EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July 31,
1997, by and among ACCENT SOFTWARE INTERNATIONAL LTD., a corporation organized
under the laws of Israel (the "COMPANY"), with headquarters located at 28 Xxxxxx
Xxxxxx Xxxxxx, X.X. Xxx 00000, Xxxxxxxxx 00000 Xxxxxx and the purchaser (the
"PURCHASER") set forth on the execution page hereof (the "EXECUTION PAGE").
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT");
B. The Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, (i) 6% Convertible Debentures of the Company in the
aggregate principal amount of $2,000,000, in the form attached hereto as EXHIBIT
A (the "DEBENTURES"), convertible into the Company's ordinary shares, nominal
value NIS .01 per share (the "COMMON STOCK"), (ii) a warrant, in the form
attached hereto as EXHIBIT B, to acquire 250,000 shares of Common Stock and
(iii) a warrant, in the form attached hereto as EXHIBIT C, to acquire 50,000
shares of Common Stock (the warrants referred to in clauses (ii) and (iii) of
this sentence shall be referred to as the "WARRANTS"). The shares of Common
Stock issuable upon conversion of the Debentures or otherwise pursuant to the
Debentures are referred to herein as the "CONVERSION SHARES", the shares of
Common Stock issuable upon exercise of the Warrants or otherwise pursuant to the
Warrants are referred to herein as the "WARRANT SHARES" and the Debentures,
Warrants, Conversion Shares and Warrant Shares are collectively referred to
herein as the "SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT D (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS.
a. PURCHASE OF DEBENTURES AND WARRANTS. On the Closing Date (as defined
below), subject to the satisfaction (or waiver) of the conditions set forth in
Section 6 and Section 7 below, the Company shall issue and sell to the Purchaser
and the Purchaser agrees to purchase from the Company, the Debentures and
Warrants. The purchase price (the "PURCHASE PRICE") of the Debentures and
Warrants shall be equal to Two Million Dollars ($2,000,000.00).
b. FORM OF PAYMENT. On the Closing Date, the Purchaser shall pay the
aggregate Purchase Price for the Debentures and Warrants being purchased by the
Purchaser on the Closing Date by wire transfer to the Company, in accordance
with the Company's written wiring instructions, against delivery of duly
executed Debentures and Warrants being purchased by such Purchaser and the
Company shall deliver such Debentures and Warrants against delivery of such
aggregate Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Debentures and Warrants pursuant to this
Agreement shall be 12:00 noon Eastern Daylight Savings Time on August 4, 1997
(subject to a two (2) business day grace period at either party's option, but in
any event not later than August 8, 1997), or such other time as may be mutually
agreed upon by the Company and the Purchaser (the "CLOSING DATE"). The closing
shall occur at the offices of Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx, 0000
Xxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000.
d. EXCHANGE OF DEBENTURES FOR PREFERRED STOCK. In accordance with and
subject to satisfaction of the terms and conditions of Article X.O of the
Debenture, the Company may on or prior to that date which is ninety days after
the date hereof, require the Purchaser to exchange all but not less than all of
the Debentures then held thereby for shares of Preferred Stock of the Company
(the "Preferred Shares") having the rights, preferences and privileges set forth
in the Certificate of Designation attached hereto as EXHIBIT E (the "CERTIFICATE
OF DESIGNATION"). In the event the Company exercises its rights pursuant to
this Section 1(d), for purposes of Sections 3, 4 and 5 hereof, the term (i)
"DEBENTURES" shall also include the Preferred Shares and (ii) "CONVERSION
SHARES" shall also include the shares of Common Stock issuable upon conversion
of the Preferred Shares. The Company shall, by virtue of exchanging Preferred
Shares for Debentures, make to the Purchaser as of the date of such exchange,
all representations and warranties contained in Section 3 hereof.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Company as set forth in this
Section 2. Purchaser makes no other representations or warranties, express or
implied, to the Company in connection with the transactions contemplated hereby
and any and all prior representations and warranties, if any, which may have
been made by Purchaser to the Company in connection with the transactions
contemplated hereby shall be deemed to have been merged in this Agreement and
any
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such prior representations and warranties, if any, shall not survive the
execution and delivery of this Agreement:
a. INVESTMENT PURPOSE. Purchaser is purchasing the Debentures and
Warrants for Purchaser's own account for investment only and not with a present
view towards the public sale or distribution thereof, except pursuant to sales
that are exempt from the registration requirements of the Securities Act and/or
sales registered under the Securities Act. Purchaser understands that Purchaser
must bear the economic risk of this investment indefinitely, unless the
Securities are registered pursuant to the Securities Act and any applicable
state securities or blue sky laws or an exemption from such registration is
available, and that the Company has no present intention of registering any such
Securities other than as contemplated by the Registration Rights Agreement.
Notwithstanding anything in this Section 2(a) to the contrary, by making the
representations herein, the Purchaser does not agree to hold the Securities for
any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.
b. ACCREDITED INVESTOR STATUS. Purchaser is an "ACCREDITED INVESTOR" as
that term is defined in Rule 501(a) of Regulation D.
c. RELIANCE ON EXEMPTIONS. Purchaser understands that the Debentures and
Warrants are being offered and sold to Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Debentures and Warrants.
d. INFORMATION. Purchaser and its counsel have been furnished all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Debentures and Warrants which
have been specifically requested by Purchaser or its counsel. Purchaser and its
counsel, if any, have been afforded the opportunity to ask questions of the
Company and have received what Purchaser believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Purchaser or its counsel or any of its
representatives shall modify, amend or affect Purchaser's right to rely on the
Company's representations and warranties contained in Section 3 below.
Purchaser understands that Purchaser's investment in the Securities involves a
high degree of risk.
e. GOVERNMENTAL REVIEW. Purchaser understands that no United States
United States or Israeli federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or endorsement of
the Securities.
f. TRANSFER OR RESALE. Purchaser understands that (i) except as provided
in the Registration Rights Agreement, the Securities have not been and are not
being registered under the
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Securities Act or any state securities laws, and may not be transferred unless
(a) subsequently registered thereunder, or (b) an exemption from such
registration is available, or (c) Purchaser shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration or (d) sold pursuant to Rule 144 promulgated
under the Securities Act (or a successor rule) ("RULE 144") or (e) sold or
transferred to an affiliate of Purchaser; (ii) any sale of such Securities made
in reliance on Rule 144 may be made only in accordance with the terms of said
Rule and further, if said Rule is not applicable, any resale of such Securities
under circumstances in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the
Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to the Registration Rights Agreement).
g. LEGENDS. Purchaser understands that the Debentures and Warrants and,
until such time as the Conversion Shares and the Warrant Shares have been
registered under the Securities Act as contemplated by the Registration Rights
Agreement or otherwise may be sold by Purchaser pursuant to Rule 144, the
certificates for the Conversion Shares and Warrants Shares may bear a
restrictive legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended or the
securities laws of any state of the United States. The securities
represented hereby may not be offered or sold, in the absence of an
effective registration statement for the securities under applicable
securities laws or unless offered, sold or transferred pursuant to an
available exemption from the registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions to the effect that
a public sale or transfer of such Security may be made without registration
under the Securities Act or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144. Purchaser
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been removed, pursuant to an effective registration
statement or in compliance with an exemption from the registration requirements
of the Securities Act. In the event the above legend is removed from any
Security and thereafter the effectiveness of a registration statement covering
such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to Purchaser the Company may require that the above
legend be placed on any such Security that cannot then be sold pursuant to an
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effective registration statement or Rule 144 or with respect to which the
opinion referred to in clause (b) above has not been rendered and Purchaser
shall cooperate in the prompt replacement of such legend. Such legend shall be
removed when such Security may be sold pursuant to an effective registration
statement or Rule 144 or such holder provides the opinion with respect thereto
described in clause (b) above..
h. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
i. RESIDENCY. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
a. ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries 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 by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
Securities; (ii) the ability of the Company to perform its obligations
hereunder, the Debentures, the Warrants or the Registration Rights Agreement or
(iii) the business, operations, properties, prospects or financial condition of
the Company and its subsidiaries, taken as a whole.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, to issue and sell the Debentures and Warrants in
accordance with the terms hereof, and to issue the Conversion Shares in
accordance with the terms of the Debentures and the Warrant Shares in accordance
with the terms of the Warrants; (ii) the execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the issuance of the Debentures, the Warrants and
the issuance and reservation for issuance of the Conversion Shares and Warrant
Shares) have been duly authorized by the Company's Board of Directors and, no
further consent or authorization of the Company, its Board or Directors, or its
shareholders is required (under Rule 4460(i) promulgated by the National
Association of Securities Dealers or otherwise); (iii) this Agreement has been
duly executed and delivered by the Company; and (iv) this Agreement constitutes,
and, upon execution and delivery by the Company of the Registration Rights
Agreement,
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such agreement will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
c. CAPITALIZATION. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Debentures or Warrants)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares to be reserved for issuance upon conversion of
the Debentures and Warrants is set forth on SCHEDULE 3(c). All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
issued, fully paid and nonassessable. No shares of capital stock of the Company
(including the Conversion Shares and Warrant Shares) are subject to preemptive
rights or any other similar rights of the shareholders of the Company or any
liens or encumbrances. Except for the Securities and as set forth on SCHEDULE
3(c), as of the date of this Agreement, (i) 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 shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, and (ii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of its or their securities under the Securities Act (except the
Registration Rights Agreement). Except as set forth on SCHEDULE 3(c), there are
no securities or instruments containing antidilution or similar provisions that
will be triggered by the issuance of the Securities in accordance with the terms
of this Agreement or the Debentures or Warrants. The Company has furnished to
each Purchaser true and correct copies of the Company's Memorandum of
Association as in effect on the date hereof (the "MEMORANDUM"), the Company's
Articles of Association as in effect on the date hereof (the "ARTICLES" and
collectively with the Memorandum the "ORGANIZATIONAL DOCUMENTS") and all other
instruments and agreements governing securities convertible into or exercisable
or exchangeable for Common Stock of the Company.
d. ISSUANCE OF SHARES. The Conversion Shares and Warrant Shares are, and
the Preferred Shares, if issued, will be, duly authorized and reserved for
issuance. Upon such issuance of the Preferred Shares, conversion of the
Debentures in accordance with the terms thereof and the exercise of the Warrants
in accordance with the terms thereof, as the case may be, the Preferred Shares,
Conversion Shares and Warrant Shares will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances and will
not be subject to preemptive rights or other similar rights of shareholders of
the Company and will not impose personal liability upon the holder thereof.
e. NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, the performance
by the Company of its obligations under the Debentures and Warrants, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
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issuance, as applicable, of the Debentures, the Conversion Shares and the
Warrant Shares) will not (i) result in a violation of the Organizational
Documents or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including U.S. federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its Organizational
Documents or other organizational documents and neither the Company nor any of
its subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for possible defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted, and
shall not be conducted so long as Purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and the Registration Rights Agreement or as set
forth on SCHEDULE 3(e) hereto, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency or other party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Registration Rights Agreement, the
Debentures or the Warrants, in each case in accordance with the terms hereof or
thereof. The Company has not received notification that it is in violation of
the listing requirements of The Nasdaq Stock Market ("NASDAQ").
f. SEC DOCUMENTS, FINANCIAL STATEMENTS. Since December 31, 1993, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") (all of the foregoing, filed prior to the date hereof and after December
31, 1993, and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to the Purchaser true and complete copies of the SEC Documents, except
for such exhibits, schedules and incorporated documents. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
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. None of the statements made in any such
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SEC Documents is, or has been, required to be updated or amended under
applicable law. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
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 consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end audit adjustments). Except
as set forth in the financial statements of the Company included in the SEC
Documents filed prior to the date hereof, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such financial statements and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which liabilities and obligations
referred to in clauses (i) and (ii) individually or in the aggregate, are not
material to the financial condition or operating results of the Company. The
SEC Documents contain a complete and accurate list of all material undischarged
written or oral contracts, agreements, leases or other instruments to which the
Company or any subsidiary is a party or by which the Company or any subsidiary
is bound or to which any of the properties or assets of the Company or any
subsidiary is subject (each a "CONTRACT"). None of the Company, its
subsidiaries or, to the best knowledge of the Company, any of the other parties
thereto, is in breach or violation of any Contract, which breach or violation
would have a Material Adverse Effect. No event, occurrence or condition exists
which, with the lapse of time, the giving of notice, or both, or the happening
of any further event or condition, would become a default by the Company or its
subsidiaries thereunder which would have a Material Adverse Effect.
g. ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company except as disclosed in SCHEDULE 3(g) or in the SEC Documents
filed prior to the date hereof.
h. ABSENCE OF LITIGATION. Except as disclosed in the SEC Documents filed
prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against or affecting the Company, any of
its subsidiaries, or any of their respective directors or officers in their
capacities as such wherein an unfavorable decision, ruling or finding would have
a Material Adverse Effect or would adversely affect the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under this Agreement or any
of such other documents. There are no facts which, if known by a potential
claimant or governmental authority, could give rise to a
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claim or proceeding which, if asserted or conducted with results unfavorable to
the Company or any of its subsidiaries, could have a Material Adverse Effect.
i. INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "INTANGIBLES")
necessary for the conduct of its business as now being conducted and as
described in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. To the best knowledge of the Company, neither the Company
nor any subsidiary of the Company infringes or is in conflict with any right of
any other person with respect to any Intangibles which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect. Neither the Company nor any of its subsidiaries
has received written notice of any pending conflict with or infringement upon
such third party Intangibles. Neither the Company nor any of its subsidiaries
has entered into any consent, indemnification, forbearance to xxx or settlement
agreements with respect to the validity of the Company's or its subsidiaries'
ownership or right to use its Intangibles and, to the best knowledge of the
Company, there is no reasonable basis for any such claim to be successful. The
Intangibles are valid and enforceable and no registration relating thereto has
lapsed, expired or been abandoned or canceled or is the subject of cancellation
or other adversarial proceedings, and all applications therefor are pending and
are in good standing. The Company and its subsidiaries have complied, in all
material respects, with its respective contractual obligations relating to the
protection of the Intangibles used pursuant to licenses. To the best knowledge
of the Company, no person is infringing on or violating the Intangibles owned or
used by the Company or its subsidiaries.
j. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
k. DISCLOSURE. All information relating to or concerning the Company set
forth in this Agreement or provided to the Purchaser pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the
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Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to the primary issuance of the Company's
securities.
l. ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE DEBENTURES AND
WARRANTS. The Company acknowledges and agrees that the Purchaser is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, that
this Agreement and the transactions contemplated hereby and the relationship
between the Company and the Purchaser are "arms length" and that any statement
made by the Purchaser, or any of its representatives or agents, in connection
with this Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Purchaser's purchase of the
Debentures and Warrants and has not been relied upon by the Company, its
officers or directors in any way. The Company further represents to the
Purchaser that the Company's decision to enter into this Agreement has been
based solely on an independent evaluation by the Company and its
representatives.
m. FORM S-3 ELIGIBILITY. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act.
n. NO GENERAL SOLICITATION. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "GENERAL SOLICITATION," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
o. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offerers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of the Company for
purposes of the Securities Act or any applicable shareholder approval
provisions.
p. NO BROKERS. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with Cardinal Capital Management, Inc.
whose commissions and fees will be paid for by the Company.
q. ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares issuable
upon conversion of the Debentures and Warrant Shares issuable upon exercise of
the Warrants may increase substantially in certain circumstances, including the
circumstance wherein the trading price of the Common Stock declines. The
Company's executives have studied and fully understand the nature of the
securities being sold hereunder. The Company acknowledges that its obligation
to issue Conversion Shares in accordance with the terms of the Debentures and
Warrant Shares in accordance with the terms of the Warrants is absolute and
unconditional, regardless of the dilution that such issuance may have on the
ownership interests of other shareholders. Taking the foregoing into
-10-
account, the Company's Board of Directors has determined in its good faith
business judgment that the issuance of the Debentures and Warrants hereunder and
the consummation of the other transactions contemplated hereby are in the best
interests of the Company and its shareholders.
r. TITLE. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in SCHEDULE 3(r) or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
s. TAX STATUS. Except as set forth on SCHEDULE 3(s), the Company and each
of its subsidiaries has made or filed all foreign, federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
t. KEY EMPLOYEES. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in SCHEDULE 3(t). No Key
Employee, to the best of the knowledge of the Company and its subsidiaries, is,
or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. Except as set forth on SCHEDULE 3(t), no Key Employee has,
to the best of the knowledge of the Company and its subsidiaries, any intention
to terminate his employment with, or services to, the Company or any of its
subsidiaries. "Key Employee" means each of the employees set forth on SCHEDULE
3(t) hereto.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and 7 of this Agreement,
including without limitation, obtaining the consents, approvals, authorizations
and orders set forth on SCHEDULE 3(e) hereto.
-11-
b. SECURITIES LAW. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
the Purchaser on or prior to the date of the Closing. The Company agrees to
file a Form 8-K disclosing this Agreement and the transactions contemplated
hereby with the SEC within fifteen (15) days of the date of the Closing. The
Company shall, on or before the Closing Date take such action as the Company
shall reasonably determine is necessary to sell the Securities to the Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the
Closing Date.
c. REPORTING STATUS. So long as the Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
d. USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the UNIT as set forth in SCHEDULE 4(d).
e. ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST OFFER. The Company agrees
that the Company will not, other than a Permitted Transaction (as defined
below), without the prior written consent of the Purchaser (or its designated
agent) offer or contract with any party to obtain additional equity financing
(including any debt financing with an equity component) ("FUTURE OFFERINGS") in
any form which provide for registration rights or public resale rights during
the period beginning on the date hereof and ending 180 days after the date
hereof (the "LOCK-UP PERIOD"). In addition, the Company will not, other than a
Permitted Transaction, conduct any offering or sale or enter into any agreement
to conduct a sale of any of its Common Stock or securities which are convertible
into or exchangeable or exercisable for Common Stock based on a sales,
conversion, exchange or exercise price calculated as a discount of greater than
fifteen percent (15%) to the trading price of the Common Stock during a
specified period (a "DISCOUNT OFFERING"), unless it shall have first delivered
to the Purchaser at least five (5) business days prior to the closing of such
Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof, and providing each Purchaser and its
affiliates, an option during the five (5) business day period following delivery
of such notice to purchase the securities being offered in the Discount Offering
on the same terms as contemplated by such Discount Offering; PROVIDED, HOWEVER,
such limitations shall not apply to the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof and set forth on Schedule 3(c) hereto.
