EXHIBIT 10.14
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of February
20th, 2005, is made by and among Organitech USA, Inc., a company organized under
the laws of the State of Delaware, with headquarters located at Yoqne'am Illit,
X.X. Xxx 000, Xxxxxx 00000 (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 Rule 903 of
Regulation S of the Securities Act of 1933, as amended (the "1933 ACT")
("REGULATION S") 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 shares of
the Company's Common Stock, par value $0.001 (the "COMMON STOCK") set forth
opposite such Buyer's name in column (3) on the Schedule of Buyers (which
aggregate amount for all Buyers together shall be up to Four Million (4,000,000)
shares of Common Stock and shall collectively be referred to herein as the
"PURCHASED SHARES"); (ii) series A-1 warrants, in substantially the form
attached hereto as EXHIBIT A1 (the "SERIES A-1 WARRANTS"), to acquire that
number of shares of Common Stock set forth opposite such Buyer's name in column
(4) on the Schedule of Buyers (which aggregate amount for all Buyers together
shall be up to 2,000,000 shares of Common Stock) (as exercised, collectively,
the "SERIES A-1 WARRANT SHARES"); and (iii) series A-2 warrants, in
substantially the form attached hereto as EXHIBIT A2 (the "SERIES A-2 WARRANTS",
collectively with Series A-1 Warrants, the "WARRANTS"), to acquire that number
of shares of Common Stock set forth opposite such Buyer's name in column (5) on
the Schedule of Buyers (which aggregate amount for all Buyers together shall be
2,000,000 shares of Common Stock) (as exercised, collectively, the "SERIES A-2
WARRANT SHARES") (Series A-1 Warrant Shares and Series A-2 Warrant Shares, shall
be collectively referred to as 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 B (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Purchased Shares and the Warrant Shares
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
D. The Purchased Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the "SECURITIES".
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NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PURCHASED SHARES AND WARRANTS.
a. PURCHASE OF PURCHASED SHARES AND WARRANTS. 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), the
number of Purchased Shares as set forth opposite such Buyer's name on the
Schedule of Buyers, along with Warrants to acquire that number of Warrant Shares
as set forth opposite such Buyer's name on the Schedule of Buyers (the
"CLOSING").
b. PURCHASE PRICE. The purchase price for each Buyer (the "PURCHASE PRICE")
of the Purchased Shares and related Warrants to be purchased by each such Buyer
at Closing shall be equal to Twenty Five ($0.25) Cents for each share of Common
Stock and related Warrants (the exercise price of the Warrants is as set forth
in the Warrants) being purchased by such Buyer at the Closing.
c. CLOSING Date. The date and time of the Closing (the "CLOSING DATE")
shall be 10:00 a.m., Israel time, on the first business day after notification
of satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 below but not later than 30 days after the date hereof (or such
later date or period as is mutually agreed to by the Company and the holders of
the majority of the Purchased Shares.
d. FORM OF PAYMENT. On the Closing Date, (i) the Company shall deliver to
the office of Gross, Kleinhendler, Hodak, Halevy, Xxxxxxxxx & Co., located at
One Azrieli Center, Round Tower, Tel Aviv, Israel, certificates for the
Purchased Shares and the Warrants duly executed on behalf of the Company and
registered in the name of each Buyer (which certificates shall be held in trust
by such counsel until actual receipt of the entire Purchase Price payable by the
relevant Buyer), and (ii) each Buyer shall pay its Purchase Price to the Company
for the Purchased Shares and Warrants 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.
e. SALE OF ADDITIONAL SECURITIES. (a) After the Closing, the Company may
sell, on the same terms and conditions as those contained in this Agreement ,
any Securities not purchased by Buyers at the Closing (the "Additional
Securities"), to one or more buyers (the "Additional Buyers"), provided that (i)
such subsequent sale is consummated prior to 14 days after the Closing, (or such
longer period agreed to by Clal and the Company); (ii) each Additional Buyer
shall become a party to the Transaction Documents, as defined below, by
executing and delivering a counterpart signature page to each of the Transaction
Agreements. Upon the execution of such signature pages by each Additional Buyer,
such party shall be deemed a "BUYER" for all purposes hereunder, and the
Additional Securities so purchased shall be deemed "SECURITIES" for all purposes
hereunder. The Schedule of Buyers to this Agreement shall be updated to reflect
the number of Additional Securities purchased at each such closing and the
parties purchasing such Additional Securities. At each additional closing, the
Company shall deliver to each Additional Buyer a certificate representing the
shares of Common Stock and the Warrants that such Additional Buyer is purchasing
at the additional closing and each Additional Buyer shall deliver payment of the
purchase price therefor to the Company by check or wire transfer in immediately
available funds.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. NO PUBLIC SALE OR DISTRIBUTION; PRIOR SALES. Such Buyer is (i) acquiring
the Purchased Shares and the Warrants, and (ii) upon exercise of the Warrants,
will acquire the Warrant Shares issuable upon exercise thereof, in the ordinary
course of business 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 and has no agreement
or understanding, directly or indirectly, with any Person to distribute any of
the Securities; 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 and reserves the right to dispose of the Securities at any time
provided that such disposition is in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. NON U.S. PERSON STATUS. Such Buyer certifies that (i) it is not a "U.S.
Person" as that term is defined in Rule 902(k) of Regulation S , and (ii) it is
not acquiring the securities for the account or benefit of any U.S. person. Each
Buyer agrees to resell such securities only in accordance with the provisions of
Regulation S (xx.xx. 230.901 through 230.905, and Preliminary Notes), pursuant
to registration under the 1933 Act, or pursuant to an available exemption from
registration; and agrees not to engage in hedging transactions with regard to
such securities unless in compliance with the 1933 Act.
c. RELIANCE ON EXEMPTIONS. No prospectus or offering memorandum has been
delivered to the Buyer in connection with the purchase of Securities. 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 that have
been requested for deciding whether to acquire the Common Stock. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received, to their satisfaction, answers to such questions.
Neither such inquiries nor any other 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 and is able to afford a complete loss of such investment.
Such Buyer further represents to the Company that such Buyer's decision to enter
into the Transaction Documents, as defined below, has been based solely on the
independent evaluation by such Buyer and its representatives and the provisions
of the Transaction Documents. Such Buyer understands that the market price of
the Company's Common Stock is volatile and that no representation is being made
as to the future value of the Company's Common Stock. 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.
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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 subsequent
offers and sales of the Securities prior to the date which is one year after the
original issuance of the Securities shall be made only (A) to the Company or a
subsidiary thereof, (B) pursuant to a registration statement which has been
declared effective under the 1933 Act, (C) pursuant to a resale to a person that
is not a U.S. Person, as that term is defined in Rule 902(k) of Regulation S,
that occurs outside the United States within the meaning of Regulation S under
the 1933 Act and in compliance with Rules 904 and 905 thereunder, or (D)
pursuant to any other available exemption from the registration requirements of
the 1933 Act; and (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(r)) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 0000
Xxx) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder. Such Buyer acknowledges that the
Company shall require, prior to any offer, sale or other transfer of the
Securities, the delivery of an opinion of counsel, in generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from registration under
the 1933 Act. The Securities may be pledged in connection with a bona fide
margin account or other loan secured by the Securities and such pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Buyer 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, this Section 2(f); PROVIDED, that in
order to make any sale, transfer or assignment of Securities, such Buyer and its
pledgee makes such disposition in accordance with the provisions of Regulation S
(xx.xx. 230.901 through 230.905, and Preliminary Notes), pursuant to
registration under the 1933 Act, or pursuant to an available exemption from
registration.
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g. LEGENDS. Such Buyer understands that the certificates or other
instruments representing the Purchased Shares and the Warrants and, until such
time as the resale of the Purchased Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Warrant Shares, 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):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION, ACCOMPANIED BY
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED".
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 sale under the 1933 Act, or (ii) in connection
with a sale, assignment or other transfer, such holder provides the Company with
an opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities is made in accordance with the
provisions of Regulation S (xx.xx. 230.901 through 230.905, and Preliminary
Notes, may be made without registration under the 1933 Act and that such legend
is no longer required.
h. VALIDITY; ENFORCEMENT. This Agreement and the Registration Rights
Agreement 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 (i) 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, or (ii) as any rights to indemnity or contribution hereunder may be
limited by federal and state securities laws and public policy consideration.
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i. RESIDENCY. Such Buyer is a resident of that country and/or state
specified below its address on the Schedule of Buyers.
j. ACKNOWLEDGMENT REGARDING COMPANY'S DEFICIENT FILING. Such Buyer
acknowledges that the Company filed a deficient Form 10SB-K with the SEC for the
year ending December 31, 2003, as described and set forth in SCHEDULE 3(E).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers as of the date hereof
and as of the Closing Date that:
a. ORGANIZATION AND QUALIFICATION. Each of the Company and its Subsidiaries
are companies duly organized and validly existing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power and authorization to own their properties and to carry on their business
as now being conducted in all material respects. Each of the Company and each
Subsidiary is duly qualified as a foreign corporation to do business and is in
good standing (to the extent applicable to an Israeli subsidiary) 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. No proceeding has been instituted by the Registrar of Companies
in Israel for the dissolution of any Israeli Subsidiary of the Company. As used
in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect
on the business, properties, assets, operations, results of operations or
financial condition of the Company and its Subsidiaries, taken as a whole, or on
the transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
below). For purposes of this Agreement, "SUBSIDIARY" means any entity in which
the Company directly owns share capital. The Company has no Subsidiaries, or it
does not hold any entity in which it owns directly or indirectly share capital
or holds an equity or similar interest except as set forth in SCHEDULE 3(A).
Unless otherwise set forth in SCHEDULE 3(A), each of the entities set forth in
SCHEDULE 3(A), which is not a Subsidiary, is not active and has no material
assets.
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 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 Purchased Shares and
the Warrants and the reservation for issuance and the issuance of the Warrant
Shares issuable upon exercise thereof have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders. 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 (i) 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, or (ii) as any rights to indemnity or contribution hereunder may be
limited by federal and state securities laws and public policy consideration.
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c. ISSUANCE OF SECURITIES. The Purchased Shares and Warrants are duly
authorized and, upon issuance in accordance with the terms hereof, shall be free
from all taxes, liens and charges with respect to the issue thereof. 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 the United States or 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
the Company pursuant to the Transaction Documents. As of the Closing Date, the
Company shall have duly authorized and reserved for issuance a number of shares
of Common Stock which equals the number of Warrant Shares. The Company shall, so
long as any of the Warrants are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued capital stock,
solely for the purpose of effecting the exercise of the Warrants, 100% of the
number of shares of Common Stock issuable upon exercise of the Warrants. Upon
exercise in accordance with the Warrants, the Warrant Shares 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 Common Stock. Assuming the accuracy of each of the
representations and warranties set forth in Section 2 hereof, the issuance by
the Company of the Securities is exempt from registration under the 1933 Act.
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 Purchased Shares and Warrants and reservation for issuance and issuance of
the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation of the Company (the "CERTIFICATE OF INCORPORATION"), or the Bylaws
of the Company (the "BYLAWS") or any similar charter documents 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 material agreement, indenture or instrument to which the Company or any
Subsidiary 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 NASD Over-the-Counter
Bulletin Board (the "PRINCIPAL MARKET")) applicable to the Company or any
Subsidiary or by which any property or asset of the Company or any Subsidiary is
bound or affected, except in the case of clauses (ii) and (iii), for such
breaches or defaults as would not be reasonably expected to have a Material
Adverse Effect.
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e. CONSENTS. Except as expressly set forth in SCHEDULE 3(E), (i) the
notification to the Investment Center of the Israeli Ministry of Industry and
Trade and (ii) the consent of the Office of Chief Scientist of the Israeli
Ministry of Industry and Trade, 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. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have or will have been obtained or effected
on or prior to the Closing Date. Except as set forth in SCHEDULE 3(E), (A) The
Company and each Subsidiary are unaware of any facts or circumstances that might
prevent the Company from obtaining or effecting any of the foregoing, and (B)
The Company is not in violation of the listing requirements of the Principal
Market and has no knowledge of any facts that would reasonably lead to delisting
or suspension of the Common Stock 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. 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" or
Directed Selling Efforts (within the meaning of Regulation D or S, respectively)
in connection with the offer or sale of the Securities. Except as set forth in
SCHEDULE 3 (G), the Company will not be obligated for any finder's fee or
commission in connection with this transaction. The Company shall be responsible
for the payment of any placement agent's fees, financial advisory fees, or
brokers' commissions relating to or arising out of the transactions contemplated
hereby, other than fees or commission for persons engaged solely by any Buyer or
its investment advisor unknown to the Company and not set forth in SCHEDULE 3
(G). The Company shall pay, and hold each Buyer harmless against, any liability,
loss or expense (including, without limitation, reasonable attorney's fees and
incurred out-of-pocket expenses) arising in connection with any such claim.
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h. NO INTEGRATED OFFERING. None of the Company, any Subsidiary, 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 stockholder approval provisions, including, without limitation,
under the rules and regulations of the Principal Market. None of the Company,
any Subsidiary, 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 acknowledges that its obligation to issue
the Warrant Shares upon exercise of the Warrants in accordance with this
Agreement and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
j. APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. There are no
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation of the Company or the laws of the state
of its incorporation 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 stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Common
Stock or a change in control of the Company.
k. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as set forth in SCHEDULE 3
(K), from October 2000 to date, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof, 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"). Except
as modified by subsequent filings, 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 and its Subsidiaries as
of the dates thereof and the results of their 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, 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.
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l. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3(L), since
September 30, 2004, there has been no material adverse change and no material
adverse development in the business, properties, operations, financial condition
or results of operations of the Company or any Subsidiary. Since September 30,
2004, the Company has not (i) declared or paid any dividends, (ii) sold any
assets, individually or in the aggregate, in excess of $50,000 outside of the
ordinary course of business or (iii) had any investments in fixed assets,
individually or in the aggregate, in excess of $50,000. 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.
m. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. No
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur (other than the transactions contemplated hereby), with
respect to the Company or any Subsidiary or their respective business,
properties, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement on Form S-1/SB-1 filed with the SEC relating to an issuance and sale
by the Company of its Common Stock and which has not been publicly announced in
the SEC Documents or otherwise.
