EXHIBIT 4.2
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made as of February 23,
2003 (the "EFFECTIVE Date"), by and between B.O.S. Better Online Solutions Ltd.,
a company organized under the laws of Israel ("BOS"), and Catalyst Investments,
L.P., a limited partnership registered under the laws of Israel ("Catalyst").
BOS and Catalyst shall be referred to herein collectively as the "PARTIES".
RECITALS
WHEREAS, BOS is a holder of (i) 465,000 Ordinary Shares of Surf
Communication Solutions Ltd., a company organized under the laws of Israel
("SURF"), and (ii) 222,883 Preferred C Shares of Surf; and
WHEREAS, Catalyst is a holder of (i) 316,484 Preferred C Shares of Surf
(the "SURF PREFERRED C Shares", and (ii) a warrant to purchase 79,121 Preferred
C Shares of Surf (the "WARRANTS");
WHEREAS, the Board of Directors of BOS believes it in the best interests of
BOS to purchase (i) 191,548 Preferred C Shares of Surf (the "SURF SHARES"), (ii)
an option to purchase on or prior to January 31, 2006 any shares of Surf then
held by Catalyst, which are owned by it on the date hereof or issued with
respect thereto, and the right to receive any proceeds in excess of the option
exercise price pursuant to a disposition of such shares prior to the option
exercise date, all subject to the terms and conditions of the Option Agreement
(as defined below), and (iii) the Surf Warrants (as defined below) which will be
transferred to BOS under this Agreement and under the Option Agreement pro rata
to the number of the Surf Preferred C Shares to be transferred to BOS hereunder
and thereunder in exchange for 2,529,100 Ordinary Shares of BOS (the "BOS
SHARES"), and
WHEREAS, the Board of Directors of Catalyst believes it in the best
interests of Catalyst to purchase 2,529,100 Ordinary Shares of BOS in exchange
for 191,548 Preferred C Shares of Surf held by Catalyst; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to enter into this Agreement, Catalyst shall
xxxxx XXX (i) Warrants to purchase 47,887 Surf Shares (the "SURF WARRANTS",
together with the Surf Shares, the "SURF SECURITIES"), (ii) an option to
purchase additional Surf Preferred C Shares held by Catalyst under the terms and
conditions set forth herein and under the Option Agreement (as defined below);
and
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to enter into this Agreement, BOS shall grant
Catalyst registration rights with respect to the BOS Shares under the terms and
conditions set forth herein and under the BOS Registration Rights Agreement (as
defined below); and
WHEREAS, the Parties wish to define the respective rights and obligations
of the Parties in connection with the exchange of the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the Parties hereby agree as follows:
ARTICLE 1
THE EXCHANGE
1.01 TRANSACTIONS AT CLOSING
Subject to the terms and conditions of this Agreement, at the Closing (as
defined below), the following transactions shall occur, which transactions shall
be deemed to take place simultaneously and no transaction shall be deemed to
have been completed or any document delivered until all such transactions have
been completed and all required documents delivered:
(1) PURCHASE AND SALE OF BOS SHARES Catalyst shall purchase, and BOS shall
sell and issue to Catalyst the BOS Shares, representing 19.90% of the issued and
outstanding share capital of BOS immediately prior to the Closing and prior to
the issuance of the BOS Shares, at a purchase price of $0.694 per share, which
equals to the average of the closing prices of the BOS Shares on NASDAQ in the
last thirty days immediately prior to November 27, 2002, the date of the term
sheet entered into by the Parties, and which equals to a purchase price of
$1,755,195 (the "BOS SHARES PURCHASE PRICE"), PROVIDED, HOWEVER, that BOS shall
set-off the BOS Shares Purchase Price due by Catalyst to BOS under this
Subsection 1.01(1) against payment of the Surf Shares Purchase Price due to
Catalyst from BOS under Subsection 1.01(2). The BOS Shares shall have the
rights, preferences, privileges and restrictions set forth in the Articles of
Association of BOS (the "BOS ARTICLES OF ASSOCIATION").
(2) PURCHASE AND SALE OF SURF SHARES BOS shall purchase, and Catalyst shall
sell and transfer to BOS the Surf Shares, representing, immediately prior to the
Closing, (i) 5.24% of the issued and outstanding Preferred C Shares of Surf, and
(ii) 3.48% of the share capital of Surf on an as converted basis, assuming
conversion of all Preferred Shares of Surf into Ordinary Shares of Surf at a
ratio of 1 to 1, at a purchase price of $9.1632 per share, which is the original
purchase price paid by Catalyst to Surf on November 14, 2001 and on November 17,
2002 for the Surf Shares, and which equals to $1,755,195 (the "SURF SHARES
PURCHASE PRICE", and together with the BOS Shares Purchase Price, the "PURCHASE
PRICE"). Catalyst shall assign to BOS all rights attached to the Surf Shares,
and all rights held by Catalyst immediately prior to the date hereof by virtue
of its holdings of the Surf Shares, in each case, under the Shareholders Rights
Agreement dated as of November 14, 2001 among Surf, the New Shareholders and the
Existing Shareholders (as such terms are defined therein) (the "SURF
SHAREHOLDERS AGREEMENT") and under the Registration Rights Agreement dated as of
November 14, 2001 among Surf, the Preferred C Holders, the Preferred A+B Holders
and the Ordinary Holders (as such terms are defined therein) (the "SURF
REGISTRATION RIGHTS AGREEMENT"). Catalyst shall set-off the BOS Shares Purchase
Price due by it to BOS under Subsection 1.01(1) against payment of the Surf
Shares Purchase Price due to it from BOS under this Subsection 1.01(2). Catalyst
covenants to BOS that immediately after the Closing (i) the Surf Shares shall
have the rights, preferences, privileges and restrictions set forth in the
Articles of Association of Surf (the "SURF ARTICLES OF ASSOCIATION"), the Surf
Shareholders Agreement and the Surf Registration Rights Agreement, and (ii) BOS
shall have, by virtue of its holdings of the Surf Shares, the rights,
preferences, privileges and restrictions under the Surf Shareholders Agreement,
and under the Surf Registration Rights Agreement.
(3) SET-OFF For the avoidance of doubt, the Parties' intention is that the
Surf Shares Purchase Price shall be fully set-off against the BOS Shares
Purchase Price, and that the respective Purchase Prices will be paid by both
Parties in equity and not in cash, PROVIDED, HOWEVER, that in the event that any
third party exercises its right of first refusal with respect to the Surf
Shares, then (i) the number of Surf Shares which BOS shall purchase hereunder
shall be reduced by the number of shares purchased by such third party pursuant
to exercise of its right of first refusal, and (ii) Catalyst shall purchase the
BOS Shares in exchange for (a) the Surf Shares which were not purchased by such
third parties pursuant to exercise of right of first refusal, and (b) cash
payment equals to the Surf Shares sold to such third parties pursuant to
exercise of such right of first refusal times the Surf Shares Purchase Price.
(4) OPTION In order to induce BOS to enter into this Agreement, subject to
the terms and conditions of this Agreement, at the Closing, Catalyst shall xxxxx
XXX, for no additional consideration, an option to purchase on or prior to
January 31, 2006, any shares of Surf then held by Catalyst subject to the terms
and conditions of the Option Agreement in the form attached hereto as EXHIBIT A
(the "OPTION AGREEMENT"), including without limitation, the right of BOS to
receive for no additional consideration any after-tax proceeds to Catalyst in
excess of the exercise price of the option derived from any disposition by
Catalyst of Preferred C Shares held by it prior to the option exercise date or
within eighteen months thereafter, all in accordance with the terms and
conditions of the Option Agreement.
(5) SURF WARRANTS In order to induce BOS to enter into this Agreement,
subject to the terms and conditions of this Agreement, at the Closing, Catalyst
shall transfer to BOS, for no additional consideration, the Surf Warrants
(6) SURF COMMITTEES Catalyst hereby undertakes and covenants to BOS that,
in the event that BOS wishes to appoint a representative of BOS as a member of
the Board committees of Surf, then Catalyst shall support such appointment, and
shall use its best efforts to perform such further acts and execute such further
documents as may required to effect such appointment.
(7) BOS REGISTRATION RIGHTS In order to induce Catalyst to enter into this
Agreement, subject to the terms and conditions of this Agreement, BOS shall
grant Catalyst, by virtue of its holdings of the BOS Shares, certain
registration rights, which shall be subject to the terms and conditions of the
Registration Rights Agreement in the form attached hereto as EXHIBIT B (the "BOS
REGISTRATION RIGHTS AGREEMENT").
1.02 CLOSING
The closing of the transactions contemplated hereby (the "CLOSING"), shall
take place at the offices of Catalyst not later than April 6, 2003 (the "CLOSING
DATE"). The Closing shall be effective as of, and the consummation of the
transactions contemplated hereby shall be deemed to occur at, the close of
business on the Closing Date.
ARTICLE 2
TERMINATION
2.01 TERMINATION PRIOR TO CLOSING
The transactions contemplated herein may be terminated at any time but not
later than the Closing Date:
(1) by mutual consent of all of the Parties; or
(2) by and at the option of (i) BOS, if prior to April 6, 2003, the closing
conditions set out in Articles 6 hereunder have not been fulfilled, and (ii)
Catalyst, if prior to April 6, 2003, the closing conditions set out in Articles
7 hereunder have not been fulfilled, and, in each case, as a result the Closing
shall not have occurred on or before the Closing Date; or
(3) by and at the option of any Party, if any order, decree, ruling, or
charge of any court, forbidding any of the Parties to approve and/or adopt,
and/or enter into, this Agreement or the Ancillary Agreements, or otherwise
forbidding and/or preventing the consummation of any of the transactions
contemplated by this Agreement and the Ancillary Agreements, will be in force
and effect on the Closing Date.
2.02 PROCEDURE UPON TERMINATION PRIOR TO CLOSING
In the event of termination by any of the Parties or both Parties, pursuant
to Section 2.01 hereof, written notice thereof shall forthwith be given to the
other Party and the transactions contemplated by this Agreement shall be
terminated, without further action by the Parties hereto. If the transactions
contemplated by this Agreement are terminated as provided herein, no Party and
none of its directors, officers, stockholders, affiliates, controlling persons,
agents or advisors (including, without limitation, attorneys, accountants,
consultants, financial advisors and any representatives of your agents and
advisors) shall have any liability or further obligation to any other Party to
this Agreement, and each Party shall bear its own fees and expenses incurred in
preparation and negotiation of this Agreement and the Ancillary Agreements,
(including without limitation legal and accounting).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CATALYST
Catalyst represents and warrants to BOS that the statements contained in
this Section 2 are true, correct and complete in all material respects as of the
date of this Agreement and acknowledges that BOS is relying on such
representations and warranties in entering into this Agreement:
3.01 CORPORATE ORGANIZATION AND STANDING
Catalyst is a limited partnership duly organized, validly existing under
the laws of Israel and has all corporate power and authority to conduct its
business and to own and use its property, except where the failure to be so
qualified would not have a material adverse effect on the business, operations,
results of operations or financial condition of Catalyst, or the ability of
Catalyst to consummate the transactions contemplated by this Agreement (for the
purpose of this Article 3, a "CATALYST MATERIAL ADVERSE EFFECT").