"PERMITTED TRANSACTION" shall mean the offer or sale or entering into an
agreement to conduct a sale of Common Stock based on a sales price calculated as
a discount of not more than twenty-five percent (25%) to the trading price of
the Common Stock (or without such a discount) during a specified period for a
purchase price of not more than Two Million Dollars ($2,000,000)
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f. EXPENSES. The Company shall pay to the Purchaser, or at its
direction, at the Closing reimbursement for the expenses reasonably incurred by
it and its affiliates and advisors in connection with the negotiation,
preparation, execution, and delivery of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, such
Purchaser's and its affiliates' and advisors' reasonable due diligence and
attorneys' fees and expenses (the "EXPENSES"). In addition, from time to time
thereafter, upon any Purchaser's written request, the Company shall pay to the
Purchaser such additional Expenses, if any, not covered by such payment, in each
case to the extent reasonably incurred by the Purchaser.
g. FINANCIAL INFORMATION. The Company agrees to send the following
reports to Purchaser until such Purchaser transfers, assigns or sells all of its
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K; and (ii) within one (1) day
after release, copies of all press releases issued by the Company or any of its
subsidiaries.
h. RESERVATION OF SHARES. The Company shall at all times have authorized
and reserved for the purpose of issuance a sufficient number of shares of Common
Stock to provide for the full conversion of the outstanding Debentures and
exercise of the Warrants and issuance of the Conversion Shares and Warrant
Shares in connection therewith and as otherwise required by the Debentures or
the Warrants. The Company shall not reduce the number of shares reserved for
issuance upon conversion of the Debentures and exercise of the Warrants without
the consent of the holders holding a majority of the Debentures then
outstanding; PROVIDED, HOWEVER, the Company may reduce the number of shares so
reserved without obtaining such consent in the event of a reverse stock split or
similar transaction, in an amount so that the number of shares so reserved after
such transaction divided by the number of shares issued and outstanding equals
the number of shares reserved prior to such transaction divided by the number of
shares issued and outstanding.
i. LISTING. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares and Warrant Shares from time to time issuable upon conversion
of the Debentures and exercise of the Warrants. The Company will use its best
efforts to continue the listing and trading of its Common Stock on the NASDAQ,
the New York Stock Exchange ("NYSE") or the American Stock Exchange ("AMEX") and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. In the event the Common
Stock is delisted from trading on the NASDAQ, the NYSE or the AMEX and the
Common Stock is not eligible for listing on any such exchange or system, the
Company shall, with the written consent of the Purchaser, use its best efforts
to cause the Common Stock to be eligible for trading on the over-the-counter
bulletin board at the earliest practicable date and remain eligible for trading
while any Debentures or Warrants are outstanding. The Company shall promptly
provide to each holder of Debentures copies of any notices it receives regarding
the continued eligibility of the Common Stock for trading in the over-
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the-counter market or, if applicable, any securities exchange (including the
NASDAQ) on which securities of the same class or series issued by the Company
are then listed or quoted, if any.
j. CORPORATE EXISTENCE. So long as the Purchaser beneficially owns any
Debentures or Warrants, the Company shall maintain its corporate existence, and
in the event of a merger, consolidation or sale of all or substantially all of
the Company's assets, the Corporation shall ensure that the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the Debentures, Warrants and the agreements and instruments
entered into in connection herewith regardless of whether or not the Company
would have had a sufficient number of shares of Common Stock authorized and
available for issuance in order to effect the conversion of all Debentures and
exercise of all Warrants outstanding as of the date of such transaction and (ii)
is a publicly traded corporation whose common stock is listed for trading on the
NASDAQ, NYSE or AMEX.
k. NO INTEGRATED OFFERINGS. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of Securities to be integrated with any
other offering of securities by the Company for purposes of NASDAQ Rule 4460(i).
l. INTENTIONAL ACTS OR OMISSIONS. The Company shall not intentionally
perform any act which if performed, or intentionally omit to perform any act
which if omitted to be performed, would prevent or excuse the performance of
this Agreement or any of the transactions contemplated hereby.
m. HEDGING TRANSACTIONS. The Company understands that the Purchaser is a
so-called "hedge" fund and the Company hereby expressly agrees that the
Purchaser shall not (except to the extent expressly provided herein to the
contrary) in any way be prohibited or restricted from any purchases or sales of
any securities of, or related to, the Company, including, without limitation,
short sales and hedging and arbitrage transactions.
n. LOCK-UP LETTERS. The Company shall cause Xxxx Xxxxx to execute and
deliver to the Purchaser at the Closing a Lock-Up Letter in the form attached
hereto as EXHIBIT F.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to time by such
Purchaser to the Company upon conversion of the Debentures and exercise of the
Warrants, as the case may be. To the extent and during the periods provided in
Section 2(f) and 2(g) of this Agreement, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement.
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b. The Company warrants that no instruction other than such instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof in the case of the Conversion Shares or Warrant Shares prior
to registration thereof under the Securities Act, will be given by the Company
to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way each Purchaser's obligations and agreement
set forth in Section 2(g) hereof to resell the Securities pursuant to an
effective registration statement or in compliance with an exemption from the
registration requirements of applicable securities law.
c. If (a) the Purchaser provides the Company with an opinion of counsel,
which opinion of counsel shall be in form, substance and scope customary for
opinions of counsel in comparable transactions (the reasonable costs of which
shall be borne by Company), to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from
registration, or (b) the Purchaser provides the Company with reasonable
assurances that such Securities may be sold pursuant to Rule 144 or the
Purchaser transfers Securities to an affiliate, the Company shall permit the
transfer, and, in the case of the Conversion Shares and the Warrant Shares
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Purchaser.
d. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Purchaser by vitiating the intent
and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 5, that the Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Debentures
and Warrants to the Purchaser hereunder is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions thereto, 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.
a. The Purchaser shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Company.
b. The Purchaser shall have delivered the Purchase Price for the
Debentures and Warrants in accordance with Section 1(b) above.
-15-
c. The representations and warranties of the Purchaser shall be true and
correct 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 representations and warranties shall be true and correct as of such
date), and the Purchaser 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 Purchaser at or
prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
e. The Company shall have received all consents, authorizations,
approvals and orders necessary to enter into this Agreement and consummate the
transactions contemplated hereby, all of which are set forth on SCHEDULE 3(e)
hereto.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of the Purchaser hereunder to purchase the Debentures and
Warrants to be purchased by it at the closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in the Purchaser's sole discretion:
a. The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Purchaser.
b. The Company shall have delivered to the Purchaser duly executed
Debentures and Warrants (in such denominations as the Purchaser shall request)
being so purchased by the Purchaser in accordance with Section 1(b) above.
c. The Common Stock shall be authorized for quotation on NASDAQ and
trading in the Common Stock (or NASDAQ generally) shall not have been suspended
by the SEC or NASDAQ.
d. The representations and warranties of the Company shall be true and
correct 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 representations and warranties shall be true and correct as of such
date) and the Company 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 Company at or prior
to the Closing Date. The Purchaser 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 Purchaser.
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e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
f. The Purchaser shall have received an opinion of the Company's counsel,
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of EXHIBIT G
attached hereto.
g. The Company shall have delivered evidence reasonably satisfactory to
the Purchaser that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as EXHIBIT H.
h. The Company shall have received all consents, approvals,
authorizations and orders necessary to enter into this Agreement and consummate
the transactions contemplated hereby.
i. The Company shall have delivered the Lock-Up Letter referred to in
Section 4(n) hereof.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed in the State of Illinois. The Company and
the Purchasers irrevocably consent to the exclusive jurisdiction of the United
States federal courts located in the State of Illinois in any suit or proceeding
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Service of process on the Company mailed
by first class mail shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein shall
affect the right of any Purchaser to serve process in any other manner permitted
by law. The Company agrees that a final non-appealable judgment in any such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
b. COUNTERPARTS. This Agreement may be executed in two or more
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. 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 party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed execution page(s)
to be physically delivered to the other party within five (5) days of the
execution hereof.
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c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. 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 Purchaser make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchaser.
f. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Accent Software International Ltd.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
with a copies to:
Accent Software International Ltd.
00 Xxxxxx Xxxxxx Xxxxxx
Xxxxxxxxx 00000 Israel
Telecopy: (000) 00000000
Attn: Xxx Xxxxxxxxxxxx
and
Rothgerber, Appel, Powers & Xxxxxxx LLP
0000 00xx Xxxxxx
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Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, III
If to the Purchaser, to such address set forth under the Purchaser's name
on the Execution Page hereto executed by the Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor the Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Purchaser may assign its rights hereunder to
any of its "AFFILIATES," as that term is defined under the Exchange Act, without
the consent of the Company. This provision shall not limit the Purchaser's
right to transfer the Securities pursuant to the terms thereof and this
Agreement or to assign the Purchaser's rights hereunder to any such transferee.
h. 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.
i. SURVIVAL. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by
or on behalf of the Purchaser. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies the Purchaser may have under applicable federal or state securities
laws. The Company agrees to indemnify and hold harmless the Purchaser and each
of the Purchaser's officers, directors, employees, partners, members, agents and
affiliates for loss or damage arising as a result of or related to (i) any
breach or alleged breach by the Company of any of its representations or
covenants set forth herein or (ii) the matters disclosed in paragraph 2 of
SCHEDULE 3(h), including advancement of expenses as they are incurred. The
Purchaser agrees to indemnify and hold harmless the Company and each of the
Company's officers, directors, employees, partners, members, agents and
affiliates for loss or damage arising as a result of or related to any breach by
the Purchaser of any of its representations or covenants set forth herein.
j. PUBLICITY. The Company and the Purchaser shall have the right to
approve before issuance any press releases, SEC, NASDAQ or NASD filings, 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 Purchaser, to make any press release or SEC, NASDAQ or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although the Purchaser shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
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k. 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.
l. TERMINATION. In the event that the Closing Date shall not have
occurred on or before August 4, 1997, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to the termination
hereof.
m. JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement. As such, the
language used herein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
ACCESS SOFTWARE INTERNATIONAL LTD.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
PURCHASER:
CC INVESTMENTS, LDC
By: CSS Corporation Ltd., Corporate Secretary
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
RESIDENCE: Cayman Islands
ADDRESS: CC Investments, LDC
c/o Citco Fund Services (Cayman Islands) Ltd.
Corporate Center, West Bay Road
P.O. Box 31106
SMB Grand Cayman, Cayman Islands
AGGREGATE SUBSCRIPTION AMOUNT
Purchase Price: $2,000,000.00
Schedule 3c
(i) CAPITALIZATION OF ACCENT SOFTWARE INTERNATIONAL LTD.
AUTHORIZED AND ISSUED/OUTSTANDING SHARES
Authorized Shares 30,000,000
Ordinary Shares Issued and Outstanding 9,896,442
Units Issued and Outstanding 1,800,000
(Consisting of one Ordinary Share
and one warrant to purchase one
Ordinary
Share)
SHARES RESERVED FOR ISSUANCE UPON
RESERVATION FOR OUTSTANDING WARRANTS AND
OPTIONS
STRIKE
NUMBER PRICE
WARRANTS
January 1995 Loan Warrants 483,875 $1.83
Bridge Loan (1995) Warrants 407,250 $3.33
IPO Underwriter Warrants 244,500 $7.15
IPO Underwriter Warrants to Purchase
Warrants 122,250 $8.50
Secondary Unit Warrants 1,800,000 $11.50
Secondary Underwriter Warrants 180,000 $12.75
IMR Loan Warrants (1996) 180,000 $11.50
Consultant Warrants 200,000 $7.00
OPTIONS
Founders Plan 225,125 $024/1.00
ESOP 1,057,708 various
NESOP 300,000 various
CEO SOP 450,000 various
(NUMBER OF OPTIONS ISSUED AND OUTSTANDING)
Founders Plan 225,125
ESOP 713,835
NESOP 183,500
CEO SOP 350,000
(II) CAPITALIZATION OF AGENTSOFT LTD.
AUTHORIZED AND ISSUE/OUTSTANDING SHARES
Authorized Shares 10,000
Ordinary Shares Issued and
Outstanding 7,960
SHARES RESERVED FOR ISSUANCE IN
CONNECTION
WITH EMPLOYEE SHARE OPTION PLAN
ESOP 2,040
(III) PIGGYBACK REGISTRATION RIGHTS
(A) The Shareholders Agreement, dated 20 July 1995, between Accent, IMR,
Xxxxxxx Xxxxxx (formerly Accent Software Partners), Xxxxxx Xxxxxxxxxxx,
Xxxxxxx Xxxxxxxxxxx, KZ Overseas Holding Corp. (owned by Xxxxxxx
Xxxxxxxxxxx) and Xxx Xxx (an Israeli corporation which is no longer a
shareholder) provides that should the Company file a registration statement
with the SEC (apart from registrations on Forms S-4 and S-8), the
shareholders are entitled, at their option, to have their unregistered
shares registered.
(B) Warrants, dated 9 December 1996, issued to Xxxxxx Xxxxxx, Xxxx Xxxxxx and
Xxxxxxx Xxxxxx, provide that should the Company file a registration
statement with the SEC (apart from registrations on Forms S-4 and S-8), the
shareholders are entitled, at their option, to have their unregistered
shares registered provided that the managing underwriter or underwriters
agree to such inclusion.
SCHEDULE 3E
REQUIRED CONSENTS, APPROVALS AND AUTHORIZATIONS
The Company is required to obtain consent, approval and authorization from the
following Israeli governmental and non-governmental bodies to consummate the
transaction contemplated by the Securities Purchase Agreement, the Registration
Rights Agreement, the Debentures and the Warrants:
1. Bank Leumi L'yisrael
2. Bank of Israel
3. Investment Center, Ministry of Trade and Industry
4. Office of the Chief Scientist, Ministry of Trade and Industry
SCHEDULE 3H
LITIGATION AND OTHER CLAIMS
The Company is aware of two instances of claims against it that could mature
into litigation, the adverse outcome of which could have a Material Adverse
Affect or would adversely affect the transactions contemplated by this
Agreement.
1. CLAIM BY FORMER EMPLOYEE
A former employee in the Israeli office of the Company has claimed, through a
lawyer, unpaid royalties and damages resulting from options he was allegedly not
allowed to exercise. The amount of his claim is in excess of $400,000. The
Company does not believe that his claims have merit. According to our
calculations, the Company potentially owes him several thousand dollars in
connection with unpaid royalties. However, this amount is likely to be offset by
undocumented expense advances given to the employee, the amount of which has not
yet been settled. In addition, the former employee's non-exercise of options was
governed by the Company's Xxxxxxx Xxxxxxx Policy and was based on legitimate
corporate considerations. Company counsel has met with the former employee's
lawyer in an attempt to settle the claims short of actual litigation. Settlement
has been delayed because of the former employee's absence from Israel. Should
the matter reach court, however, it is theoretically possible that a court would
award him damages in or close to the amount he has claimed.
2. CLAIM BY PLACEMENT AGENT
On 29 July 29, 1997, the Company received a letter from a lawyer representing
an investment group with whom the Company had discussed a private placement
pursuant to Reg D (the "Investor"). The Investor claims that the Company
negotiated with it in bad faith and that the Company's intention to pursue a
Reg D offering with another investor consisting of debentures convertible
into preferred shares in turn convertible into ordinary shares of the Company
is a violation of the Investor's rights in what it has referred to as its
confidential and proprietary information. This allegedly confidential and
proprietary information is the investment structure described in the previous
sentence. The Investor claims that such investment structure is the unique
and unprecedented fruit of significant labor and ingenuity of the Investor
and, as such, proprietary to the Investor. The Investor's counsel has
demanded that the Company give a written undertaking within 48 hours of its
receipt of his letter that it will not utilize the allegedly proprietary and
confidential investment structure without the approval of the Investor. In
the event that the Company does not supply such a written undertaking, the
Investor will seek legal relief, including, but not limited to, an injunction
preventing the utilization of the said investment structure.
The Company takes the position that the allegedly proprietary and confidential
investment structure is neither proprietary nor confidential. It does not intend
to give the written undertaking sought by the Investor and its counsel.
Furthermore, the Company has
received advice of counsel that the Investor could not successfully obtain
preliminary relief from an Israeli or United States court.
SCHEDULE 3R
LIENS AND OTHER ENCUMBRANCES
The only lien or encumbrance on any real or personal property material to the
business of the Company or its subsidiaries is a floating lien against all its
assets held by Bank Leumi Leyisrael as security for the Company's indebtedness
in connection with the Israeli Government-guaranteed loan in the approximate
principal amount of $4.1 million.
SCHEDULE 3S
TAX STATUS
The Company and each of its subsidiaries are in compliance with the
representations made in paragraph 3d of the Securities Purchase Agreement.
SCHEDULE 3T
KEY EMPLOYEES
ACCENT SOFTWARE INTERNATIONAL LTD.