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n. CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the Company nor any
Subsidiary is in violation of any term of or in default under its Certificate of
Incorporation or Bylaws or any similar charter documents except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Neither the Company nor any Subsidiary is in violation of any
judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any Subsidiary, and neither the Company nor any
Subsidiary 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, except as disclosed in SCHEDULE 3(N), 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 that would reasonably
lead to delisting or suspension of the Common Stock by the Principal Market in
the foreseeable future. Except as disclosed in SCHEDULE 3(N), since October
2000, (i) the Common Stock has been designated for quotation or listed on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign 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 Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any certificate, authorization or permit; 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 or its Subsidiaries have not
received any notice of any proceeding or investigation relating to revocation or
modification of any "Approved Enterprise" status granted with respect to any of
the Company's or its Subsidiaries' facilities which the Company believes could
reasonably be expected to result in material liability to the Company, or (iii)
the Company and its Subsidiaries are not in violation of any condition or
requirement stipulated by the instruments of approval granted to the Company by
the Office of Chief Scientist in the Israeli Ministry of Industry and Trade (the
"OCS") and any applicable laws and regulations with respect to any research and
development grants given to it by such office. 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. The Company's
and its Subsidiaries' contingent liabilities to the OCS are disclosed in the
Company's Form 10-QSB for the quarter ended September 30, 2004.
o. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any Subsidiary, nor
any director, officer, agent, employee or other Person acting on behalf of the
Company or any Subsidiary 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.
11
p. TRANSACTIONS WITH AFFILIATES. Except as set forth in SCHEDULE 3(P), none
of the officers, directors or employees of the Company is presently a party to
any transaction with the Company or any Subsidiary (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.
q. EQUITY CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of 10,000,000 shares of Preferred Stock, of which
as of the date hereof, none of which are issued and outstanding, 80,000,000
shares of Common Stock, of which as of the date hereof, 19,017,819 shares are
issued and outstanding, 1,622,000 shares of Common Stock are reserved for
issuance pursuant to the Company's employee incentive plan and other warrants
outstanding and 2,149,430 shares are reserved for issuance pursuant to
securities (other than the Warrants) exercisable or exchangeable for, or
convertible into, Common Stock. All of such outstanding shares have been, or
upon issuance in accordance with the terms thereof will be, validly issued and
are fully paid and nonassessable. Except as set forth in SCHEDULE 3(Q), at the
date hereof (i) No shares of the Company's capital stock are 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 shares of capital stock of the Company or any
Subsidiary, or contracts, commitments, understandings or arrangements by which
the Company or any Subsidiary is or may become bound to issue additional capital
stock of the Company or any Subsidiary 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
shares of capital stock of the Company or any Subsidiary; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness (as defined
in Section 3(r)) of the Company or any Subsidiary or by which the Company or any
Subsidiary is or may become bound which in the aggregate amount to more than
$50,000; (iv) there are no financing statements securing obligations in any
amounts in excess of $50,000 in the aggregate, filed in connection with the
Company; (v) there are no agreements or arrangements under which the Company or
any Subsidiary is obligated to register the sale 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 Subsidiary which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to redeem a security of the Company or any
Subsidiary; (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 (as defined herein) but not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company's or any Subsidiary's respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect. The Company has made available to the Buyer true, correct and complete
copies of the Company's Certificate of Incorporation, as amended and as in
effect on the date hereof, and the Company's Bylaws, as amended and as in effect
on the date hereof, and the terms of all securities convertible into, or
exercisable or exchangeable for, Common Stock and the material rights of the
holders thereof in respect thereto. SCHEDULE 3(Q) sets forth the capitalization
of the Company and any of its Subsidiaries, immediately following the Closing
including the number of shares of the following: (i) issued and outstanding
Common Stock; (ii) issued stock options; (iii) stock options not yet issued but
reserved for issuance; (iv) each series of preferred stock; (v) warrants or
stock purchase rights, if any; and (v) any securities convertible into or
exchangeable for shares of Common Stock or Preferred Stock.
12
r. INDEBTEDNESS AND OTHER CONTRACTS. Except as disclosed in SCHEDULE 3(R),
neither the Company nor any Subsidiary (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. For
purposes of this Agreement: (x) "INDEBTEDNESS" of any Person means, without
duplication, in amounts that individually or in the aggregate exceed $50,000 ,
(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 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.
13
s. ABSENCE OF LITIGATION. 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 best
knowledge of the Company, threatened against or affecting the Company, the
Common Stock or any Subsidiary or any of the Company's or any Subsidiary's
officers or directors in their capacities as such.
t. INSURANCE. Except as disclosed in SCHEDULE 3(T), the Company has no
insurance policies which is customary in the businesses in which the Company is
engaged. Organitech Ltd., the Israeli Subsidiary of the Company has valid
insurance policies for product liability; third party; employer liability and
contents insurance (excluding theft).
u. EMPLOYEE RELATIONS.
(i) The Company and none of the Subsidiaries is a party to any
collective bargaining agreement. No executive officer of the Company or its
Subsidiaries (as defined in Rule 501(f) of the 0000 Xxx) has notified the
Company or its Subsidiaries that such officer intends to leave the Company
or otherwise terminate such officer's employment with the Company. To the
knowledge of the Company or its Subsidiaries, no executive officer of the
Company and its Subsidiaries is in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each such
executive officer does not subject the Company or any Subsidiary to any
liability with respect to any of the foregoing matters.
14
(ii) None of the Subsidiaries is 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 applying to all employees
in Israel or to all employees in such Subsidiary's industry in Israel, with
respect to employment (including, without limitation, termination thereof)
other than the minimum benefits and working conditions required by law to
be provided pursuant to rules and regulations of the Histadrut (General
Federation of Labor), the Coordinating Bureau of Economic Organization and
the Industrialists' Association or extension orders that apply to all
employees in Israel or to all employees in such Subsidiary's industry in
Israel. 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
employment and employment practices, 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.
v. TITLE. Except as disclosed in SCHEDULE 3(V), the Company and its
Subsidiaries have 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 or such as do
not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
Subsidiaries. Neither the Company nor any Subsidiary owns any real property. Any
real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
15
w. INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries owns or
possesses adequate and sufficient legal rights to all trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, information and proprietary
rights and processes, all patents and patent right, ("INTELLECTUAL PROPERTY
RIGHTS") as are necessary to the conduct of the Company's business as now
conducted and as presently proposed to be conducted, without any known conflict
with, or infringement of, the rights of others. To the best of the Company's
knowledge, after due inquiry, no product or service marketed or sold (or
proposed to be marketed or sold) by the Company or its Subsidiaries violates or
will violate any license or infringe any intellectual property rights of any
other party. Other than with respect to commercially available software products
under standard end-user object code license agreements, there are no outstanding
options, licenses, agreements, claims, encumbrances or shared ownership
interests of any kind relating to the foregoing, nor is the Company or its
Subsidiaries bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the Company or its Subsidiaries have violated or,
by conducting its business, would violate any of the patents, trademarks,
service marks, tradenames, copyrights, trade secrets or other proprietary rights
or processes of any other person or entity. The Company and its Subsidiaries
have obtained and possesses valid licenses to use all of the software programs
present on the computers and other software-enabled electronic devices that it
owns or leases or that it has otherwise provided to its employees for their use
in connection with the Company's business. To the best of the Company's
knowledge, after due inquiry, it will not be necessary to use any inventions of
any of its employees (or persons it currently intends to hire) made prior to
their employment by the Company. Each Key Employee has assigned to the Company
all intellectual property rights he or she owns that are related to the
Company's business as now conducted. SCHEDULE 3(W) lists all patents, patent
applications, registered trademarks, trademark applications, registered service
marks, service xxxx applications, registered copyrights and domain names of the
Company or its Subsidiaries. The Company or its Subsidiaries have not embedded
any open source, copyleft or community source code in any of its products
generally available or in development, including but not limited to any
libraries or code licensed under any General Public License, Lesser General
Public License or similar license arrangement. Except as set forth in SCHEDULE
3(W), none of the Company's issued patents that are assigned to it or any
Intellectual Property Rights that are material to the business of the Company
have expired or terminated, or are expected to expire or terminate within three
years from the date of this Agreement. 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
reasonable security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
x. 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, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii) the failure
to so comply could be reasonably expected to have 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.
y. SUBSIDIARY RIGHTS. The Company has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of each Subsidiary as owned by the
Company. The Company owns all share capital and voting power of Organitech Ltd..
16
z. TAX STATUS. The Company and each Subsidiary (i) has made or filed all
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.
aa. INTERNAL ACCOUNTING CONTROLS. The Company and each Subsidiary 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. In addition, the Company has
established and maintains disclosure controls and procedures as defined in Rule
13a-14 under the 1934 Act and in compliance with Rule 13a-15 under the 1934 Act.
bb. Disclosure. The Company confirms that neither it nor, to its knowledge,
any other Person acting on its behalf has provided any of the Buyers or their
respective agents or counsel with any information that would require disclosure
to the public and has not been so disclosed. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Buyers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any Subsidiary or
either of its or their respective business, properties, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the Company's reports
filed under the Exchange Act of 1934, as amended, are being incorporated into an
effective registration statement filed by the Company under the 1933 Act). The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.
17
cc. Small Business Issuer. The Company qualifies as a "small business
issuer" as such term is defined in the 1934 Act.
4. COVENANTS.
a. REASONABLE BEST EFFORTS. Each party shall use its reasonable best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. [RESERVED]
c. REPORTING STATUS. Until the date on which the Investors (as defined in
the Registration Rights Agreement) shall have sold all the Purchased Shares and
Warrant Shares and none of the Warrants is outstanding (the "REPORTING PERIOD"),
the Company shall timely 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 and marketing purposes.
e. FINANCIAL INFORMATION. The Company agrees to send copies of any notices
and other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. LISTING. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
the Principal Market and each national securities exchange and automated
quotation system, if any, upon which Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other Common
Stock 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
use its best efforts to maintain the Common Stock' authorization for quotation
on the Principal Market. Neither the Company nor any Subsidiary shall take any
action which would be reasonably expected to result in the delisting or
suspension of the Common Stock 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. At the Closing Date, the Company shall reimburse Clal Finance
Underwriting Ltd. ("Clal") in an aggregate amount of up to $10,000 for Clal's
reasonable expenses actually incurred in connection with the preparation,
execution and performance of this Agreement and the transactions contemplated
hereunder. The Company shall be responsible for the payment of any placement
agent's fees or broker's commissions relating to or arising out of the
transactions contemplated hereby, other than fees or commission for persons
engaged solely by any Buyer or its investment advisor unknown to the Company and
not set forth in SCHEDULE 3 (G). Except as otherwise set forth in this Agreement
or in the Registration Rights Agreement, each party to this Agreement shall bear
its own expenses in connection with the sale of the Securities to the Buyers.
18
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) of this Agreement;
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 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
10:00 a.m., Israel Time, on the first Business Day following the execution of
this Agreement, the Company shall make a press release (in a form previously
approved by the Buyers) describing the terms of the transactions contemplated by
the Transaction Documents. On or before the second Business Day following the
execution of this Agreement, the Company shall file a Current Report on Form 8-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 of Warrant and the Registration Rights
Agreement) as exhibits to such filing if required by applicable law, rule or
regulation (including all attachments, the "8-K FILING"). From and after the
filing of the 8-K Filing with the SEC, no Buyer shall be in possession of any
material, nonpublic information received from the Company, any Subsidiary or any
of its respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filing. The Company shall not, and shall cause each
Subsidiary and each of its respective officers, directors, employees and agents,
not to, provide any Buyer with any material nonpublic information regarding the
Company or any Subsidiary from and after the filing of the 8-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 Subsidiary, or its each of
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 demand that the Company make a public disclosure, and if the Company
fails to do so within two Business Days the Buyer may 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, each
Subsidiary, or each of its respective officers, directors, employees or agents.
No Buyer shall have any liability to the Company, any Subsidiary, or any of its
or their respective officers, directors, employees, shareholders or agents for
any such disclosure unless such Buyer acts with gross negligence or willful
misconduct. 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 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations, including the applicable rules and
regulations of the Principal Market (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). "BUSINESS DAY" means
any day other than Saturday, Sunday or other day on which commercial banks in
The City of New York are authorized or required by law to remain closed.
19
j. ADDITIONAL SECURITIES; ADDITIONAL REGISTRATION STATEMENTS. For so long
as any Buyer beneficially owns any Warrants, the Company will not issue any
other securities that would cause a breach or default under the Warrants. Until
such time as the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective by the SEC, the Company will not file a
registration statement under the 1933 Act relating to securities that do not
include the Securities except pursuant to any existing employee and/or director
stock and stock option plans.
k. CONDUCT OF BUSINESS. The business of the Company and each Subsidiary
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.
l. SEC COMPLIANCE. The Company shall use best efforts that the following
events shall occur as soon as possible after the Closing Date:
(i) The Common Stock (I) shall designate for quotation or list on the
Principal Market and (II) shall not be suspended by the SEC or the
Principal Market from trading on the Principal Market nor shall suspension
by the SEC or the Principal Market be threatened.
(ii) The NASD Over-the-Counter Bulletin Board be removed from the
Company's listings symbol the letter "E", indicating that the Company is
current in its public reporting obligations pursuant to Rule 6530 of the
NASD Over-the-Counter Bulletin Board's rules.
(iii) The representations and warranties of the Company set forth in
Section 3(K) shall be true and correct in all respects; PROVIDED, HOWEVER,
that the exceptions set forth in SCHEDULE 3 (K) shall not apply and shall
not be applicable.