3.02 CORPORATE AUTHORIZATION; BINDING AGREEMENT
Catalyst has all corporate power to enter into this Agreement, the Option
Agreement, the BOS Registration Rights Agreement and all exhibits hereto and
thereto (the "ANCILLARY AGREEMENTS") and to transfer the Surf Warrants. This
Agreement and the Ancillary Agreements have been, or will have been, at the time
of their respective execution and delivery, duly executed and delivered by a
duly authorized officer of Catalyst. Prior to the execution of this Agreement
and the Ancillary Agreements, Catalyst shall have acted to complete all
corporate action on the part of Catalyst necessary for the authorization,
execution and delivery of this Agreement and the Ancillary Agreements, and the
sale and delivery of the Surf Shares. Prior to the execution of this Agreement,
Catalyst shall have completed all actions, and obtained all consents, required
under the Surf Shareholders Agreement and the Surf Registration Rights Agreement
for the transfer and assignment to BOS of any rights (a) granted to Catalyst by
virtue of the Surf Securities, and (b) attached to the Surf Securities pursuant
to the Surf Shareholders Agreement and the Surf Registration Rights Agreement.
This Agreement and the Ancillary Agreements constitute the valid and legally
binding obligation of Catalyst, enforceable in accordance with their terms,
except as (i) such enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or similar laws relating to or affecting
the rights of creditors generally, and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defences and to the discretion of the court before which any proceeding therefor
may be brought.
3.03 NO CONFLICT
Neither the execution and delivery of this Agreement and the Ancillary
Agreements, nor the consummation of the transactions or the performance of the
obligations contemplated hereby and thereby will result in any violation or
breach of the constating documents, by-laws, policy, board resolution or
shareholders resolution of Catalyst.
3.04 NO CONSENT
To Catalyst's best knowledge, no consent of any governmental body or
(except for rights of first refusal of Surf's shareholders with respect to the
Surf Preferred C Shares and Surf's Board of Directors' approval) third party is
required to be made or obtained by Catalyst in connection with the execution and
delivery of this Agreement and the Ancillary Agreements by Catalyst or the
consummation by Catalyst of the transactions or the performance of the
obligations contemplated hereby and thereby by Catalyst.
3.05 COMPLIANCE WITH LAW
To Catalyst's knowledge, it has been and is currently conducting its
business in all material respects in accordance with all applicable laws, rules,
regulations, orders, decrees and other requirements of all applicable
governmental bodies, except for failures to so comply which, could not,
individually or in the aggregate, affect Catalyst's ability to consummate the
transactions contemplated hereby.
3.06 SHARE CAPITAL
To the best of Catalyst's knowledge, the authorized share capital of Surf
consists as of the date hereof of: 15,631,286 Ordinary Shares, par value NIS0.01
per share (the "ORDINARY SHARES"), of which (i) 2,341,666 Ordinary Shares are
issued and outstanding, (ii) 883,208 Ordinary Shares are reserved for issuance
upon the exercise of employee, director and consultant options granted under
Surf's Option Plan, of which 851,904 are issued and outstanding, and 31, 304 are
reserved for future issuance, (i) 340,000 have been designated Preferred A
Shares, all of which are issued and outstanding, (ii) 130,000 have been
designated Preferred A1 Shares, all of which are issued and outstanding, (iii)
169,500 have been designated Preferred B Shares, all of which are issued and
outstanding, (iv) 18,834 have been designated Preferred B1 Shares, all of which
are issued and outstanding, and (v) 3,710,380 have been designated Preferred C
Shares, of which 3,655,094 are issued and outstanding, including 316,484 which
are held by Catalyst, and 55, 286 are reserved for future issuance. To
Catalyst's actual knowledge, except as set forth in the Surf Articles of
Association, the Surf Registration Rights Agreement and the Surf Shareholders
Agreement, except as set forth on the capitalization table of Surf attached
hereto as SCHEDULE 3.06, and except for options issued under Surf's employee
stock option plan, there are no other equity securities, preemptive rights,
rights of first refusal, convertible securities, equity securities having any
rights and privileges in preference to the Surf Shares, exchange rights,
outstanding warrants, options or other rights to subscribe for, purchase or
acquire from Surf and/or Catalyst any equity securities of Surf and there are
not any contracts, agreements, undertakings, promises or binding commitments
providing for the issuance of, sale of, or the granting of rights to acquire,
any equity securities of Surf or under which Surf and/or Catalyst is, or may
become, obligated to issue, sale or otherwise to become outstanding any Surf
securities.
3.07 SURF SHARES AND SURF WARRANTS
Catalyst has good and valid title to the Surf Preferred C Shares and the
Warrants. The Surf Preferred C Shares have been duly and validly authorized, and
are issued and outstanding and fully paid and nonassessable. The Surf Shares,
transferred and sold in accordance with this Agreement and the Option Agreement,
will be duly and validly authorized and issued, fully paid, nonassessable, and
free of any right of first refusal (which was waived or will be waived prior to
the Closing), and a copy of such waivers or notices of right of first refusal
with delivery confirmation, which were unanswered (and consequently, the holders
of the right of first refusal are deemed to have waived such right) shall be
delivered to BOS prior to the Closing. The Surf Shares will have the rights,
preferences, privileges and restrictions set forth in the Surf Articles of
Association, and will be free and clear of any liens, claims, encumbrances or
third party rights of any kind (except as specified in the Surf Articles of
Association, the Surf Registration Rights Agreement and in the Surf Shareholders
Agreement) and at the closing will have been duly registered in the name of BOS
in Surf's share register. The Warrants have been duly and validly authorized and
issued, and the Surf Warrants are transferred free of any right of first refusal
and at the closing will be duly registered in the name of BOS in Surf's share
register. The shares issuable upon exercise of the Surf Warrants, if issued on
the Effective Date, would be duly authorized and reserved for issuance by all
necessary corporate action and, when issued in accordance with the terms of the
Surf Articles of Association, would be duly and validly issued, fully paid and
non-assessable, and would have the rights, preferences, privileges and
restrictions set forth in the Surf Articles of Association, and will be free and
clear of any liens, encumbrances, claims, or third party rights of any kind
(except as specified in the Surf Articles of Association, the Surf Registration
Rights Agreement and in the Surf Shareholders Agreement). Catalyst is a
shareholder of Surf and is the record owner of the Surf Preferred C Shares and
the Warrants and all rights thereto, free and clear of all liens, claims,
charges, encumbrances, restrictions, rights, options to purchase, proxies,
voting trust and other voting agreements, understandings, calls or commitments
of any kind. Other than the Surf Shareholders Agreement, Catalyst is not a party
or subject to any agreement or understanding which affects or relates to the
voting of any security of Surf (including, without limitation, Surf Preferred C
Shares and the Warrants). As of the Closing, BOS shall have the same rights as
Catalyst has prior to the Closing, under the Surf Registration Rights Agreement
and the Surf Shareholders Agreement, with respect to the Surf Shares and the
Surf Warrants.
3.08 KNOWLEDGE AND EXPERIENCE
Catalyst recognizes that its purchase of the BOS Shares involves a high
degree of risk, and has evaluated the merits and risks of the purchase of the
BOS Shares. Catalyst has the requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of an
investment in BOS.
3.09 RECEIPT OF INFORMATION
Without derogating from any representations and warranties made by BOS
hereunder, Catalyst acknowledges that it has conducted a due diligence
examination of BOS and its subsidiaries and has been furnished by BOS with the
documents and information regarding BOS and its subsidiaries which it has
requested, and has had an opportunity to ask questions and receive answers from
the duly authorized officers or other representatives of BOS and its
subsidiaries regarding BOS', and its subsidiaries', business, assets and
financial position and the terms and conditions of the BOS Shares.
3.10 DISCLOSURE
Article 3 of this Agreement does not contain any untrue statement of a
material fact in view of the circumstances in which they were made. BOS has the
right to rely fully upon the representations, warranties, covenants and
agreements of Catalyst contained in this Agreement.
3.11 SECURITIES LAWS
(1) Catalyst is purchasing the BOS Shares for investment purposes, for its
own account and not with a view to, or for sale in connection with, any
distribution thereof in violation of federal or state US securities laws or
Israeli Securities Law, and Catalyst agrees that it will not divide its interest
in the BOS Shares with others, resell, or otherwise distribute the BOS Shares in
violation of federal or state US securities laws or Israeli Securities Law;
(2) Catalyst is (and will be as of the Closing) an "accredited investor" as
defined in Rule 501 of Regulation D under the Securities Act as presently in
effect; and
(3) Catalyst's principal place of business or primary residence for purpose
of federal and state securities laws is as listed in its respective signature
block.
3.12 LEGENDS
It is understood that the certificates evidencing the BOS Shares may bear
one or all of the following legends or similar legends:
(1) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN
OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER THE
SAID ACT."
(2) Any legend required by the securities laws of any state within the U.S.
or other jurisdiction.
(3) Any legend required pursuant to the BOS Registration Rights Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BOS
BOS represents and warrants to Catalyst that except as set forth on the BOS
Schedule of Exceptions attached hereto as EXHIBIT C (the "SCHEDULE OF
EXCEPTIONS"), the statements contained in this Article 4 are true, correct and
complete in all material respects as of the date of this Agreement, and
acknowledges that Catalyst is relying on such representations and warranties in
entering into this Agreement:
4.01 CORPORATE ORGANIZATION AND STANDING
BOS is a corporation duly organized, validly existing under the laws of
Israel and has all corporate power and authority to conduct its business and to
own and use its property, except where the failure to be so qualified would not
have a material adverse effect on the business, operations, results of
operations or financial condition of BOS, or the ability of BOS to consummate
the transactions contemplated by this Agreement (for the purpose of this Article
3, a "BOS MATERIAL ADVERSE EFFECT"). Boscom Ltd. ("BOSCOM") is a wholly owned
subsidiary of BOS and a corporation duly organized, validly existing under the
laws of Israel and has all corporate power and authority to conduct its business
and to own and use its property, except where the failure to be so qualified
would not have a Material Adverse Effect. Pacific Information Systems Inc.
("PACIFIC") is a wholly owned subsidiary of Xxxx USA, Inc., ("XXXX"), which is a
wholly owned subsidiary of BOS, and both Pacific and Xxxx are corporations duly
organized, validly existing under the laws of Delaware and has all corporate
power and authority to conduct its business and to own and use its property,
except where the failure to be so qualified would not have a BOS Material
Adverse Effect. BOS's Ordinary Shares are currently listed on the NASDAQ and the
TASE.
