Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of May 18,
2004, (the "Execution Date") by and among Commtouch Software Ltd., a corporation
organized under the laws of the State of Israel, with headquarters located at 0X
Xxxxxxx Xxxxxx, Xxxxx Xxxxxxxxxx Xxxx, Xxxxxxx 00000, Xxxxxx (the "Company"),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and
Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act;
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate amount of
Ordinary Shares, NIS 0.05 nominal value per share (the "Ordinary Shares") set
forth opposite such Buyer's name in column (3) on the Schedule of Buyers (the
aggregate purchase price of which for all Buyers shall be $3,900,000), (ii)
warrants, in substantially the form attached hereto as Exhibit A (the "Initial
Warrants"), to acquire up to an Ordinary Share for each two Ordinary Shares
purchased (as exercised, collectively, the "Initial Warrant Shares"), (iii) a
right to acquire up to that number of additional Ordinary Shares set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (the
"Additional Investment Rights"), in substantially the form attached hereto as
Exhibit B (as exercised, collectively, the "Additional Investment Right Shares")
and (iv) warrants, in substantially the form attached hereto as Exhibit C (the
"Additional Warrants" and, together with the Initial Warrants, the "Warrants"),
to acquire up to an Ordinary Share for each two Additional Investment Right
Shares issued upon exercise of the Additional Investment Rights (as exercised,
collectively, the "Additional Warrant Shares" and, together with the Initial
Warrant Shares, the "Warrant Shares");
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit D (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Ordinary Shares, the Additional
Investment Right Shares and the Warrant Shares under the 1933 Act and the rules
and regulations promulgated thereunder, and applicable state securities laws;
and
D. The Ordinary Shares, the Additional Investment Rights, the Warrants,
the Additional Investment Rights Shares and the Warrant Shares collectively are
referred to herein as the "Securities".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF ORDINARY SHARES, WARRANTS AND ADDITIONAL
INVESTMENT RIGHTS.
(a) Purchase of Ordinary Shares, Warrants and Additional
Investment Rights.
(i) Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and sell
to each Buyer, and each Buyer severally, but not jointly, agrees to purchase
from the Company on the Closing Date (as defined below), (w) the number of
Ordinary Shares as is set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers, (x) Initial Warrants to acquire up to an Ordinary Share for
each two Ordinary Shares purchased, (y) Additional Investment Rights to acquire
up to that number of Additional Investment Right Shares as is set forth opposite
such Buyer's name in column (4) on the Schedule of Buyers and (z) Additional
Warrants to acquire up to an Ordinary Share for each two Ordinary Shares issued
upon exercise of the Additional Investment Rights (the "Closing").
(ii) Closing. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m., New York City Time, on the second Business
Day (or such later date as is mutually agreed to by the Company and each Buyer)
after notification of satisfaction (or waiver) of the conditions to the Closing
set forth in Sections 6 and 7 below at the offices of Xxxxxxx Xxxx & Xxxxx LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(iii) Purchase Price. The purchase price for the
Ordinary Shares, Warrants and Additional Investment Rights to be purchased by
each Buyer at the Closing shall be the amount set forth opposite such Buyer's
name in column (5) of the Schedule of Buyers (the "Purchase Price"), which shall
be equal to the amount of $0.76 per Ordinary Share.
(b) Form of Payment. On the Closing Date, (i) each Buyer shall
pay its Purchase Price to the Company for the Ordinary Shares, Warrants and
Additional Investment Rights to be issued and sold to such Buyer at the Closing,
by wire transfer of immediately available funds in accordance with the Company's
written wire instructions, and (ii) the Company shall deliver to each Buyer (A)
one or more stock certificates (in such denominations as such Buyer shall
request) which such Buyer is then purchasing along with the Warrants (in the
amounts as such Buyer shall request) and Additional Investment Rights (in the
amounts as such Buyer shall request) such Buyer is purchasing, duly executed on
behalf of the Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
(a) No Public Sale or Distribution. Such Buyer is (i)
acquiring the Ordinary Shares, the Warrants and the Additional Investment
Rights, (ii) upon exercise of the Warrants will acquire the Warrant Shares
issuable upon exercise thereof and (iii) upon exercise of the Additional
Investment Rights will acquire the Additional Investment Right Shares issuable
upon exercise thereof, in each case for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, such Buyer does
not agree to hold any of the Securities for any minimum or other specific term
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and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act.
Such Buyer is acquiring the Securities hereunder in the ordinary course of its
business. Such Buyer does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(b) Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall modify, amend
or affect such Buyer's right to rely on the Company's representations and
warranties contained herein. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
(e) No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably acceptable to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, "Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the Person (as defined in Section 3(s)) through whom the
sale is made) may be deemed to be an underwriter (as that term is defined in the
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1933 Act) may require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC thereunder; and (iii) neither the Company
nor any other Person is under any obligation to register the Securities under
the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
(g) Legends. Such Buyer understands that (i) the Warrants and
the Additional Investment Rights and (ii) the certificates or other instruments
representing the Ordinary Shares, Warrant Shares and the Additional Investment
Right Shares, until such time as the resale of the Ordinary Shares, the Warrant
Shares and the Additional Investment Right Shares have been registered under the
1933 Act as contemplated by the Registration Rights Agreement and such Buyer has
confirmed in writing to the Company that it has delivered the prospectus
contained in the registration statement filed pursuant to the Registration
Rights Agreement (the "Registration Statement"), as the same may have been
supplemented by the Company, to any Person to whom such Buyer is transferring
any of the Securities, except as set forth below, shall bear any legend as
required by the "blue sky" laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE CONVERTIBLE
EXERCISABLE HAVE BEEN][THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I)
IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
COMMTOUCH SOFTWARE LTD., THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act and such Buyer has
confirmed in writing to the Company that it has delivered the prospectus
contained in the Registration Statement, as the same may have been supplemented
by the Company, to any Person to whom such Buyer is transferring any of the
Ordinary Shares, the Warrant Shares or the Additional Investment Right Shares,
(ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel, in a form reasonably acceptable
to the Company, to the effect that such sale, assignment or transfer of the
Securities may be made without registration under the applicable requirements of
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the 1933 Act, or (iii) such holder provides the Company with reasonable
assurance that the Securities can be sold, assigned or transferred pursuant to
Rule 144 or Rule 144A.