20
(iv) The Company file with the SEC, and to the SEC's satisfaction, an
amended Form 10SB-K for the year ending December 31, 2003, accompanied by a
duly executed report of its auditors.
m. CORPORATE EXISTENCE. So long as any Buyer beneficially owns any Warrants
granted hereunder or until the expiration of all of the Warrants, if earlier,
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 Stock
is quoted on or listed for trading on the Nasdaq National Market, the Principal
Market, the New York Stock Exchange or the American Stock Exchange.
n. RIGHT OF FIRST OFFER. (i) (A) From the date hereof until the date that
is 30 trading days following the date on which the Registration Statement (as
defined in the Registration Rights Agreement) is declared effective (the
"TRIGGER DATE") the Company shall not issue, sell or exchange, agree or obligate
itself to issue, sell or exchange or reserve, agree to or set aside for
issuance, sale or exchange, (1) any Common Stock, (2) any other equity security
of the Company, including without limitation shares of preferred stock, (3) any
debt security of the Company (other than debt with no equity feature), including
without limitation any debt security which by its terms is convertible into or
exchangeable for any equity security of the Company, (4) any security of the
Company that is a combination of debt and equity, or (5) any option, warrant or
other right to subscribe for, purchase or otherwise acquire any such equity
security or any such debt security of the Company, except to the extent that
such issuance, sale, exchange, obligation or setting aside shall not be deemed
an "integrated offering" for the purposes of the 1934 Act, applicable securities
laws and/or regulations (any of the foregoing a "SUBSEQUENT PLACEMENT").
(B) For a period of one (1) year following the Trigger Date, the Company will
not, directly or indirectly, effect any Subsequent Placement, unless in each
case the Company shall have first offered to sell such securities (the "OFFERED
SECURITIES") to Clal, at a unit price, number of units, and on such other terms
as shall have been specified by the Company in writing delivered to Clal (the
"OFFER"), which Offer by its terms shall remain open and irrevocable for a
period of fourteen (14) calendar days from receipt of the Offer.
(ii) Notice of Clal intention to accept alone, or together with any number of
other investors, selected by Clal, in its sole discretion ("ADDITIONAL
INVESTORS"), in whole any Offer made pursuant to Section 4(n)(i) shall be
evidenced by a writing signed by Clal and the Additional Investors, if
applicable, and delivered to the Company prior to the end of the 14-day period
of such offer, setting forth Clal and the Additional Investors, if applicable,
election to purchase all the Offered Shares (the "NOTICE OF ACCEPTANCE").
21
(iii) PERMITTED SALES OF OFFERED SECURITIES. In the event that Notices of
Acceptance are not given by Clal and the Additional Investors, if applicable, in
respect of all the Offered Securities, the Company shall have ninety (90) days
from the expiration of the period set forth in Section 4(n)(i) to close the sale
of all the Offered Securities to any person(s) or entity(ies), but only for cash
and otherwise in all respects upon terms and conditions, including, without
limitation, unit price and interest rates, which are no more favorable, in the
aggregate, to such other person(s) or or entity(ies) or less favorable to the
Company than those set forth in the Offer.
(iv) CLOSING. Upon each closing under this Section 4(n), which shall include
full payment to the Company, Clal and the Additional Investors, if applicable
shall purchase from the Company, and the Company shall sell to Clal and the
Additional Investors, if applicable the number of Offered Securities specified
in the Notices of Acceptance, upon the terms and conditions specified in the
Offer. The purchase by Clal and the Additional Investors, if applicable, of any
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and Clal and the Additional Investors of a purchase
agreement relating to such Offered Securities reasonably satisfactory in form
and substance to Clal and the Additional Investors, if applicable, and their
respective counsel.
(vi) FURTHER SALE. In each case, any Offered Securities not purchased by Clal
and the Additional Investors, if applicable, or other Person or Persons in
accordance with Section 4 may not be sold or otherwise disposed of until they
are again offered to Clal and the Additional Investors under the procedures
specified in Section 4(n).
(vii) EXCEPTION. The rights of the Clal and the Additional Investors under this
Section 4(n) shall not apply to: (A) Common Stock issued as a share dividend to
holders of Common Stock or upon any subdivision or combination of Common Stock,
(B) Common Stock issued upon exercise of the Warrants or issued upon conversion
or exercise of any other currently outstanding securities of the Company
pursuant to the terms of such securities, (C) 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 $30,000,000 (other
than an "at the market offering" as defined in Rule 415(a)(4) under the 1933 Act
and "equity lines"), (D) in connection with 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 of, or
consultant or other service provider to, the Company for services provided to
the Company, or (E) securities of the Company issued in connection with the
acquisition of any Person (whether by merger, purchase of stock or assets or
otherwise) the primary purpose of which is not to raise capital, (F) securities
of the Company issued to a strategic investor, or (G) securities issued (whether
in one or a series of related transactions) which generates gross proceeds to
the Company in an aggregate amount of less than $1,000,000 and for a price per
share that is greater than $0.25 (collectively, "EXCLUDED SECURITIES"). In
addition to the foregoing, the right of the Clal and the Additional Investors
under all provisions of this Section 4(n) other than Section 4(n)(i)(A) shall
not apply to Subsequent Placements at a price that is at least equal to the
Purchase Price per share hereunder.
22
o. RESERVATION OF SHARES. The Company shall take all action necessary at
all times to have authorized, and reserved for the purpose of issuance, from and
after the Closing Date, a number of Common Stock issuable upon exercise of the
Warrants being issued at the Closing in conformity with Section 3(c).
p. TRANSFER OF SECURITIES. The Company agrees to refuse to register any
transfer of the Securities not made in accordance with Regulation S, pursuant to
registration under the 1933 Act, or pursuant to an available exemption from
registration; provided however, that if foreign law prevents the Company from
refusing to register transfers of the Securities, other reasonable procedures
are implemented to prevent any transfer of the Securities not made in accordance
with the provisions of Regulation S.
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 Warrants), a register for the Warrants, in which the Company
shall record the name and address of the Person in whose name the Warrants 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.
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 Warrant Shares in such amounts as specified from
time to time by each Buyer to the Company upon exercise of the Warrants in the
form of EXHIBIT C attached hereto (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(f) 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, subject to
applicable securities laws. 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 Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue
such Warrant Shares to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. 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.
23
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
CLOSING DATE. The obligation of the Company hereunder to issue and sell the
Purchased Shares and the related Warrants 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:
(i) Such Buyer (and all other Buyers) 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 all other Buyers) shall have delivered to the Company the
Purchase Price (less, the amounts withheld pursuant to Section 4(g)) for the
Purchased Shares and the related Warrants 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 (except for representations and warranties that are
qualified by materiality, which shall be true and correct in all respects) as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date),
and such Buyer shall have performed, satisfied and complied in all material
respects (except for covenants, agreements and conditions that are qualified by
materiality, which shall be complied with in all 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 Purchased
Shares and the related Warrants 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 a
the Buyers holding the majority of the Purchased Shares at any time in their
sole discretion by providing the Company with written notice thereof:
24
(i) The Company shall have executed and delivered to such Buyer (i) each of the
Transaction Documents and (ii) the Purchased Shares and the related Warrants
being purchased by such Buyer at the Closing pursuant to this Agreement as set
forth opposite such Buyer's name in the Schedule of Buyers.
(ii) Such Buyer shall have received the opinions of Xxxxxx Xxxxxxxx LLP, the
Company's outside counsel, in the form attached hereto as EXHIBIT D dated as of
the Closing Date.
(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form of EXHIBIT C attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
(iv) The Company shall have executed and delivered to such Buyer a copy of the
termination agreement with BLM NV, in the form of EXHIBIT E, or otherwise as
reasonably acceptable to the Buyers holding the majority of the Purchased
Shares.
(v) 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 the form attached hereto (the "RESOLUTIONS"), (ii) the Certificate
of Incorporation of the Company and (iii) the Bylaws of the Company, each as in
effect at the Closing, in the form attached hereto as EXHIBIT F.
(vi) The representations and warranties of the Company shall be true and correct
in all material respects (except for representations and warranties that are
qualified by materiality, which shall be true and correct in all respects) as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied in all material
respects (except for covenants, agreements and conditions that are qualified by
materiality, which shall be complied with 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 in the
form attached hereto as EXHIBIT G.
(vii) The Company shall have delivered to such Buyer a letter from the Company's
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five days of the Closing Date.
(viii) The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the Purchased
Shares and the Warrants, including, without limitation, the OCS consent, which
is attached hereto. The Company has informed the Investment Center to the
transactions contemplated hereunder, which is attached hereto.
25
(ix) The Company shall have delivered to such Buyer a copy of the voting
agreement in the form of EXHIBIT H, executed by all parties therein.
(x) The designee of a majority in interest of the Buyers has been appointed as a
Director of the Company.
8. TERMINATION. In the event that the Closing shall not have occurred with
respect to a Buyer on or before thirty (30) days from the date hereof 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 any liability of any party to any other party and
without any surviving liability to either party.
9. MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Israel, without giving effect
to any statutes concerning choice or conflict of law (whether of the State of
Israel or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other that the State of Israel; PROVIDED ALWAYS, HOWEVER,
that any corporate matters involving the Company, proceedings of organs thereof
and other matters that in their nature and as a matter of law are to be governed
by the laws of the place of formation of corporations, or to U.S. securities law
shall be governed by the laws of the State of Delaware, or U.S. federal laws,
respectively. Any controversy or claim arising out of or in connection with this
agreement or any breach or alleged breach hereof shall be exclusively resolved
by the competent courts of Tel Aviv, Israel, and each of the parties hereby
irrevocably submits to the exclusive jurisdiction of such courts; provided,
however, that nothing in this Section 9 shall be construed as preventing any
party hereto from seeking injunctive relief against the Company or any of its
officers or other organs from the competent courts of the State of Delaware.
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.
26
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, 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 Purchased Shares representing at least a majority of the amount of
the Purchased Shares, or, if prior to the Closing Date, the Buyers listed on the
Schedule of Buyers as being obligated to purchase at least a majority of the
amount of the Purchased Shares. Notwithstanding the foregoing, the joinder of
Additional Buyers to the Transaction Documents pursuant to Section 1(e) above
shall not be deemed an amendment hereto or thereto, and each of the parties
hereto hereby consents to the joinder of the Additional Buyers pursuant to the
terms of such section, subject only to the approval of the Company as to the
identity of each such Additional Buyer. 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 Purchased Shares 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 Purchased Shares or holders of the Warrants,
as the case may be.
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:
Organitech USA, Inc.
Yoqne'am Illit, X.X. Xxx 000,
Xxxxxx 00000
Telephone: 000-0-0000000
Fax: 000-0-0000000
27
With a copy to (which shall not constitute notice):
Xxxxxx, Xxx-Xxxxxx, Xxxx & Co.
One Azrieli Center, Round Tower, Tel Aviv, Israel
Telephone: x(000)-0-000-0000
Facsimile: x(000)-0-000-0000
Attention: Xxxxx Xxxx, Adv.
If to the Transfer Agent:
Interwest Transfer Company, Inc.
0000 Xxxxxx Xxxxxxxx Xx # 000
Xxxxxxxx, XX 00000
Telephone: (000)000-0000
Facsimile: (000)000-0000
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.
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 Purchased Shares or the Warrants. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of Purchased Shares representing at
least a majority of the number of the Purchased Shares, except by merger or
consolidation under the terms of Section 4(l). A Buyer may assign some or all of
its rights hereunder after closing 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, the agreements and covenants set forth in Sections 4, 5 and 9
shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
28
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 stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated 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 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) the
status of such Buyer or holder of the Securities as an investor in the Company.
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. The foregoing indemnification obligations set forth in
this Section 9(k) shall not apply to any Indemnified Liability that is
judicially determined on the merits to have been caused primarily by the gross
negligence, bad faith, willful misfeasance, or reckless disregard of obligations
or duties on the part of the Buyer or its Indemnitees. 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.
29
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 this Agreement, 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, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part 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 shares underlying the Warrants. 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
30
(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 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 limitations, 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]
31
IN WITNESS WHEREOF, each Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
ORGANITECH USA, INC.
By: ________________
Name:
Title:
BUYERS:
____________________
____________________
____________________
32
SCHEDULE OF BUYERS
---------- -------------- ------------ ------------ ------------ ---------------
ADDRESS AND NUMBER OF
FACSIMILE PURCHASED NUMBER OF NUMBER OF AGGREGATE
NAME NUMBER SHARES WARRANT X-0 XXXXXXX X-0 XXXXXXXX PRICE
---------- -------------- ------------ ------------ ------------ ---------------
---------- -------------- ------------ ------------ ------------ ---------------
---------- -------------- ------------ ------------ ------------ ---------------
---------- -------------- ------------ ------------ ------------ ---------------
33
EXHIBITS
Exhibit A Form of Warrants
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Irrevocable Transfer Agent Instructions
Exhibit D Form of Company Counsel Opinion
Exhibit E Form of Termination Agreement with BLM
Exhibit F Form of Secretary's Certificate
Exhibit G Form of Officer's Certificate
Exhibit H Form of Voting Agreement
34
Exhibit A
FORM OF WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION ACCOMPANIED BY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH
ACT. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED.
ORGANITECH USA, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: W-1
Number of Shares: _________
Date of Issuance: February __, 2005 ("ISSUANCE DATE")
Organitech USA, Inc., a company organized under the laws of the State of
Delaware (the "COMPANY"), hereby certifies that, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
___________, the registered holder hereof or its permitted assigns (the
"HOLDER"), is entitled, subject to the terms set forth below, to purchase from
the Company, at the Exercise Price (as defined below) then in effect, upon
surrender of this Warrant to Purchase Common Stock (including all Warrants to
Purchase Common Stock issued in exchange, transfer or replacement hereof, the
"WARRANT"), at any time or times on or after the date hereof, but not after
11:59 P.M., Israel Time, on the Expiration Date (as defined below),
_____________ (______) fully paid and nonassessable shares of Common Stock (as
defined below) (the "WARRANT SHARES"). Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth in Section
15. This Warrant is one of the Warrants to Purchase Common Stock (the "SPA
WARRANTS") issued pursuant to Section 1 of that certain Securities Purchase
Agreement, dated as of February 20, 2005 (the "INITIAL ISSUANCE DATE"), among
the Company and the purchasers (the "PURCHASERS") referred to therein (the
"SECURITIES PURCHASE AGREEMENT").