Xxxx X. Xxxxx President/Chief Executive Officer
Xxxxxx X. Xxxx Chief Financial Officer
Xxxxx Xxxxx Senior Vice President, Product Development
Xxxxxxx Xxxxxxxxxxx Senior Vice President, Business Development
Xxxxxx Xxxxxxxxxxxx Senior Vice President, Administration & Legal Affairs
Xxxxxx X. Xxxxxxxxxxx Chief Technology Officer, Languages
Xxxxxxx X. Xxxxxxxxxxx Chief Technology Officer, Agent Technology
Xxxxxxx Xxxxxxxxxxxx Vice President, Engineering
Xxxxx Xxxxxxxxx Group Leader, Engineering
Yehudit Halle Group Leader, Engineering
Xxxxx Xxxxx Group Leader, Engineering
Xxxx Xxxxxxxxx Group Leader, Engineering
Xxxxxx Brief Group Leader, Engineering
Xxxx Xxxxx GDK Technical Manager
Xxxxxx Xxxxxx Director, Quality Assurance
Xxxx Xxxxxx Manager, Documentation
Xxxxxx Xxxxxx Director, Project Management
Xxxxxx Xxxxxxxxxx Project Manager, GDK
ACCENT SOFTWARE INTERNATIONAL
(EUROPE) LTD.
Xxxx Xxxxx Vice President and General Manager
AGENTSOFT LTD.
Xxxx X. Xxxxx Chief Executive Officer
Xxxxxxx X. Xxxxxxxxxxx Chairman of the Board of Directors and Chief Scientist
Xxxxxx Xxxxxxxxx Vice President, Engineering
Xxxxx Xxxxxxxx Senior Research Scientist
Xxxxxxx X. Xxxxxxxxxxx, Chief Technology Officer, Agent Technology for the
Company and Chairman of the Board and Chief Scientist of AgentSoft Ltd. has been
working for the Company and its subsidiary on a full-time basis during an
approved leave of absence from his duties as a Senior Lecturer in Computer
Science at the Hebrew University. This leave of absence comes to an end in
October 1997, and Xx. Xxxxxxxxxxx has indicated his
intentions to return to his position at the university. However, he will
continue to be employed by both the Company and its subsidiary as a consultant
in a manner similar to his employment by the Company prior to the commencement
of his academic leave of absence.
EXHIBIT A
TO
SECURITIES PURCHASE
AGREEMENT
THIS 6% CONVERTIBLE DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR ANY SUCH OFFER, SALE OR TRANSFER IS MADE PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
6% CONVERTIBLE DEBENTURE
August 5, 1997 $2,000,000
FOR VALUE RECEIVED, ACCENT SOFTWARE INTERNATIONAL LTD., an Israeli
corporation (hereinafter called the "BORROWER," the "CORPORATION" or the
"COMPANY") hereby promises to pay to the order of CC INVESTMENTS LTD or
registered assigns (the "HOLDER") the sum of Two Million Dollars ($2,000,000) on
August 5, 1999 (the "SCHEDULED MATURITY DATE"), and to pay interest on the
unpaid principal balance hereof at the rate of six percent (6%) per annum from
the date hereof (the "ISSUE DATE") until the same becomes due and payable (which
interest shall accrue on a daily basis), whether at maturity or upon
acceleration or otherwise. Any amount of principal of or interest on this
Debenture which is not paid when due shall bear interest at the rate of fifteen
percent (15%) per annum from the due date thereof until the same is paid.
Interest shall commence accruing on the Issue Date and, to the extent not
converted in accordance with the provisions of Article IV below, shall be
payable on the Schedule Maturity Date. All payments of interest (to the extent
not converted in accordance with the terms hereof) shall, at the Company's
election, be made in (i) a number of shares of the Company's ordinary shares,
nominal value, NIS .01 per share ("COMMON STOCK"), equal to the quotient of the
amount of such interest payable on such date divided by the Conversion Price (as
defined in Article III) or (ii) lawful money of the United States of America;
PROVIDED, HOWEVER, unless the Holder shall have received written notice, not
later than five (5) business days prior to the first day of any month, of
Borrower's election to not have dividend amounts be paid in shares of Common
Stock at the time of any conversion in such following month, all payments of
interest shall be made in shares of Common Stock at the time of conversion.
Notwithstanding the foregoing, Borrower shall be permitted to make such interest
payments in shares of Common Stock only at such times as which the resale of
such shares is registered with the Securities and Exchange Commission (the
"SEC") pursuant to an effective registration statement. All payments of
principal (to the extent not converted in accordance with the terms hereof)
shall be made in lawful money of the United States of America. All payments
shall be made at such address as the Holder shall hereafter give to the Borrower
by written notice made in accordance with the provisions of this Debenture.
This Debenture (the "DEBENTURE") is being issued by the Borrower and
delivered to the Holder pursuant to that certain Securities Purchase Agreement,
dated as of July 31, 1997, by and among the Borrower and the Holder (the
"SECURITIES PURCHASE AGREEMENT").
ARTICLE I
PREPAYMENT
A. LIMITED RIGHT TO PREPAY. Other than pursuant to Article I.B below
and as required pursuant to Article VIII hereof, this Debenture may not be
prepaid without the prior written consent of the Holder.
B. PREPAYMENT AT BORROWER'S OPTION.
(i) So long as no Event of Default shall have occurred and the
Borrower is not in material violation of any of its obligations under the
Securities Purchase Agreement or that certain Registration Rights Agreement,
dated as of the date hereof, by and among the Borrower and the Holders (the
"Registration Rights Agreement"), the Borrower shall have the right to prepay
("PREPAYMENT AT BORROWER'S ELECTION"), exercisable on or after that date which
is three hundred sixty (360) days after the Issue Date, all or any portion of
the then outstanding Debentures (other than Debentures which are the subject of
a Notice of Conversion delivered prior to the Effective Date of Prepayment (as
defined below)) in accordance with the prepayment procedures set forth below.
Any optional prepayment pursuant to this Paragraph B shall be made ratably among
the holders of Debentures in proportion to the principal amount of Debentures
then outstanding. Holders of Debentures may convert all or any part of their
Debentures selected for prepayment hereunder into Common Stock in accordance
with the terms hereof by delivering a Notice of Conversion (each as defined in
Article III below) to the Borrower at any time prior to the Effective Date of
Prepayment (as defined below). The "OPTIONAL PREPAYMENT AMOUNT" with respect to
each Debenture means the greater of (i) 125% multiplied by the principal amount
thereof plus all accrued and unpaid interest and Conversion Default Payments (if
any) thereon through the date of prepayment and (ii) the Default Amount (as
defined in Paragraph B of Article VIII).
(ii) The Borrower may not deliver an Optional Prepayment Notice to a
Holder unless on or prior to the date of delivery of such Optional Prepayment
Notice, the Borrower shall have deposited with its transfer agent in the United
States or another escrow agent reasonably satisfactory to the Holder, as a trust
fund, cash sufficient in amount to pay all amounts to which the holders of
Debentures are entitled upon such prepayment pursuant to subparagraph (i) of
this Paragraph B, with irrevocable instructions and authority to such transfer
agent or escrow agent to complete the prepayment thereof in accordance with this
Paragraph B. Any Optional Prepayment Notice delivered in accordance with the
immediately preceding sentence shall be accompanied by a statement executed by a
duly authorized officer of its transfer agent or escrow agent, certifying the
amount of funds which have been deposited with such transfer agent or escrow
agent and that the transfer agent or escrow agent has been instructed and agrees
to act as prepayment agent hereunder.
(iii) The Borrower shall effect each prepayment under this Article
I.B by giving at least twenty (20) business days prior written notice (the
"OPTIONAL PREPAYMENT NOTICE") of the date which such prepayment is to become
effective (the "EFFECTIVE DATE OF PREPAYMENT"), the total principal amount of
Debentures to be prepaid and the Optional Prepayment Amount to (i) the holders
of Debentures at the
2
address and facsimile number of such holder appearing in the Borrower's register
for the Debentures and (ii) the transfer agent for the Common Stock, which
Optional Prepayment Notice shall be deemed to have been delivered on the
business day after the Borrower's fax (with a copy sent by overnight courier to
the holders of Debentures) of such notice to the holders of Debentures.
(iv) The Optional Prepayment Amount shall be paid to the holder of
the Debentures being prepaid within three (3) business days after the Effective
Date of Prepayment; PROVIDED, HOWEVER, that the Borrower shall not be obligated
to deliver any portion of the Optional Prepayment Amount until (a) in the event
all outstanding Debentures are being prepaid, either the Debentures being
prepaid are delivered to the office of the Borrower or the transfer agent, or
the holder notifies the Borrower or the transfer agent that such Debentures have
been lost, stolen or destroyed and delivers the documentation in accordance with
Article X.H hereof or (b) in the event less than all outstanding Debentures are
being prepaid, a countersigned Optional Prepayment Notice evidencing the holders
acknowledgment that the principal amount of Debentures to be prepaid, as set
forth in such Optional Prepayment Notice, are the subject of prepayment.
Notwithstanding anything herein to the contrary, in the event that the
Debentures being prepaid or a countersigned Optional Prepayment Notice, as the
case may be, are not delivered to the Borrower or the transfer agent within
three business days after the Effective Date of Prepayment, the prepayment of
the Debentures pursuant to this Article I.B shall still be deemed effective,
interest on such Debentures shall cease to accrue and all rights of the holders
of such Debentures as creditors of the Company shall cease as of the Effective
Date of Prepayment (other than the right to receive the Optional Prepayment
Amount (without additional interest after the Effective Date) in accordance with
the terms hereof) and the Optional Prepayment Amount shall be paid to the holder
of Debentures being prepaid or a countersigned Optional Prepayment Notice, as
the case may be, within three (3) business days of the date the Debentures being
prepaid are actually delivered to the Borrower or the transfer agent.
ARTICLE II
[INTENTIONALLY OMITTED]
ARTICLE III
CERTAIN DEFINITIONS
The following terms shall have the following meanings:
A. "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets (or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the aggregate principal amount represented by the then outstanding Debentures
("MAJORITY HOLDERS") if Bloomberg Financial Markets is not then reporting
closing bid prices of such security) (collectively, "BLOOMBERG"), or if the
foregoing does not apply, the last reported sale price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no sale price is reported for such security
3
by Bloomberg, the average of the bid prices of all market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau, Inc.
If the Closing Bid Price cannot be calculated for such security on such date on
any of the foregoing bases, the Closing Bid Price of such security on such date
shall be the fair market value as reasonably determined by an investment banking
firm selected by the Corporation and reasonably acceptable to the Majority
Holders, with the costs of such appraisal to be borne by the Corporation.
B. "CONVERSION AMOUNT" means the portion of the principal amount of this
Debenture being converted plus any accrued and unpaid interest thereon through
the Conversion Date being converted and any Conversion Default Payments payable
with respect thereto, each as specified in the notice of conversion in the form
attached hereto (the "NOTICE OF CONVERSION").
C. "CONVERSION DATE" means, for any Optional Conversion (as defined
below), the date specified in the Notice of Conversion so long as the copy of
the Notice of Conversion is faxed (or delivered by other means resulting in
notice) to the Corporation at or before 11:59 p.m., New York City time, on the
Conversion Date indicated in the Notice of Conversion. If the Notice of
Conversion is not so faxed or otherwise delivered before such time, then the
Conversion Date shall be the date the holder faxes or otherwise delivers the
Notice of Conversion to the Corporation. The Conversion Date for the Required
Conversion at Maturity shall be the Scheduled Maturity Date (as such terms are
defined in Paragraph D of Article IV).
D. "CONVERSION PRICE" means, subject to Paragraph E of Article VI, as of
any date of determination, the lesser of (i) the product obtained by multiplying
(x) the average of the Closing Bid Prices for the Common Stock for the five
consecutive trading days ending on the trading day immediately preceding such
date of determination (subject to equitable adjustment for any stock splits,
stock dividends, reclassifications or similar events during such applicable
period) (the "Average Price") by (y) .75 (the "Conversion Percentage") and (ii)
the product obtained by multiplying (x) the average of the Closing Bid Prices
for the five consecutive trading days ending on the trading day immediately
preceding the Issue Date by (y) 1.35 (the "Fixed Conversion Price"). The
Conversion Price shall be subject to adjustment as provided herein.
E. "BUSINESS DAY" means any day, other than a Saturday or Sunday or a day
on which banking institutions in the State of Illinois or the State of Colorado
are authorized or obligated by law, regulation or executive order to close.
ARTICLE IV
CONVERSION
A. CONVERSION AT THE OPTION OF THE HOLDER. Subject to the limitations on
conversions contained in Paragraph C of this Article IV, the Holder may, at any
time and from time to time, on or after the earlier of (i) ninety (90) days
after the Issue Date, or (ii) that date upon which a registration statement
covering the resale of the shares of Common Stock issuable upon conversion
hereof is declared effective by the SEC, convert (an "OPTIONAL CONVERSION") all
or any part of the outstanding principal amount of this Debenture,
4
plus all accrued interest thereon through the Conversion Date, into a number of
fully paid and nonassessable shares of Common Stock determined in accordance
with the following formula:
P+I+CDP
---------
CONVERSION PRICE
where:
"P" means the principal amount of this Debenture being converted;
"I" means any accrued and unpaid interest on this Debenture through the
Conversion Date being converted; and
"CDP" means any Conversion Default Payments payable with respect to this
Debenture being converted.
B. MECHANICS OF CONVERSION. In order to effect an Optional Conversion,
Holder shall fax (or otherwise deliver) a copy of the fully executed Notice of
Conversion to the Corporation or the transfer agent for the Common Stock. Upon
receipt by the Corporation of a facsimile copy of a Notice of Conversion from
Holder, the Corporation shall immediately send, via facsimile, a confirmation to
Holder stating that the Notice of Conversion has been received, the date upon
which the Corporation expects to deliver the Common Stock upon a conversion and
the name and telephone number of a contact person at the Corporation regarding
the conversion.
(i) SURRENDER OF DEBENTURES. Notwithstanding anything to the
contrary set forth herein, upon conversion of the Debentures in accordance with
the terms hereof, a Holder shall not be required to physically surrender the
Debenture to the Company unless the entire number of shares represented by such
Debenture are so converted. The Holder and the Company shall maintain records
showing the number of shares so converted and the dates of such conversions or
shall use such other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of such Debenture upon each
such conversion. Notwithstanding the foregoing, if any portion of the Debenture
is converted as aforesaid, the Holder may not transfer such Debenture unless the
Holder first surrenders such Debenture to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Debenture,
registered as the Holder may request, representing in the aggregate the
remaining principal amount owed by the Company to the Holder thereunder. The
Holder and any assignee, by acceptance of a certificate representing shares of
Common Stock pursuant to a conversion, acknowledge and agree that, unless a
substitute Debenture is provided by the Company and accepted by the Holder, by
reason of the provisions of this paragraph, following such conversion, the
principal amount of such Debenture may be less than the number stated thereon.
(ii) DELIVERY OF COMMON STOCK UPON CONVERSION; ELECTRONIC
TRANSMISSION. Subject to the immediately succeeding sentence, upon receipt of a
Notice of Conversion, the Corporation shall, no later than the later of the (a)
third business day following the Conversion Date and (b) the date of such
receipt (the "DELIVERY PERIOD"), issue and deliver to the Holder (x) that number
of shares of Common Stock issuable upon conversion of the portion of this
Debenture being converted. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided the Borrower's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Holder and so long as
the certificates therefor do not bear a legend and the holder thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Borrower shall use its best efforts to cause its transfer agent to
electronically transmit the Common Stock issuable upon conversion to
5
the Holder by crediting the account of Holder's Prime Broker with DTC through
its Deposit Withdrawal Agent Commission ("DWAC") system.
(iii) TAXES. The Corporation shall pay any and all taxes which may
be imposed upon it with respect to the issuance, delivery and determination of
the shares of Common Stock upon the conversion of this Debenture. The
Corporation shall pay to the Holder an amount equal to any and all Israeli taxes
which may be imposed upon the Holder with respect to the issuance and delivery
of this Debenture, shares of Common Stock upon conversion hereof, payment of
interest to the Holder or otherwise in connection herewith.
(iv) NO FRACTIONAL SHARES. If any conversion of this Debenture
would result in the issuance of either a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon conversion of this Debenture shall be the next higher whole number
of shares.
(v) CONVERSION DISPUTES. In the case of any dispute with respect
to a conversion, the Corporation shall promptly issue such number of shares of
Common Stock as are not disputed in accordance with subparagraph (i) above. If
such dispute only involves the calculation of the Conversion Price, the
Corporation shall submit the disputed calculations to its outside accountant via
facsimile within two (2) business days of receipt of the Notice of Conversion.
The accountant shall audit the calculations and notify the Corporation and the
Holder of the results no later than two (2) business days from the date it
receives the disputed calculations. The accountant's calculation shall be
deemed conclusive, absent manifest error. The Corporation shall then issue the
appropriate number of shares of Common Stock in accordance with subparagraph
(i) above.
C. LIMITATIONS ON CONVERSIONS. The conversion of this Debenture shall be
subject to the following limitations (each of which limitations shall be applied
independently):
(i) NO FIVE PERCENT HOLDERS. Notwithstanding anything to the
contrary contained herein, the Debenture shall not be convertible by a Holder to
the extent (but only to the extent) that, if converted by such Holder, the
Holder would beneficially own in excess of 4.9% of the shares of Common Stock.