(h) Validity; Enforcement. This Agreement and the Registration
Rights Agreement to which such Buyer is a party have been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute
the legal, valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
(i) No Conflicts. The execution, delivery and performance by
such Buyer of this Agreement and the Registration Rights Agreement to which such
Buyer is a party and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
(j) Residency. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
(k) Affiliation. Such Buyer is not affiliated with Olympus
Securities, LLC.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
(a) Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns more than 50% of the capital stock or
holds a more than 50% equity or similar interest) are entities duly organized
and validly existing and (in jurisdictions in which such concept is relevant) in
good standing under the laws of the jurisdiction in which they are formed, and
have the requisite power and authorization to own their properties and to carry
on their business as now being conducted. No proceeding has been instituted by
the Registrar of Companies in Israel for the dissolution of the Company. Each of
the Company and its Subsidiaries is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on the
business, properties, assets, operations, results of operations, condition
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(financial or otherwise) or prospects of the Company and its Subsidiaries, taken
as a whole, or on the transactions contemplated hereby and the other Transaction
Documents or by the agreements and instruments to be entered into in connection
herewith or therewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined below). The Company
has no Subsidiaries except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Warrants, the Additional Investment Rights, and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "Transaction Documents") and
to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Ordinary Shares, the
reservation for issuance and the issuance of the Warrant Shares issuable upon
exercise of the Warrants, the reservation for issuance and the issuance of the
Additional Investment Right Shares issuable upon exercise of the Additional
Investment Rights, have been duly authorized by the Company's Board of Directors
and (other than (i) the filing with the SEC of one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement, (ii) any required approval by the Office of Chief Scientist in the
Israeli Ministry of Industry and Trade (the "OCS") and the Investment Center of
the transactions contemplated hereunder and (iii) the Shareholder Approval
pursuant to Section 4(q)) no further filing, consent, or authorization is
required by the Company, its Board of Directors or its shareholders. This
Agreement and the other Transaction Documents of even date herewith have been
duly executed and delivered by the Company, and constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies. As of the Closing, the Transaction Documents dated after the date
hereof and required to have been executed and delivered with respect to such
Closing shall have been duly executed and delivered by the Company, and shall
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditor's
rights and remedies.
(c) Issuance of Securities. The Ordinary Shares, the Warrants
and Additional Investment Rights are duly authorized. Other than Israeli stamp
tax and withholding tax, there is no tax, levy, impost, duty, fee, assessment or
other governmental charge, or any deduction or withholding, imposed by any
governmental agency or authority in or of Israel either (A) on or by virtue of
the execution or delivery of the Transaction Documents to which Company is a
party, (B) the issuance of the Securities pursuant hereto or (C) on any payment
to be made by Company pursuant to the Transaction Documents. As of the Closing,
a number of Ordinary Shares shall have been duly authorized and reserved for
issuance which equals the sum of (i) 130% of the maximum number of Ordinary
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Shares issuable upon exercise of the Warrants and (ii) 100% of the maximum
number of Ordinary Shares issuable upon exercise of the Additional Investment
Rights . Upon exercise in accordance with the Warrants and the Additional
Investment Rights, as applicable, the Warrant Shares and the Additional
Investment Right Shares, as applicable, will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Ordinary Shares. The offer and issuance by the Company of the
Securities is exempt from registration under the 1933 Act. There are no
prospectus delivery requirements under Israeli law in connection with the offer
and issuance of the Securities.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Ordinary Shares, the Warrants and the Additional Investment
Rights and reservation for issuance and issuance of the Warrant Shares and the
Additional Investment Right Shares) will not (i) result in a violation of the
Articles of Association of the Company ("Articles of Association"), any share
capital of the Company or Memorandum of Association ("Memorandum") of the
Company or any of its Subsidiaries or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of The Nasdaq SmallCap Market (the "Principal Market")) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected.
(e) Consents. The Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency or any
other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in each case in
accordance with the terms hereof or thereof, except for the filing of a Form D
with the SEC and with the California Department of Corporations. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the Closing Date, and the Company and its Subsidiaries are unaware
of any facts or circumstances which might prevent the Company from obtaining or
effecting any of the registration, application or filings pursuant to the
preceding sentence. Other than as set forth in that certain letter, dated May
10, 2004, from The Nasdaq Stock Market, Inc., to the Company, attached hereto as
Schedule 3(e) (the "Delisting Letter"), the Company is not in violation of the
listing requirements of the Principal Market and has no knowledge of any facts
which would reasonably be expected to lead to delisting or suspension of the
Ordinary Shares by the Principal Market in the foreseeable future.
(f) Acknowledgment Regarding Buyer's Purchase of Securities.
The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby and that no Buyer is (i) an
officer or director of the Company, (ii) an "affiliate" of the Company (as
defined in Rule 144) or (iii) to the knowledge of the Company, a "beneficial
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owner" of more than 10% of the Ordinary Shares (as defined for purposes of Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the "1934 Act")). The
Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither
the Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has not engaged any
placement agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Company, its
Subsidiaries, any of their affiliates, and any Person acting on their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated. None of the Company, its Subsidiaries, their affiliates
and any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would require registration of any of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges
that the number of Warrant Shares issuable upon exercise of the Warrants and
Additional Investment Rights Shares issuable upon exercise of the Additional
Investment Rights will increase in certain circumstances. The Company further
acknowledges that its obligation to issue the Warrant Shares upon exercise of
the Warrants and the Additional Investment Right Shares upon exercise of the
Additional Investment Rights in accordance with this Agreement, the Warrants and
the Additional Investment Rights is not in any manner diminished due to any
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Articles of Association (as
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defined in Section 3(r)) or the laws of the jurisdiction of its formation which
is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the Securities. The
Company has not adopted a shareholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Ordinary Shares or a change
in control of the Company.