1. EXERCISE OF WARRANT.
a. Subject to the terms and conditions hereof (including, without
limitation, the limitations set forth in Section 1(f)), this Warrant may be
exercised by the Holder on any day, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as EXHIBIT A (the "EXERCISE
NOTICE"), of the Holder's election to exercise this Warrant (ii) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the
"AGGREGATE EXERCISE PRICE") in cash or wire transfer of immediately available
funds, which may be paid, at the sole discretion of the Holder, in U.S. Dollars
or in New Israeli Shekels, at the representative exchange rate in effect on that
day, and (iii) the delivery to the Company of this Warrant. Execution and
delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. On or before the first Business Day following the date on
which the Company has received each of the Exercise Notice, this Warrant and the
Aggregate Exercise Price (the "EXERCISE DELIVERY DOCUMENTS"), the Company shall
transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Delivery Documents to the Holder and the Company's transfer agent (the
"TRANSFER AGENT"). On or before the third Business Day following the date on
which the Company has received all of the Exercise Delivery Documents (the
"SHARE DELIVERY DATE"), the Company shall (X) provided that the Transfer Agent
is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the name of the
Holder or its designee, for the number of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon delivery of the Exercise Delivery
Documents, the Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which this Warrant
has been exercised, irrespective of the date of delivery of the certificates
evidencing such Warrant Shares. If this Warrant is submitted in connection with
any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than five Business Days after any exercise
and at its own expense, issue a new Warrant (in accordance with Section 6(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised. No fractional
Common Stock are to be issued upon the exercise of this Warrant, but rather the
number of Common Stock to be issued shall be rounded up or down to the nearest
whole number. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant.
b. EXERCISE PRICE. For purposes of this Warrant, "EXERCISE PRICE" means
$0.75, U.S Dollars, subject to adjustment as provided herein.
2
c. COMPANY'S FAILURE TO TIMELY DELIVER SECURITIES. Subject to Section 1(f),
if the Company shall fail for any reason or for no reason to issue to the
holder, within five Business Days of receipt of the Exercise Delivery Documents,
a certificate for the number of shares of Common Stock to which the holder is
entitled or to credit the holder's balance account with DTC for such number of
shares of Common Stock to which the holder is entitled upon the holder's
exercise of this Warrant, the Company shall pay as additional damages in cash to
such holder on each day after such fifth Business Day that the issuance of such
Common Stock certificate is not timely effected an amount equal to 1.0% of the
product of (A) the sum of the number of shares of Common Stock not issued to the
holder on a timely basis and to which the holder is entitled and (B) the
difference between the Closing Sale Price of the Common Stock on the trading day
immediately preceding the last possible date which the Company could have issued
such shares of Common Stock to the holder without violating Section 1(a) and the
Exercise Price. In addition, the holder, upon written notice to the Company, may
void its Exercise Notice with respect to, and have returned, any portion of this
Warrant that has not been exercised pursuant to such Exercise Notice; provided
that the voiding of an Exercise Notice shall not affect the Company's
obligations to make any payments which have accrued prior to the date of such
notice pursuant to this Section 1(c)(i) or otherwise.
d. DISPUTES. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 12.
e. [RESERVED]
f. LIMITATIONS ON EXERCISES.
(i) BENEFICIAL OWNERSHIP. The Company shall not effect the exercise of this
Warrant, and no Person (as defined below) who is a holder of this Warrant shall
have the right to exercise this Warrant, to the extent that after giving effect
to such exercise, such Person (together with such Person's affiliates) would
beneficially own in excess of 9.99% of the shares of the Common stock
outstanding immediately after giving effect to such exercise. For purposes of
the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of
shares of Common stock issuable upon exercise of this Warrant with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such Person
and its affiliates (including, without limitation, any convertible notes or
convertible preferred shares or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein. Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. For purposes of this Warrant, in determining the number
of outstanding Common stock a holder may rely on the number of outstanding
Common stock as reflected in (1) the Company's most recent Form 10-QSB or other
public filing with the Securities and Exchange Commission, as the case may be,
(2) a more recent public announcement by the Company or (3) any other notice by
the Company or its Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral request
of the holder of this Warrant, the Company shall within one Business Day confirm
orally and in writing to the holder of this Warrant the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the exercise of
securities of the Company, including the SPA Warrants, by the holder of this
Warrant and its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.
3
(ii) PRINCIPAL MARKET REGULATION. The Company shall not be obligated to
issue any shares of Common Stock upon exercise of this Warrant if the issuance
of such Common Stock would exceed that number of shares of Common Stock which
the Company may issue upon exercise of this Warrant without breaching the
Company's obligations, if any, under the rules or regulations of the Principal
Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the
event that the Company obtains the approval of its stockholders as required by
the applicable rules of the Principal Market for issuances of Common Stock in
excess of such amount. Until such approval is obtained, no Purchaser shall be
issued, upon exercise of any SPA Warrants, Common stock in an amount greater
than the product of the Exchange Cap multiplied by a fraction, the numerator of
which is the total number of Common stock underlying the SPA Warrants issued to
such Purchaser pursuant to the Securities Purchase Agreement on the Initial
Issuance Date and the denominator of which is the aggregate number of Common
stock underlying all the Warrants issued to the Purchasers pursuant to the
Securities Purchase Agreement on the Initial Issuance Date (with respect to each
Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall
sell or otherwise transfer any of such Purchaser's SPA Warrants, the transferee
shall be allocated a pro rata portion of such Purchaser's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of SPA Warrants shall exercise
all of such holder's SPA Warrants into a number of shares of Common Stock which,
in the aggregate, is less than such holder's Exchange Cap Allocation, then the
difference between such holder's Exchange Cap Allocation and the number of
shares of Common Stock actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of SPA Warrants on
a pro rata basis in proportion to the shares of Common stock underlying the SPA
Warrants then held by each such holder.
2. ADJUSTMENT OF EXERCISE PRICE. If the Company at any time after the date
of issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased. If the Company at
any time after the date of issuance of this Warrant combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of Warrant Shares will be proportionately decreased. Any adjustment under
this Section 2 shall become effective at the close of business on the date the
subdivision or combination becomes effective.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments
pursuant to Section 2 above, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders
of Common stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a "DISTRIBUTION"), at any time
after the issuance of this Warrant, then, in each such case, any Exercise Price
in effect immediately prior to the close of business on the record date fixed
for the determination of holders of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Exercise Price by a
fraction of which (i) the numerator shall be the Closing Sale Price of the
Common Stock on the trading day immediately preceding such record date minus the
value of the Distribution (as determined in good faith by the Company's Board of
Directors) applicable to one share of Common stock, and (ii) the denominator
shall be the Closing Sale Price of one share of Common Stock on the trading day
immediately preceding such record date.
4
4. PURCHASE RIGHTS; ORGANIC CHANGE.
a. PURCHASE RIGHTS. In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"PURCHASE RIGHTS"), then the holder of this Warrant will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
b. ORGANIC CHANGE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction, in each case which is effected in such a
way that holders of Common Stock are entitled to receive securities or assets
with respect to or in exchange for Common Stock is referred to herein as an
"ORGANIC CHANGE." Subject to Section 4(k) of the Securities Purchase Agreement,
prior to the consummation of any (i) sale of all or substantially all of the
Company's assets to an acquiring Person or (ii) other Organic Change following
which the Company is not a surviving entity, the Company will secure from the
Person purchasing such assets or the Person issuing the securities or providing
the assets in such Organic Change (in each case, the "ACQUIRING ENTITY") a
written agreement (in form and substance reasonably satisfactory to the holders
of SPA Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding) to deliver to the
holder of this Warrant in exchange for this Warrant, a security of the Acquiring
Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant and reasonably satisfactory to the holder of this
Warrant (including, an adjusted exercise price equal to the value for the shares
of Common Stock reflected by the terms of such consolidation, merger or sale,
and exercisable for a corresponding number of shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant), if the value so reflected is less than the
Exercise Price in effect immediately prior to such consolidation, merger or
sale). In the event that an Acquiring Entity is directly or indirectly
controlled by a company or entity whose Common Stock or similar equity interest
is listed, designated or quoted on a securities exchange or trading market, the
holder of this Warrant may elect to treat such Person as the Acquiring Entity
for purposes of this Section 4(b). Prior to the consummation of any other
Organic Change, the Company shall be required to make appropriate provision to
insure that the holder of this Warrant thereafter will have the right to acquire
and receive in lieu of or in addition to (as the case may be) the shares of
Common Stock immediately theretofore acquirable and receivable upon the exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant including those set forth in Sections 1(f)(i) and 1(f)(ii) of this
Warrant), such shares of stock, securities or assets that would have been issued
or payable in such Organic Change with respect to or in exchange for the number
of Common Stock which would have been acquirable and receivable upon the
exercise of this Warrant as of the date of such Organic Change (without regard
to any limitations on the exercise of this Warrant including those set forth in
Sections 1(f)(i) and 1(f)(ii) of this Warrant).
5
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, and
will at all times in good faith carry out all the provisions of this Warrant and
take all action as may be required to protect the rights of the holder of this
Warrant. Without limiting the generality of the foregoing, the Company (i) will
not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (ii) will take
all such actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Common Stock upon the
exercise of this Warrant, and (iii) will, so long as any of the SPA Warrants are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, 100% of the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise) in accordance
with Section 3(c) of the Securities Purchase Agreement.
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, no holder, solely in such Person's capacity as a
holder, of this Warrant shall be entitled to vote or receive dividends or be
deemed the holder of stock of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, solely
in such Person's capacity as a holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which such Person
is then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding this
Section 6, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
7. REISSUANCE OF WARRANTS.
a. TRANSFER OF WARRANT. If this Warrant is to be transferred, the holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the holder of this Warrant a new
Warrant (in accordance with Section 7(d)), registered as the holder of this
Warrant may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the holder of this Warrant representing the
right to purchase the number of Warrant Shares not being transferred.
6
b. LOST, STOLEN OR MUTILATED WARRANT. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the holder of this Warrant to the Company
in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the Warrant Shares then underlying this Warrant.
c. WARRANT EXCHANGEABLE FOR MULTIPLE WARRANTS. This Warrant is
exchangeable, upon the surrender hereof by the holder of this Warrant at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is
designated by the holder of this Warrant at the time of such surrender;
provided, however, that no Warrants for fractional Common Stock shall be given.
d. ISSUANCE OF NEW WARRANTS. Whenever the Company is required to issue a
new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be
of like tenor with this Warrant, (ii) shall represent, as indicated on the face
of such new Warrant, the right to purchase the Warrant Shares then underlying
this Warrant (or in the case of a new Warrant being issued pursuant to Section
7(a) or Section 7(c), the Warrant Shares designated by the holder of this
Warrant which, when added to the number of shares of Common Stock underlying the
other new Warrants issued in connection with such issuance, does not exceed the
number of Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant, which is the same
as the Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
holder of this Warrant with prompt written notice of all actions taken pursuant
to this Warrant, including in reasonable detail a description of such action and
the reason therefor. Without limiting the generality of the foregoing, the
Company will give written notice to the holder of this Warrant (i) promptly upon
any adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen days
prior to the date on which the Company takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any grants,
issues or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of Common Stock or (C)
for determining rights to vote with respect to any Organic Change, dissolution
or liquidation, provided in each case that such information shall be made known
to the public prior to or in conjunction with such notice being provided to such
holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of SPA
Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding; provided that no
such action may increase the initial exercise price of any SPA Warrant or
decrease the initial number of shares or class of stock obtainable upon exercise
of any SPA Warrant without the written consent of the holder of this Warrant. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the SPA Warrants then outstanding.
7
10. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without giving
effect to any statutes concerning choice or conflict of law. Any controversy or
claim arising out of or in connection with this agreement or any breach or
alleged breach hereof shall be exclusively resolved by the competent courts of
Tel Aviv, Israel, and each of the parties hereby irrevocably submits to the
exclusive jurisdiction of such courts; provided, however, that nothing in this
Section 10 shall be construed as preventing any party hereto from seeking
injunctive relief against the Company or any of its officers or other organs
from the competent courts of the State of Delaware.
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.
12. DISPUTES. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 10.
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, the Securities Purchase Agreement,
the SPA Securities and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the holder of this Warrant right to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holder of this Warrant and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of
this Warrant shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
14. TRANSFER. Subject to compliance with any applicable securities laws,
this Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(f) of
the Securities Purchase Agreement.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
"BLOOMBERG" means Bloomberg Financial Markets.
8
"BUSINESS DAY" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.
"CLOSING SALE PRICE" means, for any security as of any date, the last
closing trade price for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price then the last trade price
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last trade price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last trade price is
reported for such security by Bloomberg, the average of the ask prices of any
market makers for such security as reported in the "pink sheets" by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Closing Sale Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Sale Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 12. All such
determinations to be appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during the applicable calculation
period.
"COMMON STOCK" means (i) the Company's Common stock, par value $0.001 per
share, and (ii) any stock capital into which such Common Stock shall have been
changed or any share capital resulting from a reclassification of such Common
stock.
"CONVERTIBLE SECURITIES" means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
Common stock.
"EXCLUDED SECURITIES" shall have the meaning given to it in the Securities
Purchase Agreement.
"EXPIRATION DATE" means the later date of (i) twelve (12) month after the
Closing Date (as defined in the Securities Purchase Agreement) pursuant to which
this Warrant was initially issued; or (ii) three (3) month after the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the SEC; provided, however, that if such date falls on a
day other than a Business Day or on which trading does not take place on the
Principal Market (a "Holiday"), the next date that is not a Holiday.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
9
"PRINCIPAL MARKET" means NASD Over-the-Counter Bulletin Board or in the
event that the Company is no longer listed with NASD Over-the-Counter Bulletin
Board, the market or exchange on which the Common Stock are then listed and
traded, which only may be The New York Stock Exchange, Inc., the American Stock
Exchange or the Nasdaq National Market.
"REGISTRATION RIGHTS AGREEMENT" means that certain registration rights
agreement between the Company and the Purchasers.
"SPA SECURITIES" means the Common Stock issued pursuant to the Securities
Purchase Agreement.
[SIGNATURE PAGE FOLLOWS]
10
[SIGNATURE PAGE - WARRANT II]
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above.
ORGANITECH USA, INC.
By: ________________
Name:
Title:
11
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT TO
PURCHASE COMMON STOCK
ORGANITECH USA, INC.