4.02 CORPORATE AUTHORIZATION; BINDING AGREEMENT
BOS has all corporate power to enter into this Agreement and the Ancillary
Agreements. This Agreement and the Ancillary Agreements have been, or will have
been, at the time of their respective execution and delivery, duly executed and
delivered by a duly authorized officer of BOS. Prior to the Closing of this
Agreement and the Ancillary Agreements, BOS shall have acted to complete all
corporate action on the part of BOS, necessary for the authorization, execution
and delivery of this Agreement and the Ancillary Agreements, and the issuance,
sale and delivery of the BOS Shares. This Agreement and the Ancillary Agreements
constitute the valid and legally binding obligation of BOS, enforceable in
accordance with their terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws
relating to or affecting the rights of creditors generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defences and to the discretion of the court before which
any proceeding therefor may be brought.
4.03 NO CONFLICT
Neither the execution and delivery of this Agreement and the Ancillary
Agreements, nor the consummation of the transactions or the performance of the
obligations contemplated hereby and thereby will result in any violation or
breach of the constating documents, by-laws, policy, board resolution or
shareholders resolution of BOS.
4.04 NO CONSENT
To BOS's best knowledge, except for reporting obligations and approvals
required under applicable security laws and market regulations, no consent of
any governmental body or third party is required to be made or obtained by BOS
in connection with the execution and delivery of this Agreement and the
Ancillary Agreements by BOS or the consummation by BOS of the transactions or
the performance of the obligations contemplated hereby and thereby by BOS.
4.05 COMPLIANCE WITH LAW
To BOS's knowledge, it has been and is currently conducting its business in
all material respects in accordance with all applicable laws, rules,
regulations, orders, decrees and other requirements of all applicable
governmental bodies, except for failures to so comply which, could not,
individually or in the aggregate affect BOS' ability to consummate the
transactions contemplated hereby, except for compliance with continued listing
requirements on the NASDAQ, which has been disclosed to Catalyst by BOS as part
of Catalyst's due diligence investigation. BOS is not aware of any
non-compliance with any disclosure requirements under applicable security laws.
4.06 SHARE CAPITAL
Except as set forth on the Schedule of Exceptions, the authorized share
capital of BOS will consist immediately prior to the Closing of: 35,000,000
Ordinary Shares, par value NIS 1.00 per share, of which (i) 12,709,056 Ordinary
Shares are issued and outstanding, (ii) 2,244,316 Ordinary Shares are reserved
for issuance upon the exercise of employee, director and consultant options
granted under BOS's Option Plan, of which as of 31.12.02, 1,147,716 were issued
and outstanding, and 1,096,600 were reserved for future issuance. Except as set
forth on the Schedule of Exceptions, there are no other equity securities,
convertible securities, outstanding warrants, options or other rights to
purchase from BOS any equity securities of BOS and there are not any contracts
or binding commitments providing for the issuance of, sale of, or the granting
of rights to acquire, any equity securities of BOS. Israel Gal, CEO of BOS and
Boscom holds options to purchase securities of Boscom under terms approved by
the shareholders at the annual General Meeting shareholders held March 13, 2002.
4.07 ORWER TRANSACTION
On March 13, 2002, the BOS shareholders approved an issuance of 1 million
Ordinary Shares of BOS, at a price of $2 per share, and the grant of an option
to purchase within 1 year an additional 1 million Ordinary Shares of BOS at a
purchase price of $3 per share, to Orwer Ltd., an Israeli company, wholly owned
by Xx. Xxxxxx Xxxxxxxx and his spouse ("Orwer"). In May 2002, Xx. Xxxxxxxx
announced that Orwer would not be purchasing the shares, and therefore in July
2002 the Company terminated the private placement agreement.
4.08 BOS SHARES
The BOS Shares, when issued and sold in accordance with this Agreement, will be
duly and validly authorized and issued, fully paid, nonassessable, and free of
any right of first refusal, and will have the rights, preferences, privileges
and restrictions set forth in the BOS Articles of Association and in Section
3.12, and will be free and clear of any liens, claims, encumbrances (except as
specified in the BOS Articles of Association), and duly registered in the name
of Catalyst.
4.09 FINANCIAL INFORMATION.
(a) The audited consolidated financial statements of BOS as of December 31,
2001, and the related statements, and unaudited financial statements of BOS as
of September 30, 2002, are true, correct and complete and present truly and
fairly the financial position of BOS as of the respective dates thereof, all in
accordance with generally accepted accounting principles consistently applied
throughout the periods covered therein on a basis consistent with those applied
in prior periods, and have been prepared in accordance with the books and
records of BOS as at the applicable dates and for the applicable periods.
(b) Subject to section 4.15 hereunder, and other than as reported in BOS'
current reports, since September 30, 2002, there has not been any event or
material adverse change in the conditions of BOS as reflected in the Financial
Statements which, individually or collectively with other events or changes
could have a BOS Material Adverse Effect.
4.10 KNOWLEDGE AND EXPERIENCE
BOS recognizes that its purchase of the Surf Securities involves a high
degree of risk, and has evaluated the merits and risks of the purchase of the
Surf Securities. BOS has the requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of an
investment in Surf.
4.11 INVESTMENT INTENT
BOS represents that its purchase of the Surf Securities is made solely for
its own account, for investment, and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act or the Israel Securities Law. BOS furthermore has no
current commitment or obligation, contingent or otherwise, to anyone to dispose
of the Surf Securities, and has no current plan or intent to dispose of the Surf
Securities.
4.12 BOS' RELATIONSHIP WITH SURF
Without derogating from any representations and warranties made by Catalyst
hereunder, BOS hereby acknowledges that as of the date hereof, it holds shares
in Surf.
4.13 NASDAQ LISTING
BOS had a hearing before the Nasdaq Listing Qualification Panel to review
the Nasdaq delisting notice. While there can be no assurance that the Panel will
grant the Company's request for continued listing, the Company is exploring
possible avenues to preserve the Nasdaq listing.
4.14 REGISTRATION RIGHTS
Except as set out on the Schedule of Exceptions, the Company has not
granted any registration rights with respect to any of its shares.
4.15 DISCLOSURE
BOS is in compliance with all current disclosure requirements under (i) the
United States Securities Exchange Act of 1934, and all regulations promulgated
thereunder, and (ii) the Israel Securities Law, 5728-1968, and all regulations
promulgated thereunder, to the extent applicable to BOS. All materials disclosed
by BOS pursuant to the aforementioned securities laws are correct. This Article
4 does not contain any untrue statements of a material fact, in view of the
circumstances in which they were made. Changes in the conditions of BOS,
subsequent to September 30, 2002, have been specifically disclosed to Catalyst
pursuant to this Agreement or as set forth on the Schedule of Exceptions
(Exhibit C hereto). Catalyst has the right to rely fully upon the
representations, warranties, covenants and agreements of BOS contained in this
Agreement. Notwithstanding the foregoing, except as explicitly provided in
Section 4.01 and 4.09(a) hereunder, the information regarding Pacific and BOS'
liabilities with respect to Pacific is given on an 'AS IS' basis, and it is
understood and agreed that no warranties of any kind are given by BOS with
respect to the potential exposure of BOS to liabilities arising from and/or
relating to Pacific.
ARTICLE 5
COVENANTS OF THE PARTIES
5.01 THIRD PARTY CONSENTS
5.01.1 CATALYST THIRD PARTY CONSENTS
Catalyst has taken and delivered, or immediately after the date hereof,
shall take and deliver, all notices and take all actions required to be taken by
it under the Surf Articles of Association, the Surf Shareholders Agreement and
the Surf Registration Rights Agreement for the transfer of the Surf Securities
to BOS, and the transfer and assignment to BOS of all rights attached to the
Surf Securities, and all rights granted to Catalyst as a holder of the Surf
Securities, under the Surf Articles of Association, the Surf Shareholders
Agreement and the Surf Registration Rights Agreement.
5.01.2 BOS THIRD PARTY CONSENTS
BOS shall take all actions required for the issuance of the BOS Shares to
Catalyst.
5.02 CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS
Both before and after the Closing Date or the termination of this Agreement
for any reason, the Parties will consult with each other before issuing any
press release or news media release or otherwise making any public statements
with respect to this Agreement and/or the Ancillary Agreements and the
transactions contemplated hereby.
5.03 ACCESS TO INFORMATION AND CONFIDENTIALITY
(1) During the course of negotiating this Agreement and after the execution
thereof, and until the Closing and thereafter, each of the parties (the
"DISCLOSING PARTY") shall provide and have provided to the other party (the
"RECEIVING PARTY"), its counsel and consultants (collectively, the
"REPRESENTATIVES") access to confidential information of the Disclosing Party.
(2) Any information disclosed to the Receiving Party or to its
Representative, which has not previously been made available to the general
public by the Disclosing Party, shall be considered confidential (individually
and collectively, the "INFORMATION").
(3) The Receiving Party acknowledges the confidential character of the
Information and agrees that the Information is the valuable property of the
Disclosing Party. The Receiving Party agrees not to reproduce any of the
Information without the prior written consent of the Disclosing Party, not to
use any Information for any purpose except as permitted by and in the
performance of this Agreement, and not to divulge all or any part of the
Information to any third party.
(4) In the event that any of the Parties is requested or becomes legally
compelled to disclose the terms of this Agreement or the transactions
contemplated hereby in contravention of Sections 5.02 or 5.03, such Party shall
provide the other Party with prompt written notice of that fact so that the
appropriate Party may seek (with the co-operation and reasonable efforts of the
other Party) a protective order, confidential treatment or other appropriate
remedy. In such event, such Party shall furnish only that portion of the
information, which is legally required and shall exercise reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded such
information to the extent reasonably requested by the other Party.
(5) All Non-Disclosure Agreements and confidentiality obligations
undertaken by the Parties, if any, will remain in full force and effect
regardless of the execution and consummation or termination of this Agreement.
ARTICLE 6
BOS CLOSING CONDITIONS
The obligations of BOS to effect the transactions contemplated hereby shall
be subject to the satisfaction of BOS, at or before the Closing, of each of the
following conditions any one of which may be waived in writing, in whole or in
part, by BOS:
6.01 REPRESENTATIONS AND WARRANTIES TRUE
The representations and warranties of Catalyst set forth in this Agreement
shall each be true, complete and accurate as of the date of this Agreement
6.02 PERFORMANCE
Catalyst shall have performed and complied with all agreements, obligations
and conditions required by this Agreement to be performed or complied with by it
on or prior to the Closing, including, without limitation, completion of the
sale and transfer of the Surf Shares to BOS, and the assignment of all rights
attached to the Surf Shares, and all rights held by Catalyst immediately prior
to the date hereof by virtue of its holdings of the Surf Shares, in each case,
under the Surf Articles of Association, the Surf Shareholders Agreement and
under the Surf Registration Rights Agreement.