(k) SEC Documents; Financial Statements. Since December 31,
2001, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof, or in connection with any Closing subsequent to the date hereof, filed
prior to the date of such Closing, and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on the XXXXX
system. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
(l) Absence of Certain Changes. Except as disclosed in
Schedule 3(l), since December 31, 2002, there has been no Material Adverse
Effect and no material adverse development in the business, properties,
operations, condition (financial or otherwise), results of operations or
prospects of the Company or its Subsidiaries. Since December 31, 2002, the
Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $250,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $250,000. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
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and after giving effect to the transactions contemplated hereby to occur at each
Closing, will not be Insolvent (as defined below). For purposes of this Section
3(l), "Insolvent" means (i) the present fair saleable value of the Company's
assets is less than the amount required to pay the Company's total Indebtedness
(as defined in Section 3(s)), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, or (iii) the Company intends to incur
or believes that it will incur debts that would be beyond its ability to pay as
such debts mature.
(m) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form F-1 filed with
the SEC relating to an issuance and sale by the Company of its Ordinary Shares
and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits.
(i) Neither the Company nor its Subsidiaries is in
violation of any term of or in default under its Articles of Association or
Memorandum or their organizational charter or memorandum of association or
bylaws, respectively. Neither the Company nor any of its Subsidiaries is in
violation of any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company or its Subsidiaries, and neither the
Company nor any of its Subsidiaries will conduct its business in violation of
any of the foregoing, except for possible violations which would not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, other than as set forth in the
Delisting Letter, the Company is not in violation of any of the rules,
regulations or requirements of the Principal Market and has no knowledge of any
facts or circumstances which would reasonably be expected to lead to delisting
or suspension of the Ordinary Shares by the Principal Market in the foreseeable
future. Since December 31, 2002, (i) the Ordinary Shares have been designated
for quotation on the Principal Market, (ii) trading in the Ordinary Shares have
not been suspended by the SEC or the Principal Market and (iii) other than the
Delisting Letter, the Company has received no communication, written or oral,
from the SEC or the Principal Market regarding the suspension or delisting of
the Ordinary Shares from the Principal Market. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
(ii) The Company is in compliance in all material
respects with all conditions and requirements stipulated by the instruments of
approval granted to it with respect to the "Approved Enterprise" status of any
of the Company's facilities by Israeli laws and regulations relating to such
"Approved Enterprise" status and other tax benefits received by the Company; and
the Company has not received any notice of any proceeding or investigation
- 10 -
relating to revocation or modification of any "Approved Enterprise" status
granted with respect to any of the Company's facilities.
(iii) The Company is not in violation of any
condition or requirement stipulated by the instruments of approval granted to
the Company by the OCS and any applicable laws and regulations with respect to
any research and development grants given to it by such office as to grants for
projects that the OCS has not confirmed as having been closed. All information
supplied by the Company with respect to such applications was true, correct and
complete in all material respects when supplied to the appropriate authorities.
Schedule 3(n)(iii) provides a correct and complete list of the aggregate amount
of pending and outstanding grants from the OCS, net of royalties paid.
(o) Foreign Corrupt Practices. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other Person
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any
and all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the
SEC Documents filed at least ten days prior to the date hereof and other than
the grant of stock options disclosed on Schedule 3(r), none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
(r) Equity Capitalization. As of the date hereof, the
authorized share capital of the Company consists of 75,000,000 Ordinary Shares,
of which as of the date hereof, approximately 37,363,024 are issued and
outstanding, approximately 11,773,544 shares are reserved for issuance pursuant
to the Company's stock option and purchase plans and 14,887,071 shares are
reserved for issuance pursuant to securities (other than the Securities)
exercisable or exchangeable for, or convertible into, Ordinary Shares. All of
such outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable. Except as disclosed in Schedule 3(r) and
except pursuant to benefit plans disclosed in the Company's filings with the SEC
- 11 -
available on XXXXX: (i) none of the Company's share capital is subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any share capital of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional share capital of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any share capital of the Company or any of its
Subsidiaries; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound; (iv) there are no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company; (v) there are no
agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (vi) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.
(s) Indebtedness and Other Contracts. Except as disclosed in
Schedule 3(s), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under which, by the
other party(ies) to such contract, agreement or instrument would result in a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule 3(s) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
- 12 -
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. Other than the Delisting Letter,
there is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, the Ordinary Shares or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or
directors in their capacities as such, except as set forth in Schedule 3(t).
(u) Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(v) Employee Relations. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company (as defined
in Rule 501(f) of the 0000 Xxx) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company. No executive officer of the Company, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
- 13 -
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.
(ii) Neither the Company nor any of its Subsidiaries
is not subject to, nor do any of its employees benefit from, whether pursuant to
applicable employment laws, regulations, extension orders ("tzavei harchava") or
otherwise, any agreement, arrangement, understanding or custom with respect to
employment (including, without limitation, termination thereof). The severance
pay due to the Employees is fully funded or provided for in accordance with
generally accepted accounting principles, consistently applied.
(iii) The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(w) Title. The Company and its Subsidiaries have good and
marketable title to all real property and interests therein and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as do not materially interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(x) Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("Intellectual Property Rights") necessary to conduct their respective
businesses as now conducted. Except as set forth in Schedule 3(x) and except for
trademarks, none of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate, within three years from the
date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others. There is no claim, action or proceeding being made or brought, or to
the knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights. The Company is unaware
of any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings. The Company and its
Subsidiaries have taken security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
(y) Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all Environmental Laws (as hereinafter defined),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
- 14 -
license or approval where, where the failure to so comply in each of the
foregoing clauses (i), (ii) and (iii) could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
"Environmental Laws" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. The Company or one of its Subsidiaries
has the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital
securities of its Subsidiaries as owned by the Company or such Subsidiary.
(aa) Tax Status. The Company and each of its Subsidiaries (i)
has made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and (iii)
has set aside on its books provision reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(bb) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.