The undersigned holder hereby exercises the right to purchase _________________
of the Common Stock ("WARRANT SHARES") of Organitech USA, Inc., a company
organized under the laws of the State of Delaware (the "Company"), evidenced by
the attached Warrant to Purchase Common Stock (the "WARRANT"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
____________ a "CASH EXERCISE" with respect to _________________ Warrant Shares.
2. Payment of Exercise Price. The holder is hereby delivering to the
Company payment in the amount of $_________ or NIS _________ representing the
Aggregate Exercise Price for such Warrant Shares.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
_____________________________
Name of Registered Holder
By: ____________________
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
Interwest Transfer Company, Inc. to issue the above indicated number of Common
Stock in accordance with the Transfer Agent Instructions dated February __, 2005
from the Company and acknowledged and agreed to by Interwest Transfer Company,
Inc.
ORGANITECH USA, INC.
By: ________________
Name:
Title:
12
FORM OF WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION ACCOMPANIED BY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH
ACT. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED.
ORGANITECH USA, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: W-2
Number of Shares: _________
Date of Issuance: February __, 2005 ("ISSUANCE DATE")
Organitech USA, Inc., a company organized under the laws of the State of
Delaware (the "COMPANY"), hereby certifies that, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
___________, the registered holder hereof or its permitted assigns (the
"HOLDER"), is entitled, subject to the terms set forth below, to purchase from
the Company, at the Exercise Price (as defined below) then in effect, upon
surrender of this Warrant to Purchase Common Stock (including all Warrants to
Purchase Common Stock issued in exchange, transfer or replacement hereof, the
"WARRANT"), at any time or times on or after the date hereof, but not after
11:59 P.M., Israel Time, on the Expiration Date (as defined below),
_____________ (______) fully paid and nonassessable shares of Common Stock (as
defined below) (the "WARRANT SHARES"). Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth in Section
15. This Warrant is one of the Warrants to Purchase Common Stock (the "SPA
WARRANTS") issued pursuant to Section 1 of that certain Securities Purchase
Agreement, dated as of February 20, 2005 (the "INITIAL ISSUANCE DATE"), among
the Company and the purchasers (the "PURCHASERS") referred to therein (the
"SECURITIES PURCHASE AGREEMENT").
1. EXERCISE OF WARRANT.
a. Subject to the terms and conditions hereof (including, without
limitation, the limitations set forth in Section 1(f)), this Warrant may be
exercised by the Holder on any day, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as EXHIBIT A (the "EXERCISE
NOTICE"), of the Holder's election to exercise this Warrant (ii) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the
"AGGREGATE EXERCISE PRICE") in cash or wire transfer of immediately available
funds , which may be paid, at the sole discretion of the Holder, in U.S. Dollars
or in New Israeli Shekels, at the representative exchange rate in effect on that
day, and (iii) the delivery to the Company of this Warrant. Execution and
delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. On or before the first Business Day following the date on
which the Company has received each of the Exercise Notice, this Warrant and the
Aggregate Exercise Price (the "EXERCISE DELIVERY DOCUMENTS"), the Company shall
transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Delivery Documents to the Holder and the Company's transfer agent (the
"TRANSFER AGENT"). On or before the third Business Day following the date on
which the Company has received all of the Exercise Delivery Documents (the
"SHARE DELIVERY DATE"), the Company shall (X) provided that the Transfer Agent
is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the name of the
Holder or its designee, for the number of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon delivery of the Exercise Delivery
Documents, the Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which this Warrant
has been exercised, irrespective of the date of delivery of the certificates
evidencing such Warrant Shares. If this Warrant is submitted in connection with
any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than five Business Days after any exercise
and at its own expense, issue a new Warrant (in accordance with Section 6(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised. No fractional
Common Stock are to be issued upon the exercise of this Warrant, but rather the
number of Common Stock to be issued shall be rounded up or down to the nearest
whole number. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant.
b. EXERCISE PRICE. For purposes of this Warrant, "EXERCISE PRICE" means One
($1) Dollar, subject to adjustment as provided herein. Notwithstanding the
foregoing, within the thirty (30) days period, prior to the Expiration Date, the
Exercise Price shall be equal to ninety (90%) percent of the average Closing
Sale Price within the thirty (30) days period, prior to the delivery of the
EXERCISE NOTICE in accordance with to Section 1(a).
2
c. COMPANY'S FAILURE TO TIMELY DELIVER SECURITIES. Subject to Section 1(f),
if the Company shall fail for any reason or for no reason to issue to the
holder, within five Business Days of receipt of the Exercise Delivery Documents,
a certificate for the number of shares of Common Stock to which the holder is
entitled or to credit the holder's balance account with DTC for such number of
shares of Common Stock to which the holder is entitled upon the holder's
exercise of this Warrant, the Company shall pay as additional damages in cash to
such holder on each day after such fifth Business Day that the issuance of such
Common Stock certificate is not timely effected an amount equal to 1.0% of the
product of (A) the sum of the number of shares of Common Stock not issued to the
holder on a timely basis and to which the holder is entitled and (B) the
difference between the Closing Sale Price of the Common Stock on the trading day
immediately preceding the last possible date which the Company could have issued
such shares of Common Stock to the holder without violating Section 1(a) and the
Exercise Price. In addition, the holder, upon written notice to the Company, may
void its Exercise Notice with respect to, and have returned, any portion of this
Warrant that has not been exercised pursuant to such Exercise Notice; provided
that the voiding of an Exercise Notice shall not affect the Company's
obligations to make any payments which have accrued prior to the date of such
notice pursuant to this Section 1(c)(i) or otherwise.
d. DISPUTES. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 12.
e. [RESERVED]
f. LIMITATIONS ON EXERCISES.
(i) BENEFICIAL OWNERSHIP. The Company shall not effect the exercise of this
Warrant, and no Person (as defined below) who is a holder of this Warrant shall
have the right to exercise this Warrant, to the extent that after giving effect
to such exercise, such Person (together with such Person's affiliates) would
beneficially own in excess of 9.99% of the shares of the Common stock
outstanding immediately after giving effect to such exercise. For purposes of
the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of
shares of Common stock issuable upon exercise of this Warrant with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such Person
and its affiliates (including, without limitation, any convertible notes or
convertible preferred shares or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein. Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. For purposes of this Warrant, in determining the number
of outstanding Common stock a holder may rely on the number of outstanding
Common stock as reflected in (1) the Company's most recent Form 10-QSB or other
public filing with the Securities and Exchange Commission, as the case may be,
(2) a more recent public announcement by the Company or (3) any other notice by
the Company or its Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral request
of the holder of this Warrant, the Company shall within one Business Day confirm
orally and in writing to the holder of this Warrant the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the exercise of
securities of the Company, including the SPA Warrants, by the holder of this
Warrant and its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.
3
(ii) PRINCIPAL MARKET REGULATION. The Company shall not be obligated to
issue any shares of Common Stock upon exercise of this Warrant if the issuance
of such Common Stock would exceed that number of shares of Common Stock which
the Company may issue upon exercise of this Warrant without breaching the
Company's obligations, if any, under the rules or regulations of the Principal
Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the
event that the Company obtains the approval of its stockholders as required by
the applicable rules of the Principal Market for issuances of Common Stock in
excess of such amount. Until such approval is obtained, no Purchaser shall be
issued, upon exercise of any SPA Warrants, Common stock in an amount greater
than the product of the Exchange Cap multiplied by a fraction, the numerator of
which is the total number of Common stock underlying the SPA Warrants issued to
such Purchaser pursuant to the Securities Purchase Agreement on the Initial
Issuance Date and the denominator of which is the aggregate number of Common
stock underlying all the Warrants issued to the Purchasers pursuant to the
Securities Purchase Agreement on the Initial Issuance Date (with respect to each
Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall
sell or otherwise transfer any of such Purchaser's SPA Warrants, the transferee
shall be allocated a pro rata portion of such Purchaser's Exchange Cap
Allocation, and the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap Allocation allocated
to such transferee. In the event that any holder of SPA Warrants shall exercise
all of such holder's SPA Warrants into a number of shares of Common Stock which,
in the aggregate, is less than such holder's Exchange Cap Allocation, then the
difference between such holder's Exchange Cap Allocation and the number of
shares of Common Stock actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of SPA Warrants on
a pro rata basis in proportion to the shares of Common stock underlying the SPA
Warrants then held by each such holder.
2. ADJUSTMENT OF EXERCISE PRICE. If the Company at any time after the date
of issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased. If the Company at
any time after the date of issuance of this Warrant combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of Warrant Shares will be proportionately decreased. Any adjustment under
this Section 2 shall become effective at the close of business on the date the
subdivision or combination becomes effective.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments
pursuant to Section 2 above, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders
of Common stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a "DISTRIBUTION"), at any time
after the issuance of this Warrant, then, in each such case, any Exercise Price
in effect immediately prior to the close of business on the record date fixed
for the determination of holders of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Exercise Price by a
fraction of which (i) the numerator shall be the Closing Sale Price of the
Common Stock on the trading day immediately preceding such record date minus the
value of the Distribution (as determined in good faith by the Company's Board of
Directors) applicable to one share of Common stock, and (ii) the denominator
shall be the Closing Sale Price of one share of Common Stock on the trading day
immediately preceding such record date.
4
4. PURCHASE RIGHTS; ORGANIC CHANGE.
a. PURCHASE RIGHTS. In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"PURCHASE RIGHTS"), then the holder of this Warrant will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
b. ORGANIC CHANGE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction, in each case which is effected in such a
way that holders of Common Stock are entitled to receive securities or assets
with respect to or in exchange for Common Stock is referred to herein as an
"ORGANIC CHANGE." Subject to Section 4(k) of the Securities Purchase Agreement,
prior to the consummation of any (i) sale of all or substantially all of the
Company's assets to an acquiring Person or (ii) other Organic Change following
which the Company is not a surviving entity, the Company will secure from the
Person purchasing such assets or the Person issuing the securities or providing
the assets in such Organic Change (in each case, the "ACQUIRING ENTITY") a
written agreement (in form and substance reasonably satisfactory to the holders
of SPA Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding) to deliver to the
holder of this Warrant in exchange for this Warrant, a security of the Acquiring
Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant and reasonably satisfactory to the holder of this
Warrant (including, an adjusted exercise price equal to the value for the shares
of Common Stock reflected by the terms of such consolidation, merger or sale,
and exercisable for a corresponding number of shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant), if the value so reflected is less than the
Exercise Price in effect immediately prior to such consolidation, merger or
sale). In the event that an Acquiring Entity is directly or indirectly
controlled by a company or entity whose Common Stock or similar equity interest
is listed, designated or quoted on a securities exchange or trading market, the
holder of this Warrant may elect to treat such Person as the Acquiring Entity
for purposes of this Section 4(b). Prior to the consummation of any other
Organic Change, the Company shall be required to make appropriate provision to
insure that the holder of this Warrant thereafter will have the right to acquire
and receive in lieu of or in addition to (as the case may be) the shares of
Common Stock immediately theretofore acquirable and receivable upon the exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant including those set forth in Sections 1(f)(i) and 1(f)(ii) of this
Warrant), such shares of stock, securities or assets that would have been issued
or payable in such Organic Change with respect to or in exchange for the number
of Common Stock which would have been acquirable and receivable upon the
exercise of this Warrant as of the date of such Organic Change (without regard
to any limitations on the exercise of this Warrant including those set forth in
Sections 1(f)(i) and 1(f)(ii) of this Warrant).
5
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, and
will at all times in good faith carry out all the provisions of this Warrant and
take all action as may be required to protect the rights of the holder of this
Warrant. Without limiting the generality of the foregoing, the Company (i) will
not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (ii) will take
all such actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Common Stock upon the
exercise of this Warrant, and (iii) will, so long as any of the SPA Warrants are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, 100% of the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise) in accordance
with Section 3(c) of the Securities Purchase Agreement.
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, no holder, solely in such Person's capacity as a
holder, of this Warrant shall be entitled to vote or receive dividends or be
deemed the holder of stock of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, solely
in such Person's capacity as a holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which such Person
is then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding this
Section 6, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
7. REISSUANCE OF WARRANTS.
a. TRANSFER OF WARRANT. If this Warrant is to be transferred, the holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the holder of this Warrant a new
Warrant (in accordance with Section 7(d)), registered as the holder of this
Warrant may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the holder of this Warrant representing the
right to purchase the number of Warrant Shares not being transferred.
6
b. LOST, STOLEN OR MUTILATED WARRANT. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the holder of this Warrant to the Company
in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the Warrant Shares then underlying this Warrant.
c. WARRANT EXCHANGEABLE FOR MULTIPLE WARRANTS. This Warrant is
exchangeable, upon the surrender hereof by the holder of this Warrant at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is
designated by the holder of this Warrant at the time of such surrender;
provided, however, that no Warrants for fractional Common Stock shall be given.
d. ISSUANCE OF NEW WARRANTS. Whenever the Company is required to issue a
new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be
of like tenor with this Warrant, (ii) shall represent, as indicated on the face
of such new Warrant, the right to purchase the Warrant Shares then underlying
this Warrant (or in the case of a new Warrant being issued pursuant to Section
7(a) or Section 7(c), the Warrant Shares designated by the holder of this
Warrant which, when added to the number of shares of Common Stock underlying the
other new Warrants issued in connection with such issuance, does not exceed the
number of Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant, which is the same
as the Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
holder of this Warrant with prompt written notice of all actions taken pursuant
to this Warrant, including in reasonable detail a description of such action and
the reason therefor. Without limiting the generality of the foregoing, the
Company will give written notice to the holder of this Warrant (i) promptly upon
any adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen days
prior to the date on which the Company takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any grants,
issues or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of Common Stock or (C)
for determining rights to vote with respect to any Organic Change, dissolution
or liquidation, provided in each case that such information shall be made known
to the public prior to or in conjunction with such notice being provided to such
holder.
7
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of SPA
Warrants representing at least a majority of the shares of Common Stock
obtainable upon exercise of the SPA Warrants then outstanding; provided that no
such action may increase the initial exercise price of any SPA Warrant or
decrease the initial number of shares or class of stock obtainable upon exercise
of any SPA Warrant without the written consent of the holder of this Warrant. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the SPA Warrants then outstanding.
10. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without giving
effect to any statutes concerning choice or conflict of law. Any controversy or
claim arising out of or in connection with this agreement or any breach or
alleged breach hereof shall be exclusively resolved by the competent courts of
Tel Aviv, Israel, and each of the parties hereby irrevocably submits to the
exclusive jurisdiction of such courts; provided, however, that nothing in this
Section 10 shall be construed as preventing any party hereto from seeking
injunctive relief against the Company or any of its officers or other organs
from the competent courts of the State of Delaware.