6.03 CONSENTS
Catalyst shall have duly obtained and secured all permits, approvals,
consents and authorizations necessary or required lawfully to consummate this
Agreement and the Ancillary Agreements, and to sell and transfer the Surf
Shares, the Surf Warrants. Without limiting the generality of the foregoing,
Catalyst shall provide (i) a certified copy of the decision of Surf's Board of
Directors approving the transfer of the Surf Securities to BOS, and (ii) a
certified copy of Surf's register of shareholders, registering BOS as the holder
of the Surf Securities.
BOS shall have duly obtained the following permits, approvals, consents and
authorizations necessary or required lawfully to consummate this Agreement and
the Ancillary Agreements: (i) approval by NASDAQ of issuance of the BOS Shares,
(ii) approval by TASE of issuance of the BOS Shares, and (iii) issuance of the
BOS Shares certificates by the transfer agent of BOS.
6.04 SHARE CERTIFICATES; WARRANTS
(A) Catalyst shall have delivered to BOS validly executed (i) share
certificates representing the Surf Shares, issued in the names of BOS, and (ii)
the Surf Warrants issued in the name of BOS; and (B) Surf shall have duly
registered in the share register of Surf the transfer of (a) the Surf Shares,
and (b) the Surf Warrants to BOS.
6.05 OPTION AGREEMENT AND PROXY; REGISTRATION RIGHTS AGREEMENT
The Option Agreement and the irrevocable proxy attached thereto as Exhibit
B, and the Registration Rights Agreement shall have been executed by Catalyst
and delivered to BOS.
6.06 WAIVER OF RIGHTS; NOTICES.
Catalyst shall have delivered to BOS a copy of the notices of right of
first refusal with respect to the Surf Securities that Catalyst delivered to
Surf, requesting that Surf deliver same to all holders of such right of first
refusal with respect to the Surf Securities, and a confirmation that all such
notices were delivered to the holders of such right of first refusal and were
unanswered or rejected (and consequently, the holders of the right of first
refusal are deemed to have waived such right).
6.07 NO ACTION
No order, decree, ruling, or charge of any court, forbidding any of the Parties
to approve and/or adopt, and/or enter into, this Agreement or the Ancillary
Agreements, or otherwise forbidding and/or preventing the consummation of any of
the transactions contemplated by this Agreement and the Ancillary Agreements,
will be in force and effect on the Closing Date.
6.08 CATALYST COMPLIANCE CERTIFICATE
Catalyst shall have delivered to BOS a duly executed Compliance
Certificate, dated as of the Closing Date, in the form attached hereto as
EXHIBIT D.
6.09 LEGAL OPINION
Catalyst shall have delivered to BOS a legal opinion in the forms attached
hereto as EXHIBIT E.
6.10 PURCHASE PRICE
To the extent not fully set-off in accordance with the provisions of
Section 1.01(3) (as a result of exercise of any right of first refusal with
respect to the Surf Shares), Catalyst shall have transferred to BOS the Purchase
Price in United States Dollars by wire transfer to a bank account or such other
form of payment as is mutually agreed by BOS and Catalyst to a bank account
designated in writing by BOS.
ARTICLE 7
CATALYST CLOSING CONDITIONS
The obligations of Catalyst to effect the transactions contemplated hereby
shall be subject to the satisfaction of Catalyst, at or before the Closing, of
each of the following conditions any one of which may be waived in writing, in
whole or in part, by Catalyst:
7.01 REPRESENTATIONS AND WARRANTIES TRUE.
The representations and warranties of BOS set forth in this Agreement shall
each be true, complete and accurate as of the date of this Agreement.
7.02 PERFORMANCE.
BOS shall have performed and complied with all agreements, obligations and
conditions required by this Agreement to be performed or complied with by it on
or prior to the Closing, including, without limitation, completed the issuance,
sale and delivery of the BOS Shares to Catalyst.
7.03 CONSENTS.
BOS shall have duly obtained and secured all permits, approvals, consents
and authorizations that shall be necessary or required lawfully to consummate
this Agreement and the Ancillary Agreements and to issue and sell the BOS
Shares. Without limiting the generality of the foregoing, BOS shall provide
Catalyst with a copy of the decision of BOS' Board of Directors approving the
issuance of the BOS Shares to Catalyst.
7.04 SHARE CERTIFICATES
BOS shall have delivered to Catalyst validly executed share certificates
representing the BOS Shares, issued in the names of Catalyst. Surf shall have
delivered to either of BOS or Catalyst validly executed (i) share certificates
representing the Surf Shares, issued in the names of BOS, and (ii) the Surf
Warrants issued in the name of BOS; and Surf shall have duly registered in the
share register of Surf the transfer of (a) the Surf Shares, and (b) the Surf
Warrants to BOS.
7.05 NO ACTION
No order, decree, ruling, or charge of any court, forbidding any of the
Parties to approve and/or adopt, and/or enter into, this Agreement or the
Ancillary Agreements, or otherwise forbidding and/or preventing the consummation
of any of the transactions contemplated by this Agreement and the Ancillary
Agreements, will be in force and effect on the Closing Date.
7.06 OPTION AGREEMENT AND PROXY; REGISTRATION RIGHTS AGREEMENT
The Option Agreement and the irrevocable proxy attached thereto as Exhibit
B, and the Registration Rights Agreement shall have been executed by BOS and
delivered to Catalyst.
7.07 BOS COMPLIANCE CERTIFICATE
BOS shall have delivered to Catalyst a duly executed Compliance
certificate, dated as of the Closing Date, in the form attached hereto as
EXHIBIT F.
7.08 LEGAL OPINION
BOS shall have delivered to Catalyst a legal opinion in the forms attached
hereto as EXHIBIT G.
ARTICLE 8
LIMITATION ON REMEDIES
8.01 BREACH OF THE OPTION AGREEMENT
In the event of a breach of the Option Agreement, at any time after the
Closing, BOS may proceed to protect and enforce its rights, whether for the
specific performance of any term contained in the Option Agreement or for an
injunction against the breach of any such term, or to enforce any other legal or
equitable right of BOS, or to claim any monetary remedy with regard to any
direct and indirect damages caused to BOS by such breach, PROVIDED that in the
event of a claim for monetary remedy, the sole remedy of BOS shall be paid by
means of the Option Shares calculated according to the Exercise Price (as such
terms are defined in the Option Agreement), PROVIDED HOWEVER, that only in the
event that such transfer of Surf Shares is impossible for any reason, BOS will
be compensated in cash.
8.02 BREACH OF THIS AGREEMENT
In the event of a breach of this Agreement, including without limitation,
liabilities, damages, deficiencies, judgments, settlements, costs of
investigation or other expenses (including but not limited to interest,
penalties and reasonable attorneys' fees and disbursements) resulting from or
arising out of any act or omission of either party, or any breach of any
representation or warranty contained in this Agreement and all exhibits attached
hereto, and the Ancillary Agreements, both Parties and/or their successors may
proceed to protect and enforce their rights, provided that in the event of a
claim for monetary remedy, the sole remedy of the plaintiff shall be restitution
of the Surf Shares or the BOS Shares sold hereunder, as the case may be,
calculated according to the Surf Shares Purchase Price and the BOS Shares
Purchase Price, as applicable, provided however, that only in the event that
such restitution is impossible for any reason, the plaintiff will be compensated
in cash, which shall not exceed the Purchase Price, and further provided, that
such claim has been filed within one year of the Effective Date hereunder.
ARTICLE 9
MISCELLANEOUS
9.01 PAYMENT OF EXPENSES
Except as otherwise provided hereunder, each Party shall pay its own fees
and expenses incurred in preparation, negotiation, execution and delivery of
this Agreement and the Ancillary Agreements, and the performance of its
obligations hereunder and thereunder (including, without limitation, legal,
accounting and travel).
9.02 NOTICES
All notices and other communications required or permitted hereunder to be
given to any Party shall be in writing and shall be faxed or mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed to such party's address as set forth below:
If to B.O.S. Better Online Solutions Ltd., to the addresses set forth in its
signature block, with a copy to:
Xxxxxxx Xxxxxxxx & Co., Advocates
00 X Xxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxxxxx 00000
Israel
Facsimile: (00) 000-0000
(00) 000-0000
and:
Zvi Firon, Adv
Firon, Karni, Sarov and Firon, Xxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx If to Catalyst Investments, L.P., to the addresses set
forth in its signature block, with a copy to:
Fischer, Behar, Chen & Co.
0 Xxxxxx Xxxxxx Xx.
Xxx Xxxx 00000
Israel
Facsimile: (00) 000-0000
Or such other address with respect to a Party as such Party shall notify each
other Parties in writing as above provided. Any notice sent in accordance with
this Section 9.02 shall be effective (i) if mailed, seven (7) business days (and
fourteen (14) business days for international mail) after mailing, (ii) if sent
by messenger, upon delivery, (iii) if sent via telecopier, upon transmission and
electronic confirmation of receipt or (if transmitted and received on a
non-business day) on the first business day following transmission and
electronic confirmation of receipt), and (iv) one (1) business day (and three
(3) business days for international mail) after the business day of deposit with
Federal Express or similar overnight courier, freight prepaid, PROVIDED,
HOWEVER, that any notice change of address shall only be valid upon receipt
thereof.
9.03 ASSIGNMENT
This Agreement may not be assigned in whole or in part by any Party without
the prior written consent of the other Parties.
9.04 AMENDMENT
This Agreement may be modified, supplemented or amended only by a written
instrument executed by all of the Parties.
9.05 SURVIVAL
The provisions of Sections 5.02, 5.03, Article 8 and this Article 9 shall
survive the termination of this Agreement for any reason.
9.06 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE
The rights and remedies of the Parties shall be cumulative (and not
alternative). Each Party acknowledges and agrees that the other Party may be
damaged irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Each Party agrees that the other Party may be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court having competent jurisdiction, in addition to any
other right or remedy to which they may be entitled, at law or in equity.
9.07 WAIVER
Any Party may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other Party hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
Party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such Party contained herein. Any agreement on the part of a Party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such Party.
9.08 GOVERNING LAW
This Agreement shall be exclusively governed by and construed according to
the laws of Israel, without regard to the conflict of laws provisions thereof.
9.09 ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement, its validity, its interpretation, its execution or any breach or
claimed breach thereof, shall be settled by a single arbitrator, who shall be
Xx. Xxxxx Xxxxxx, and if Xx. Xxxxx Xxxxxx is unwilling or unavailable to serve
as an arbitrator, the arbitrator shall be an attorney with experience in complex
corporate transactions to be mutually selected by the Parties' legal counsels
(the "ARBITRATOR"), and if the Parties are unable to reach an agreement on the
identity of the arbitrator with in thirty (30) days, the arbitrator shall be
appointed by court having competent jurisdiction. The arbitration shall take
place in Tel Aviv, Israel, in the Hebrew language. The Arbitrator shall be
exempt from the civil procedure rules and the rules of evidence, but shall be
bound by substantive law and by the duty of citing grounds for his ruling. The
Arbitrator shall be authorized to issue injunctions and interim orders. The
execution of this Agreement by the parties shall be deemed the execution of an
arbitration agreement as required by the Israeli Arbitration Law, 5728-1968.