(cc) Taxes. No tax, levy, impost, duty, fee, assessment or
other governmental charge or any deduction or withholding imposed by any
governmental agency or authority in or of the State of Israel is payable by or
on behalf of the Buyers or any assignee of any of the Buyers (i) as a result of
the execution, delivery or performance by the Company of any of the Transaction
Documents, including, but not limited to, the issuance by the Company of the
Securities or (ii) any resale by the Buyers of any of the Securities in
accordance with the terms thereof and this Agreement.
- 15 -
(dd) Form F-3 Eligibility; Foreign Private Issuer Status. The
Company is eligible to register the resale by the Buyers of the Ordinary Shares
acquired pursuant to the Transaction Documents on a registration statement on
Form F-3 under the 1933 Act. The Company qualifies as a "foreign private issuer"
as such term is defined in the 1934 Act.
(ee) Financial Position. After giving effect to the net
proceeds to the Company from the sale of Ordinary Shares at the Closing
hereunder, the Company shall not be subject to receipt from the Company's
independent auditors of inclusion of a "going concern" or other qualification in
their opinion with respect to Company's financial statements for the year ended
December 31, 2003.
(ff) Disclosure. The Company confirms that neither it nor any
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that the Company believes constitutes material,
non-public information. The Company understands and confirms that the Buyers
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement; provided however, that a failure by the Company to
make a required filing with the Israeli Registrar of Companies which is
occasioned by a strike or work stoppage shall result in postponement of the
Closing Date until such filing becomes practicable and shall not be considered a
breach of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Buyers at each of the Closings pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyers on or prior to
the applicable Closing Dates. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following each
of the Closing Dates.
(c) Reporting Status. During the period in which the Company
is required to maintain the effectiveness of a resale registration statement
under the Registration Rights Agreement (the "Reporting Period"), the Company
shall file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from
the sale of the Securities for working capital purposes and not for the (i)
- 16 -
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (ii) redemption or repurchase of any of its equity securities.
(e) Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period unless the following are
filed with the SEC through XXXXX and are available to the public through the
XXXXX system: (i) within five (5) Business Days after the filing thereof with
the SEC, a copy of its Annual Reports on Form 20-F, any interim reports or any
consolidated balance sheets, income statements, shareholders' equity statements
and/or cash flow statements for any period other than annual, any Reports on
Form 6-K and any registration statements (other than those for benefit plans or
dividend or interest reinvestment plans) or amendments filed pursuant to the
1933 Act, (ii) on the day after the release thereof, facsimile copies of all
press releases issued by the Company or any of its Subsidiaries, and (iii)
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.
(f) Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which the Ordinary Shares are then listed (subject to
official notice of issuance) and shall maintain, so long as any other Ordinary
Shares shall be so listed, such listing of all Registrable Securities from time
to time issuable under the terms of the Transaction Documents. The Company shall
maintain the Ordinary Shares' authorization for quotation on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Ordinary Shares on the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).
(g) Fees. Subject to Section 8 below, the Company shall pay an
expense allowance of $15,000 to Smithfield Fiduciary LLC (a Buyer) or its
designee(s). The amount due at Closing shall be withheld by such Buyer from its
Purchase Price at the Closing. The Company shall be responsible for the payment
of any placement agent's fees, financial advisory fees, or broker's commissions
(other than for Persons engaged by any Buyer) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyers.
(h) Pledge of Securities. The Company acknowledges and agrees
that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall
be required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
- 17 -
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
(i) Disclosure of Transactions and Other Material Information.
On or before 8:30 a.m., New York Time, on May 18, 2004, the Company shall issue
a press release describing the terms of the transactions contemplated by the
Transaction Documents and on or before 8:30 a.m., New York Time, on May 19,
2004, the Company shall file a Report on Form 6-K describing the terms of the
transactions contemplated by the Transaction Documents in the form required by
the 1934 Act and attaching the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement), the
form the Warrants, the form of the Additional Investment Right and the
Registration Rights Agreement) as exhibits to such filing (including all
attachments, the "6-K Filing"). On or before 8:30 a.m., New York Time, on the
first Business Day following the Closing Date and each exercise of the
Additional Investment Right, the Company shall file a Report on Form 6-K with
the SEC describing the transaction consummated or proposed on such date. From
and after the filing of the 6-K Filing with the SEC, no Buyer shall be in
possession of any material, nonpublic information received from the Company, any
of its Subsidiaries or any of its respective officers, directors, employees or
agents, that is not disclosed in the 6-K Filing. The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide any Buyer with any
material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 6-K Filing with the SEC without the express
written consent of such Buyer. In the event of a breach of the foregoing
covenant by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, a Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or agents for any such disclosure.
Subject to the foregoing, neither the Company nor any Buyer shall issue any
press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Buyer, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 6-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release).
(j) Corporate Existence. So long as any Buyer beneficially
owns any Ordinary Shares or Additional Investment Rights, the Company shall
maintain its corporate existence and shall not sell all or substantially all of
the Company's assets, except in the event of a merger or consolidation or sale
of all or substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose common equity stock is
quoted on or listed for trading on the Nasdaq National Market, The Nasdaq
SmallCap Market, the American Stock Exchange or The New York Stock Exchange,
Inc.
- 18 -
(k) Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, from and after the Closing Date, the sum of (i) 130% of the number of
Ordinary Shares issuable upon exercise of the Warrants and (ii) 100% of the
number of Ordinary Shares issuable upon exercise of the Additional Investment
Rights.
(l) Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(m) Extension of Exercise Period for Additional Notes.
Notwithstanding the provisions of Section 1(c) of that certain Securities
Purchase Agreement, dated as of November 26, 2004, by and among the Company and
the Buyers (the "Prior SPA"), the period of time during which a Buyer shall be
allowed to deliver an Additional Note Notice (as defined therein) shall
terminate on the date which is the eighteen month anniversary of the
effectiveness of the Registration Statement.
(n) Additional Issuances of Securities.
(i) For purposes of this Section 4(n), the following
definitions shall apply.