To the extent the foregoing limitation applies, the determination of whether a
Debenture shall be convertible (vis-a-vis other securities owned by such Holder)
and of which Debenture shall be converted shall be in the sole discretion of the
Holder and the submission of the Debenture for conversion shall be deemed to be
the Holder's determination of whether such Debenture is convertible and of which
Debenture is convertible, subject to such aggregate percentage limitation. No
prior inability to convert Debentures pursuant to this Section shall have any
effect on the applicability of the provisions of this Section with respect to
any subsequent determination of convertibility. For the purposes of this
Section, beneficial ownership and all calculations, including without
limitation, with respect to calculations of percentage ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D and G thereunder. The provisions of this
Section may be amended and/or implemented in a manner otherwise than in strict
conformity with the terms of this Section with the approval of the Board of
Directors of the Company and the Majority Holders: (i) with respect to any
matter to cure any ambiguity herein, to correct this subsection (or any portion
thereof) which may be defective or inconsistent with the intended 4.9%
beneficial ownership limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such 4.9%
limitation; and (ii) with respect to any other matter, with
6
the further consent of the holders of majority of the then outstanding shares of
Common Stock; the provisions of this Section may be waived with the approval of
the Majority Holders upon ninety (90) days prior written notice from such
Holders to the Company and all other Holders. The limitations contained in this
Section shall apply to a successor Holder of Debentures if, and to the extent,
elected by such successor Holder concurrently with its acquisition of such
Debentures, such election to be promptly confirmed in writing to the Company
(provided no transfer or series of transfers to a successor Holder or Holders
shall be used by a Holder to evade the limitations contained herein).
D. REQUIRED CONVERSION AT MATURITY. Subject to the limitations set forth
in Section IV.C and provided all shares of Common Stock issuable upon conversion
of all outstanding Debentures are then (i) authorized and reserved for issuance,
(ii) registered under the Securities Act of 1933, as amended (the "Securities
Act") for resale by all Holders of such Debentures and (iii) eligible to be
traded on either the Nasdaq, the NYSE or AMEX, each Debenture outstanding on the
Scheduled Maturity Date (and any accrued and unpaid Conversion Default
Payments), automatically shall be converted into shares of Common Stock on such
date in accordance with the conversion formula set forth in Section IV.A (the
"Required Conversion at Maturity"). If a Required Conversion at Maturity
occurs, the Company and the Holders shall follow the applicable conversion
procedures set forth in this Article IV; provided, however, that a Notice of
Conversion shall be deemed to be delivered to the Company on the Maturity Date.
E. LEGEND REMOVAL FEE. In the event (i) a Holder elects an Optional
Conversion prior to that date which is one hundred fifty (150) days after the
Issue Date (the "Legend Removal Fee Period"), (ii) certificates representing the
shares of Common Stock issued by the Company to effect such a conversion are
issued without the restrictive legend set forth in Article X.K hereof or are
credited to the account of the Holder's prime broker with DTC through its DWAC
system without restrictions on transfers, and (iii) the calculation of the
Conversion Price with respect to such conversion is made using clause (i) of the
definition thereof, such Holder shall pay to the Company a Legend Removal Fee
(as defined below). The Legend Removal Fee due and owing with respect to a
conversion shall mean a dollar amount equal to the product of (i) the applicable
Conversion Amount for such conversion, and (ii) (x) .0667, if such Optional
Conversion occurs on or prior to the one hundred nineteenth (119th) day after
the Issue Date, or (y) .0333, if such Optional Conversion occurs after the one
hundred nineteenth (119th) day after the Issue Date but on or prior to the one
hundred fiftieth (150th) day after the Issue Date. The Legend Removal Fee shall
be paid by the Holder to the Company by wire transfer of immediately available
funds, pursuant to instructions provided by the Company to the Holder in
writing, promptly upon receipt by the Holder of unlegended certificates
representing the shares issued to such Holder pursuant to a conversion or the
crediting of the account of the Holder's prime broker with DTC through its DWAC
system without restrictions on transfers.
ARTICLE V
RESERVATION OF SHARES OF COMMON STOCK
A. RESERVED AMOUNT. On the Issue Date, the Corporation shall have
authorized and reserved and shall thereafter keep available for issuance from
its authorized but unissued shares of Common Stock not less than 3,000,000
shares of Common Stock solely for the purpose of issuance upon conversion of
this Debenture. The Company shall not later than fifteen (15) days after the
date hereof increase the Reserved Amount to 3,500,000 shares. Such number of
authorized but unissued shares of Common Stock so reserved (the "RESERVED
AMOUNT") shall not be decreased, except in the case of reverse stock splits and
similar
7
transactions, and shall at all times be sufficient to provide for the conversion
of the outstanding principal amount of this Debenture (and accrued interest
thereon) at the then current Conversion Price.
B. INCREASES TO RESERVED AMOUNT. If the Reserved Amount for any three
(3) consecutive trading days (the last of such three (3) trading days being the
"AUTHORIZATION TRIGGER DATE") shall be less than 175% of the number of shares of
Common Stock issuable upon conversion of this Debenture on such trading days,
the Corporation shall immediately notify Holder of such occurrence and shall
take immediate action (including, if necessary, seeking shareholder approval to
authorize the issuance of additional shares of Common Stock) to increase the
Reserved Amount to 200% of the number of shares of Common Stock then issuable
upon conversion of this Debenture. In the event the Corporation fails to so
increase the Reserved Amount within ninety (90) days after an Authorization
Trigger Date, Holder shall thereafter have the option, exercisable in whole or
in part at any time and from time to time by delivery of a Default Notice (as
defined in Article VIII.C) to the Corporation, to require the Corporation to
prepay for cash, at the Default Amount (as defined in Article VIII.B), a portion
of the principal amount of this Debenture (plus accrued interest thereon) such
that, after giving effect to such prepayment, the Reserved Amount exceeds 175%
of the total number of shares of Common Stock issuable to Holder upon conversion
of this Debenture on the date of the Default Notice. If the Corporation fails
to pay such Default Amount within five (5) business days after its receipt of a
Default Notice, then Holder shall be entitled to the remedies provided in
Article VIII.C.
ARTICLE VI
FAILURE TO SATISFY CONVERSIONS
A. CONVERSION DEFAULT PAYMENTS. If, at any time, (x) Holder submits a
Notice of Conversion and the Corporation fails for any reason (other than
because such issuance would exceed Holder's Reserved Amount, for which failure
the Holder shall have the remedies set forth in Article V) to deliver, on or
prior to the fourth business day following the expiration of the Delivery Period
for such conversion, such number of freely tradeable shares of Common Stock to
which Holder is entitled upon such conversion, or (y) the Corporation provides
notice to any Holder at any time of its intention not to issue freely tradeable
shares of Common Stock upon exercise by any Holder of its conversion rights in
accordance with the terms of the Debentures (other than because such issuance
would exceed such Holder's Reserved Amount) (each of (x) and (y) being a
"CONVERSION DEFAULT"), then the Corporation shall pay to Holder, payments for
the first ten (10) business days following the expiration of the Delivery
Period, in the case of a Conversion Default described in clause (x), and for the
first ten (10) business days of a Conversion Default described in clause (y), an
amount equal to $1,000 per day. In the event any Conversion Default continues
beyond such ten (10) business day period, the Corporation shall pay to Holder an
additional amount equal to:
.24 x (D/365) x (the Payment Amount)
where:
"D" means the number of days after the expiration of the ten (10) business
day period described above through and including the Default Cure Date;
8
"PAYMENT AMOUNT" means the outstanding principal amount of all Debentures
held by Holder plus all accrued and unpaid interest thereon as of the first day
of the Conversion Default.
"DEFAULT CURE DATE" means (i) with respect to a Conversion Default
described in clause (x) of its definition, the date the Corporation effects the
conversion of the portion of this Debenture submitted for conversion and (ii)
with respect to a Conversion Default described in clause (y) of its definition,
the date the Corporation begins to issue freely tradeable Common Stock in
satisfaction of all conversions of Debentures in accordance with their terms.
The payments to which Holder shall be entitled pursuant to this Paragraph A
are referred to herein as "CONVERSION DEFAULT PAYMENTS." Holder may elect to
receive accrued Conversion Default Payments in cash or to convert all or any
portion of such accrued Conversion Default Payments, at any time, into Common
Stock at the lowest Conversion Price in effect during the period beginning on
the date of the Conversion Default through the Conversion Date for such
conversion. In the event Holder elects to receive any Conversion Default
Payments in cash, it shall so notify the Corporation in writing. Such payment
shall be made in accordance with and be subject to the provisions of Article
X.J. In the event Holder elects to convert all or any portion of the Conversion
Default Payments, Holder shall indicate on a Notice of Conversion such portion
of the Conversion Default Payments which Holder elects to so convert and such
conversion shall otherwise be effected in accordance with the provisions of
Article IV.
B. ADJUSTMENT TO CONVERSION PRICE. If Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Delivery Period with respect to a conversion of
any portion of any of Holder's Debentures for any reason (other than because
such issuance would exceed Holder's Reserved Amount, for which failure Holder
shall have the remedies set forth in Article V), then the Conversion Price shall
thereafter be the lesser of (i) the Conversion Price on the Conversion Date
specified in the Notice of Conversion which resulted in the Conversion Default
and (ii) the lowest Conversion Price in effect during the period beginning on,
and including, such Conversion Date through and including the day such shares of
Common Stock are delivered to the Holder. If there shall occur a Conversion
Default of the type described in clause (y) of Article VI.A, then the Conversion
Price with respect to any conversion thereafter shall be the lowest Conversion
Price in effect at any time during the period beginning on, and including, the
date of the occurrence of such Conversion Default through and including the
Default Cure Date. The Conversion Price shall thereafter be subject to further
adjustment for any events described in Article IX.
C. BUY-IN CURE. Unless the Corporation has notified the Holder in
writing prior to the delivery by such Holder of a Notice of Conversion that the
Corporation is unable to honor conversions, if (i) the Corporation fails for any
reason to deliver during the Delivery Period shares of Common Stock to Holder
upon a conversion of this Debenture and (ii) after the applicable Delivery
Period with respect to such conversion, Holder purchases (in an open market
transaction or otherwise) shares of Common Stock in satisfaction of a sale by
Holder to persons other than affiliates of such Holder of the shares of Common
Stock (the "SOLD SHARES") which Holder anticipated receiving upon such
conversion (a "BUY-IN"), the Corporation shall pay Holder (in addition to any
other remedies available to Holder) the amount by which (x) Holder's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the net proceeds received by the Holder
from the sale of the Sold Shares. For example, if a holder purchases shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to shares of Common Stock sold for $10,000, the Corporation will be
required to
9
pay the Holder $1,000. Holder shall provide the Corporation written
notification indicating any amounts payable to Holder pursuant to this Paragraph
C. The Corporation shall make any payments required pursuant to this Paragraph
C in accordance with and subject to the provisions of Article X.J.
D. RIGHT TO REQUIRE PREPAYMENT. If the Corporation fails, and such
failure continues uncured for five (5) business days after the Corporation has
been notified thereof in writing by Holder, for any reason (other than because
such issuance would exceed Holder's Reserved Amount, for which failure Holder
shall have the remedies set forth in Article V) to issue shares of Common Stock
within ten (10) business days after the expiration of the Delivery Period with
respect to any conversion of this Debenture, then Holder may elect at any time
and from time to time prior to the Default Cure Date for such Conversion
Default, by delivery of a Default Notice (as defined in Article VIII.C) to the
Corporation, to have all or any portion of Holder's outstanding Debentures
prepaid by the Corporation for cash at the Default Amount. If the Corporation
fails to pay such Default Amount within five (5) business days after its receipt
of a Prepayment Notice, then Holder shall be entitled to the remedies provided
in Article VIII.C.
ARTICLE VII
[INTENTIONALLY OMITTED]
ARTICLE VIII
EVENTS OF DEFAULT
A. EVENTS OF DEFAULT. If any of the following events of default (each,
an "EVENT OF DEFAULT") shall occur:
(i) the Corporation fails (i) to pay the principal hereof when due,
whether at maturity, upon acceleration or otherwise or (ii) to pay any
installment of interest hereon when due and such failure continues for a period
of five (5) business days after the due date thereof,
(ii) the Common Stock (including any of the shares of Common Stock
issuable upon conversion of this Debenture) is suspended from trading on any of,
or is not listed (and authorized) for trading on at least one of, the New York
Stock Exchange, the American Stock Exchange or Nasdaq for an aggregate of five
(5) trading days in any nine (9) month period,
(iii) the Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreement has
not been declared effective by January 31, 1998 or such Registration Statement,
after being declared effective, cannot be utilized by Holder for the resale of
all of its Registrable Securities (as defined in the Registration Rights
Agreement) for an aggregate of more than thirty (30) days,
(iv) the Corporation fails, and any such failure continues uncured
for five (5) business days after the Corporation has been notified thereof in
writing by the Holder, to remove any restrictive legend on
10
any certificate or any shares of Common Stock issued to the Holder upon
conversion of any Debenture as and when required by the Debentures, the
Securities Purchase Agreement or the Registration Rights Agreement,
(v) the Corporation provides notice to any of the Holders,
including by way of public announcement, at any time, of its intention not to
issue shares of Common Stock to any of the Holders upon conversion in accordance
with the terms of the Debentures (other than due to the circumstances
contemplated by Article V for which the Holders shall have the remedies set
forth in such Article),
(vi) the Corporation shall:
(a) sell, convey or dispose of all or substantially all of
its assets; or
(b) merge, consolidate or engage in any other business
combination with any other entity (other than (i) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Corporation or (ii) except as expressly permitted pursuant to Section 4(j)
of the Securities Purchase Agreement); or
(c) have fifty percent (50%) or more of the voting power of
its capital stock owned beneficially by one person, entity or "group" (as such
term is used under Section 13(d) of the Securities Exchange Act of 1934, as
amended);
(vii) the Corporation breaches any material covenant or other
material term or condition of this Debenture (other than as specifically
provided in subparagraphs (i)-(vi) of this Paragraph A), the Securities Purchase
Agreement or the Registration Rights Agreement and such breach continues for a
period of ten (10) business days after written notice thereof to the
Corporation's discovery of such breach;
(viii) any representation or warranty of the Corporation made
herein or in any agreement, statement or certificate given in writing pursuant
hereto or in connection herewith (including, without limitation, the Securities
Purchase Agreement and the Registration Rights Agreement), shall be false or
misleading in any material respect when made and the breach of which would have
a material adverse effect on the Corporation or the prospects of the Corporation
or a material adverse effect on the Corporation or the rights of the Corporation
with respect to any of the Debentures or the shares of Common Stock issuable
upon conversion of the Debentures;
(ix) Xxxx Xxxxx is no longer the Chief Executive Officer and a
Director of the Company;
(x) the Corporation or any subsidiary of the Corporation shall make
an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed; or
(xi) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any subsidiary of the Corporation;
11
then, upon the occurrence and during the continuation of any Event of Default
specified in subparagraphs (i)-(ix) of this Paragraph A, at the option of the
Holder hereof, and upon the occurrence of any Event of Default specified in
subparagraph (x) or (xi) of this Paragraph A, the Corporation shall pay to the
Holder, in satisfaction of its obligation to pay the outstanding principal
amount of this Debenture and accrued and unpaid interest thereon, an amount
equal to the Default Amount and such Default Amount, together with all other
ancillary amounts payable hereunder shall immediately become due and payable,
all without demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, legal fees and
expenses of collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity.
B. DEFINITION OF DEFAULT AMOUNT. The "DEFAULT AMOUNT" with respect to
any portion of this Debenture means an amount equal to:
M X A
------
C P
where:
"A" means the principal amount of this Debenture being paid plus all
accrued and unpaid interest thereon through the payment date and any Conversion
Default Payment payable with respect thereto;
"CP" means the Conversion Price in effect on the date of the Default
Notice;
"M" means the highest Closing Bid Price of the Company's Common Stock
during the period beginning on the date of the Default Notice and ending on the
payment date, as reported on the principal securities exchange or trading market
on which the Common Stock is traded; and
C. FAILURE TO PAY DEFAULT AMOUNT. If the Corporation fails to pay the
Default Amount within five (5) business days of its receipt of a notice
requiring such payment (a "DEFAULT NOTICE"), then the Holder (i) shall be
entitled to interest on the Default Amount at a per annum rate equal to the
lower of twenty-four percent (24%) and the highest interest rate permitted by
applicable law from the date of the Default Notice until the date of payment
hereunder, and (ii) shall have the right, at any time and from time to time, to
require the Corporation, upon written notice, to immediately convert (in
accordance with the terms of Paragraph A of Article IV) all or any portion of
the Default Amount, plus interest as aforesaid, into shares of Common Stock at
the lowest Conversion Price in effect during the period beginning on the date of
the Default Notice and ending on the Conversion Date with respect to the
conversion of such Default Amount. In the event the Corporation is not able to
pay all amounts due and payable with respect to all Debentures subject to
Default Notices, the Corporation shall pay the Holders such amounts pro rata,
based on the total amounts payable to such Holder relative to the total amounts
payable to all Holders.
D. SUSPENSION OF TRADING. In addition to the remedies provided elsewhere
herein, upon the occurrence of an Event of Default pursuant to Article
VIII.A(ii)(a "Suspension Event") the Company shall pay to the Holders, pro rata
in proportion to the principal amount of Debentures held thereby, the Suspension
Fee (as defined below). The Suspension Fee shall mean a dollar amount equal to
the product of (i) the number of shares of Common Stock issuable if the
principal amount of all outstanding Debentures plus all accrued and unpaid
interest thereon were converted into Common Stock as of the date the Suspension
Event
12
occurred, multiplied by (ii) the Average Price, multiplied by (iii) .0625. In
addition, for purposes of determining the Conversion Price, on and after the
occurrence of a Suspension Event, (i) the Conversion Percentage shall equal the
product (x) .80 and (y) the Conversion Percentage in effect immediately
preceding the adjustment contained herein and (ii) and the Fixed Conversion
Price shall mean the product of the Fixed Conversion Price as calculated
pursuant to the definition of Conversion Price, multiplied by .9412.
ARTICLE IX
ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time as
follows:
A. STOCK SPLITS, STOCK DIVIDENDS, ETC. If at any time on or after the
date of issuance of this Debenture, the number of outstanding shares of Common
Stock is increased by a stock split, stock dividend, combination,
reclassification or other similar event, the Conversion Price shall be
proportionately reduced, or if the number of outstanding shares of Common Stock
is decreased by a reverse stock split, combination or reclassification of
shares, or other similar event, the Conversion Price shall be proportionately
increased. In such event, the Corporation shall notify the Corporation's
transfer agent of such change on or before the effective date thereof.