9.10 FURTHER ASSURANCES
Each of the Parties shall perform such further acts and execute such
further documents as may reasonably be necessary to carry out and give full
effect to the provisions of this Agreement and the Ancillary Agreements and the
intentions of the parties as reflected hereby and thereby.
9.11 BINDING EFFECT; BENEFITS
This Agreement shall inure to the benefit of, and be binding upon, the
Parties and their respective successors and permitted assigns. Nothing contained
in this Agreement, express or implied, is intended to confer upon any person or
entity other than the Parties' respective successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
9.12 SEVERABILITY
If any provision of this Agreement is held by a court of competent
jurisdiction to be unenforceable under applicable law, then such provision shall
be excluded from this Agreement and the remainder of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms; PROVIDED, HOWEVER, that in such event this Agreement
shall be interpreted so as to give effect, to the greatest extent consistent
with and permitted by applicable law, to the meaning and intention of the
excluded provision as determined by such court of competent jurisdiction.
9.13 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument.
9.14 ENTIRE AGREEMENT
This Agreement, together with all schedules and exhibits hereto, constitute
the full and entire understanding and agreement between the Parties with regard
to the subject matters hereof and thereof, and shall replace any previous
agreement between the Parties, whether or not separate or together with other
parties.
9.15 RULES OF CONSTRUCTION
The Parties agree that they have been represented by counsel during the
negotiation, preparation and execution of this Agreement, and therefore, waive
the application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document be construed
against the party drafting such agreement or document. Words denoting the
singular include the plural and vice versa and words denoting any gender include
all genders. Any reference to a statute shall mean the statute in force as at
the date hereof, unless otherwise expressly provided. The use of headings is for
convenience of reference only and shall not affect the construction of this
Agreement. When calculating the period of time within which or following which
any act is to be done or step taken, the date which is the reference day in
calculating such period shall be excluded. If the last day of such period is not
a business day, the period shall end on the next business day.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF this Share Purchase Agreement has been executed by duly
authorized officers of each of the Parties as of the date first above written.
B.O.S. BETTER ONLINE SOLUTIONS LTD.
By: ________________________
Name:
Title:
Address:
CATALYST INVESTMENTS, L.P.
By: ________________________
Name:
Title:
Address:
EXHIBITS
Exhibit A - Option Agreement
Exhibit B - BOS Registration Rights Agreement
Exhibit C - Schedule of Exceptions [omitted]
Exhibit D - Catalyst Compliance Certificate [omitted]
Exhibit E - Catalyst Legal Opinion [omitted]
Exhibit F - BOS Compliance Certificate [omitted]
Exhibit G - BOS Legal Opinion [omitted]
SCHEDULES
Schedule 3.06 - Surf Capitalization Table [omitted]
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "AGREEMENT") is made as of March 30, 2003 (the
"EFFECTIVE DATE"), by and between B.O.S. Better Online Solutions Ltd., a company
organized under the laws of Israel ("BOS"), and Catalyst Investments, L.P.
("CATALYST"). BOS and Catalyst shall be referred to herein collectively as the
"PARTIES".
RECITALS
WHEREAS, Catalyst, prior to consummating the transactions contemplated
hereby and under the Share Purchase Agreement (as defined below), is a holder of
(i) 316,484 Preferred C Shares (the "PREFERRED C Shares") of Surf Communication
Solutions Ltd., a company organized under the laws of Israel ("SURF"), and (ii)
warrants to purchase 79,121 Preferred C Shares of Surf (the "WARRANTS"); and
WHEREAS, concurrently with the execution and delivery of this Agreement,
BOS and Catalyst are entering into a Share Purchase Agreement (the "SHARE
PURCHASE AGREEMENT"), which provides that, upon the terms and conditions
thereof, Catalyst will sell to BOS certain equity securities of Surf owned by
it; and
WHEREAS, as a condition to BOS's willingness to enter into the Share
Purchase Agreement, Catalyst agrees to xxxxx XXX (i) a right to receive any
Surplus (as defined below) received by Catalyst as a result of the sale of any
Preferred C Shares of Surf held by it and not sold to BOS under the Share
Purchase Agreement, and (ii) an option to purchase such and or all Preferred C
Shares in the event not sold by Catalyst prior to the Option Expiration Date (as
defined below), in each case, under the terms and conditions set forth herein;
and
WHEREAS, this Agreement is entered into as, and forms, an integral part of
the Share Purchase Agreement; and
WHEREAS, the Parties wish to define the respective rights and obligations
of the Parties in connection with the option grant contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the Parties hereby agree as follows:
1. NUMBER OF ORDINARY SHARES AVAILABLE FOR PURCHASE
Catalyst hereby grants BOS an irrevocable option (the "OPTION") to purchase, at
any time and from time to time on or prior to January 31, 2006 (the "OPTION
EXPIRATION DATE") on one or a number of occasions, any or all of the 124,936
Preferred C Shares owned by Catalyst on the Effective Date, or hereafter
acquired by Catalyst pursuant to exercise of the Warrant, to purchase 31,234
Preferred C Shares which are held by Catalyst on the Effective Date (the "OPTION
SHARES"), including all associated rights under (a) the Registration Rights
Agreement, dated as of November 14, 2001 among Surf, the Preferred C Holders,
the Preferred A+B Holders and the Ordinary Holders (as such terms are defined
therein) (the "REGISTRATION RIGHTS AGREEMENT") and (b) the Shareholders
Agreement dated as of November 14, 2001 among Surf, the New Shareholders and the
Existing Shareholders (as such terms are defined therein) (the "SHAREHOLDERS
AGREEMENt"), at an exercise price of US$9.1632 plus interest at a rate of 4.75%
per annum, accrued from the Effective Date until the Option exercise date, per
Preferred C Share, or a higher exercise price at the sole discretion of BOS,
subject to adjustments under Section 6 (the "EXERCISE PRICE"), PROVIDED,
HOWEVER, that in the event that any third party exercises its right of first
refusal with respect to the Option Shares, then the number of Option Shares
which BOS shall purchase pursuant to the exercise of the Option shall be reduced
by the number of shares purchased by such third party pursuant to exercise of
its right of first refusal. BOS hereby acknowledges that any transactions
consummated pursuant to this Agreement are subject to applicable rights of first
refusal of Surf shareholders.
2. TRANSFER OF PREFERRED C SHARES BY CATALYST
2.1 CATALYST UNDERTAKING.
(a) Insofar as Catalyst sells or otherwise disposes (a "DISPOSITION") of
any Preferred C Shares of Surf owned by Catalyst on the Effective
Date, or hereafter acquired by Catalyst pursuant to the exercise of
the Warrants, at any time after the Effective Date, and prior to the
Option Expiration Date (the "UPSIDE PERIOD") at a price greater than
the Exercise Price, then Catalyst shall pay BOS such sale price less
(x) U.S. $9.1632 per share and (y) any applicable tax as stated in
writing by Catalyst's accountants (the "SURPLUS"). BOS shall have a
right to appeal to the tax authorities with respect to the tax imposed
on Catalyst pursuant to such transaction. In the event that Catalyst
purchases Preferred C Shares of Surf after the Effective Date other
than pursuant to the exercise of the Warrants (the "NEW SHARES"), and
subsequently sells Preferred C Shares of Surf, then the number of
shares to be subject to this Section 2.1 shall be pro-rated between
the Option Shares and the New Shares, unless otherwise agreed by the
Parties. For purposes of this section 2.1(a), the above shall also
apply in the event of a Disposition by Catalyst of any Preferred C
Shares or Surf Warrants consummated on or prior to July 31, 2007,
PROVIDED that the negotiations with respect thereto commenced before
the Option Expiration Date, and such Disposition will be deemed for
all purposes as a "Disposition" hereunder. .
(b) Subject to the terms of this Agreement, Catalyst agrees and covenants
to BOS that it shall sell the Option Shares within the Upside Period
to any purchaser designated by BOS (including without limitation, BOS,
an affiliate of BOS or any third party), PROVIDED that the purchase
price of the Option Shares pursuant to such sale shall be in excess of
(x) the Exercise Price plus (y) any applicable taxes paid by Catalyst
pursuant to such sale.
3. EXERCISE OF OPTION.
The Option may be exercised by delivering to Catalyst at its principal
office the Notice of Exercise attached hereto as EXHIBIT A duly completed
and duly executed by BOS. The exercise of Option in connection with the
following events, may be made conditional upon the completion of such
events:
(a) acquisition of Surf by another entity by means of any transaction or
series of related transactions (including, without limitation, a merger,
consolidation or reorganization of Surf with or into another corporation),
or a sale of all, or substantially all of the assets of Surf (including,
without limitation, intellectual property rights which in the aggregate
constitute substantially all of Surf's material assets);
(b) a firmly underwritten public offering pursuant to a registration
statement filed by Surf under the Securities Act of 1933 or a similar act
of another jurisdiction; or
(c) either Catalyst or Surf (1) makes an assignment for the benefit of
creditors, admits in writing its inability to pay its debts as they become
due, or files a voluntary petition in bankruptcy, (2) is adjudicated as
bankrupt or insolvent, (3) files any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law, or
regulation, (4) files any answer admitting or not contesting the material
allegations of a petition filed against Catalyst, as applicable in any such
proceeding, or (5) seeks, consents to, or acquiesces in, the appointment of
any trustee, receiver, or liquidator of Catalyst or of all or any
substantial part of the assets of Catalyst; (6) the commencement of an
action against Catalyst seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any present or future statute, law or regulation, such action shall
not have been dismissed within ninety (90) days.
4. CLOSING.
Upon exercise of the Option hereunder, promptly following expiration or
exercise of the right of first refusal with respect to the Option Shares,
(the "CLOSING"), (a) Catalyst shall deliver to BOS (i) a duly executed
share transfer deed; (ii) a share certificate representing the number of
Option Shares specified in the Exercise Notice held by it; (iii) a pro-rata
portion of the Warrants held by Catalyst on the date of such exercise; and
(iv) a copy of any notices of exercise of rights of first refusal or all
waivers, consents or approvals by third party having rights of first
refusal with respect to the Option Shares, whereby each such third party
waives such right of first refusal or confirmation of Surf, stating that
such rights have been waived or expired; against delivery of (b) payment by
BOS to Catalyst of the Purchase Price for the Option Shares so transferred
and being purchased by delivery of a certified check or bank check in
immediately available funds.
