries' shares of capital stock to the extent such
subsidiary is a corporation or otherwise has certificated capital stock,
along with duly executed blank stock powers and (ii) appropriate financing
statements on Form UCC-1 to be duly filed in such office or offices as may
be necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests purported to be created by each Security
Document.
15
(p) Within two (2) Business Days prior to the Closing, the Company
shall have delivered or caused to be delivered to the Investor (i) true
copies of UCC search results, listing all effective financing statements
which name as debtor the Company or any of its Subsidiaries filed in the
prior five years to perfect an interest in any assets thereof, together
with copies of such financing statements, none of which, except as
otherwise agreed in writing by the Investor and the Other Investors, shall
cover any of the Collateral (as defined in the Security Documents) and the
results of searches for any tax lien and judgment lien filed against such
Person or its property, which results, except as otherwise agreed to in
writing by the Investors shall not show any such Liens (as defined in the
Security Documents); and (ii) a perfection certificate, duly completed and
executed by the Company and each of its Subsidiaries, in form and substance
satisfactory to the Investors.
(q) The Company shall have obtained all governmental, regulatory or
third party consents and approvals, if any, necessary for the sale of the
Securities.
(r) The Company shall have delivered to the Investor such other
documents relating to the transactions contemplated by this Agreement as
the Investor or its counsel may reasonably request.
7. TERMINATION.
In the event that the Closing does not occur on or before five (5)
Business Days from the date hereof, due to the Company's or the Investor's
failure to satisfy the conditions set forth in Sections 5 and 6 hereof (and
the nonbreaching party's failure to waive such unsatisfied conditions(s)),
the nonbreaching party shall have the option to terminate this Agreement
with respect to such breaching party at the close of business on such date
without liability of any party to any other party [INSERT IN SMITHFIELD
AGREEMENT ONLY:; PROVIDED, HOWEVER, if this Agreement is terminated
pursuant to this Section 7, the Company shall remain obligated to reimburse
the Investor for the expenses described in Section 4(c) above]. Upon such
termination, the terms hereof shall be null and void and the parties shall
continue to comply with all terms and conditions of the Transaction
Documents, as in effect prior to the execution of this Agreement.
8. MISCELLANEOUS.
(a) COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were
an original, not a facsimile signature.
(b) HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
16
(c) SEVERABILITY. If any provision of this Agreement is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest
extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Agreement so long as this Agreement as so
modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in
question does not substantially impair the respective expectations or
reciprocal obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The parties
will endeavor in good faith negotiations to replace the prohibited, invalid
or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
(d) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning
the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New
York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and 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 any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. 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 to such party
at the address for such 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 manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(e) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
(f) 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.
(g) 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.
17
(h) ENTIRE AGREEMENT; EFFECT ON PRIOR AGREEMENTS; AMENDMENTS. Except
for the Transaction Documents in effect prior to this Agreement (to the
extent any such Transaction Document is not amended by this Agreement),
this Agreement supersedes all other prior oral or written agreements
between the Investor, the Company, their affiliates and Persons acting on
their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither
the Company nor the Investor makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this Agreement
may be amended other than by an instrument in writing signed by the
Company. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. 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 (on a pro rata basis), other than
legal fee reimbursement, also is offered to all of the parties to the
Transaction Documents, Holders of Notes or holders of the Warrants, as the
case may be. The Company has not, directly or indirectly, made any
agreements with any of the Investors relating to the terms or conditions of
the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents.
(i) NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company:
InkSure Technologies Inc.
0000 X.X. 00xx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxxx
Copy to:
Blank Rome LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
e-mail: xxxxxxxx@xxxxxxxxx.xxx
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
18
If to the Investor, to its address and facsimile number set forth in the
Securities Schedule attached hereto,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of
such other Person as the recipient party has specified by written notice
given to each other party five (5) days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt
from an overnight courier service in accordance with clause (i), (ii) or
(iii) above, respectively.
(j) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns in accordance with the terms of the Existing Securities Purchase
Agreement.
(k) SURVIVAL. Unless this Agreement is terminated under Section 7, the
representations and warranties of the Company and the Investor contained
herein and the agreements and covenants set forth herein shall survive the
Closing.
(l) REMEDIES. The Investor and each holder of the Securities shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders
have under any law. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other
rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Investor. The Company therefore agrees that the
Investor shall be entitled to seek temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages and
without posting a bond or other security.