B. ADJUSTMENT DUE TO MAJOR ANNOUNCEMENT. In the event the Corporation
(i) makes a public announcement that it intends to consolidate or merge with any
other entity (other than a merger in which the Corporation is the surviving or
continuing entity and its capital stock is unchanged and there is no
distribution thereof) or to sell or transfer all or substantially all of the
assets of the Corporation or (ii) any person, group or entity (including the
Corporation) publicly announces a tender offer to purchase 50% or more of any
class of the Corporation's capital stock (the date of the announcement referred
to in clause (i) or (ii) of this Paragraph B is hereinafter referred to as the
"ANNOUNCEMENT DATE"), then the Conversion Price shall, effective upon the
Announcement Date and continuing through the consummation of the proposed tender
offer, exchange offer or transaction or the Abandonment Date (as defined below),
be equal to the lesser of (x) the Conversion Price which would have been
applicable for an Optional Conversion occurring on the Announcement Date and (y)
the Conversion Price determined in accordance with Article III.D on the
Conversion Date set forth in the Notice of Conversion for the Optional
Conversion. From and after the Abandonment Date, the Conversion Price shall be
determined as set forth in Article IV. "ABANDONMENT DATE" means with respect to
any proposed transaction or tender offer for which a public announcement as
contemplated by this Paragraph B has been made, the date which is seven trading
days after the date upon which the Corporation (in the case of clause (i) above)
or the person, group or entity (in the case of clause (ii) above) publicly
announces the termination or abandonment of the proposed transaction or tender
offer which caused this Paragraph B to become operative.
C. ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time there
shall be (i) any reclassification or change of the outstanding shares of Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
(ii) any consolidation or merger of the Corporation with any other entity (other
than a merger in which the Corporation is the surviving or continuing entity and
its capital stock is unchanged), (iii) any sale or transfer of all or
substantially all of the assets of the Corporation or (iv) any share exchange
pursuant to which all of the outstanding shares of Common Stock are converted
into other securities or property
13
(each, a "Major Transaction"), then the Holder shall thereafter have the right
to receive upon conversion, in lieu of the shares of Common Stock immediately
theretofore issuable, the greater of, as determined by the Holder in its sole
discretion, (i) the number of shares of stock, securities and/or other property
of the Company, or of the entity resulting from such Major Transaction (the
"Major Transaction Consideration"), to which a Holder of the number of shares of
Common Stock delivered upon conversion of such Debentures would have been
entitled upon such Major Transaction had the Holder exercised its right of
conversion (without regard to any limitations on conversion herein contained) on
the trading date immediately preceding the public announcement of the
transaction resulting in such Major Transaction and had such Common Stock been
issued and outstanding and had such Holder been the holder of record of such
Common Stock at the time of such Major Transaction, and the Company shall make
lawful provision therefor as a part of such Major Transaction; and (ii) 125% of
the principal amount of such Debenture plus any accrued and unpaid interest
thereon and any Conversion Default payment payable with respect thereto in cash.
No sooner than ten (10) days nor later than five (5) days prior to the
consummation of the Major Transaction, but not prior to the public announcement
of such Major Transaction, the Company shall deliver written notice ("Notice of
Major Transaction") to each Holder, which Notice of Major Transaction shall be
deemed to have bene delivered one (1) business day after the Company's sending
such notice by telecopy (provided that the Company sends a confirming copy of
such notice on the same day by overnight courier) of such Notice of Major
Transaction. Such Notice of Major Transaction shall indicate the amount and
type of the Major Transaction Consideration which such Holder would receive
under clause (i) of this Article IX.C. If the Major Transaction Consideration
does not consist entirely of United States currency, such Holder may elect to
receive United States currency in an amount equal to the value of the Major
Transaction Consideration in lieu of the Major Transaction Consideration by
delivering notice of such election to the Company within five (5) days of the
Holder's receipt of the Notice of Major Transaction.
D. ADJUSTMENT DUE TO DISTRIBUTION. If the Corporation shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise (including any dividend or distribution to the Corporation's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (I.E. a spin-off)) (a "DISTRIBUTION"), then the Holder shall be
entitled, upon any conversion of this Debenture after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the Holder with respect to the
shares of Common Stock issuable upon such conversion had Holder been the holder
of such shares of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
E. ISSUANCE OF OTHER SECURITIES WITH VARIABLE CONVERSION PRICE. If the
Corporation shall issue any securities which are convertible into or
exchangeable for Common Stock ("CONVERTIBLE SECURITIES") at a conversion or
exchange rate based on a discount to the market price of the Common Stock at the
time of conversion or exercise which is less than the Fixed Conversion Price,
then the Fixed Conversion Price in respect of any conversion of any portion of
this Debenture after such issuance shall be calculated utilizing the greatest
discount applicable to any such Convertible Securities. The foregoing shall not
apply in the event the Company issues (i) warrants in exchange for warrants of
the Company which are currently outstanding with an exercise price of $11.50 per
share and the holders thereof exercise such warrants in full substantially
contemporaneous with such exchange and (ii) options to purchase not more than
500,000 shares of Common Stock in exchange for bona fide services.
14
F. PURCHASE RIGHTS. If the Corporation issues any Convertible Securities
or rights to purchase stock, warrants, securities or other property (the
"PURCHASE RIGHTS") pro rata to the record holders of Common Stock, then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
Holder had held the number of shares of Common Stock acquirable upon complete
conversion of this Debenture immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
G. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article IX, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of Holder, furnish to Holder a like certificate setting
forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time
in effect and (iii) the number of shares of Common Stock and the amount, if
any, of other securities or property which at the time would be received upon
conversion of this Debenture.
ARTICLE X
MISCELLANEOUS
A. FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
B. NOTICES. Any notice herein required or permitted to be given shall be
in writing and may be personally served or delivered by courier and shall be
deemed to have been given upon receipt (which shall include telephone line
facsimile transmission). The addresses for such communications shall be:
If to the Company:
Accent Software International Ltd.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
15
with a copies to:
Accent Software International Ltd.
00 Xxxxxx Xxxxxx Xxxxxx
Xxxxxxxxx 00000 Israel
Telecopy: (000) 00000000
Attn: Xxx Xxxxxxxxxxxx
and
Rothgerber, Appel, Powers & Xxxxxxx LLP
0000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, III
If to the Holder, at such address as such Holder shall have provided in writing
to the Company, or at such other address as such Holder furnishes by notice
given in accordance with this Article X.B.
with a copy to:
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esquire
C. AMENDMENT PROVISION. This Debenture and any provision hereof may only
be amended by an instrument in writing signed by the Corporation and the holders
of a majority of the Debentures outstanding at such times. The term "DEBENTURE"
and all references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
D. ASSIGNABILITY. This Debenture shall be binding upon the Corporation
and its successors and assigns and shall inure to the benefit of the Holder and
its successors and assigns. In the event a Holder shall sell or otherwise
transfer any portion of this Debenture, each transferee shall be allocated a pro
rata portion of such transferor's Reserved Amount. Any portion of the Reserved
Amount which remains allocated to any person or entity which does not hold any
Debentures shall be allocated to the remaining holders of Debentures, pro rata
based on the total principal amount of Debentures then held by such Holders.
E. COST OF COLLECTION. If default is made in the payment of this
Debenture, the Corporation shall pay the Holder hereof costs of collection,
including reasonable attorneys' fees.
16
F. GOVERNING LAW. This Debenture shall be governed by and construed in
accordance with the laws of the State of Illinois applicable to contracts made
and to be performed in the State of Illinois. The Corporation irrevocably
consents to the jurisdiction of the United States federal courts located in the
State of Illinois in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Corporation irrevocably waives
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Corporation further agrees that service of process upon the
Corporation, mailed by first class mail shall be deemed in every respect
effective service of process upon the Corporation in any such suit or
proceeding. Nothing herein shall affect the Holder's right to serve process in
any other manner permitted by law. The Corporation agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
G. DENOMINATIONS. At the request of the Holder, upon surrender of this
Debenture, the Corporation shall promptly issue new Debentures in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $100,000 as the Holder shall request.
H. LOST OR STOLEN DEBENTURES. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of this Debenture and
(ii) (y) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Corporation, or (z) in the case of mutilation, upon
surrender and cancellation of this Debenture, the Corporation shall execute and
deliver new Debentures, in the form hereof, in such denominations of at least
$100,000 as the Holder may request. However, the Corporation shall not be
obligated to reissue such lost or stolen Debentures if the Holder
contemporaneously requests the Corporation to convert this Debenture.
I. QUARTERLY STATEMENTS OF AVAILABLE SHARES. For each of the Company's
fiscal quarters beginning in the quarter in which the registration statement
required to be filed pursuant to Section 2(a) of the Registration Rights
Agreement is declared effective and thereafter so long as this Debenture is
outstanding, the Corporation shall deliver to Holder a written report notifying
the Holder of any occurrence which prohibits the Corporation from issuing
Common Stock upon any such conversion. The report shall also specify (i) the
total principal amount of all outstanding Debentures as of the end of such
quarter, (ii) the total number of shares of Common Stock issued upon all
conversions of Debentures prior to the end of such quarter, (iii) the total
number of shares of Common Stock which are reserved for issuance upon
conversion of Debentures as of the end of such quarter and (iv) the total number
of shares of Common Stock which may thereafter be issued by the Corporation
upon conversion of Debentures before the Corporation would exceed the Reserved
Amount. The Corporation shall deliver the report for each quarter to Holder by
the 45th day following the quarter to which such report relates. In addition,
the Corporation shall provide, within fifteen (15) days after delivery to the
Corporation of a written request by Holder, any of the information enumerated in
clauses (i) - (iv) of this Paragraph I as of the fiscal quarter immediately
preceding the date of such request.
J. PAYMENT OF CASH; DEFAULTS. Whenever the Corporation is required to
make any cash payment to Holder under this Debenture (as a Conversion Default
Payment, as a prepayment or otherwise), such cash payment shall be made to the
Holder within five (5) business days after delivery by Holder of a notice
specifying that the Holder elects to receive such payment in cash and the method
(E.G., by check, wire transfer) in which such payment should be made. If such
payment is not delivered within such five (5) business day period, Holder shall
thereafter be entitled to interest on the unpaid amount at a per annum rate
17
equal to the lower of twenty-four percent (24%) and the highest interest rate
permitted by applicable law until such amount is paid in full to the Holder.
K. RESTRICTIONS ON SHARES. The shares of Common Stock issuable upon
conversion of this Debenture may not be sold or transferred unless (i) they
first shall have been registered under the Securities Act and applicable state
securities laws, (ii) the Corporation shall have been furnished with an opinion
of legal counsel (in form, substance and scope reasonably satisfactory to the
Company) to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act or (iii) they are sold pursuant
to Rule 144 under the Act. Except as otherwise provided in the Securities
Purchase Agreement, each certificate for shares of Common Stock issuable upon
conversion of this Debenture that have not been so registered and that have not
been sold pursuant to an exemption that permits removal of the legend, shall
bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon conversion of this Debenture, the Corporation shall remove
the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if (i) with such request, the
Corporation shall have received either (A) an opinion of counsel, in form,
substance and scope reasonably satisfactory to the Company to the effect that
any such legend may be removed from such certificate, or (B) satisfactory
representations from the Holder that Holder is eligible to sell such security
pursuant to Rule 144 or (ii) a registration statement under the Securities Act
covering such securities is in effect. Nothing in this Debenture shall (i)
limit the Corporation's obligation under the Registration Rights Agreement, or
(ii) affect in any way the Holder's obligations to comply with applicable
securities laws upon the resale of the securities referred to herein.
L. STATUS AS DEBENTUREHOLDER. Upon submission of a Notice of Conversion
by Holder, the principal amount of this Debenture and the interest thereon
covered thereby shall be deemed converted into shares of Common Stock and the
holder's rights with respect thereto shall cease and terminate, excepting only
the right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to Holder
because of a failure by the Corporation to comply with the terms of this
Debenture. Notwithstanding the foregoing, if Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Delivery Period with respect to a conversion for
any reason, then (unless Holder
18
otherwise elects to retain its status as a holder of Common Stock) the portion
of the principal amount and interest thereon subject to such conversion shall be
deemed outstanding under this Debenture and the Corporation shall, as soon as
practicable, return this Debenture to the Holder. In all cases, Holder shall
retain all of its rights and remedies (including, without limitation, (i) the
right to receive Conversion Default Payments pursuant to Article VI.A to the
extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with Article VI.B) for the
Corporation's failure to convert this Debenture.
M. REMEDIES CUMULATIVE. The remedies provided in this Debenture shall be
cumulative and in addition to all other remedies available under this Debenture,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit Holder's right to pursue actual damages for any failure by the
Corporation to comply with the terms of this Debenture. The Company covenants
to each Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the Holder hereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Corporation
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Corporation therefore agrees, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
N. SPECIFIC SHALL NOT LIMIT GENERAL. No specific provision contained in
this Debenture shall limit or modify any more general provision contained
herein.
O. REQUIRED CONVERSION INTO PREFERRED STOCK.
(i) At any time during the first ninety (90) days following the
Issuance Date (the "REQUIRED CONVERSION PERIOD") that the Required Conversion
Conditions (as defined in subparagraph (iii) below) are satisfied, the
Corporation shall have the right to require the conversion of all (but not less
than all) of the outstanding principal amount of this Debenture and all accrued
and unpaid interest and Conversion Default Payments thereon into that number of
shares of a to-be created series of the Company's preferred stock having the
designations, preferences and rights set forth in the Certificate of
Designations, Preferences and Rights attached to the Securities Purchase
Agreement as Exhibit E (the "PREFERRED STOCK") which have a total face amount
equal to such principal amount and all accrued and unpaid interest and
Conversion Default Payments thereon (a "REQUIRED CONVERSION"). The Corporation
may exercise such right by delivery of a Required Conversion Notice (as defined
in subparagraph (ii) below) during the Required Conversion Period in accordance
with the procedures set forth below. Holder may convert all or any portion of
this Debenture into Common Stock by delivering a Notice of Conversion to the
Corporation at any time prior to the Effective Date of Required Conversion (as
defined in subparagraph (ii) below).
19
(ii) The Corporation shall effect a Required Conversion under this
Paragraph O by giving at least five (5) business days but not more than ten (10)
business days prior written notice (the "REQUIRED CONVERSION NOTICE") of the
date which such Required Conversion is to become effective (the "EFFECTIVE DATE
OF REQUIRED CONVERSION") to Holder, which Required Conversion Notice shall be
deemed to have been delivered on the business day after the Corporation's fax
(with a copy sent by overnight courier) of such notice to Holder. Upon the
surrender of this Debenture, the Corporation shall issue and deliver to Holder
the Preferred Shares to which Holder is entitled upon the Required Conversion.
Notwithstanding the foregoing, such conversion shall be deemed effective and the
Holder shall be the Holder of the Preferred Stock and shall no longer own the
Debenture being converted on the Effective Date of Conversion, assuming all
Required Conditions are satisfied or waived.
(iii) The "REQUIRED CONDITIONS" shall consist of the following:
(a) no Event of Default shall have occurred;
(b) the Common Stock shall be authorized for quotation on
NASDAQ and trading in the Common Stock (or NASDAQ generally) shall not have
been suspended;
(c) Holder shall have received an officer's certificate in
the form attached as Exhibit 2 hereto;
(d) the Articles of Association of the Corporation shall
have been amended to provide for the creation of the Preferred Shares and
evidence satisfactory to the Purchase thereof shall have been provided to the
Purchaser; and
(e) Holder shall have received an opinion of the Company's
counsel, dated as of the Effective Date of Required Conversion, in form, scope
and substance reasonably satisfactory to Holder and in substantially the form of
Exhibit 3 attached hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
IN WITNESS WHEREOF, Borrower has caused this Debenture to be signed in
its name by its duly authorized officer this 4th day of August, 1997.
ACCENT SOFTWARE INTERNATIONAL LTD.
By:
-------------------------------
Name:
Title:
21
EXHIBIT 1
NOTICE OF CONVERSION
To: Accent Software International Ltd.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
The undersigned hereby irrevocably elects to convert $____________ principal
amount of the Debenture (the "CONVERSION"), into shares of common stock
("COMMON STOCK") of Accent Software International, Ltd. (the "CORPORATION")
according to the conditions of the Convertible Term Debenture dated August ___,
1997 (the "DEBENTURE"), as of the date written below. If securities are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. No fee will be charged to
the holder for any conversion, except for transfer taxes, if any. A copy of the
Debenture is attached hereto (or evidence of loss, theft or destruction
thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of
this Debenture shall be made pursuant to registration of the Common Stock under
the Securities Act or pursuant to an exemption from registration under the Act.
In the event of partial exercise, please reissue an appropriate Debenture(s) for
the principal balance which shall not have been converted.
Date of Conversion:
----------------------------------
Applicable Conversion Price:
--------------------------
Amount of Accrued and Unpaid Interest
on the Principal Amount to be converted,
if any:
----------------------------------------------
Amount of Conversion Default Payments
to be Converted, if any:
-----------------------------
Number of Shares of
Common Stock to be Issued:
---------------------------
Signature:
-------------------------------------------
Name:
------------------------------------------------
Address:
---------------------------------------------
EXHIBIT 2
TO
DEBENTURE
OFFICER'S CERTIFICATE
The undersigned, Xxxxxx X. Xxxx, hereby certifies that:
1. He is the duly elected and acting Chief Financial Officer of Accent
Software International Ltd. an Israeli corporation (the "Company").
2. The representations and warranties made by the Company in Section 3 of
the Securities Purchase Agreement, dated as of July __, 1997 (the "Purchase
Agreement"), are true and correct as of the date of this Certificate. Other
than as described on Exhibit A hereto, the capitalization of the Company
described in Section 3(c) of the Purchase Agreement has not changed.