5. OPTION CONFERS VOTING RIGHTS.
As long as the Option is outstanding and unexercised, BOS shall have a
right to vote all except for one of the Option Shares as a shareholder of
Surf at its sole and absolute discretion at any meeting of the shareholders
of Surf and in any written resolution of the shareholders of Surf, and for
that purpose Catalyst shall xxxxx XXX a proxy to vote all minus one Option
Shares in the form attached hereto as EXHIBIT B. The Parties agree that
Catalyst shall retain voting rights with respect to one of the Option
Shares, and Catalyst hereby agrees and covenants to BOS that it will vote
such share in the same manner as BOS votes the Option Shares at BOS's sole
discretion.
Notwithstanding BOS' rights hereunder, BOS undertakes not to vote the
Option Shares in such a manner that will cause Catalyst to be subject to a
financial obligation without Catalyst's prior written consent to assume
such obligation, unless BOS has agreed in writing to personally assume such
financial obligation.
6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF OPTION SHARES
The number and kind of securities purchasable upon the exercise of the
Option and the Exercise Price shall be subject to adjustment from time to
time upon the occurrence of the following events:
In the event of any change in Surf's equity securities by reason of stock
dividends, stock splits, reverse stock splits, mergers, recapitalizations,
combinations, exchange of shares and the like, the type and number of
Option Shares and/or the Exercise Price, as the case may be, shall be
adjusted appropriately, so BOS shall receive, upon exercise of the Option,
the number and class of shares or other securities or property that BOS
would have received in respect of the Option Shares if the Option had been
exercised immediately prior to such event or the record date therefore, as
applicable.
7. EXERCISE OF WARRANTS.
Catalyst hereby covenants to BOS that during the term of this Agreement it
shall not exercise the Warrants without the prior written consent of BOS,
which may be granted or withheld at BOS's discretion. In addition, Catalyst
hereby agrees and covenants to BOS that it will exercise the Warrants if so
directed by BOS, at its sole discretion, and such exercise shall be deemed
exercise of the Option with respect to the shares underlying such Warrant,
PROVIDED that BOS shall bear the exercise price of the Warrants and any tax
imposed on Catalyst with respect thereto, if any such tax is imposed, and
such exercise price shall be deemed the Exercise Price of such shares.
Notwithstanding the foregoing, if BOS shall have not exercised the Option
in full on or prior to the date which is 45 days prior to the Warrant's
termination date, (November 14, 2005) (hereinafter: the "WARRANT
TERMINATION DATE"), Catalyst shall have a right to notify BOS of its wish
to exercise the Warrant. BOS shall then notify Catalyst in writing no later
than 30 days prior to the Warrant Termination Date whether or not it
intends to exercise the Warrant, and if BOS indicated that is does not
intend to exercise the Warrant, Catalyst will then have a right to exercise
the Warrant at its own expense. . For further clarity, in the event that
Catalyst exercises such Warrant, the shares issued by Catalyst pursuant to
such exercise shall be deemed to be Option Shares hereunder.
8. PAYMENT OF EXPENSES.
Except as otherwise provided hereunder, each Party shall pay its own fees
and expenses incurred in preparation, negotiation, execution and delivery
of this Agreement and the, and the performance of its obligations
hereunder.
9. NOTICES
All notices and other communications required or permitted hereunder to be
given to any Party shall be in writing and shall be faxed or mailed by
registered or certified mail, postage prepaid, or otherwise delivered by
hand or by messenger, addressed to such party's address as set forth below:
If to B.O.S. Better Online Solutions Ltd., to the addresses set forth
in its signature block, with a copy to:
Xxxxxxx Xxxxxxxx & Co., Advocates
00 X Xxxx Xxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxxxxx 00000
Israel
Facsimile: (00) 000-0000
(00) 000-0000
and:
Zvi Firon, Adv
Firon, Karni, Sarov and Firon, Xxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx
Facsimile: (00) 000-0000
If to Catalyst Investments, L.P., to the addresses set forth in its
signature block, with a copy to:
Fischer, Behar, Chen & Co.
0 Xxxxxx Xxxxxx Xx.
Xxx Xxxx 00000
Israel
Facsimile: (00) 000-0000
Or such other address with respect to a Party as such Party shall notify
each other Parties in writing as above provided. Any notice sent in
accordance with this Section 9 shall be effective (i) if mailed, seven (7)
business days (and fourteen (14) business days for international mail)
after mailing, (ii) if sent by messenger, upon delivery, (iii) if sent via
telecopier, upon transmission and electronic confirmation of receipt or (if
transmitted and received on a non-business day) on the first business day
following transmission and electronic confirmation of receipt), and (iv)
one (1) business day (and three (3) business days for international mail)
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, PROVIDED, HOWEVER, that any notice change of
address shall only be valid upon receipt thereof.
10. ASSIGNMENT
This Agreement may not be assigned in whole or in part by any Party without
the prior written consent of the other Parties.
11. AMENDMENT; WAIVER
This Agreement may be modified, supplemented or amended only by a written
instrument executed by each Party. The terms and conditions hereto may be
waived by a written instrument executed by the Party waiving compliance.
12. REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE
The rights and remedies of the Parties shall be cumulative (and not
alternative). Each Party acknowledges and agrees that the other Party may
be damaged irreparably in the event any of the provisions of this Agreement
are not performed in accordance with their specific terms or otherwise are
breached. Each Party agrees that the other Party may be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court having competent
jurisdiction, in addition to any other right or remedy to which they may be
entitled, at law or in equity. In the event of termination or breach of the
Share Purchase Agreement, the Parties hereto shall have available to them
the remedies set forth in the Share Purchase Agreement in addition to the
remedies available to them by law.
13. GOVERNING LAW
This Agreement shall be exclusively governed by and construed according to
the laws of Israel, without regard to the conflict of laws provisions
thereof.
14. ARBITRATION.
Any controversy or claim arising under, out of, or in connection with this
Agreement, its validity, its interpretation, its execution or any breach or
claimed breach thereof, shall be settled by a single arbitrator, who shall
be Xx. Xxxxx Xxxxxx, and if Xx. Xxxxx Xxxxxx is unwilling or unavailable to
serve as an arbitrator, the arbitrator shall be an attorney with experience
in complex corporate transactions to be mutually selected by the Parties'
legal counsels (the "ARBITRATOR"), and if the Parties are unable to reach
an agreement on the identity of the Arbitrator within thirty (30) days, the
Arbitrator shall be appointed by a court having competent jurisdiction. The
arbitration shall take place in Tel Aviv, Israel, in the Hebrew language.
The Arbitrator shall be exempt from the civil procedure rules and the rules
of evidence, but shall be bound by substantive law and by the duty of
citing grounds for his ruling. The Arbitrator shall be authorized to issue
injunctions and interim orders. The execution of this Agreement by the
parties shall be deemed the execution of an arbitration agreement as
required by the Israeli Arbitration Law, 5728-1968.
15. FURTHER ASSURANCES.
Each of the Parties shall provide all such further information, perform
such further acts and execute such further documents as may reasonably be
necessary to carry out and give full effect to the provisions of this
Agreement and the intentions of the parties as reflected thereby.
16. BINDING EFFECT; BENEFITS
This Agreement shall inure to the benefit of, and be binding upon, the
Parties and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon
any person or entity other than the Parties' respective successors and
permitted assigns any rights or remedies under or by reason of this
Agreement.
17. SEVERABILITY.
If any provision of this Agreement is held by a court of competent
jurisdiction to be unenforceable under applicable law, then such provision
shall be excluded from this Agreement and the remainder of this Agreement
shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms; PROVIDED, HOWEVER, that in such
event this Agreement shall be interpreted so as to give effect, to the
greatest extent consistent with and permitted by applicable law, to the
meaning and intention of the excluded provision as determined by such court
of competent jurisdiction.
18. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, and all of which together shall constitute one
and the same instrument.
19. ENTIRE AGREEMENT
This Agreement, together with all exhibits hereto and the Share Purchase
Agreement constitute the full and entire understanding and agreement
between the Parties with regard to the subject matters hereof and thereof,
and shall replace any previous agreement between the Parties, whether or
not separate or together with other parties.
20. RULES OF CONSTRUCTION
The Parties agree that they have been represented by counsel during the
negotiation, preparation and execution of this Agreement, and therefore,
waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document
be construed against the party drafting such agreement or document. Words
denoting the singular include the plural and vice versa and words denoting
any gender include all genders. Any reference to a statute shall mean the
statute in force as at the date hereof, unless otherwise expressly
provided. The use of headings is for convenience of reference only and
shall not affect the construction of this Agreement. When calculating the
period of time within which or following which any act is to be done or
step taken, the date which is the reference day in calculating such period
shall be excluded. If the last day of such period is not a business day,
the period shall end on the next business day.
IN WITNESS WHEREOF this Option Agreement has been executed by duly
authorized officers of each of the Parties as of the date first above written.
B.O.S. BETTER ONLINE SOLUTIONS LTD.
By: ________________________
Name:
Title:
Address:
CATALYST INVESTMENTS, L.P.
By: ________________________
Name:
Title:
Address:
EXHIBIT A
NOTICE OF EXERCISE
[omitted]
EXHIBIT B
PROXY
[omitted]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made as of March
30, 2003, by and between B.O.S. Better Online Solutions Ltd., a company
organized under the laws of Israel ("BOS" or the "COMPANY"), and Catalyst
Investments, L.P., a limited partnership organized under the laws of Israel
("CATALYST"). BOS and Catalyst shall be referred to herein collectively as the
"PARTIES".
WITNESSETH
WHEREAS, concurrently with the execution and delivery of this Agreement,
BOS and Catalyst are entering into a Share Purchase Agreement (the "SHARE
PURCHASE AGREEMENT"), which provides that, upon the terms and conditions
thereof, BOS will sell to Catalyst 2,529,100 Ordinary Shares of BOS (the "BOS
SHARES"); and
WHEREAS, as a condition to Catalyst's willingness to enter into the Share
Purchase Agreement, BOS agrees to grant Catalyst registration rights with
respect to the BOS Shares under the terms and conditions set forth herein; and
WHEREAS, BOS is a party to that certain Registration Rights Agreement Made
as of May 3, 2000, by and among BOS, Mr. Israel Gal, Mrs. Yael Gal, Xx. Xxxxx
Xxx and Xxx. Xxxxx Xxx and the persons and corporation listed on Schedule 1
thereto (the "EXISTING SHAREHOLDERS") (the "EXISTING REGISTRATION RIGHTS
AGREEMENT"), providing, among other things that the Company may not, without the
prior written consent by holders of at least a majority of the then outstanding
Registrable Securities (as defined therein), enter into an agreement for the
grant of (i) registration rights senior to or in parity with the rights of the
holders under the Existing Registration Rights Agreement, or (ii) demand
registration; and
WHEREAS, BOS, Catalyst, Mr. Israel Gal, holders of a majority of the
outstanding Registrable Securities (as defined in the Existing Registration
Rights Agreement) and others are parties to that certain Settlement Agreement,
dated February 10, 2003 (the " SETTLEMENT AGREEMENT"), which has been approved
by the District Court of Tel-Aviv, providing, among other things for the grant
of piggyback registration rights in parity with the rights of the holders under
the Existing Registration Rights Agreement and two demand registrations. A copy
of the Settlement Agreement is attached hereto as EXHIBIT A.