(1) "Approved Stock Plan" means any employee
benefit plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to
any employee, officer or director for services provided to the Company.
(2) "Convertible Securities" means any stock
or securities (other than Options) convertible into or exercisable or
exchangeable for Ordinary Shares.
(3) "Excluded Securities" means any Ordinary
Shares issued or issuable: (i) in connection with any Approved Stock
Plan; (ii) upon the exercise of the Warrants or Additional Investment
Rights; (iii) pursuant to a bona fide firm commitment underwritten
public offering with a nationally recognized underwriter which
generates gross proceeds to the Company in excess of $45,000,000 (other
than an "at-the-market offering" as defined in Rule 415(a)(4) under the
1933 Act and "equity lines"); and (iv) upon conversion of any Options
or Convertible Securities which are outstanding on the day immediately
preceding the date hereof, provided that the terms of such Options or
Convertible Securities are not amended, modified or changed on or after
the date hereof.
(4) "Options" means any rights, warrants or
options to subscribe for or purchase Ordinary Shares or Convertible
Securities.
(5) "Ordinary Share Equivalents" means,
collectively, Options and Convertible Securities.
- 19 -
(6) "Trading Day" means any day on which the
Ordinary Shares are traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the Ordinary
Shares, then on the principal securities exchange or securities market
on which the Ordinary Shares are then traded; provided that "Trading
Day" shall not include any day on which the Ordinary Shares are
scheduled to trade on such exchange or market for less than 4.5 hours
or any day that the Ordinary Shares are suspended from trading during
the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of
trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York Time).
(ii) From the date hereof until the date that is 90
Trading Days following the date on which the Registration Statement is declared
effective (the "Trigger Date"), the Company will not, directly or indirectly,
offer, sell, grant any option to purchase, or otherwise dispose of (or announce
any offer, sale, grant or any option to purchase or other disposition of) any of
its or its Subsidiaries' equity or equity equivalent securities, including
without limitation any debt, preferred stock or other instrument or security
that is, at any time during its life and under any circumstances, convertible
into or exchangeable or exercisable for Ordinary Shares or Ordinary Share
Equivalents (any such offer, sale, grant, disposition or announcement being
referred to as a "Subsequent Placement").
(iii) From the Trigger Date until the eighteen month
anniversary thereof, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4(n)(iii).
(1) The Company shall deliver to each Buyer a written notice
(the "Offer Notice") of any proposed or intended issuance or sale or
exchange (the "Offer") of the securities being offered (the "Offered
Securities") in a Subsequent Placement, which Offer Notice shall (w)
identify and describe the Offered Securities, (x) describe the price
and other terms upon which they are to be issued, sold or exchanged,
and the number or amount of the Offered Securities to be issued, sold
or exchanged, (y) identify the persons or entities (if known) to which
or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with the
Buyers one-third (1/3) of the Offered Securities, allocated among the
Buyers (a) based on such Buyer's pro rata portion of the aggregate
number of Ordinary Shares purchased hereunder (the "Basic Amount"), and
(b) with respect to each Buyer that elects to purchase its Basic
Amount, any additional portion of the Offered Securities attributable
to the Basic Amounts of other Buyers as such Buyer shall indicate it
will purchase or acquire should the other Buyers subscribe for less
than their Basic Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part, a Buyer must
deliver a written notice to the Company prior to the end of the tenth
(10th) Business Day after such Buyer's receipt of the Offer Notice (the
"Offer Period"), setting forth the portion of the Buyer's Basic Amount
that such Buyer elects to purchase and, if such Buyer shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any,
that such Buyer elects to purchase (in either case, the "Notice of
Acceptance"). If the Basic Amounts subscribed for by all Buyers are
less than the total of all of the Basic Amounts, then each Buyer who
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has set forth an Undersubscription Amount in its Notice of Acceptance
shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed for;
provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and
the Basic Amounts subscribed for (the "Available Undersubscription
Amount"), each Buyer who has subscribed for any Undersubscription
Amount shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such Buyer bears to the
total Basic Amounts of all Buyers that have subscribed for
Undersubscription Amounts, subject to rounding by the Company to the
extent its deems reasonably necessary.
(3) The Company shall have five (5) Business Days from the
expiration of the Offer Period above to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Buyers (the "Refused Securities"),
but only to the offerees described in the Offer Notice (if so described
therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable
to the acquiring person or persons or less favorable to the Company
than those set forth in the Offer Notice.
(4) In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and on
the terms specified in Section 4(n)(iii)(3) above), then each Buyer
may, at its sole option and in its sole discretion, reduce the number
or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or
amount of the Offered Securities that the Buyer elected to purchase
pursuant to Section 4(n)(iii)(2) above multiplied by a fraction, (i)
the numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange
(including Offered Securities to be issued or sold to Buyers pursuant
to Section 4(n)(iii)(3) above prior to such reduction) and (ii) the
denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance,
the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such
securities have again been offered to the Buyers in accordance with
Section 4(n)(iii)(1) above.
(5) Upon the closing of the issuance, sale or exchange of all
or less than all of the Refused Securities, the Buyers shall acquire
from the Company, and the Company shall issue to the Buyers, the number
or amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4(n)(iii)(3) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Buyers of any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the
Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their
respective counsel.
- 21 -
(6) Any Offered Securities not acquired by the Buyers or other
persons in accordance with Section 4(n)(iii)(3) above may not be
issued, sold or exchanged until they are again offered to the Buyers
under the procedures specified in this Agreement.
(iv) The restrictions contained in subsections (ii)
and (iii) of this Section 4(n) shall not apply in connection with the issuance
of any Excluded Securities.
(o) Variable Securities. So long as any Buyer beneficially
owns any Warrants, the Company shall not, in any manner, issue or sell any
rights, warrants or options to subscribe for or purchase Ordinary Shares or
directly or indirectly convertible into or exchangeable or exercisable for
Ordinary Shares at a price which varies or may vary with the market price of the
Ordinary Shares, including by way of one or more reset(s) to any fixed price
unless the conversion, exchange or exercise price of any such security cannot be
less than the then applicable Exercise Price (as defined in the Warrants) with
respect to the Ordinary Shares into which any Warrant is exercisable.