3. As of the date hereof, all of the Required Conditions specified in
Article X.O of the 6% Convertible Debentures of the Company due August __, 1999
(the "Debentures") have been satisfied.
4. Except as disclosed in the SEC Documents (as defined in the Purchase
Agreement), there have been no material adverse changes in the business,
affairs, prospects, operations, properties, assets or condition of the Company
since December 31, 1996, other than the continued utilization of cash resources.
5. The Company has the requisite corporate power and authority to enter
into and perform the Certificate of Designations, Preferences and Rights in
respect of the Preferred Stock of the Company (the "Certificate of Designation")
and to issue ordinary shares of the Company upon conversion ("Conversion
Shares") of the Preferred Stock of the Company (the "Preferred Shares") in
accordance with the terms of the Certificate of Designation.
6. The Preferred Shares and Conversion Shares are duly authorized and,
upon issuance in accordance with the terms of the Certificate of Designation and
upon conversion of the Preferred Shares, as applicable, the Preferred Shares and
Conversion Shares shall be validly issued, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
securityholders of the Company.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
______, 1997.
-----------------------------------------
Xxxxxx X. Xxxx, Chief Financial Officer
EXHIBIT 3
TO
DEBENTURE
[Date of Conversion]
To: Name of Purchaser
Ladies and Gentlemen:
We have acted as counsel to Accent Software International Ltd, an Israeli
corporation (the "COMPANY"), in connection with the Securities Purchase
Agreement, dated as of July __, 1997, between you and the Company (the
"AGREEMENT") and the transactions contemplated therein. Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
assigned to such terms in the Agreement. The Agreement, the Debentures and the
Registration Rights Agreement are hereinafter referred to collectively as the
"TRANSACTION AGREEMENTS."
In so acting, we have examined the Transaction Agreements and the Company's
Articles of Association (the "Articles") and Memorandum of Incorporation
("Memorandum"), as in effect on the date hereof and the Certificate of
Designations, Preferences and Rights (the "CERTIFICATE OF INCORPORATION"), and
we have examined and considered such corporate records, certificates and matters
of law as we have deemed appropriate as a basis for our opinions set forth
below.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that as of
the date hereof:
(1) (i) The Company has the requisite corporate power and authority to
issue the Preferred Shares upon conversion of the Debentures in accordance with
the terms thereof, and to issue the Conversion Shares upon conversion of the
Preferred Shares in accordance with the terms of the Certificate of Designation,
(ii) the consummation by the Company of the transactions contemplated by the
Certificate of Designation have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its Board or
Directors, or its shareholders is required and (iii) the Certificate of
Designation has been duly executed and properly filed by the Company with all
appropriate authorities in accordance with the requirements of all applicable
law.
(2) The Preferred Shares have been validly issued and are fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof and, upon issuance in accordance with the terms of the Certificate
of Designation and the Conversion Shares will be validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issue thereof. The rights, preferences and privileges of the Preferred Shares
are as set forth in the Certificate of Designation. A
number of shares of Common Stock sufficient to meet the Company's obligations to
issue Common Stock upon full conversion of the Preferred Shares have been duly
reserved.
(3) Based upon your representations, warranties and covenants set forth in
the Agreement, the Preferred Shares and Conversion Shares, may be issued to you
without registration under the 1933 Act.
(4) Other than necessary approvals that have been obtained, no
authorization approval or consent of any court, governmental body, regulatory
agency, self-regulatory organization or stock exchange or market, or the
shareholders of the Company, or, to our knowledge, any third party is required
to be obtained by the Company for the issuance and sale of the Preferred Shares
or Conversion Shares, as contemplated by the Transaction Agreements and the
Certificate of Designation or the consummation of the other transactions
contemplated thereby.
(5) The Company is not in violation of any term of its Articles or
Memorandum. Neither the Articles nor the Memorandum of the Company are in
violation of any relevant law. The execution, delivery and performance of and
compliance with the terms of the Transaction Agreements and the issuance of the
Preferred Shares (and the Common Stock issuable upon conversion thereof), do not
violate any provision of the Articles or Memorandum, or, to our knowledge, any
provision of any applicable Israeli or United States federal or state law, rule
or regulation. The execution, delivery and performance of and compliance with
the Transaction Agreements and the issuance of the Preferred Shares upon
conversion of the Debentures in accordance with the terms thereof, the issuance
of the Conversion Shares upon conversion of the Preferred Shares, have not
resulted and will not result in any violation of, or constitute a default (or
give rise to any right of termination, cancellation or acceleration) under (or
an event which with the passage of time or the giving of notice or both would
constitute a default under), or result in the creation of any lien, security
interest or encumbrance on the assets or properties of the Company pursuant to
any contract, agreement, instrument, judgment or decree binding upon the Company
which, individually or in the aggregate, would have a material adverse effect on
the business or financial condition of the Company.
(6) All approvals necessary for you to acquire the Preferred Shares, and
the Conversion Shares under the laws of the State of Israel have been obtained.
These opinions are limited to the matters expressly stated herein and are
rendered solely for your benefit and may not be quoted or relied upon for any
other purpose or by an other person, except that the opinions expressed in
paragraphs (2) and (3) above may be relied upon by as Transfer Agent.
The opinions expressed herein are subject to the following assumptions,
limitations, qualifications and exceptions:
(a) We have assumed the genuineness of all signatures, the
authenticity of all Transaction Agreements submitted to us as originals, the
conformity with originals of all Transaction Agreements submitted to us as
copies, the authenticity of certificates of public officials and the due
authorization, execution and delivery of all Transaction Agreements (except the
due authorization, execution and delivery by the Company of the Transaction
Agreements).
(b) We have assumed that each of the parties to the Transaction
Agreements other than the Company (the "OTHER PARTIES") has the legal right,
capacity and power to enter into, enforce and perform all of its obligations
under the Transaction Agreements. Furthermore, we have assumed the due
authorization by each of the Other Parties of all requisite action and the due
execution and delivery of the Transaction Agreements by each of the Other
Parties, and that the Transaction Agreements are valid and binding upon each of
the other Parties and are enforceable against each Other Party in accordance
with their terms.
[OTHER APPROPRIATE ASSUMPTIONS TO BE ADDED]
In the process of our review of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (the "Form 10-K"), and any of the
other reports filed by the Company pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, since the date of the filing of the
Form 10-K, although we have not engaged in any independent investigation, and do
not assume any responsibility for the accuracy or completeness of the
information contained therein, nothing has come to our attention that would lead
us to believe that any of such reports contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of circumstances under which they were
made, not misleading, as of its filing date.
Our examination of law relevant to the matters covered by this opinion is
limited to the laws of the___________________________ and the federal United
States laws, and we express no opinion as to the effect on the matters covered
by this opinion of the laws of any other jurisdiction.
This opinion in given as of the date hereof and we assume no obligation, to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur.
Very truly yours,
EXHIBIT B
TO
SECURITIES
PURCHASE
AGREEMENT
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON AUGUST 5, 2002
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND
TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase 250,000
Ordinary Shares, nominal value
NIS .01 per share
Date: August 5, 1997
ACCENT SOFTWARE INTERNATIONAL LTD.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CC Investments, LDC or its
registered assigns, is entitled to purchase from ACCENT SOFTWARE INTERNATIONAL
LTD., an Israeli corporation (the "COMPANY"), at any time or from time to time
during the period specified in Section 2 hereof, Two Hundred Fifty Thousand
(250,000) fully paid and nonassessable shares of the Company's Ordinary Shares,
nominal value NIS .01 per share (the "COMMON STOCK"), at an exercise price per
share (the "EXERCISE PRICE") equal to $2.80. The number of shares of Common
Stock purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are
subject to adjustment as provided in Section 4 hereof. The term "WARRANTS"
means this Warrant and the other warrants of the Company issued pursuant to that
certain Securities Purchase Agreement, dated as as of July 31, 1997, by and
among the Company and the other signatories thereto (the "SECURITIES PURCHASE
AGREEMENT").
This Warrant is subject to the following terms, provisions, and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, clearance of a certified or official bank check
or by wire transfer for the account of the Company, of the Exercise Price for
the Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the Warrant Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), delivery to the Company of a written notice of an election to
effect a Cashless Exercise (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two (2)
business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an Exercise
Agreement and payment to the Company of the Exercise Price for each of the
Warrant Shares specified in the Exercise Agreement, and the Company does not
have sufficient authorized but unissued shares of Common Stock available to
effect such exercise in accordance with the provisions of this Section 1 (an
"EXERCISE DEFAULT"), the Company shall issue to the holder all of the shares of
Common Stock which are available to effect such exercise and, within five (5)
business days of the attempted exercise of this Warrant, refund to the holder
that portion of the holder's payment of the Exercise Price allocable to the
number of shares of Common Stock included in the Exercise Agreement which
exceeds the amount which is then issuable by the Company (the "EXCESS AMOUNT").
The Excess Amount shall, notwithstanding anything to the contrary contained
herein, not be exercisable for Common Stock in accordance with the terms hereof
until (and at the holder's option on or at any time after) the date additional
shares of Common Stock are authorized by the Company to permit such exercise.
The Company shall pay to the holder payments ("EXERCISE DEFAULT PAYMENTS") for
an Exercise Default in the amount of (a) (N/365), multiplied by (b) the Market
Price (as defined in Section 4(1) below) on the Exercise Default Date (as
defined below) less the Exercise Price,
2
multiplied by (c) the Excess Amount on the date the Exercise Agreement giving
rise to the Exercise Default is transmitted in accordance with this Section 1
(the "EXERCISE DEFAULT DATE"), multiplied by (d) .24, where N = the number of
days from the Exercise Default Date to the date (the "AUTHORIZATION DATE") that
the Company authorizes a sufficient number of shares of Common Stock to effect
exercise of this Warrant in full. The Company shall send notice to the holder
of the authorization of additional shares of Common Stock, the Authorization
Date and the amount of holder's accrued Exercise Default Payments. The accrued
Exercise Default Payment for each calendar month shall be paid in cash or shall
be convertible into Common Stock at the Exercise Price, at the holder's option,
as follows:
(a) In the event holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock (in
accordance with the terms contained in Article VI of the Debentures) at the
Market Price (as in effect at the time of conversion) at any time after the
fifth (5th) day of the month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 4(h) of the
Securities Purchase Agreement or to otherwise issue shares of Common Stock upon
exercise of this Warrant in accordance with the terms hereof, and each holder
shall have the right to pursue all remedies available at law or in equity
(including a decree of specific performance and/or injunctive relief).
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the Issue Date and before 5:00 p.m., New York City time
on the fifth (5th) anniversary of the date hereof (the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or
3
automated quotation system, if any, upon which shares of Common Stock are then
listed or become listed (subject to official notice of issuance upon exercise of
this Warrant) and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on
each national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE. Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price (as hereinafter defined) on
the date of issuance (a "DILUTIVE ISSUANCE"), then effective immediately upon
the Dilutive Issuance, the Exercise Price will be adjusted in accordance with
the following formula:
P
---
E(1) = E x O + M
------------
CSDO
4
where:
E(1) = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in Section 4(1));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined in Section 4(l)) immediately after
the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance ("BELOW MARKET OPTIONS"),
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Market Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Market Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Below Market Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable upon
the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
5
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the
Market Price on the date of issuance, then the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such exercise,
conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per
share for which is issuable upon such exercise, conversion or exchange for
purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be deemed
to be the lowest price per share which would be applicable (assuming all holding
period and other conditions to any discounts contained in such Convertible
Security have been satisfied) if the Market Price on the date of issuance of
such Convertible Security was 75% of the Market Price on such date (the "ASSUMED
VARIABLE MARKET PRICE"). Further, if the Market Price at any time or times
thereafter is less than or equal to the Assumed Variable Market Price last used
for making any adjustment under this Section 4 with respect to any Variable Rate
Convertible Security, the Exercise Price in effect at such time shall be
readjusted to equal the Exercise Price which would have resulted if the Assumed
Variable Market Price at the time of issuance of the Variable Rate Convertible
Security had been 75% of the Market Price existing at the time of the adjustment
required by this sentence.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional
6
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon exercise, conversion or exchange
of any Convertible Securities is not, in fact, issued and the rights to exercise
such Option or to exercise, convert or exchange such Convertible Securities
shall have expired or terminated, the Exercise Price then in effect will be
readjusted to the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair
market value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding as of the date hereof
as set forth on Schedule 3(c) of the Securities Purchase Agreement in accordance
with the terms of such securities as of such date, including those securities
with respect to which vesting or the exercise period therefore has not yet
occurred; (ii) upon the issuance of any debentures (the "Debentures") or
Warrants issued or issuable in accordance with terms of the Securities Purchase
Agreement; (iii) upon conversion of the Debentures or exercise of the Warrants;
(iv) upon the issuance or exercise of Warrants which are issued by the Company
in exchange for currently outstanding Warrants with an exercise price of $11.50
per share provided the holder of such Warrants exercises its purchase rights
thereunder substantially contemporaneous with such exchange; or (v) upon the
issuance or exercise of options to purchase not more than 500,000 shares of
Common Stock in connection with bona fide services provided to the Company.
7
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of this Warrant had such consolidation, merger or sale
or conveyance not taken place. In any such case, the Company will make
appropriate provision to insure that the provisions of this Section 4 hereof
will thereafter be applicable as nearly as may be in relation to any shares of
stock or securities thereafter deliverable upon the exercise of this Warrant.
The Company will not effect any consolidation, merger or sale or conveyance
unless prior to the consummation thereof, the successor corporation (if other
than the Company) assumes by written instrument the obligations under this
Section 4 and the obligations to deliver to the holder of this Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "DISTRIBUTION"), at any time during the Exercise Period, then
the holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets (or rights) which would have been payable
8
to the holder had such holder been the holder of such shares of Common Stock on
the record date for the determination of shareholders entitled to such
Distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case
9
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, notice of the date (or, if not then
known, a reasonable approximation thereof by the Company) when the same shall
take place. Such notice shall also specify the date on which the holders of
Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case may be. Such notice shall be given at least 30 days prior to the record
date or the date on which the Company's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not affect the
validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv)
above.
(k) CERTAIN EVENTS. If, at any time during the Exercise Period, any
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the Nasdaq
Small Cap Market for the five (5) trading days immediately preceding such date,
or (ii) if the Nasdaq Small Cap Market is not the principal trading market for
the shares of Common Stock, the average of the last reported bid prices on the
principal trading market for the Common Stock for the five (5) trading days
immediately preceding such date or, if there is no bid price for such period,
the last reported sales price for such period, or (iii) if market value cannot
be calculated as of such date on any of the foregoing bases, the Market Price
shall be the average fair market value as reasonably determined by an investment
banking firm selected by the Company and reasonably acceptable to the holder,
with the costs of the appraisal to be borne by the Company. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
10
(iii) "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock, in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section 7(f) and (g) hereof and to the provisions of
Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of the date hereof, by and among the Company and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
11
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes and any tax
measured by income or asset value) and all other expenses (other than legal
expenses, if any, incurred by the Holder or transferees) and charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 7.
(e) WARRANT REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope reasonably satisfactory to the Company) to the effect that
such exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws, (ii) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee
be an "ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such opinion, letter, status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
(g) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER. Notwithstanding
anything contained herein to the contrary, in no event shall the holder hereof
exercise Warrants to the extent that (a) the number of shares of Common Stock
beneficially owned by such holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised portion of the Warrants or the unexercised or unconverted portion of
any other securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (b) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portion
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by such holder and its affiliates of more
than
12
4.99% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(a) hereof.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement.
9. NOTICES. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Accent Software International Ltd.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
with a copies to:
Accent Software International Ltd.
00 Xxxxxx Xxxxxx Xxxxxx
Xxxxxxxxx 00000 Israel
Telecopy: (000) 00000000
Attn: Xxx Xxxxxxxxxxxx
and
Rothgerber, Appel, Powers & Xxxxxxx LLP
0000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9
13
with a copy to:
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esquire
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed in the Illinois. The Company irrevocably
consents to the jurisdiction of the United States federal courts located in the
State of Illinois, in any suit or proceeding based on or arising under this
Warrant and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company agrees that service of process upon the Company mailed by first
class mail shall be deemed in every respect effective service of process upon
the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised at any time after August __, 1998
until the end of the Exercise Period, by presentation and surrender of this
Warrant to the Company at its principal executive offices with a written notice
of the holder's intention to effect a cashless exercise, including a calculation
of the number of shares of Common Stock to be issued upon such exercise in
accordance with the terms hereof (a "CASHLESS EXERCISE"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder
shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
14
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
(d) BUSINESS DAY. For purposes of this Warrant, the term "business
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of Illinois are authorized or obligated by law,
regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
ACCENT SOFTWARE
INTERNATIONAL LTD.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: Accent Software International Ltd.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
The undersigned hereby irrevocably exercises the right to purchase
_____________ Ordinary Shares of Accent Software International Ltd., an Israeli
corporation (the "COMPANY"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
i. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144(k) is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND
SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD
PURSUANT TO RULE 144(K) UNDER SAID ACT.
ii. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:
----------------- ----------------------------------------
Signature of Holder
----------------------------------------
Name of Holder (Print)
Address:
----------------------------------------
----------------------------------------
----------------------------------------
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
---------------- ------- ------------
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
----------------------
Name:
-----------------------------------
Signature:
------------------------------
Title of Signing Officer or Agent (if any):
------------------------------
Address:
------------------------------
------------------------------
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
EXHIBIT C
TO
SECURITIES
PURCHASE
AGREEMENT
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON AUGUST 5, 2002
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS
THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase 50,000
Ordinary Shares, nominal value
NIS .01 per share
Date: August 5, 1997
ACCENT SOFTWARE INTERNATIONAL LTD.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CC Investments, LDC or its
registered assigns, is entitled to purchase from ACCENT SOFTWARE INTERNATIONAL
LTD., an Israeli corporation (the "COMPANY"), at any time or from time to time
during the period specified in Section 2 hereof, Fifty Thousand (50,000) fully
paid and nonassessable shares of the Company's Ordinary Shares, nominal value
NIS .01 per share (the "COMMON STOCK"), at an exercise price per share (the
"EXERCISE PRICE") equal to $3.20. The number of shares of Common Stock
purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject
to adjustment as provided in Section 4 hereof. The term "WARRANTS" means this
Warrant and the other warrants of the Company issued pursuant to that certain
Securities Purchase Agreement, dated as of July 31, 1997 by and among the
Company and the other signatories thereto (the "SECURITIES PURCHASE
AGREEMENT").