WHEREAS, the Parties wish to define the respective rights and obligations
of the Parties in connection with the grant of registration rights contemplated
hereby.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the Parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:
"ACT" means the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"COMMISSION" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Act.
"ORDINARY SHARES" shall mean the Company's Ordinary Shares NIS 1- par value
per share.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 as amended, or any
successor federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"HOLDER" means any person who is then the record owner of Registrable
Securities which have not been sold to the public.
"REGISTRABLE SECURITIES" shall mean all Ordinary Shares of the Company
issued to Catalyst pursuant to the Share Purchase Agreement, excluding
Ordinary Shares which (a) have been registered under the Securities Act
pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the registration statement covering them,
(b) have been publicly sold pursuant to Rule 144 under the Securities Act,
or (c) are then immediately available for sale pursuant to Rule 144 under
the Securities Act. For the avoidance of doubt, should the Company modify
its share capital in any way (e.g. stock spit, reverse stock split, etc.),
any additional shares issued to Catalyst as a result of such modification
shall also constitute Registrable Securities as defined hereunder. If
Catalyst purchases after the date hereof additional Ordinary Shares of BOS
from Xx. Xxxxx Xxx and/or Xx. Xxxxx Xxx, then Catalyst shall have a right
at its sole discretion to determine that such Ordinary Shares shall be
deemed Registrable Securities under this Agreement, subject to the
limitations set forth in Sections (a), (b) and (c) above.
The term "REGISTER" means to register under the Act and applicable state
securities laws for the purpose of effecting a public sale of securities.
2. REQUIRED REGISTRATION
(a) At any time commencing 60 days after the closing Catalyst may
request, once a year, that the Company register under the Securities Act
all or any portion of the Registrable Securities held by Catalyst for sale
in the manner specified in such notice, PROVIDED HOWEVER that the
registration is requested for at least 200,000 Registrable Securities (as
adjusted upon any recapitalization event).
Notwithstanding anything to the contrary contained herein, no request may
be made under this Section 2 within 180 days after the effective date of a
registration statement filed by the Company covering a firm commitment
underwritten public offering in which the Holders of Registrable Securities
under this Agreement and under the Existing Registration Rights Agreement
shall have been entitled to join pursuant to Sections 3 or 4 hereof and in
which there shall have been effectively registered all shares of
Registrable Securities as to which registration shall have been requested.
2
(b) Following receipt of any notice under this Section 2, the Company
shall immediately notify all Holders of Registrable Securities under this
Agreement and under the Existing Registration Rights Agreement from whom
notice has not been received and shall use its best efforts to register
under the Securities Act, for public sale in accordance with the method of
disposition specified in such notice from requesting Holder, the number of
Registrable Securities specified in such notice (and in all notices
received by the Company from other holders within 30 days after the giving
of such notice by the Company). If such method of disposition shall be an
underwritten public offering, the Company shall designate the managing
underwriter of such offering, subject to the approval of the Holders, which
approval shall not be unreasonably withheld or delayed. The Company shall
shall not be obligated to effect, or take any action to effect, any
registration pursuant to this Section 2 after the Company has effected two
(2) registrations pursuant to this Section 2, PROVIDED, HOWEVER that unless
(i) the registration statement is withdrawn and such withdrawal is not
attributable to adverse information concerning the Company's operations,
condition or prospects or (ii) the number of Registrable Securities covered
thereby is reduced, in either case at the request of Holders of Registrable
Securities covered thereby, such obligation shall be deemed satisfied only
when the registration statement covering all Registrable Securities
specified in notices received as aforesaid, for sale in accordance with the
method of disposition specified by the requesting Holders, shall become
effective and, if such Registrable Securities shall have been sold pursuant
thereto. The company not more than once in any period of twelve consecutive
months, may defer the effectiveness of such registration for up to one
hundred eighty (180) days from the date of the notice of request is
received, upon determination by the Board of Directors that such
registration would be detrimental to the Company.
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 2 for sale in accordance with the
method of disposition specified by the requesting Holders. Ordinary Shares
to be sold by the Company for its own account, except and to the extent
that in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Registrable Securities to be sold. If
Ordinary Shares are included by the Company for its own account and such
Ordinary Shares constitute at least 51% of the total shares covered by the
registration statement filed pursuant to this Section 2, such registration
will be deemed to have been completed pursuant to Section 3 hereof and not
this Section 2. Except for registration statements on Form S-4 or Form S-8
or any successor thereto, the Company will not file with the Commission any
other registration statement with respect to its Ordinary Shares, whether
for its own account or that of other Holders, from the date of receipt of a
notice from requesting Holders pursuant to this Section 2 until the
completion of the period of distribution of the registration contemplated
thereby.
3
3. INCIDENTAL REGISTRATION. If the Company at any time (other than pursuant to
Section 2 or Section 4) proposes to register any of its securities under
the Securities Act for sale to the public, for its own account (except with
respect to registration statements on Form X-0, Xxxx X-0, their respective
successor forms, or another form not available for registering the
Registrable Securities for sale to the public), each such time it will give
written notice to all Holders of outstanding Registrable Securities of its
intention so to do. The Company shall, upon the written request of any such
Holder, received by the Company within 20 days after the giving of any such
notice by the Company, to register any of its Registrable Securities (which
request shall state the intended method of disposition thereof) use its
best efforts to cause the Registrable Securities as to which registration
shall have been so requested to be included in the securities to be covered
by the registration statement proposed to be filed by the Company all to
the extent requisite to permit the sale or other disposition by the Holder
(in accordance with its written request) of such Registrable Securities so
registered. In the event that any registration pursuant to this Section 3,
shall be, in whole or in part, an underwritten public offering of Ordinary
Shares, the number of Ordinary Shares to be included in such underwriting
may be reduced (pro rata among the requesting Holders under this Agreement
and under the Existing Registration Agreement, based upon the numbers of
Ordinary Shares owned by such Holders) subject to any registration rights;
if and to the extent that the managing underwriter shall be of the opinion
that such inclusion would adversely affect the marketing of the securities
to be sold by the Company therein. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement referred to
in this Section 3 without thereby incurring any liability to the Holders of
Registrable Securities (other than as provided in Section 6).
4. FORM F-3 REGISTRATION. If at any time (i) a Holder or Holders of
Registrable Securities under this Agreement and under the Existing
Registration Rights Agreement requests that the Company file a registration
statement on Form S-3 or any successor thereto for a public offering of all
or part of the Registrable Securities held such requesting Holder or
Holders, the reasonably anticipated aggregate price to the public of which
would exceed $1,000,000, and (ii) the Company is a registrant entitled to
use Form S-3 or any successor thereto to register such shares, then the
Company shall use its reasonable best efforts to register under the
Securities Act on Form S-3 or any successor thereto, for public sale in
accordance with the method of disposition specified in such notice, the
number of Registrable Securities specified in such notice. Whenever the
Company is required by this Section 4 to use its reasonable best efforts to
effect the registration of Registrable Securities, each of the procedures
and requirements of Section 2 (including but not limited to the requirement
that the Company notify all Holders of Registrable Securities under this
Agreement and under the Existing Registration Rights Agreement from whom
notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration: PROVIDED
HOWEVER that there shall be no limitation on the number if registrations on
Form S-3 which may be issued and obtained under this Section 4: and
PROVIDED FURTHER HOWEVER, that the requirements contained in the first
sentence of Section 2(a) shall not apply to any registration on Form S-3
which may be requested under this Section 4.
4
(b) The Company shall not be obliged to effect any registration, qualification
or compliance, pursuant to this Section 4 if: (i) Form S-3 (or any
successor form to Form S-3 regardless of its designation) is not available
for such offering by the Holders; (ii) the aggregate net offering price
(after deduction of underwriting discounts and commissions) of the
Registrable Securities specified in such request is less than $1,000,000;
(iii) the Company has already effected one registration on Form S-3 within
the previous six-month period; or (iv) the Company shall furnish to the
Holders a certificate signed by the president of the Company stating that,
in good faith judgment of the Board of directors, it would not be in the
best interests of the Company and its stockholders for such Form S-3
registration to be effected at such time, in which event the Company shall
have the right to defer the filing of the Form S-3 registration for a
period of not more than one hundred eighty (180) days after receipt of the
request of the Holder or Holders under this Section 4; provided however
that the Company shall not utilize this right more than once in any twelve
month period.
5. EXPENSES. The Company shall pay all out-of-pocket costs in connection with
any registration pursuant to this Agreement. The costs and expenses of any
such registration shall include, without limitation, the fees and expenses
of the Company's counsel and its accountant and all other out-of-pocket
costs and expenses of the Company incident to the preparation, printing and
filing under the Securities Act of the registration statement and all
amendments and supplements thereto; and the cost of furnishing copies of
each preliminary prospectus, each final prospectus and each amendment or
supplement thereto to underwriters, dealers and other purchasers of the
securities so registered under the "blue sky" laws of various
jurisdictions, the fees and expenses of the Company's transfer agent, the
fees and expenses of one counsel for the Holders, expenses of all marketing
and promotional efforts requested by the managing underwriter and all other
costs and expenses of complying with the foregoing provisions hereof with
respect to such legislation. The Holders shall bear underwriting discounts,
selling commissions and transfer taxes with respect to the shares sold by
them pursuant to the registration.
5
6. REGISTRATION PROCEDURES. In the case of each registration effected by the
Company pursuant to this Agreement, the Company will keep each Holder of
Registrable Securities included in such registration advised in writing as
to the initiation of each registration and as to the completion thereof. At
its expense, the Company will do the following for the benefit of such
Holders:
(a) Keep such registration effective for a period of 90 days or until the
Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs and
amend or supplement such registration statement and the prospectus
contained therein from time to time to the extent necessary to comply
with the Act and applicable state securities laws. If at any time the
Commission should institute or threaten to institute any proceedings
for the purpose of issuing or should issue a stop order suspending the
effectiveness of any such registration statement, the Company will
promptly notify the Holder and will use reasonable efforts to prevent
the issuance of any such stop order or to obtain the withdrawal
thereof as soon as possible.
(b) Use its best efforts to register or qualify the Registrable Securities
covered by such registration under the applicable securities or "blue
sky" laws of such jurisdictions as the selling shareholders may
reasonably request; PROVIDED that the Company shall not be obligated
to qualify to do business in any jurisdiction where it is not then so
qualified or otherwise required to be so qualified or to take any
action which would subject it to the service of process in suits other
than those arising out of such registration.