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(m) INDEMNIFICATION.
(i) In consideration of the Investor's execution and delivery of
the Transaction Documents, acquiring the Securities thereunder and
entering into this Agreement and in addition to all of the Company's
other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Investor and each
other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED
LIABILITIES"), incurred by any Indemnitee as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or
claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of
the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or
thereby, (ii) any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds of the issuance of
the Securities, (iii) any disclosure made by the Investor pursuant to
Section 4(c), or (iv) the status of the Investor or holder of the
Securities as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents. To the extent that the
foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
(ii) Promptly after receipt by an Indemnitee under this Section
8(m) of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving an
Indemnified Liability, such Indemnitee shall, if a claim for
indemnification in respect thereof is to be made against any
indemnifying party under this Section 8(m), deliver to the
indemnifying party a written notice of the commencement thereof, and
the indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party
and the Indemnitee; provided, however, that an Indemnitee shall have
the right to retain its own counsel with the fees and expenses of not
more than one counsel for such Indemnitee to be paid by the
indemnifying party, if, in the reasonable opinion of the Indemnitee,
the representation by such counsel of the Indemnitee and the
indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnitee and any other party
represented by such counsel in such proceeding. Legal counsel referred
to in the immediately preceding sentence shall be selected by the
Investors holding at least a majority of the Notes. The Indemnitee
shall cooperate fully with the indemnifying party in connection with
any negotiation or defense of any such action or Indemnified
Liabilities by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the
Indemnitee that relates to such action or Indemnified Liabilities. The
indemnifying party shall keep the Indemnitee fully apprised at all
times as to the status of the defense or any settlement negotiations
with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its
prior written consent, provided, however, that the indemnifying party
shall not unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the prior written consent of the
Indemnitee, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnitee of a release from all liability in respect to such
Indemnified Liabilities or litigation. Following indemnification as
provided for hereunder, the indemnifying party shall be subrogated to
all rights of the Indemnitee with respect to all third parties, firms
or corporations relating to the matter for which indemnification has
been made. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action
shall not relieve such indemnifying party of any liability to the
Indemnitee under this Section 8(m), except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
20
(iii) The indemnification required by this Section 8(m) shall be
made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or
Indemnified Liabilities are incurred.
(iv) The indemnity agreements contained herein shall be in
addition to (x) any cause of action or similar right of the Indemnitee
against the indemnifying party or others, and (y) any liabilities the
indemnifying party may be subject to pursuant to the law.
(n) INDEPENDENT NATURE OF INVESTOR'S OBLIGATIONS AND RIGHTS. The
obligations of the Investor under any Transaction Document (including this
Agreement) are several and not joint with the obligations of any Other
Investor, and the Investor shall not be responsible in any way for the
performance of the obligations of any Other Investor under any Transaction
Document. Nothing contained herein or in any other Transaction Document,
and no action taken by the Investor pursuant hereto, shall be deemed to
constitute the Investor and Other Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investor and Other Investors are in any way acting in
concert or as a group, and the Company will not assert any such claim with
respect to the obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Investor and
Other Investors are not acting in concert or as a group with respect to
such obligations or the transactions contemplated by the Transaction
Documents. The Company acknowledges and the Investor confirms that the
Investor has independently participated in the negotiation of the
transactions contemplated hereby with the advice of its own counsel and
advisors. The Investor shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out
of this Agreement or out of any other Transaction Documents, and it shall
not be necessary for any Other Investor to be joined as an additional party
in any proceeding for such purpose.
[SIGNATURE PAGE FOLLOWS]
21
IN WITNESS WHEREOF, the Investor and the Company have caused their
respective signature page to this Agreement to be duly executed as of the date
first written above.
COMPANY:
INKSURE TECHNOLOGIES INC.
By: _____________________
Name:
Title:
[Signature Page to Amendment, Exchange and Purchase Agreement]
1
IN WITNESS WHEREOF, the Investor and the Company have caused their
respective signature page to this Agreement to be duly executed as of the date
first written above.
INVESTOR:
SMITHFIELD FIDUCIARY LLC
By: _____________________
Name: Xxxx X. Chill
Title: Authorized Signatory
[Signature Page to Amendment and Exchange Agreement]