(p) Waiver of Prior Participation Rights. Each Buyer hereby
waives the application of the provisions of Section 4(q) of the Prior SPA in
connection with the offer of the Securities hereunder.
(q) Shareholder Approval. The Company shall provide each
shareholder entitled to vote at a special meeting of shareholders of the Company
(the "Shareholder Meeting"), which shall be promptly called and held not later
than June 28, 2004 (the "Shareholder Meeting Deadline"), a proxy statement,
substantially in the form which has been previously reviewed by the Buyers and a
counsel of their choice, soliciting each such shareholder's affirmative vote at
the Shareholder Meeting for approval of resolutions providing for the following
(the "Resolutions"): (i) an increase in the authorized share capital of the
Company to no less than 150,000,000 Ordinary Shares and to allow, at a minimum,
the Company to reserve for issuance the number of Ordinary Shares required to be
reserved hereunder for issuance of the Ordinary Shares issuable hereunder and
upon exercise of all Warrants and all Additional Investment Rights (the
"Authorized Share Capital Resolution"), (ii) the Company's issuance of all of
the Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the Principal Market and (iii)
the amendments to the terms of the Prior Securities (as defined in Section 4(s)
below) as set forth in Section 4(s) below in accordance with applicable law and
the rules and regulations of the Principal Market (such affirmative approval of
the Resolutions being referred to herein as the "Shareholder Approval"), and the
Company shall use its best efforts to solicit its shareholders' approval of the
Resolutions and to cause the Board of Directors of the Company to recommend to
the shareholders that they approve the Resolutions. The Company shall be
obligated to seek to obtain the Shareholder Approval by the Shareholder Meeting
Deadline.
(r) Form 20-F. The Company shall file with the SEC its Annual
Report on Form 20-F for the year ended December 31, 2003, by no later than one
(1) Business Day after the Closing and such Form 20-F shall not have included
from the Company's independent auditors a "going concern" or other qualification
in their opinion with respect to Company's financial statements contained in
such Form 20-F.
- 22 -
(s) Amendment of Prior Transaction. In connection with the
transaction entered into pursuant to the Prior SPA and notwithstanding the
provisions of the Transaction Documents (as defined in the Prior SPA), the
parties agree to the following terms and amendments to the terms of such
transaction:
(i) The Conversion Price set forth in the Initial
Notes (as defined in the Prior SPA) and the Exercise Price set forth in
the Initial Warrants (as defined in the Prior SPA) is amended to be
equal to $0.83 (subject to adjustment as provided in the Initial Notes
and Initial Warrants).
(ii) The Conversion Price set forth in the Additional
Notes (as defined in the Prior SPA) and the Exercise Price set forth in
the Additional Warrants (as defined in the Prior SPA) is amended to be
equal to $0.90 (subject to adjustment as provided in the Additional
Notes and Additional Warrants).
(iii) The term "Securities" as defined in the Prior
SPA is referred to in this Agreement as the "Prior Securities".
(iv) The Company will include any Ordinary Shares
underlying the Prior Securities that are not covered by an effective
registration statement and are otherwise required to be registered
pursuant to the terms of that certain Registration Rights Agreement,
dated as of November 26, 2003, among the Company and the Buyers, in the
Registration Statement.
(v) As of the Closing, the Company will authorize and
reserve a number of Ordinary Shares for issuance which equals 130% of
the maximum number of Ordinary Shares issuable (x) upon conversion of
the Notes, including the Additional Notes, and (y) upon exercise of the
Warrants, including the Additional Warrants.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
(a) Register. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to each holder of Ordinary Shares, Warrants and Additional
Investment Rights), a register for the Ordinary Shares, the Warrants and the
Additional Investment Rights, in which the Company shall record the name and
address of the Person in whose name the Ordinary Shares, the Warrants and the
Additional Investment Rights have been issued (including the name and address of
each transferee), and the number of Warrant Shares issuable upon exercise of the
Warrants held by such Person and the number of Additional Investment Rights
Shares issuable upon exercise of the Additional Investment Rights held by such
Person. The Company shall keep the register open and available at all times
during business hours for inspection of any Buyer or its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at The Depository Trust Company ("DTC"), registered in the name of each Buyer or
its respective nominee(s), for the Ordinary Shares, Warrant Shares and
Additional Investment Right Shares issued at Closing or upon exercise of the
Warrants or Additional Investment Rights in such amounts as specified from time
to time by each Buyer to the Company in the form of Exhibit E attached hereto
- 23 -
(the "Irrevocable Transfer Agent Instructions"). The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5(b), and stop transfer instructions to give effect to Section
2(g) hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or transfer
involves Ordinary Shares, Warrant Shares or Additional Investment Rights Shares
sold, assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive
legend provided, in the case of sale, assignment or transfer pursuant to an
effective registration statement, that the Buyer has confirmed in writing to the
Company that it has delivered the prospectus included in the Registration
Statement, as the same may have been supplemented by the Company, to any Person
to whom such Buyer is selling, assigning or transferring any of the Ordinary
Shares, Warrant Shares or the Additional Investment Rights Shares. In addition
to the foregoing, following the date that the Registration Statement is declared
effective or at such earlier time as a legend is no longer required for certain
Securities, the Company will no later than three Business Days following the
delivery by a Buyer to the Company or the Company's transfer agent of a legended
certificate representing such Securities, deliver or cause to be delivered to
such Buyer a certificate representing such Securities that is free from all
restrictive and other legends. Following the date that the Registration
Statement is declared effective and upon the delivery to any Buyer of any
certificate representing Securities that is free from all restrictive and other
legends, such Buyer agrees that any sale of such Securities shall be made
pursuant to the Registration Statement and in accordance with the plan of
distribution described therein or pursuant to an available exemption from the
registration requirements of the 1933 Act. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a
Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach
of its obligations under this Section 5(b) will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Closing Date. The obligation of the Company hereunder to issue
and sell the Ordinary Shares and the related Warrants and Additional Investment
Rights to each Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
- 24 -
(i) Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the same to the
Company.