(c) Furnish such number of prospectuses and other documents incident
thereto as a Holder or underwriter from time to time may reasonably
request.
(d) To the extent required, the Company will enter into any underwriting
agreement reasonably necessary to effect the offer and sale of
Ordinary Shares PROVIDED that such underwriting agreement contains
customary underwriting provisions and is entered into by the Holder
and PROVIDED further that, if the underwriter so requests, the
underwriting agreement will contain customary contribution provisions
on the part of the Company.
(e) To the extent then permitted under applicable professional guidelines
and standards, use its best efforts to obtain a comfort letter from
the Company's independent public accountants in customary form and
covering by comfort letters and an opinion from the Company's counsel
in customary form and covering such matters of the type customarily
covered in a public issuance of securities, in each case addressed to
the Holders and provide copies thereof to the Holders.
(f) Permit the counsel to the selling shareholders whose expenses are
being paid pursuant to Section 4 hereof to inspect and copy such
corporate documents as he may reasonably request.
6
7. INDEMNIFICATION
(a) The Company will and hereby does, indemnify and hold harmless each
Holder, each of its officers, directors and partners and each person
controlling such Holder within the meaning of the Act, with respect to
which registration, qualification or compliance has been effected
pursuant to this Agreement, and each underwriter, if any, and each
person who controls such underwriter within the meaning of the Act,
against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact in any prospectus,
offering, circular or other document (including any related
registration statement, modification or the like) incident to any such
registration, qualification or compliance, or based on any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Act or the Exchange
Act or securities act of any state or any rule or regulation
thereunder applicable to the Company in connection with any such
registration, qualification or compliance, and will reimburse each
such Holder, each of its officers, directors and partners and each
person controlling such Holder, each such underwriter and each person
who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, whether
or not resulting in any liability, PROVIDED that the Company will not
be liable in any such case to the extent that any such claim, loss
damage, liability or expense arises out of or is (x) based upon any
such untrue statement or omission or alleged untrue statement or
omission made in reliance upon information furnished in writing to the
Company by the Holders or any underwriter or any controlling person of
the Holders or any such underwriter specifically for use therein or
(y) made in any preliminary prospectus if the prospectus contained in
the registration statement as declared effective or in the form filed
by the Company with the Commission pursuant to Rule 424 under the
Securities Act shall have corrected such statement or omission, ample
copies of such prospectus (together with a statement that such
corrected prospectus must be used in lieu of all prior prospectuses)
shall have been provided by the Company to the Holders or underwriter,
and a copy of such prospectus shall not have been sent or otherwise
delivered to such person by the Holders or underwriter at or prior to
the confirmation of such sale to such person.
(b) By requesting confirmation under this Agreement, each Holder shall
agree in the same manner and to the same extent as set forth in the
preceding paragraph, to indemnify and to hold harmless the Company and
its directors, officers and each person, if any, who controls the
Company within the meaning of the Securities Act and any underwriter
(as defined in the Securities Act) of any shares offered by the
Holders, against any such claim, loss, damage, liability or expense,
joint or several, to which any such persons may be subject under the
Securities Act or otherwise, and to reimburse any of such persons for
any legal or other expenses reasonably incurred by them in connection
with investigating or defending against any such claim, loss, damage,
liability or expense, but only to the extent it arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission of a material fact in any registration statement
under which the Holders' shares were registered under the Securities
Act pursuant to this Agreement, any prospectus contained therein, or
any amendment or supplement thereto, which was based upon and made in
conformity with information furnished in writing to the Company by the
Holders or such underwriter expressly for use therein, provided
HOWEVER, that payments by each Holder hereunder shall be limited to an
amount equal to the net proceeds received by such Holder upon the
sales of the securities.
7
(c) Each party entitled to indemnification under this Section 7 (the
"INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought. The failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its
obligations under this Section 7, except and to the extent the
Indemnifying Party has been prejudiced as a consequence thereof and in
no event shall such failure relieve the underlying party from any
other liability which it may have to such indemnified party. The
Indemnifying Party will be entitled to participate in, and to the
extent that it may elect by written notice delivered to the
Indemnified Party promptly after receiving the aforesaid notice from
such Indemnified Party, at its own expense to assume the defense of
any such claim or any litigation resulting therefrom, with counsel
reasonably satisfactory so such Indemnified Party, PROVIDED that the
Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying
Party, and PROVIDED, further, that if the defendants in any such
action shall include both the Indemnified Party and the Indemnifying
Party and the Indemnified Party shall have reasonably concluded that
there may be legal defenses available to it and/or other Indemnified
Parties which are different form or additional to those available to
the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and
to otherwise participate in the defense of such action on behalf of
such Indemnified Party or Parties and the fees and expenses of such
counsel shall be paid by the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except
with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnified Party of a release from all liability in respect to
such claim or litigation. Each Indemnified Party shall (i) furnish
such information regarding itself of the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claims and
litigation resulting therefrom and (ii) shall reasonably assist the
Indemnifying Party in any such defense, PROVIDED that the Indemnified
Party shall not be required to expend its funds in connection with
such assistance.
8
(d) No Holder shall be required to participate in a registration pursuant
to which it would be required to execute an underwriting agreement in
connection with a registration effected under Section 2 or 3 which
imposes indemnification or contribution obligations on such Holder
more onerous than those imposed hereunder: PROVIDED HOWEVER that the
Company shall not be deemed to breach those provisions of Section 2 or
3 if a Holder is not permitted to participate in a registration on
account of his refusal to execute an underwriting agreement on the
basis of this sub-section (d).
8. LOCK-UP AGREEMENT. If requested by the underwriter in any registered public
offering by the Company, the Holder agrees not to sell or otherwise
transfer any Registrable Securities for such period of time after the date
of such offering as may be requested by the underwriter, but in no event to
exceed 180 days from the close of the initial public offering and 90 days
from the close of any subsequent registered public offering, PROVIDED that
all executive officers and directors of the Company enter into similar
agreements.
9. INFORMATION BY HOLDER. Each Holder of Registrable Securities included in
any registration shall furnish to the Company such information regarding
such Holder and the distribution proposal by such Holder as the Company may
reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to
in this Agreement or otherwise required by applicable state or federal
securities laws.
10. LIMITATIONS ON REGISTRATION RIGHTS. From and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities under this Agreement
enter into any agreement with any holder or prospective holder of any
securities of the Company, not having any registration rights on the date
hereof, which would give any such holder or prospective holder the right to
require the Company, upon any registration of any of its securities, to
include, among the securities which the Company is then registering,
securities owned by such holder, unless under the terms of such agreement,
such holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of its securities will
not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities hereunder.
11. EXCEPTION TO REGISTRATION. The Company shall not be required to effect a
registration under this Agreement if (i) in the written opinion of counsel
for the Company, which counsel and the opinion so rendered shall be
reasonably acceptable to the Holders of the Registrable Securities, such
Holders may sell without registration under the Act all Registrable
Securities for which they requested registration under the provisions of
the Act and in the manner and in the quantity in which the Registrable
Securities were proposed to be sold, or (ii) the Company shall have
obtained from the Commission a "no action: letter to that effect; PROVIDED
that this Section 11 shall not apply to sales made under Rule 144 (k) or
any successor rule promulgated by the Commission until after the effective
date of the Company's initial registration of shares under the Act.
9
12. RULE 144 REPORTING. With a view to making available the benefits of certain
rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the Act) to
the public without registration, the Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Act, at all times from
and after ninety days following the effective date of the first
registration under the Act filed by the Company for an offering of its
securities to the public;
(b) use its best efforts to file with the Commission in a timely manner,
all reports and other documents required of the Company under the Act
and the Exchange Act at any time after it has become subject to such
reporting requirements; and
(c) so long as a Holder owns any restricted securities, furnish to the
Holder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety days following the effective date of the
first registration statement filed by the Company for an offering of
its securities to the general public), and of the Act and Exchange Act
(at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed by the
Company as the Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing the Holder to sell any
such securities without registration.
13. LISTING APPLICATION. If share of any class of stock of the Company shall be
listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Holder.
14. ASSIGNMENT OF REGISTRATION RIGHTS. Any of the Holders may assign its rights
(but only with all related obligations) to cause the Company to register
Shares hereunder to (i) a transferee or assignee of such securities who,
after such assignment or transfer, holds at least thirty three percent
(33%) of the Registrable Securities held by such transferring Holder on the
date hereof, or (ii) any amount of Registrable Securities to a limited
liability company or corporation, in any transfer to an affiliated entity
and any current and former constituent partners, members, shareholders and
affiliates of such Holder or an affiliated entity, PROVIDED HOWEVER that
such transfer or assignment is made pursuant to the provisions of the
Company's Articles of Association, including without limitation, the
provisions relating to transfer of securities, and FURTHER PROVIDED that
(a) the Company is, as soon as practicable and in any event within twenty
one (21) days after such transfer, is furnished with a written notice of
the name and address of such transferee or assignee and a description of
the securities with respect to which such registration rights are being
assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement; and (c) such
assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act.
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15. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Registrable
Securities) whether so expressed or not.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage pre-paid, or telecopied or
sent by facsimile method addressed as follows:
If to the Company, or a Holder, at the address of such party as set
forth on the signature block or the most recent address as is shown on
the stock records of the Company; and
If to any subsequent Holder of Registrable Securities, to it at such
address as may have been furnished to the Company in writing by such
party, or, in case, at such other address or addresses as shall have
been furnished in writing to the Company (in the case of a Holder of
registrable Securities) or to the Holders of Registrable Securities
(in the case of the Company) in accordance with the provisions of this
paragraph.
(c) This Agreement shall be governed by and construed in accordance with
the state of New York, without giving effect to the conflicts of laws
thereof.
(d) This Agreement may not be amended or modified, and no part hereof may
be waived, without the written consent of the Company and the holders
of at least a majority of the then outstanding Registrable Securities.
(e) 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 instrument.
11
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in
any manner affect or render illegal, invalid or unenforceable, any
other provision of this Agreement, and this Agreement shall be carried
out as if any such illegal, invalid or unenforceable provision were
not contained herein.
(g) This Agreement contains the entire agreement between the parties
hereto with respect to registration rights, and supersedes all prior
agreements relating to the same subject matter.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
12
IN WITNESS WHEREOF this Registration Rights Agreement has been executed by
duly authorized officers of each of the Parties as of the date first above
written.
B.O.S. BETTER ONLINE SOLUTIONS LTD.
By: ________________________
Name:
Title:
Address:
CATALYST INVESTMENTS, L.P.
By: ________________________
Name:
Title:
Address:
13
EXHIBIT A
SETTLEMENT AGREEMENT
[omitted]