1
This Warrant is subject to the following terms, provisions, and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, clearance of a certified or official bank check
or by wire transfer for the account of the Company, of the Exercise Price for
the Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the Warrant Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), delivery to the Company of a written notice of an election to
effect a Cashless Exercise (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two (2)
business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an Exercise
Agreement and payment to the Company of the Exercise Price for each of the
Warrant Shares specified in the Exercise Agreement, and the Company does not
have sufficient authorized but unissued shares of Common Stock available to
effect such exercise in accordance with the provisions of this Section 1 (an
"EXERCISE DEFAULT"), the Company shall issue to the holder all of the shares of
Common Stock which are available to effect such exercise and, within five (5)
business days of the attempted exercise of this Warrant, refund to the holder
that portion of the holder's payment of the Exercise Price allocable to the
number of shares of Common Stock included in the Exercise Agreement which
exceeds the amount which is then issuable by the Company (the "EXCESS AMOUNT").
The Excess Amount shall, notwithstanding anything to the contrary contained
herein, not be exercisable for Common Stock in accordance with the terms hereof
until (and at the holder's option on or at any time after) the date additional
shares of Common Stock are authorized by the Company to permit such exercise.
The Company shall pay to the holder payments ("EXERCISE DEFAULT PAYMENTS") for
an Exercise Default in the amount of (a) (N/365), multiplied by (b) the Market
Price (as defined in Section 4(1) below) on the Exercise Default Date (as
defined below) less the Exercise Price,
2
multiplied by (c) the Excess Amount on the date the Exercise Agreement giving
rise to the Exercise Default is transmitted in accordance with this Section 1
(the "EXERCISE DEFAULT DATE"), multiplied by (d) .24, where N = the number of
days from the Exercise Default Date to the date (the "AUTHORIZATION DATE") that
the Company authorizes a sufficient number of shares of Common Stock to effect
exercise of this Warrant in full. The Company shall send notice to the holder
of the authorization of additional shares of Common Stock, the Authorization
Date and the amount of holder's accrued Exercise Default Payments. The accrued
Exercise Default Payment for each calendar month shall be paid in cash or shall
be convertible into Common Stock at the Exercise Price, at the holder's option,
as follows:
(a) In the event holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock (in
accordance with the terms contained in Article VI of the Debentures) at the
Market Price (as in effect at the time of conversion) at any time after the
fifth (5th) day of the month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 4(h) of the
Securities Purchase Agreement or to otherwise issue shares of Common Stock upon
exercise of this Warrant in accordance with the terms hereof, and each holder
shall have the right to pursue all remedies available at law or in equity
(including a decree of specific performance and/or injunctive relief).
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the Issue Date and before 5:00 p.m., New York City time
on the fifth (5th) anniversary of the date hereof (the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become
3
listed (subject to official notice of issuance upon exercise of this Warrant)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all shares of Common Stock from time to time issuable
upon the exercise of this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE. Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price (as hereinafter defined) on
the date of issuance (a "DILUTIVE ISSUANCE"), then effective immediately upon
the Dilutive Issuance, the Exercise Price will be adjusted in accordance with
the following formula:
P
---
E(1) = E x O + M
-----------
CSDO
where:
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E(1) = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in Section 4(1));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined in Section 4(l)) immediately after
the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance ("BELOW MARKET OPTIONS"),
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Market Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Market Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Below Market Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable upon
the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise,
5
conversion or exchange (as determined pursuant to Section 4(b)(ii)(B) if
applicable) is less than the Market Price on the date of issuance, then the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such exercise, conversion or exchange" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise, conversion or exchange thereof at the time such
Convertible Securities first become exercisable, convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of all such Convertible Securities. No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock upon exercise, conversion or exchange of such Convertible
Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per
share for which is issuable upon such exercise, conversion or exchange for
purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be deemed
to be the lowest price per share which would be applicable (assuming all holding
period and other conditions to any discounts contained in such Convertible
Security have been satisfied) if the Market Price on the date of issuance of
such Convertible Security was 75% of the Market Price on such date (the "ASSUMED
VARIABLE MARKET PRICE"). Further, if the Market Price at any time or times
thereafter is less than or equal to the Assumed Variable Market Price last used
for making any adjustment under this Section 4 with respect to any Variable Rate
Convertible Security, the Exercise Price in effect at such time shall be
readjusted to equal the Exercise Price which would have resulted if the Assumed
Variable Market Price at the time of issuance of the Variable Rate Convertible
Security had been 75% of the Market Price existing at the time of the adjustment
required by this sentence.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon exercise, conversion or exchange
of any Convertible Securities is not, in fact, issued and the
6
rights to exercise such Option or to exercise, convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price then
in effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair market
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities issued and outstanding as of the date hereof as set
forth on Schedule 3(c) of the Securities Purchase Agreement in accordance with
the terms of such securities as of such date, including those securities with
respect to which vesting or the exercise period therefore has not yet occurred;
(ii) upon the issuance of any debentures (the "Debentures") or Warrants issued
or issuable in accordance with terms of the Securities Purchase Agreement; (iii)
upon conversion of the Debentures or exercise of the Warrants; (iv) upon the
issuance or exercise of Warrants which are issued by the Company in exchange for
currently outstanding Warrants with an exercise price of $11.50 per share
provided the holder of such Warrants exercises its purchase rights thereunder
substantially contemporaneous with such exchange; or (v) upon the issuance or
exercise of options to purchase not more than 500,000 shares of Common Stock in
connection with bona fide services provided to the Company.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization,
7
reclassification or otherwise) its shares of Common Stock into a smaller number
of shares, then, after the date of record for effecting such combination, the
Exercise Price in effect immediately prior to such combination will be
proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation
of the Company with, or merger of the Company into any other corporation, or
in case of any sale or conveyance of all or substantially all of the assets
of the Company other than in connection with a plan of complete liquidation
of the Company at any time during the Exercise Period, then as a condition of
such consolidation, merger or sale or conveyance, adequate provision will be
made whereby the holder of this Warrant will have the right to acquire and
receive upon exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this Warrant, such
shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this
Warrant had such consolidation, merger or sale or conveyance not taken place.
In any such case, the Company will make appropriate provision to insure that
the provisions of this Section 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect
any consolidation, merger or sale or conveyance unless prior to the
consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Section 4 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way of return
of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "DISTRIBUTION"), at any time during the
Exercise Period, then the holder of this Warrant shall be entitled upon
exercise of this Warrant for the purchase of any or all of the shares of
Common Stock subject hereto, to receive the amount of such assets (or rights)
which would have been payable to the holder had such holder been the holder
of such shares of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price
8
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any
9
defect therein shall not affect the validity of the proceedings referred to in
clauses (i), (ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If, at any time during the Exercise Period,
any event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number
of shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the Nasdaq
Small Cap Market for the five (5) trading days immediately preceding such date,
or (ii) if the Nasdaq Small Cap Market is not the principal trading market for
the shares of Common Stock, the average of the last reported bid prices on the
principal trading market for the Common Stock for the five (5) trading days
immediately preceding such date or, if there is no bid price for such period,
the last reported sales price for such period, or (iii) if market value cannot
be calculated as of such date on any of the foregoing bases, the Market Price
shall be the average fair market value as reasonably determined by an investment
banking firm selected by the Company and reasonably acceptable to the holder,
with the costs of the appraisal to be borne by the Company. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iii) "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock, in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
10
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section 7(f) and (g) hereof and to the provisions of
Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of the date hereof, by and among the Company and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT").
11
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes and any tax
measured by income or asset value) and all other expenses (other than legal
expenses, if any, incurred by the Holder or transferees) and charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 7.
(e) WARRANT REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope reasonably satisfactory to the Company) to the effect that
such exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws, (ii) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee
be an "ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such opinion, letter, status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
(g) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER.
Notwithstanding anything contained herein to the contrary, in no event shall the
holder hereof exercise Warrants to the extent
12
that (a) the number of shares of Common Stock beneficially owned by such holder
and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised portion of the
Warrants or the unexercised or unconverted portion of any other securities of
the Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portion thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by such holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (a) hereof.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement.
9. NOTICES. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Accent Software International Ltd.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
with a copies to:
Accent Software International Ltd.
00 Xxxxxx Xxxxxx Xxxxxx
Xxxxxxxxx 00000 Israel
Telecopy: (000) 00000000
Attn: Xxx Xxxxxxxxxxxx
and
Rothgerber, Appel, Powers & Xxxxxxx LLP
0000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
13
Telecopy: (000) 000-0000
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9
with a copy to:
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esquire
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed in the Illinois. The Company irrevocably
consents to the jurisdiction of the United States federal courts located in the
State of Illinois, in any suit or proceeding based on or arising under this
Warrant and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company agrees that service of process upon the Company mailed by first
class mail shall be deemed in every respect effective service of process upon
the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
14
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised at any time after August __, 1998
until the end of the Exercise Period, by presentation and surrender of this
Warrant to the Company at its principal executive offices with a written notice
of the holder's intention to effect a cashless exercise, including a calculation
of the number of shares of Common Stock to be issued upon such exercise in
accordance with the terms hereof (a "CASHLESS EXERCISE"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder
shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
(d) BUSINESS DAY. For purposes of this Warrant, the term "business
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of Illinois are authorized or obligated by law,
regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
ACCENT SOFTWARE
INTERNATIONAL LTD.
By:
---------------------------------
Name:
-----------------------------
Title:
------------------------------
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: Accent Software International, Ltd.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
The undersigned hereby irrevocably exercises the right to purchase
_____________ Ordinary Shares of Accent Software International Ltd., an Israeli
corporation (the "COMPANY"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
a. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144(k) is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR
AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144(K) UNDER
SAID ACT.
b. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:
------------------ -------------------------------------
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
---------------- ------- ------------
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated:
---------------------, ----,
In the presence of
------------------
Name:
----------------------------
Signature:
-----------------------
Title of Signing Officer or Agent (if any):
------------------------
Address:
------------------------
------------------------
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
EXHIBIT D
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of August 5,
1997 by and among ACCENT SOFTWARE INTERNATIONAL LTD., a corporation organized
under the laws of the State of Israel, with headquarters located at 28 Xxxxxx
Xxxxxx Xxxxxx, X.X. Xxx 00000, Xxxxxxxxx 00000 Xxxxxx (the "COMPANY"), and the
undersigned (together with affiliates, the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement dated as of July
31, 1997 between the Company and the Initial Investor (the "SECURITIES PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i) 6%
Convertible Debentures ("Debentures") of the Company in the aggregate principal
amount of $2,000,000, convertible into shares of the Company's Ordinary Shares,
nominal value NIS .01 per share ("Common Stock"), (ii) a warrant to purchase
250,000 shares of Common Stock and (iii) a warrant to purchase 50,000 shares of
Common Stock (the warrants referred to in clauses (ii) and (iii) of this
sentence shall be referred to as the "Warrants"). The shares of Common Stock,
issuable upon conversion of (i) the Debentures or otherwise pursuant to the
terms of the Debentures and (ii) the Preferred Shares (as defined in the
Securities Purchase Agreement) if the Company exercises its rights contained in
Section X.O of the Debentures shall collectively be referred to as the
"Conversion Shares" and the shares of Common Stock issuable upon exercise of the
Warrants or otherwise pursuant to the terms of the Warrants shall be referred to
herein as the "Warrant Shares");
B. To induce the Initial Investor to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investor and any transferees
or assignees who agree to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion Shares
issued or issuable with respect to the Debentures and the Preferred Shares
(including any Conversion Shares issuable with respect to Conversion Default
Payments under the Debentures and the Preferred Shares or in redemption of any
Debentures and the Preferred Shares), the Warrant Shares issued or issuable with
respect to the Warrants and any shares of capital stock issued or issuable, from
time to time (with any adjustments), as a distribution on or in exchange for or
otherwise with respect to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration statement of
the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, as soon
as practicable after the date hereof (but not later than that date which is
fifteen (15) days after the date hereof), file with the SEC a Registration
Statement on Form S-3 (or, if Form S-3 is not then available, on such form of
Registration Statement as is then available to effect a registration of all of
the Registrable Securities, subject to the consent of the Initial Investors (as
determined pursuant to Section 11(j) hereof)) covering the resale of at least
3,800,000 Registrable Securities, which Registration Statement, to the extent
allowable under the Securities Act and the Rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of the Debentures and the Preferred Shares and exercise
of the Warrants (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions or (ii) by reason of changes in the Conversion
Price of the Debentures and the Preferred Shares or the Exercise Price of the
2
Warrants in accordance with the terms thereof. The Registrable Securities
included in the Registration Statement shall be allocated to the Investors as
set forth in Section 11(k) hereof. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the approval of) the
Initial Investors and their counsel prior to its filing or other submission.
b. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of the
Initial Investors, shall have the right to select one legal counsel to represent
the Investors and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
c. PAYMENTS BY THE COMPANY. The Company shall cause the
Registration Statement required to be filed pursuant to Section 2(a) hereof to
become effective as soon as practicable, but in no event later than October 31,
1997. If (i) the Registration Statement(s) covering the Registrable Securities
required to be filed by the Company pursuant to Section 2(a) hereof is not
declared effective by the SEC on or before October 31, 1997 (the "REGISTRATION
DEADLINE") or if, after the Registration Statement has been declared effective
by the SEC, sales of all the Registrable Securities (including any Registrable
Securities required to be registered pursuant to Section 3(b) hereof) cannot be
made pursuant to the Registration Statement (by reason of a stop order or the
Company's failure to update the Registration Statement or any other reason
outside the control of the Investors) or (ii) the Common Stock is not listed or
included for quotation on the Nasdaq National Stock Market ("NASDAQ"), the New
York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at
any time after the Registration Deadline, then the Company will make payments to
the Investors in such amounts and at such times as shall be determined pursuant
to this Section 2(c) as partial relief for the damages to the Investors by
reason of any such delay in or reduction of their ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to each Investor
an amount equal to the product of (i) the aggregate principal amount of
Debentures held by such Investor (including, without limitation, Debentures that
has been converted into Conversion Shares then held by such Investor) (the
"AGGREGATE PRICE") multiplied by (ii) (x) one hundredths (.01), during that
period beginning on that date which is ninety (90) days after the date hereof
and ending on that date which is one hundred nineteen (119) after the date
hereof, or (y) two hundredths (.02), during that period beginning on that date
which is one hundred twenty (120) days after the date hereof, multiplied by
(iii) the sum of: (y) the number of months (prorated for partial months) after
the Registration Deadline and prior to the date the Registration Statement filed
pursuant to Section 2(a) is declared effective by the SEC and (z) the number of
months (prorated for partial months) that sales of any Registrable Securities
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective or the Common Stock is not listed or
included for quotation on Nasdaq, the NYSE or AMEX; provided, however that there
shall be excluded from each such period any delays which are solely attributable
to changes (other than corrections of Company mistakes with respect to
information previously provided by the Investors) required by the Investors
3
in the Registration Statement with respect to information relating to the
Investors, including, without limitation, changes to the plan of distribution.