(ii) Such Buyer and each other Buyer shall have
delivered to the Company the Purchase Price (less, in the case of Smithfield
Fiduciary LLC, the amounts withheld pursuant to Section 4(g)) for the Ordinary
Shares and the related Warrants and Additional Investment Rights being purchased
by such Buyer at the Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
Closing Date. The obligation of each Buyer hereunder to
purchase the Ordinary Shares and the related Warrants and Additional Investment
Rights at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
(i) The Company shall have executed and delivered to
such Buyer (i) each of the Transaction Documents, (ii) certificates for the
Ordinary Shares (in such denominations as such Buyer shall request) being
purchased by such Buyer at the Closing pursuant to this Agreement and (iii) the
Warrants (in such amounts as such Buyer shall request) and the Additional
Investment Rights (in such amounts as such Buyer shall request) being purchased
by such Buyer at the Closing pursuant to this Agreement.
(ii) Such Buyer shall have received the opinions of
Xxxxxxx XxXxxxxxx LLP, the Company's United States outside counsel, and
Naschitz, Xxxxxxx & Co., the Company's Israeli outside counsel, each dated as of
the Closing Date, in a form reasonably acceptable to such Buyer.
(iii) The Company shall have delivered to such Buyer
a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit E
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(iv) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing and/or valid existence of
the Company and each of its Subsidiaries in such entity's jurisdiction of
formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within 10 days of the Closing Date.
(v) The Company shall have delivered to such Buyer a
certificate evidencing the Company's qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each
- 25 -
jurisdiction in which the Company conducts business, as of a date within 10 days
of the Closing Date.
(vi) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
by the Company's Board of Directors in a form reasonably acceptable to such
Buyer (the "Transaction Resolutions"), (ii) the Articles of Association and
(iii) the Memorandum, each as in effect at the Closing, in the form attached
hereto as Exhibit F.
(vii) The representations and warranties of the
Company shall be true and correct as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit G.
(viii) The Ordinary Shares (I) shall be designated
for quotation or listed on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from
trading on the Principal Market nor shall suspension by the SEC or the Principal
Market (other than pursuant to the Delisting Letter the requirements of which
shall have been satisfied in order to maintain such listing) have been
threatened, as of the Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.
(ix) The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Ordinary Shares, the Warrants and the Additional
Investment Rights. Without limiting the generality of the foregoing, the Company
shall also have obtained approval by the OCS and the Investment Center of the
transactions contemplated hereunder.
(x) The Company shall have obtained the Shareholder
Approval.
(xi) The Company shall have delivered to such Buyer
such other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
8. TERMINATION. In the event that the Closing shall not have
occurred with respect to a Buyer on or before June 30, 2004 due to the Company's
or such Buyer's failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party; provided, however, this
if this Agreement is terminated pursuant to this Section 8, the Company shall
- 26 -
remain obligated to reimburse the non-breaching Buyers for the expenses
described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyers, the Company,
their affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
- 27 -
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of Ordinary Shares representing at least a majority of
the aggregate number of Ordinary Shares purchased hereunder, or, if prior to the
Closing Date, the Company and the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least a majority of the Ordinary Shares
hereunder, and any amendment to this Agreement made in conformity with the
provisions of this Section 9(e) shall be binding on all Buyers. No provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Ordinary Shares
purchased hereunder then outstanding. No consideration shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration also is
offered to all of the parties to the Transaction Documents, holders of Warrants
or holders of the Additional Investment Rights, as the case may be. The Company
has not, directly or indirectly, made any agreements with any Buyers relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier service, in each case properly addressed
to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Commtouch Software Ltd.
0X Xxxxxxx Xxxxxx
Xxxxx Xxxxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxx 00000
Xxxxxx
Telephone: (000) 000-0-000-0000
Facsimile: (000) 000-0-000-0000
Attention: Chief Executive Officer
- 28 -
Copy to:
Commtouch Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxx #000
Xxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx, Esq.
and
Pillsbury Winthrop LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Transfer Agent:
Xxxxx Fargo Shareholder Services
000 Xxxxx Xxxxxxx Xxxxxxxx Xx.
Xxxxx Xx. Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, Account Manager,
Shareowner Services
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers, or to such other address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
The Company hereby irrevocably appoints Xxxx Xxxxx, Esq. at
Commtouch Inc, 0000 Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000,
Telephone: (000) 000-0000, Facsimile: (000) 000-0000, as its agent for the
receipt of service of process in connection with any action pursuant to any
Transaction Document in the United States. The Company agrees that any document
may be effectively served on it in connection with any action, suit or
proceeding in the United States by service on its agents.
Any document shall be deemed to have been duly served if
marked for the attention of the agent at its address (as set out above) or such
other address in the United States as may be notified to the party wishing to
- 29 -
serve the document and delivered in accordance with the notice provisions set
forth in this Section 9(f).
If the Company's agent at any time ceases for any reason to
act as such, the Company shall appoint a replacement agent having an address for
service in the United States and shall notify each Buyer in writing of the name
and address of the replacement agent. Failing such appointment and notification,
each Buyer shall be entitled by notice to the Company to appoint a replacement
agent to act on the Company's behalf. The provisions of this Section 9(f)
applying to service on an agent apply equally to service on a replacement agent.
(g) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Ordinary Shares issued hereunder or the
Warrants or the Additional Investment Rights. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of Ordinary Shares representing at least a majority of
the number of Ordinary Shares purchased hereunder, including by merger or
consolidation, except pursuant to an Organic Change as defined in the Warrants
and Additional Investment Rights with respect to which the Company is in
compliance with Section 4(b) of each of the Warrants and Additional Investment
Rights. A Buyer may assign some or all of its rights hereunder without the
consent of the Company, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
(i) Survival. Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3 and the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive the Closing and/or the exercise of the
Securities. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
shareholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
- 30 -
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the same
as those set forth in Section 6 of the Registration Rights Agreement.