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.
12. DISPUTES. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall promptly issue to the holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with Section 10.
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, the Securities Purchase Agreement,
the SPA Securities and the Registration Rights Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the holder of this Warrant right to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holder of this Warrant and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of
this Warrant shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
14. TRANSFER. Subject to compliance with any applicable securities laws,
this Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(f) of
the Securities Purchase Agreement.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
"BLOOMBERG" means Bloomberg Financial Markets.
8
"BUSINESS DAY" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.
"CLOSING SALE PRICE" means, for any security as of any date, the last
closing trade price for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price then the last trade price
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last trade price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last trade price is
reported for such security by Bloomberg, the average of the ask prices of any
market makers for such security as reported in the "pink sheets" by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Closing Sale Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Sale Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 12. All such
determinations to be appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during the applicable calculation
period.
"COMMON STOCK" means (i) the Company's Common stock, par value $0.001 per
share, and (ii) any stock capital into which such Common Stock shall have been
changed or any share capital resulting from a reclassification of such Common
stock.
"CONVERTIBLE SECURITIES" means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
Common stock.
"EXCLUDED SECURITIES" shall have the meaning given to it in the Securities
Purchase Agreement.
"EXPIRATION DATE" means the later date of (i) eighteen (18) month after the
Closing Date (as defined in the Securities Purchase Agreement) pursuant to which
this Warrant was initially issued; or (ii) three (3) month after the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the SEC; provided, however, that if such date falls on a
day other than a Business Day or on which trading does not take place on the
Principal Market (a "Holiday"), the next date that is not a Holiday.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
9
"PRINCIPAL MARKET" means NASD Over-the-Counter Bulletin Board or in the
event that the Company is no longer listed with NASD Over-the-Counter Bulletin
Board, the market or exchange on which the Common Stock are then listed and
traded, which only may be The New York Stock Exchange, Inc., the American Stock
Exchange or the Nasdaq National Market.
"REGISTRATION RIGHTS AGREEMENT" means that certain registration rights
agreement between the Company and the Purchasers.
"SPA SECURITIES" means the Common Stock issued pursuant to the Securities
Purchase Agreement.
[SIGNATURE PAGE FOLLOWS]
10
[SIGNATURE PAGE - WARRANT II]
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above.
ORGANITECH USA, INC.
By: ________________
Name:
Title:
11
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT TO
PURCHASE COMMON STOCK
ORGANITECH USA, INC.
The undersigned holder hereby exercises the right to purchase _________________
of the Common Stock ("WARRANT SHARES") of Organitech USA, Inc., a company
organized under the laws of the State of Delaware (the "Company"), evidenced by
the attached Warrant to Purchase Common Stock (the "WARRANT"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
____________ a "CASH EXERCISE" with respect to _________________ Warrant Shares.
2. Payment of Exercise Price. The holder is hereby delivering to the
Company payment in the amount of $_________ or NIS _________ representing the
Aggregate Exercise Price for such Warrant Shares.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
_____________________________
Name of Registered Holder
By: ___________________
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
Interwest Transfer Company, Inc. to issue the above indicated number of Common
Stock in accordance with the Transfer Agent Instructions dated February __, 2005
from the Company and acknowledged and agreed to by Interwest Transfer Company,
Inc.
ORGANITECH USA, INC.
By: ___________________
Name:
Title:
12
Exhibit B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
February__, 2005, is made by and among Organitech USA, Inc., a company organized
under the laws of the State of Israel, with headquarters located at 1 Yoqne'am
Illit, X.X. Xxx 000, Xxxxxx 00000 (the "COMPANY"), and the investors listed on
the Schedule of Buyers attached hereto (each, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell on the date hereof to the
Buyers (i) Four Million (4,000,000) shares of Common Stock and shall
collectively be referred to herein as the "PURCHASED SHARES"); (ii) series A-1
warrants, substantially in the form attached hereto as EXHIBIT A1 (the "SERIES
A-1 WARRANTS"), to acquire that number of shares of Common Stock set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (which
aggregate amount for all Buyers together shall be 2,000,000 shares of Common
Stock) (as exercised, collectively, the "SERIES A-1 WARRANT SHARES"); and (iii)
series A-2 warrants, in substantially the form attached hereto as EXHIBIT A2
(the "SERIES A-2 WARRANTS", collectively with Series A-1 Warrants, the
"WARRANTS"), to acquire that number of shares of Common Stock set forth opposite
such Buyer's name in column (5) on the Schedule of Buyers (which aggregate
amount for all Buyers together shall be 2,000,000 shares of Common Stock) (as
exercised, collectively, the "SERIES A-2 WARRANT SHARES") (Series A-1 Warrant
Shares and Series A-2 Warrant Shares, shall collectively referred to as the
"WARRANT SHARES");
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "BUSINESS DAY" means any day other than Saturday, Sunday or any
other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
b. "INVESTOR" means a Buyer, any transferee or assignee thereof to
whom a Buyer assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section
9 and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by
the provisions of this Agreement in accordance with Section 9.
1
c. "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and governmental or any department or agency thereof.
d. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant
to Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("RULE 415"), and the
declaration or ordering of effectiveness of such Registration Statement(s)
by the United States Securities and Exchange Commission (the "SEC").
e. "REGISTRABLE SECURITIES" means (i) the Purchased Shares, (ii) the
Warrant Shares issued or issuable upon exercise of the Warrants and (iii)
any shares of capital stock issued or issuable with respect to the
Purchased Shares, the Warrant Shares or the Warrants as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on exercise of the Warrants.
f. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering
the Registrable Securities.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall use its best efforts to
prepare, as soon as practicable, but in no event later than 75 Business
Days after the Closing Date (as defined in the Securities Purchase
Agreement) (the "FILING DEADLINE"), file with the SEC a Registration
Statement on Form SB-2 covering the resale of all of the Registrable
Securities together with other securities of the Company as may be
determined by the Company ("ADDITIONAL SECURITIES"). In the event that Form
SB-2 is unavailable for such a registration, the Company shall use such
other form as is available for such a registration. The Registration
Statement prepared pursuant hereto shall register for resale 8,000,000
shares of Common Stock (subject to adjustment) and the Additional
Securities. The Registration Statement shall contain (except if otherwise
directed by the holders of at least a majority of the Registrable
Securities) the "SELLING STOCKHOLDERS" section in substantially the form
attached hereto as EXHIBIT B and the "PLAN OF DISTRIBUTION" attached hereto
as EXHIBIT B. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as
practicable. The Company shall use its best efforts to respond, file, amend
the Registration Statement, and satisfy ("RESPONSE"), as soon as
practicable, any questions, comments, demands, or any other requests of the
SEC, but in no event later than 14 days after the receipt of the same (or
such other period agreed in writing by the Company and the holders of the
majority of the Registrable Securities (the "EFFORTS DEADLINE").
2
b. ALLOCATION OF REGISTRABLE SECURITIES. The number of Registrable
Securities included in any Registration Statement shall be allocated pro
rata among the Investors based on the number of Registrable Securities held
by each Investor at the time the Registration Statement covering such
number of Registrable Securities is declared effective by the SEC. In the
event that an Investor sells or otherwise transfers any of such Investor's
Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in
such Registration Statement for such transferor. Any shares of Common Stock
included in a Registration Statement and which remain allocated to any
Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro
rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement. In no event
shall the Company include any securities other than Registrable Securities
on any Registration Statement prior to the sale of all Registrable
Securities, without the prior written consent of Buyers holding at least a
majority of the Registrable Securities; provided, however, that Buyers
shall be deemed to have consented to the inclusion of the Additional
Securities in the Registration Statement of the Registrable Securities. The
allocation of the Additional Securities shall be as determined by the
Company.
c. LEGAL COUNSEL. Subject to Section 5 hereof, the Buyers holding at
least a majority of the Registrable Securities shall have the right to
select one legal counsel to review and oversee any registration pursuant to
this Section 2 ("LEGAL COUNSEL"), which shall be Gross, Kleinhendler,
Hodak, Halevy, Xxxxxxxxx & Co. or such other counsel as thereafter
designated by the holders of at least a majority of the Registrable
Securities, the fees of whom will be paid by such Buyers.
d. COMPANY'S LEGAL COUNSEL. The Company's legal counsel to draft the
registration statement pursuant to this Section 2, and file any required
Response, shall be selected by the Company and approved by the holders of
at least a majority of the Registrable Securities, which such approval
shall not be unreasonably withheld or delayed.
e. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the number of
shares available under a Registration Statement filed pursuant to Section
2(a) is insufficient to cover all of the Registrable Securities required to
be covered by such Registration Statement or an Investor's allocated
portion of the Registrable Securities pursuant to Section 2(b), the Company
shall amend the applicable Registration Statement, or file a new
Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the number of such
Registrable Securities as of the trading day immediately preceding the date
of the filing of such amendment or new Registration Statement, in each
case, as soon as practicable, but in any event not later than fifteen (15)
days after the Company becomes aware of the necessity therefor, or such
other period agreed between the Company and the holders of the majority of
the Registrable Securities. The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the
foregoing provision, the number of shares available under a Registration
Statement shall be deemed "insufficient to cover all of the Registrable
Securities" if at any time the number of shares of Common Stock available
for resale under such Registration Statement is less than the number of
Registrable Securities issued or issuable upon exercise of the Warrants.
The calculation set forth in the foregoing sentence shall be made without
regard to any limitations on the exercise of the Warrants and such
calculation shall assume that the Warrants are then exercisable into Common
Stock at the then prevailing Warrant Exercise Price (as defined in the
Warrants).
3
f. EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN EFFECTIVENESS OF
REGISTRATION STATEMENT. If (i) a Registration Statement covering all the
Registrable Securities required to be covered thereby and required to be
filed by the Company pursuant to this Agreement is (A) not filed with the
SEC on or before the Filing Deadline (a "FILING FAILURE") or (B) the
Company has not filed a Response with the SEC on or before an Efforts
Deadline (an "EFFORTS FAILURE") or (ii) on any day after such Registration
Statement has been declared effective by the SEC, sales of all the
Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace Period (as
defined in Section 3(q)) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such
Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement or
to register sufficient Common Stock) (a "MAINTENANCE FAILURE"), then, as
relief for the damages to any holder by reason of any such delay in or
reduction of its ability to sell the underlying Common Stock (which remedy
shall be exclusive of any other remedies available at law or in equity),
the Company shall pay to each Investor relating to such Registration
Statement: on the earlier of the last day of each 30 day period after a
Filing Failure, an Efforts Failure and the initial day of a Maintenance
Failure, as the case may be, or on the third Business Day after any such
Filing Failure, Efforts Failure or Maintenance Failure is cured, an amount
in cash equal to the product of (i) the Aggregate Purchase Price (as such
term is defined in Securities Purchase Agreement) paid by such Investor
multiplied by (ii) 0.01 per month (or a prorated daily amount for a period
of less than a month). In the event the Company fails to make any payments
pursuant to this Section 2(f) in a timely manner, such payments shall bear
interest at the rate of 1.0% per month, or such lower maximum amount as is
permitted by law, (prorated for partial months) until paid in full.
Notwithstanding the foregoing, if a Filing Failure, an Efforts Failure, or
a Maintenance Failure, results from the Company not exerting its best
efforts to avoid any such failure, then the remedy set forth above shall be
non-exclusive of any other remedies available at law or in equity.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a) or 2(e), the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:
a. The Company shall submit to the SEC, within two (2) Business Days
after the Company learns that no review of a particular Registration
Statement will be made by the staff of the SEC or that the staff of the SEC
has no further comments on a particular Registration Statement, as the case
may be, a request for acceleration of effectiveness of such Registration
Statement to a time and date not later than 48 hours after the submission
of such request. The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until the earlier of (i) the
date as of which the Investors may sell all of the Registrable Securities
covered by such Registration Statement without restriction pursuant to Rule
144(k) (or successor thereto) promulgated under the 1933 Act or (ii) the
date on which the Investors shall have sold all the Registrable Securities
covered by such Registration Statement (the "REGISTRATION PERIOD"). The
Company shall ensure that each Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading.
4
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period. In the case of
amendments and supplements to a Registration Statement which are required
to be filed pursuant to this Agreement (including pursuant to this Section
3(b)) by reason of the Company filing a report on Form 10-KSB, Form 10-QSB,
or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 ACT"), the Company shall have incorporated such
report by reference into such Registration Statement, if applicable, or
shall file such amendments or supplements with the SEC on the same day on
which the 1934 Act report is filed which created the requirement for the
Company to amend or supplement such Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and comment
upon (i) a Registration Statement at least ten (10) Business Days prior to
its filing with the SEC and (ii) all amendments and supplements to all
Registration Statements (except for Annual Reports on Form 10-KSB, Form
10-QSB, and Current Reports on Form 8-K and any similar or successor
reports) within a reasonable number of days prior to their filing with the
SEC, and (B) not file any Registration Statement or amendment or supplement
thereto in a form to which Legal Counsel reasonably objects. The Company
shall not submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto without the
prior approval of Legal Counsel, which consent shall not be unreasonably
withheld, conditioned or delayed. The Company shall furnish to Legal
Counsel, without charge, (i) copies of any correspondence from the SEC or
the staff of the SEC to the Company or its representatives relating to any
Registration Statement, (ii) promptly after the same is prepared and filed
with the SEC, one copy of any Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, if requested by an Investor and not
otherwise available on the XXXXX system, and all exhibits and (iii) upon
the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto.
d. The Company shall furnish to Legal Counsel and each Investor whose
Registrable Securities are included in any Registration Statement, without
charge (i) promptly after the same is prepared and filed with the SEC, at
least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated
therein by reference, if requested by an Investor and not otherwise
available on the XXXXX system, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, at
least three (3) copies, and upon request, additional copies (provided
however, that the Company shall not be obligated to furnish more than fifty
(50) copies in the aggregate, which number shall include the three copies
furnished to each Investor) of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number
of copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
5
e. The Company shall use its reasonable best efforts to (i) register
and qualify, unless an exemption from registration and qualification
applies, the resale by Investors of the Registrable Securities covered by a
Registration Statement under such other securities or "blue sky" laws of
all applicable jurisdictions in the United States as the Investor may
reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection therewith or
as a condition thereto to (x) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section
3(e), (y) subject itself to general taxation in any such jurisdiction, or
(z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification
with respect to the suspension of the registration or qualification of any
of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual
notice of the initiation or threatening of any proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in writing
of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided that in
no event shall such notice contain any material, nonpublic information),
and, subject to Section 3(q), promptly prepare a supplement or amendment to
such Registration Statement to correct such untrue statement or omission,
and, if so requested, deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of
copies as Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each Investor in
writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement
or any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by
facsimile on the same day of such effectiveness and by overnight mail),
(ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and
(iii) of the Company's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction and, if such an order or suspension
is issued, to obtain the withdrawal of such order or suspension at the
earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and
the resolution thereof or its receipt of actual notice of the initiation or
threat of any proceeding for such purpose.