(For example, if the Registration Statement is not effective by the Registration
Deadline, the Company would pay $10,000 per month for each $1,000,000 of
Aggregate Price during the first ninety days following the Registration Deadline
during which the Registration statement is not effective and $20,000 per month
for each $1,000,000 of Aggregate Price thereafter until the Registration
Statement becomes effective.) Such amounts shall be paid in cash or, at each
Investor's option, may be convertible into Common Stock at the "CONVERSION
PRICE" (as defined in the Debentures). Any shares of Common Stock issued upon
conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities it
shall so notify the Company in writing within two (2) business days after the
date on which such amounts are first payable in cash and such amounts shall be
so convertible (pursuant to the mechanics set forth under Article IV of the
Debentures) beginning on the last day upon which the cash amount would otherwise
be due in accordance with the following sentence. Payments of cash pursuant
hereto shall be made within five (5) days after the end of each period that
gives rise to such obligation, provided that, if any such period extends for
more than thirty (30) days, interim payments shall be made for each such thirty
(30) day period.
d. PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall send to each Investor who is
entitled to registration rights under this Section 2(d) written notice of such
determination and, if within fifteen (15) days after the date of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities, in proportion to the number of Registrable
Securities sought to be included by such Investors; PROVIDED, HOWEVER, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and PROVIDED,
FURTHER, HOWEVER, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights. No right to registration of
4
Registrable Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. If an offering in connection
with which an Investor is entitled to registration under this Section 2(d) is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
e. ELIGIBILITY FOR FORM S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investors and any other Investor of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2(a), and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which all of the
Registrable Securities (in the reasonable opinion of counsel to the Initial
Investors) may be immediately sold to the public without registration pursuant
to Rule 144(k) under the Securities Act (the "REGISTRATION PERIOD"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is, for any three (3) consecutive trading days (the last of such three (3)
trading days being the "REGISTRATION TRIGGER DATE"), insufficient to cover one
hundred thirty-five percent (135%) of the Registrable Securities issued or
issuable upon
5
conversion (without giving effect to any limitations on conversion contained in
Article IV.C of the Debentures) of the Debentures and upon exercise of the
Warrants, the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover two hundred percent (200%) of the Registrable Securities
issued or issuable (without giving effect to any limitations on conversion
contained in Article IV.C of the Debentures) as of the Registration Trigger
Date, in each case, as soon as practicable, but in any event within fifteen (15)
days after the Registration Trigger Date (based on the market price then in
effect of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. In the event the Company fails to obtain the effectiveness of
any such Registration Statement within sixty (60) days after a Registration
Trigger Date, each Investor shall thereafter have the option, exercisable in
whole or in part at any time and from time to time by delivery of a written
notice to the Company (a "REDEMPTION NOTICE"), to require the Company to
purchase for cash, at an amount per share equal to the Redemption Amount (as
defined in Article VIII.B of the Debentures), a portion of the Investor's
Debentures such that the total number of Registrable Securities included on the
Registration Statement for resale by such Investor exceeds 135% of the
Registrable Securities issued or issuable upon conversion (without giving effect
to any limitations on conversion contained in Article IV.C of the Debentures) of
such Investor's Debentures and exercise of such Investor's Warrants). If the
Corporation fails to redeem any of such shares within five (5) business days
after its receipt of a Redemption Notice, then such Investor shall be entitled
to the remedies provided in Article VIII.C of the Debentures.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC (including, without limitation, any request to
accelerate the effectiveness of any Registration Statement or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statement (other than any portion, if
any, thereof which contains information for which the Company has sought
confidential treatment), (ii) on the date of effectiveness of the Registration
Statement or any amendment thereto, a notice stating that the Registration
Statement or amendment has been declared effective, and (iii) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary
6
to maintain such registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith or as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (b) subject itself to general taxation in any such jurisdiction,
(c) file a general consent to service of process in any such jurisdiction, (d)
provide any undertakings that cause the Company undue expense or burden, or (e)
make any change in its organizational documents, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders.
e. In the event the Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest practicable moment (including in each case by amending or supplementing
such Registration Statement) and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
(and if such Registration Statement is supplemented or amended, deliver such
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request).
h. The Company shall permit a single firm of counsel designated by
the Initial Investor to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
7
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish, on the
date of effectiveness of the Registration Statement (i) an opinion, dated as of
such date, from counsel representing the Company addressed to the Investors and
in form, scope and substances as is customarily given in an underwritten public
offering and (ii) in the case of an underwriting, a letter, dated such date,
from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; PROVIDED, HOWEVER, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein shall be deemed to
limit the Investors' ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available
8
to the public other than by disclosure in violation of this or any other
agreement, or (v) such Investor consents to the form and content of any such
disclosure. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Investor prior to making such disclosure, and allow the Investor,
at its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
m. The Company shall use its best efforts to promptly either (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on the NYSE or the AMEX or another national securities exchange and on
each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the Nasdaq and, without limiting the
generality of the foregoing, to arrange for or maintain at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an opinion of such
counsel in the form attached hereto as EXHIBIT 1.
p. At the request of any Investor, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the Securities Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated by the SEC.)
9
r. The Company shall take all such other actions as any Investor or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
s. From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement under Section 2.a
hereof or any amendment or supplement thereto under Section 3.b hereof without
the consent of the holders of a majority of the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented
10
or amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed
by the Company, such Investor shall deliver to the Company (at the expense of
the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
e. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred in connection with registrations, filings
or qualifications pursuant to Sections 2 and 3, including, without limitation,
all registration, listing and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company, the fees and
disbursements contemplated by Section 3(j) hereof, and the reasonable fees and
disbursements of one counsel selected by the Investors pursuant to Section 2(b)
hereof shall be borne by the Company. In addition, the Company shall pay all of
the Investors' costs and expenses (including legal fees) incurred in connection
with the enforcement of the rights of the Investors hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, members, employees, agents and each
person who controls any Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), if any, (each, an "INDEMNIFIED PERSON"), against any joint
or several losses, claims, damages, liabilities or expenses (collectively,
together with actions, proceedings or inquiries by any regulatory or
self-regulatory organization, whether commenced or threatened, in respect
thereof, "CLAIMS") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the
11
Exchange Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; PROVIDED, FURTHER, HOWEVER, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the
12
net proceeds actually received by such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented, and the
Indemnified Party failed to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, 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 Indemnified Person or the Indemnified Party, as the case may be; PROVIDED,
HOWEVER, that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person or the Indemnified Party and the
indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in addition
to those available to such indemnifying party. The indemnifying party shall pay
for only one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall be selected by
Investors holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates (with the approval of
the Initial Investors if they hold Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. 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
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
13
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the Company's obligations
under Section 4(c) of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns shares of
Preferred Stock, Warrants or Registrable Securities, promptly upon request, (i)
a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the shares of Debentures, the Warrants or the Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of (a) the name
and address of such transferee or assignee, and (b)
14
the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
the transferee or assignee agrees in writing for the benefit of the Company to
be bound by all of the provisions contained herein, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company and Investors who
hold a majority interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Accent Software International Ltd.
000 X. Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
15
with a copy to:
Accent Software International Ltd.
00 Xxxxxx Xxxxxx Xxxxxx
Xxxxxxxxx 00000 Israel
Telecopy: (000) 00000000
Attn: Xxx Xxxxxxxxxxxx
and
Rothgerber, Appel, Powers & Xxxxxxx LLP
0000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, III
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois applicable to contracts made and to be
performed in the State of Illinois. The Company irrevocably consents to the
exclusive jurisdiction of the United States federal courts located in the State
of Illinois in any suit or proceeding based on or arising under this Agreement
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company, mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the
Investors' right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
e. This Agreement, the Securities Purchase Agreement, the Debentures
and the Warrants (including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement, the Securities Purchase Agreement, the Debentures and the
Warrants supersede all
16
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. 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.
j. All consents and other determinations to be made by the Investors
or the Initial Investor pursuant to this Agreement shall be made by the
Investors or the Initial Investors holding a majority of the Registrable
Securities (determined as if all Debentures and Warrants then outstanding had
been converted into or exercised for Registrable Securities) held by all
Investors or Initial Investors, as the case may be.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time of such
establishment or increase, as the case may be. In the event an Investor shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. Any shares
of Common Stock included on a Registration Statement and which remain allocated
to any person or entity which does not hold any Registrable Securities shall be
allocated to the remaining Investors, pro rata based on the number of shares of
Registrable Securities then held by such Investors. For the avoidance of doubt,
the number of Registrable Securities held by any Investor shall be determined as
if all shares of Preferred Stock then outstanding or then issuable upon exercise
of the Warrants were converted into or exercised for Registrable Securities.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
ACCENT SOFTWARE INTERNATIONAL LTD.
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
INITIAL INVESTOR:
CC INVESTMENTS, LDC
By: CSS Corporation Ltd., Corporate Secretary
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
18
EXHIBIT 1
TO
REGISTRATION
RIGHTS
AGREEMENT
[Date]
[Name and address
of transfer agent]
RE: ACCENT SOFTWARE INTERNATIONAL LTD.
Ladies and Gentlemen:
We are counsel to Accent Software International Ltd., a corporation
organized under the laws of the State of Israel (the "COMPANY"), and we
understand that CC Investments, LDC (the "HOLDER") has purchased from the
Company 6% Convertible Debentures (the "PREFERRED STOCK") that are convertible
into shares of the Company's Ordinary Shares, nominal value NIS .01 per share
(the "COMMON STOCK"). Pursuant to a Registration Rights Agreement, dated as of
July __, 1997, by and among the Company and the signatories thereto (the
"REGISTRATION RIGHTS AGREEMENT"), the Company agreed with the Holder, among
other things, to register the Registrable Securities (as that term is defined in
the Registration Rights Agreement) under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the Registration
Rights Agreement, on _____ __, 1997, the Company filed a Registration Statement
on Form S-___ (File No. 333- _____________) (the "REGISTRATION STATEMENT") with
the Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities, which names the Holder as a selling stockholder thereunder.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
Very truly yours,
cc: [Name of Investor]
EXHIBIT G
TO
SECURITIES PURCHASE
AGREEMENT
[Date of Closing]
To: Names of Purchasers
Ladies and Gentlemen:
We have acted as counsel to Accent Software International Ltd. an Israeli
corporation (the "COMPANY"), in connection with the Securities Purchase
Agreement, dated as of July ___, 1997, between you and the Company (the
"AGREEMENT") and the transactions contemplated therein. Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
assigned to such terms in the Agreement. The Agreement and the Registration
Rights Agreement are hereinafter referred to collectively as the "TRANSACTION
AGREEMENTS."
In so acting, we have examined the Transaction Agreements and the Company's
Memorandum of Incorporation and Articles of Association as in effect on the date
hereof (collectively, the "ORGANIZATIONAL DOCUMENTS"), and we have examined and
considered such corporate records, certificates and matters of law as we have
deemed appropriate as a basis for our opinions set forth below.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that as of
the date hereof:
(1) The Company and its subsidiaries are corporations duly incorporated,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, have all requisite corporate power and authority
to conduct their business as described in the Company's Annual Report on Form
10-K for the Company's fiscal year ended December 31, 1996, and are duly
qualified as foreign corporations to do business in each jurisdiction in which
the nature of the business conducted by them makes such qualification necessary
and in which the failure to so qualify would have a Material Adverse Effect.
(2) (i) The Company has the requisite corporate power and authority to
enter into and perform the Transaction Agreements and to issue the Debentures,
the Conversion Shares upon conversion of the Debentures in accordance with the
terms of the Debentures, the Warrants and the
Warrant Shares upon exercise of the Warrants, (ii) the execution and delivery of
the Transaction Agreements by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board or Directors or its stockholders is required, (iii) the Transaction
Agreements have been duly executed and delivered by the Company and (iv) the
Transaction Agreements constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application and subject to the limitation
that the indemnification and contribution provisions of the Registration Rights
Agreement may be unenforceable as a matter of public policy.
(3) The Conversion Shares and the Warrant Shares will be validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges with
respect to the issue thereof. A number of shares of Common Stock sufficient to
meet the Company's obligations to issue Common Stock upon full conversion of the
Debentures and upon full exercise of the Warrants has been duly reserved.
(4) As of the date hereof, the authorized capital stock of the Company
consists of ______________ shares of Common Stock, nominal value NIS .01 per
share, of which______ shares are issued and outstanding, and ______ shares are
reserved for issuance as follows: ______________________. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of the Company's Common Stock or preferred stock are
subject to preemptive rights or any other similar rights of the stockholders of
the Company pursuant to the Organizational Documents or by statute or pursuant
to any agreement by which the Company is bound of which we are aware, and to our
knowledge are not subject to any liens or encumbrances. To our knowledge,
except as disclosed in Schedule 3(c) to the Agreement, (i) 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, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, and (ii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of its or their securities under the 1933 Act (except the
Registration Rights Agreement).
(5) Based upon your representations, warranties and covenants set forth in
the Agreement, the Securities may be issued to you without registration under
the 1933 Act.
(6) Other than necessary approvals that have been obtained, no
authorization, approval or consent of any court, governmental body, regulatory
agency, self-regulatory organization or stock exchange or market, or the
stockholders of the Company, or, to our knowledge, any third party is required
to be obtained by the Company for the issuance and sale of the Securities as
contemplated by the Transaction Agreements, the Debentures and the Warrants or
the consummation of the other transactions contemplated thereby.
2
(7) To our knowledge, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or any governmental
agency or self-regulatory organization pending or threatened against or
affecting the Company or any of its subsidiaries, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
property, business, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries taken as a whole or which would
adversely affect the validity or enforceability of or the authority or ability
of the Company to perform its obligations under the Transaction Agreements, the
Debentures and the Warrants.
(8) The Company is not in violation of any term of its Organizational
Documents. The Organizational Documents of the Company are not in violation of
the any provisions of Israeli law. The execution, delivery and performance of
and compliance with the terms of the Transaction Agreements and the issuance of
the Debentures and the Warrants (and the Common Stock issuable upon conversion
or exercise thereof, as the case may be), do not violate any provision of the
Organizational Documents, or any provision of any applicable foreign or United
States federal or state law, rule or regulation. The execution, delivery and
performance of and compliance with the Transaction Agreements and the issuance
of the Debentures and the Warrants (and the Common Stock issuable upon
conversion or exercise thereof, as the case may be) have not resulted and will
not result in any violation of, or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under (or an event which
with the passage of time or the giving of notice or both would constitute a
default under), or result in the creation of any lien, security interest or
encumbrance on the assets or properties of the Company pursuant to any contract,
agreement, instrument, judgment or decree binding upon the Company which,
individually or in the aggregate, would have a Material Adverse Effect.
(9) All approvals necessary for you (or any other holder of Debentures or
Warrants) to acquire the Debentures, Warrants, the Conversion Shares and Warrant
Shares under the laws of the State of Israel have been obtained.
These opinions are limited to the matters expressly stated herein and are
rendered solely for your benefit and may not be quoted or relied upon for any
other purpose or by an other person, except that the opinions expressed in
paragraphs (3) and (5) above may be relied upon by__________ as Transfer Agent.
The opinions expressed herein are subject to the following assumptions,
limitations, qualifications and exceptions:
(a) We have assumed the genuineness of all signatures, the
authenticity of all Transaction Agreements submitted to us as originals, the
conformity with originals of all Transaction Agreements submitted to us as
copies, the authenticity of certificates of public officials and the due
authorization, execution and delivery of all Transaction Agreements (except the
due authorization, execution and delivery by the Company of the Transaction
Agreements).
(b) We have assumed that each of the parties to the Transaction
Agreements other than the Company (the "OTHER PARTIES") has the legal right,
capacity and power to enter into, enforce
3
and perform all of its obligations under the Transaction Agreements.
Furthermore, we have assumed the due authorization by each of the Other Parties
of all requisite action and the due execution and delivery of the Transaction
Agreements by each of the Other Parties, and that the Transaction Agreements are
valid and binding upon each of the other Parties and are enforceable against
each Other Party in accordance with their terms.
[OTHER CUSTOMARY AND APPROPRIATE ASSUMPTIONS TO BE ADDED]
In the process of our review of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (the "Form 10-K"), and any of the
other reports filed by the Company pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, since the date of the filing of the
Form 10-K, although we have not engaged in any independent investigation, and do
not assume any responsibility for the accuracy or completeness of the
information contained therein, nothing has come to our attention that would lead
us to believe that any of such reports contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of circumstances under which they were
made, not misleading, as of its filing date.
Our examination of law relevant to the matters covered by this opinion is
limited to the laws of the State of ________, the federal United States laws and
the blue sky laws of the states comprising the United States, and we express no
opinion as to the effect on the matters covered by this opinion of the laws of
any other jurisdiction. In furnishing the opinion regarding the valid existence
and good standing of the Company and its subsidiaries, we have relied solely
upon good standing certificates issued by the ____________________ of the
_________________ on ___________, 1997.
This opinion in given as of the date hereof and we assume no obligation, to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur.
Very truly yours,
4
ACCENT SOFTWARE INTERNATIONAL, LTD.
July 31, 1997
American Stock Transfer & Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx
Dear Xx. Xxxxxx:
Reference is made to that certain Securities Purchase Agreement, dated July
__, 1997, by and among Accent Software International Ltd., an Israeli
corporation (the "Company") and the other signatories thereto (each, a "Holder")
pursuant to which the Company is issuing to the Holders 6% Convertible
Debentures in the aggregate principal amount of $2,000,000 ("Debentures") and
warrants to purchase an aggregate of 300,000 ordinary shares, nominal value NIS
.01 per share of the Company ("Common Stock"). The Debentures and shares of
Preferred Stock which may be issued in exchange for such Debentures are
convertible into shares of Common Stock of the Company (the "Conversion Shares")
and the Warrants are exercisable for shares of Common Stock (the "Warrant
Shares"). This letter shall serve as our irrevocable authorization and
direction to you (provided that you are the transfer agent of the Company at
such time) to issue Conversion Shares to or upon the order of the Holders from
time to time upon (i) surrender to you of a properly completed and duly executed
Conversion Notice, in the form attached hereto as Exhibit 1, which has been
properly agreed and acknowledged by the Company as indicated by the signature of
a duly authorized officer of the Company thereon and (ii) the Debenture or
Warrants, as the case may be, being converted or exercised (or an
indemnification undertaking with respect to such Debentures or Warrants in the
case of their loss, theft or destruction). So long as you have previously
received: (i) written confirmation from counsel to the Company (which counsel
may be in-house legal counsel) that a registration statement covering resales of
the Conversion Shares or Warrant Shares has been declared effective by the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, and (ii) a copy of such registration statement, certificates
representing the Conversion Shares or Warrant Shares shall not bear any legend
restricting transfer of the Conversion Shares or Warrant Shares and should not
be subject to any stop-transfer restriction. However, if you have not
previously received (i) written confirmation from counsel to the Company (which
counsel may be in-house legal counsel) that a registration statement covering
resales of the Conversion Shares or Warrant Shares has been declared effective
by the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and (ii) a copy of such registration statement, then the certificates
representing the Conversion Shares and Warrant Shares shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT."
provided, however, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates for the Conversion Shares and
Warrant Shares in the event a registration statement covering the Conversation
Shares and Warrant Shares is subject to amendment for events then current.
Please be advised that the Holders are relying upon this letter as an
inducement to enter into the Securities Purchase Agreement and, accordingly,
each Holder is a third party beneficiary to these instructions.
2
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at (000) 000-0000.
Very truly yours,
ACCENT SOFTWARE INTERNATIONAL LTD.
By:
-----------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Acknowledged:
[TRANSFER AGENT]
By:
-----------------------------
Name:
----------------------------
Title:
--------------------------
Date:
---------------------------
Enclosure
cc: [HOLDERS]
3