(l) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
(m) Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under the Transaction
Documents, any remedy at law may prove to be inadequate relief to the Buyers.
The Company therefore agrees that the Buyers shall be entitled to seek temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages and without posting a bond or other security.
(n) Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
- 31 -
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
(o) Tax Adjustments.
(i) All payments by the Company to the Buyers and any
of their respective assignees in regard or in connection with this Agreement,
the other Transaction Documents or any of the Securities shall be made in freely
transferable United States Dollars and free and clear of and without deduction
for any present or future income, excise, stamp, documentary, property or
franchise taxes and other taxes, levies, fees, duties, withholdings or other
charges of any nature whatsoever ("Taxes"), whether of any governmental agency
or authority in Israel or otherwise, and including any stamp taxes or any other
similar taxes which may be required in Israel for enforcement purposes or any
stamp tax due upon issuance of the Ordinary Shares or the shares underlying the
Warrants and the Additional Investment Rights. In the event that any withholding
or deduction from any interest, distribution or payment to be made by the
Company hereunder, the other Transaction Documents or any of the Securities is
required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Company shall promptly:
(1) pay directly or caused to be paid
directly to the relevant authority the full amount required to be so
withheld or deducted;
(2) forward to the applicable Buyer an
official receipt or other documentation satisfactory to such Buyer
evidencing such payment to such authority; and
(3) pay to the applicable Buyer such
additional amount or amounts as is necessary to ensure that the net
amount actually received by such Buyer will equal the full amount such
Buyer would have received had no such withholding or deduction been
required.
(ii) The Company further agrees that if any present
or future taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, including franchise taxes and taxes
imposed on or measured by any Buyer's net income or receipts ("Further Taxes")
are directly or indirectly asserted against such Buyer with respect to any
payment of any additional amount described in paragraph (iii) and received by
such Buyer hereunder, such Buyer may pay such Further Taxes and the Company will
promptly pay to such Buyer such additional amounts (including all penalties,
interest or expenses) that such Buyer specifies as necessary to preserve the
after-tax return that such Buyer would have received if such Taxes or Further
Taxes had not been imposed.
(iii) If the Company fails to pay any Taxes when due
to the appropriate taxing authority or fails to remit to the applicable Buyer
the required receipts or other required documentary evidence, the Company shall
indemnify such Buyer for any incremental Taxes, interest, penalties, expenses
and costs that may become payable or are incurred by such Buyer as a result of
any such failure. In addition to the foregoing, the Company hereby indemnifies
- 32 -
and holds each Buyer harmless for any and all payments made by any Buyer of any
Taxes and Further Taxes and for any liabilities (including penalties, interest,
legal costs and expenses) incurred by any Buyer or which may be imposed on any
Buyer in connection therewith or any delays in their payment.
(p) Independent Nature of Buyers' Obligations and
Rights. The obligations of each Buyer under any Transaction Document are several
and not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other Buyer
under any Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
[Signature Page Follows]
- 33 -
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
COMPANY:
COMMTOUCH SOFTWARE LTD.
By: /s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
BUYERS:
SMITHFIELD FIDUCIARY LLC
By: /s/ Xxxx X. Chill
------------------------------------
Name: Xxxx X. Chill
Title: Authorized Signatory
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OMICRON MASTER TRUST
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Partner
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
CRANSHIRE CAPITAL L.P.
By: /s/ Xxxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: President
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
VERTICAL VENTURES, LLC
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Partner
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
IROQUOIS CAPITAL LP
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Partner
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
Israel Seed IV, L.P.
By: Israel Venture Partners 2000, Ltd
Its: General Partner
By: /s/ Xxxx Xxxxx
------------------------------------
Signature
Xxxx Xxxxx, Director
------------------------------------
Name and Title of Signatory
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5) (6)
Number of Legal
Additional Representative's
Number of Investment Address and
Buyer Address and Facsimile Number Ordinary Shares Right Shares Purchase Price Facsimile Number
----- ---------------------------- --------------- ------------ -------------- ----------------
Smithfield c/o Highbridge Capital 789,474 789,474 $600,000.24 Xxxxxxx Xxxx & Xxxxx LLP
Fiduciary LLC Management, LLC 000 Xxxxx Xxxxxx
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx Xxx Xxxx, Xxx Xxxx 10022
Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxxxxx Xxxxx, Esq.
Attention: Xxx X. Xxxxxx Facsimile: (000) 000-0000
Xxxx X. Chill Telephone: (000)000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Omicron Master c/o Omicron Capital 855,263 855,263 $649,999.88
Trust 000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Bermuda
Cranshire c/o Downsview Capital, Inc. 657,899 657,896 $500,003.24
Capital L.P. The General Partner
000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Illinois
Vertical c/o Vertical Ventures, LLC 592,105 592,105 $449,999.80
Ventures, LLC 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx
Residence: New York
Iroquois Capital c/o Vertical Ventures, LLC 263,158 263,158 $200,000.08
LP 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx
Residence: New York
Israel Seed IV, c/x Xxxxxx and Xxxxxx, P.O. Box 1,973,684 1,973,684 $1,499,999.84
L.P. 309 G.T., Xxxxxx House, South
Church Street, Grand Cayman,
Cayman Islands
Telephone: (000) 000 0000
Facsimile: (000) 000 0000)
Attention: Xxxxxx Xxxxx
Residence: Cayman Islands
EXHIBITS
--------
Exhibit A Form of Initial Warrants
Exhibit B Form of Additional Investment Rights
Exhibit C Form of Additional Warrants
Exhibit D Form of Registration Rights Agreement
Exhibit E Irrevocable Transfer Agent Instructions
Exhibit F Form of Secretary's Certificate
Exhibit G Form of Officer's Certificate
SCHEDULES
---------
Schedule 3(a) Subsidiaries
Schedule 3(e) Nasdaq Delisting Letter
Schedule 3(l) Absence of Certain Changes
Schedule 3(n)(iii) OCS Grants
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(x) Intellectual Property