6
h. If any Investor is required under applicable securities law to be
described in the Registration Statement as an underwriter, at the
reasonable request of such Investor, the Company shall furnish to such
Investor, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated on such date, from the Company's
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
Investors, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Investors.
i. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, or applicable rules and regulations relating of the
Principal Market (as defined in the Securities Purchase Agreement), (ii)
the disclosure of such information is necessary or desirable to avoid or
correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor,
at the Investor's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
j. The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure designation and quotation of all the Registrable Securities
covered by a Registration Statement on Principal Market (as defined in the
Securities Purchase Agreement). The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section 3(j).
k. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, facilitate the
timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may
request.
l. If requested by an Investor, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests in writing to
be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being offered or sold, the purchase price
being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) as soon as practicable make
all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement if
reasonably requested by an Investor holding any Registrable Securities.
7
m. The Company shall use its best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
n. The Company shall make generally available to the Investors as soon
as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement covering a twelve-month
period (complying with the timing provisions and in the form and manner
provided by, the provisions of Rule 158 under the 1933 Act).
o. The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any
registration hereunder.
p. Within two (2) Business Days after a Registration Statement which
covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to
the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
q. Notwithstanding anything to the contrary herein, at any time after
the Registration Statement has been declared effective by the SEC, the
Company may delay the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the
good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel
to the Company, otherwise required (a "GRACE PERIOD"); provided, that the
Company shall promptly (i) notify the Investors in writing of the existence
of a Grace Period in conformity with the provisions of this Section 3(q)
(provided that in each notice the Company will not disclose the content of
such material non-public information to the Investors) and the date on
which the Grace Period will begin, and (ii) notify the Investors in writing
of the date on which the Grace Period ends; and, provided further, that no
Grace Period shall exceed ten (10) consecutive days and during any three
hundred sixty five (365) day period such Grace Periods shall not exceed an
aggregate of thirty (30) days and the first day of any Grace Period must be
at least two (2) trading days after the last day of any prior Grace Period
(each, an "ALLOWABLE GRACE PERIOD"). For purposes of determining the length
of a Grace Period above, the Grace Period shall begin on and include the
date the Investors receive the notice referred to in clause (i) and shall
end on and include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice. The
provisions of Section 3(g) hereof shall not be applicable during the period
of any Allowable Grace Period. Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 3(f) with
respect to the information giving rise thereto unless such material
non-public information is no longer applicable. Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, and delivered a copy of the
prospectus included as part of the applicable Registration Statement, prior
to the Investor's receipt of the notice of a Grace Period and for which the
Investor has not yet settled.
8
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) Business Days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as
shall be reasonably required to effect the effectiveness of the
registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may
reasonably request. All information provided to the Company by an Investor
pursuant to this Section 4(a) shall be in writing, and such writing shall
expressly acknowledge that the information is being provided for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) or receipt of
notice that no supplement or amendment is required. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to
deliver shares of unlegended Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's
receipt of a notice from the Company of the happening of any event of the
kind described in Section 3(g) or the first sentence of 3(f) and for which
the Investor has not yet settled.
d. Each Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to a Registration
Statement.
5. EXPENSES OF REGISTRATION.
All expenses, other than underwriting discounts and commissions (which
shall be borne by the Investors) and fees for Legal Counsel, incurred in
connection with the performance of the Company's obligations hereunder and under
the transactions contemplated hereby, including registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
9
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees, agents, representatives of, and
each Person, if any, who controls any Investor within the meaning of the
1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"), against any
losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, reasonable attorneys' fees, amounts paid in settlement or expenses,
joint or several (collectively, "CLAIMS"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or any post-effective amendment thereto or
in any filing made in connection with the qualification of the offering
under the securities or other "blue sky" laws of any jurisdiction in which
Registrable Securities are offered ("BLUE SKY FILING"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein
any material fact necessary to make the statements made therein, in the
light of the circumstances under which the statements therein were made,
not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including, without limitation,
any state securities law, or any rule or regulation thereunder relating to
the offer or sale of the Registrable Securities pursuant to a Registration
Statement or (iv) any material violation of this Agreement (the matters in
the foregoing clauses (i) through (iv) being, collectively, "VIOLATIONS").
Subject to Section 6(c), the Company shall reimburse the Indemnified
Persons, promptly as such expenses are incurred and are due and payable,
for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to
the Company by such Indemnified Person for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section
3(d); (ii) with respect to any preliminary prospectus, shall not inure to
the benefit of any such Person from whom the Person asserting any such
Claim purchased the Registrable Securities that are the subject thereof (or
to the benefit of any Person controlling such Person) if the untrue
statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(d), and the Indemnified Person was promptly advised
in writing not to use the incorrect prospectus prior to the use giving rise
to a violation and such Indemnified Person, notwithstanding such advice,
used it or failed to deliver the correct prospectus as required by the 1933
Act and such correct prospectus was timely made available pursuant to
Section 3(d); (iii) shall not be available to the extent such Claim is
based on a failure of the Investor to deliver or to cause to be delivered
the prospectus made available by the Company, including a corrected
prospectus, if such prospectus or corrected prospectus was timely made
available by the Company pursuant to Section 3(d); and (iv) shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not
be unreasonably withheld or delayed. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
10
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement and each Person,
if any, who controls the Company within the meaning of the 1933 Act or the
1934 Act (each, an "INDEMNIFIED PARTY"), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the
1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise
out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement
or any amendment thereof or supplement thereto; and, subject to Section
6(c), such Investor will reimburse any legal or other expenses reasonably
incurred by an Indemnified Party in connection with investigating or
defending any such Claim promptly as such expenses are incurred and are due
and payable; provided, however, that the indemnity agreement contained in
this Section 6(b) and the agreement with respect to contribution contained
in Section 7 shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld or delayed;
provided, further, however, that an Investor shall be liable under this
Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact was
contained in the preliminary prospectus and was corrected on a timely basis
in the prospectus, as then amended or supplemented, and the Indemnified
Party was promptly advised in writing not to use the incorrect prospectus
prior to the use giving rise to a violation and such Indemnified Party,
notwithstanding such advice, used it.
11
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a
Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
fees and expenses of not more than one counsel for such Indemnified Person
or Indemnified Party to be paid by the indemnifying party, if, in the
reasonable opinion of the Indemnified Person or the Indemnified Party, as
the case may be, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by
such counsel in such proceeding. In the case of an Indemnified Person,
legal counsel referred to in the immediately preceding sentence shall be
selected by the Investors holding at least a majority in interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate
fully with the indemnifying party in connection with any negotiation or
defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
Claim. The indemnifying party shall keep the Indemnified Party or
Indemnified Person fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim
or proceeding effected without its prior written consent, provided,
however, that the indemnifying party shall not unreasonably withhold, delay
or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to
entry of any judgment or enter into any settlement or other compromise
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation.
Following indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or Indemnified
Person with respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified
Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
12
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no Person
involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) in connection with such sale shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 4(c) of the Securities Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions of
Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company,
if true, that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule
144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of such Investor's Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.
13
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investors
who then hold at least a majority of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the Registrable Securities.
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 this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the record owner of such Registrable Securities.
b. 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 a nationally recognized overnight delivery 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:
Organitech USA, Inc.
Yoqne'am Illit, X.X. Xxx 000,
Xxxxxx 00000
Telephone: 000-0-0000000
Fax: 000-0-0000000
With a copy to (which shall not constitute notice):
Xxxxxx, Xxx-Xxxxxx, Xxxx & Co.
One Azrieli Center, Round Tower, Tel Aviv, Israel
Telephone: x(000)-0-000-0000
Facsimile: x(000)-0-000-0000
Attention: Xxxxx Xxxx, Adv.
14
If to Legal Counsel:
Gross, Kleinhendler, Hodak, Halevy, Xxxxxxxxx & Co.,
One Azrieli Center, Round Tower, Tel Aviv, Israel
Telephone: x(000)-0-000-0000
Facsimile: x(000)-0-000-0000
Attention: Aya Xxxxx, Adv.
If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers attached hereto, 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 a courier or overnight courier service
shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Rights Agreement shall be governed by and construed in
accordance with the internal laws of the State of Israel, without giving
effect to any statutes concerning choice or conflict of law (whether of the
State of Israel or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other that the State of Israel; PROVIDED
ALWAYS, HOWEVER, that any corporate matters involving the Company,
proceedings of organs thereof and other matters that in their nature and as
a matter of law are to be governed by the laws of the place of formation of
corporations, or to U.S. securities law shall be governed by the laws of
the State of Delaware, or U.S. federal laws, respectively. Any controversy
or claim arising out of or in connection with this agreement or any breach
or alleged breach hereof shall be exclusively resolved by the competent
courts of Tel Aviv, Israel, and each of the parties hereby irrevocably
submits to the exclusive jurisdiction of such courts; provided, however,
that nothing in this Section 11(d) shall be construed as preventing any
party hereto from seeking injunctive relief against the Company or any of
its officers or other organs from the competent courts of the State of
Delaware.
e. This Agreement, the Securities Purchase Agreement, the Warrants and
the instruments referenced herein and therein constitute the entire
agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement, the Securities Purchase Agreement, the Warrants and the
instruments referenced herein and therein supersede all prior agreements
and understandings among the parties hereto with respect to the subject
matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
15
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such
other agreements, certificates, instruments and documents, as 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.
j. All consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding at least a majority of
the Registrable Securities, determined as if all the Warrants then
outstanding have been exercised for Registrable Securities without regard
to any limitations on exercises of the Warrants.
k. 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.
l. 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.
m. This Agreement shall terminate and be of no further effect on the
date on which the Investors shall have sold, or can sell pursuant to Rule
144 and Regulation S, all of the Registrable Securities, without any
limitation whatsoever, including any volume limitations, and further
provided, that the restrictive legend was removed of all the Registrable
Securities.
16
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
ORGANITECH USA, INC.
By: ________________
Name:
Title:
BUYERS:
____________________
____________________
____________________
17
SCHEDULE OF BUYERS
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NAME ADDRESS AND FACSIMILE NUMBER
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18
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Interwest Transfer Company, Inc.
Attn: __________________________
Re: ORGANITECH USA, INC.
Ladies and Gentlemen:
[We are][I am] counsel to Organitech USA, Inc., a company organized under
the laws of the State of Delaware (the "COMPANY"), and have represented the
Company in connection with that certain Securities Purchase Agreement (the
"SECURITIES PURCHASE AGREEMENT") entered into by and among the Company and the
buyers named therein (collectively, the "HOLDERS") pursuant to which the Company
issued to the Holders the Company's Common Stock, with par value 0.001 per share
(the "COMMON STOCK") and warrants exercisable for Common Stock (the "WARRANTS").
Pursuant to the Securities Purchase Agreement, the Company also has entered into
a Registration Rights Agreement with the Holders (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the Common Stock issued and the Common Stock issuable upon
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on February _, 2005, the Company filed a Registration
Statement on Form SB-2 (File No. 333-_____________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.
In connection with the foregoing, [we][I] advise you that a member of the
SEC's staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
This letter shall serve as our standing opinion to you that the Common
Stock are freely transferable by the Holders pursuant to the Registration
Statement. Subject to your receipt of a letter from a Holder that such Holder
has complied with the prospectus delivery requirements of the 1933 Act, you need
not require further letters from us to effect any future legend-free issuance or
reissuance of Common Stock to the Holders as contemplated by the Company's
Irrevocable Transfer Agent Instructions dated January __, 2005. This letter
shall serve as our standing instructions to you with regard to this matter.
Very truly yours,
[ISSUER'S COUNSEL]
19
EXHIBIT B
SELLING STOCKHOLDERS
This prospectus, and the registration statement of which it is a part,
cover the reoffer by the selling stockholders of the shares of Common Stock
issued to the selling stockholders and the shares of Common Stock that are
issuable upon exercise of the warrants. For additional information regarding the
purchased Common Stock and warrants, see "Private Placement of Common Stock and
Warrants" above. We are registering the shares of Common Stock in order to
permit the selling stockholders to offer the shares for resale from time to
time. Except for the ownership of the shares of Common Stock and the warrants,
the selling stockholders have not had any material relationship with us within
the past three years.
The table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by each of the
selling stockholders. The second column lists the number of shares of Common
Stock beneficially owned by each selling stockholder, based on its ownership of
the shares of Common Stock and the warrants, as of ________, 200_, assuming
exercise of the warrants held by the selling stockholders on that date, without
regard to any limitations on exercise.
The third column lists the shares of Common Stock being offered by this
prospectus by the selling stockholders.
In accordance with the terms of registration rights agreement with the
selling stockholders and the warrants, this prospectus generally covers the
resale of at least 100% of the aggregate number of shares of Common Stock issued
to the selling stockholder and issuable to the selling stockholders upon
exercise of the related warrants. The fourth column assumes the sale of all of
the shares offered by the selling stockholders pursuant to this prospectus.
The selling stockholders may sell all, some or none of their shares in this
offering. See "Plan of Distribution."
------------ ------------------ -------------------------- ---------------------
NAME OF NUMBER OF SHARES MAXIMUM NUMBER OF SHARES NUMBER OF SHARES
SELLING OWNED PRIOR TO TO BE SOLD PURSUANT TO OWNED PRIOR AFTER
STOCKHOLDER OFFERING THIS PROSPECTUS OFFERING
------------ ------------------ -------------------------- ---------------------
------------ ------------------ -------------------------- ---------------------
------------ ------------------ -------------------------- ---------------------
------------ ------------------ -------------------------- ---------------------
PLAN OF DISTRIBUTION
We are registering the shares of Common Stock issued to the selling
stockholders and issuable upon exercise of the warrants to permit the resale of
these shares of Common Stock by the holders of the Common Stock and the warrants
from time to time after the date of this prospectus. We will not receive any of
the proceeds from the sale by the selling stockholders of the Common Stock. We
will bear all fees and expenses incident to our obligation to register the
Common Stock.
20
The selling stockholders may, from time to time, sell all or a portion of
the Common Stock beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
shares of Common Stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions, on any national securities exchange or quotation service on which
the securities may be listed or quoted at the time of sale; in the
over-the-counter market; in transactions otherwise than on these exchanges or
systems or in the over-the-counter market; through the writing of options,
whether such options are listed on an options exchange or otherwise; ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers; block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; purchases by a broker-dealer as principal and
resale by the broker-dealer for its account; an exchange distribution in
accordance with the rules of the applicable exchange; privately negotiated
transactions; short sales; broker-dealers may agree with the selling
stockholders to sell a specified number of such stocks at a stipulated price per
share; a combination of any such methods of sale; and any other method permitted
pursuant to applicable law.
If the selling stockholders effect such transactions by selling Common
Stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the Common Stock for whom they may act as agent or to whom they
may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the Common Stock or otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the
Common Stock in the course of hedging in positions they assume.
The selling stockholders may also sell Common Stock short and deliver
Common Stock covered by this prospectus to close out short positions. The
selling stockholders may also loan or pledge Common Stock to broker-dealers that
in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some or
all of the convertible notes, warrants or Common Stock owned by them and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell the Common Stock from time to time pursuant
to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933, as amended, amending,
if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus. The selling stockholders also may transfer and donate the Common
Stock in other circumstances in which case the transferees, donees, pledgees or
other successors in interest will be the selling beneficial owners for purposes
of this prospectus.
21
The selling stockholders and any broker-dealer participating in the
distribution of the Common Stock may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the Common Stock is made, a prospectus supplement, if required, will
be distributed which will set forth the aggregate amount of Common Stock being
offered and the terms of the offering.
Under the securities laws of some states, the Common Stock may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in some states the Common Stock may not be sold unless such shares have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
There can be no assurance that any selling stockholder will sell any or all
of the Common Stock registered pursuant to the registration statement.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the Common Stock by the selling stockholders
and any other participating person. Regulation M may also restrict the ability
of any person engaged in the distribution of the Common Stock to engage in
market-making activities with respect to the Common Stock. All of the foregoing
may affect the marketability of the Common Stock and the ability of any person
or entity to engage in market-making activities with respect to the Common
Stock.
We will pay all expenses of the registration of the Common Stock pursuant
to the registration rights agreement, estimated to be $[ ] in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; provided, however, that
a selling stockholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling stockholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreement, or the selling stockholders will be
entitled to contribution. We may be indemnified by the selling stockholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
stockholder specifically for use in this prospectus, in accordance with the
related registration rights agreement, or we may be entitled to contribution.
Once sold under this prospectus, the Common Stock will be freely tradable
in the hands of persons other than our affiliates.
22
OMNIBUS AMENDMENT TO SECURITIES PURCHASE AGREEMENT AND
REGISTRATION RIGHTS AGREEMENT
THIS OMNIBUS AMENDMENT TO SECURITIES PURCHASE AGREEMENT AND REGISTRATION
RIGHTS AGREEMENT (the "AMENDMENT"), dated as of January 31, 2006, is made by and
among Organitech USA, Inc., a company organized under the laws of the State of
Delaware, with headquarters located at Yoqne'am Illit, X.X. Xxx 000, Xxxxxx
00000 (the "COMPANY"), the Buyers who are indicated as such on the signature
page hereto (collectively, the "BUYERS"), the persons who are indicated as the
Previous 2006 Investors on the signature page hereto (collectively "PREVIOUS
2006 INVESTORS"), and the Additional Investors who are indicated as such on the
signature page hereto (collectively "ADDITIONAL INVESTORS").
WHEREAS:
A. The Company entered into that certain Securities Purchase Agreement,
dated as of February 20, 2005 (the "AGREEMENT") and that certain Registration
Rights Agreement, dated as of February 22, 2005 (the "REGISTRATION RIGHTS
AGREEMENT") with the Buyers, pursuant to which the Company sold shares of Common
Stock.
B. The Previous 2006 Investors agreed on January 2, 2006, to purchase from
the Company shares of Common Stock and Warrants, as set forth herein, in
consideration of an aggregate amount of Four Hundred Fifty Thousand US Dollars
($450,000), and to join (i) the Agreement, as amended herein, as an "Additional
Investor" and "Buyer", and (ii) the under the Registration Rights Agreements
Agreement, as amended herein, as a "Buyer".
C. Subject to the terms and conditions herein, the Additional Investors
desire to purchase on the date hereof from the Company shares of Common Stock
and Warrants, as set forth herein, in consideration of an aggregate amount of up
to Five Hundred Thousand US Dollars ($500,000), and to join (i) the Agreement,
as amended herein, as an "Additional Investor" and "Buyer", and (ii) the
Registration Rights Agreements Agreement, as amended herein, as a "Buyer".
D. The Company desires to amend the Agreement and the Registration Rights
Agreement and enable the Additional Investors, the Previous 2006 Investors to
purchase additional shares of Common Stock and Warrants in consideration of an
aggregate amount of up to Nine Hundred Fifty Thousand US Dollars ($950,000)
("ADDITIONAL INVESTMENTS") ("SPA AMENDMENT").
E. The Company desires to amend the Registration Rights Agreement, so that,
among others, the Filing Deadline, as defined therein, for the filing of a form
SB-2 with the Securities and Exchanged Commission be amended to 75 Business Days
following January 31, 2006 ("DEADLINE AMENDMENT").
F. The Company desires to extent the expiration date of the Series A-1
Warrants and Series A-2 Warrants as set forth herein ("AMENDED WARRANTS").
1
G. Subject to the terms and conditions hereof, the Buyers have agreed to
waive any claims that any of them, had, has or may have had at any time in the
past until and including the date of this Amendment, to (i) receive certain
compensation pursuant to Section 2(f) of the Registration Rights Agreement in
connection with a Filing Failure, Efforts Failure or Maintenance Failure, as
such terms are defined therein, or (ii) participate in the Additional
Investments ("WAIVER").
H. The Company represent and warrant that it has applied for, and at the
Subsequent Sale, has obtained, all governmental, regulatory or third party
consents and approvals, if any, necessary for the SPA Amendment and the sale of
the Securities, as defined below, including, without limitation, the Office of
Chief Scientist in the Israeli Ministry of Industry and Trade and the Investment
Center consents ("Governmental Consents"), which are attached hereto, or prior
to the Subsequent Sale, will be furnished to the Additional Investors.
I. The Company represents and warrants that it has the requisite corporate
power and authority to enter into and perform its obligations under this
Amendment, the Amended Warrants, and each of the other agreements entered into
by the parties hereto in connection with the transactions contemplated by this
Amendment (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 Securities and the reservation for issuance and
the issuance of the Warrant Shares, as defined in the Agreement, issuable upon
exercise thereof have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company.
J. Pursuant to Section 9(e) of the Agreement, an amendment to the Agreement
requires the approval of the Company and the holders of Purchased Shares (as
defined therein) representing at least a majority of the Purchased Shares.
K. Pursuant to Section 10 of the Registration Rights Agreement, an
amendment thereto requires the approval of the Company and Investors who then
hold at least a majority of the Registrable Securities (as defined therein).
L. Subject to the Additional Investment and the issuance of the Amended
Warrants, and effective upon the Additional Investments, the Buyers holding at
least a majority of the amount of the Purchased Shares and the Registrable
Securities agree to the Waiver, the SPA Amendment and the Deadline Amendment in
accordance with the terms and conditions herein.
2
NOW, THEREFORE, it is agreed as follows:
1. AMENDMENT TO RECITAL B OF THE AGREEMENT
Recital B of the Agreement shall be deleted in its entirety and replaced as
follows:
"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
shares of the Company's Common Stock, par value $0.001 (the "COMMON STOCK")
set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers (which aggregate amount for all Buyers together shall be up to Six
Million (6,000,000) shares of Common Stock and shall collectively be
referred to herein as the "PURCHASED SHARES"); (ii) series A-1 warrants, in
substantially the form attached hereto as EXHIBIT A1 (the "SERIES A-1
WARRANTS"), to acquire that number of shares of Common Stock set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (which
aggregate amount for all Buyers together shall be up to 3,000,000 shares of
Common Stock) (as exercised, collectively, the "SERIES A-1 WARRANT
SHARES"); and (iii) series A-2 warrants, in substantially the form attached
hereto as EXHIBIT A2 (the "SERIES A-2 WARRANTS", collectively with Series
A-1 Warrants, the "WARRANTS"), to acquire that number of shares of Common
Stock set forth opposite such Buyer's name in column (5) on the Schedule of
Buyers (which aggregate amount for all Buyers together shall be up to
3,000,000 shares of Common Stock) (as exercised, collectively, the "SERIES
A-2 WARRANT SHARES") (Series A-1 Warrant Shares and Series A-2 Warrant
Shares, shall be collectively referred to as the "WARRANT SHARES")."
2. AMENDMENT TO RECITAL A OF THE REGISTRATION RIGHTS AGREEMENT
Recital A of the Registration Rights Agreement shall be deleted in its
entirety and replaced as follows:
"A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell on the date hereof to the
Buyers (i) up to Six Million (6,000,000) shares of Common Stock and shall
collectively be referred to herein as the "PURCHASED SHARES"); (ii) series
A-1 warrants, substantially in the form attached hereto as EXHIBIT A1 (the
"SERIES A-1 WARRANTS"), to acquire that number of shares of Common Stock
set forth opposite such Buyer's name in column (4) on the Schedule of
Buyers (which aggregate amount for all Buyers together shall be up to
3,000,000 shares of Common Stock) (as exercised, collectively, the "SERIES
A-1 WARRANT SHARES"); and (iii) series A-2 warrants, in substantially the
form attached hereto as EXHIBIT A2 (the "SERIES A-2 WARRANTS", collectively
with Series A-1 Warrants, the "WARRANTS"), to acquire that number of shares
of Common Stock set forth opposite such Buyer's name in column (5) on the
Schedule of Buyers (which aggregate amount for all Buyers together shall be
up to 3,000,000 shares of Common Stock) (as exercised, collectively, the
"SERIES A-2 WARRANT SHARES") (Series A-1 Warrant Shares and Series A-2
Warrant Shares, shall collectively referred to as the "WARRANT SHARES");
3. AMENDMENT TO SECTION 1(E) OF THE AGREEMENT.
Sub-Section 1(e) (i) of the Agreement shall be deleted in its entirety and
replaced as follows:
"(i) such subsequent sale is consummated prior to January 31, 2006"
3
4. AMENDMENT TO SECTION 2(A) OF THE REGISTRATION RIGHTS AGREEMENT
Section 2(a) of the Registration Rights Agreement shall be shall be deleted
in its entirety and replaced as follows:
"a. MANDATORY REGISTRATION. The Company shall use its best efforts to
prepare, as soon as practicable, but in no event later than 75 Business
Days following January 31, 2006 (the "FILING DEADLINE"), file with the SEC
a Registration Statement on Form SB-2 covering the resale of all of the
Registrable Securities together with other securities of the Company as may
be determined by the Company ("ADDITIONAL SECURITIES"). In the event that
Form SB-2 is unavailable for such a registration, the Company shall use
such other form as is available for such a registration. The Registration
Statement prepared pursuant hereto shall register for resale 9,000,000
shares of Common Stock (subject to adjustment and assuming all of the
Purchased Shares and Warrants under the Securities Purchase Agreement have
been subscribed for, and to the extent a lesser amount of Purchased Shares
and Warrants under the Securities Purchase Agreement have been subscribed
for, such lesser amount) and the Additional Securities. The Registration
Statement shall contain (except if otherwise directed by the holders of at
least a majority of the Registrable Securities) the "SELLING STOCKHOLDERS"
section in substantially the form attached hereto as EXHIBIT B and the
"PLAN OF DISTRIBUTION" attached hereto as EXHIBIT B. The Company shall use
its best efforts to have the Registration Statement declared effective by
the SEC as soon as practicable. The Company shall use its best efforts to
respond, file, amend the Registration Statement, and satisfy ("RESPONSE"),
as soon as practicable, any questions, comments, demands, or any other
requests of the SEC, but in no event later than 14 days after the receipt
of the same (or such other period agreed in writing by the Company and the
holders of the majority of the Registrable Securities (the "EFFORTS
DEADLINE")."
5. AMENDMENT OF WARRANTS
Each of the Company's Warrants set forth in the EXHIBIT A hereto are hereby
amended and delivered to the holders thereof in accordance with the form
attached hereto as Form Amendment No. 1 to Series A-1 Warrant.
Each of the Company's Warrants set forth in the EXHIBIT A hereto are hereby
amended and delivered to the holders thereof in accordance with the form
attached hereto as Form Amendment No. 1 to Series A-2 Warrant.
6. WAIVER OF BUYERS
The Buyers, holding at least a majority of the amount of the Purchased
Shares and the Registrable Securities, on behalf of all the Buyers, effective
upon, and subject to, the Subsequent Sale and the issuance of the Amended
Warrants, hereby irrevocably waive any and all claims or demands against the
Company any of them, had, has or may have had at any time in the past until and
including the date of this Amendment, to (i) receive compensation or damages,
including pursuant to Section 2(f) of the Registration Rights Agreement, in
connection with any Filing Failure, Efforts Failure or Maintenance Failure, as
such terms are defined therein, or (ii) participate in the Additional
Investments. Pursuant to Section 10 of the Registration Rights Agreement, this
Waiver shall bind all Buyers, including those who are not a party hereto.
4
7. PREVIOUS 2006 INVESTORS
The Previous 2006 Investors have agreed on January 2, 2006, to purchase the
securities as set forth below opposite such Previous 2006 Investor's name, the
receipt of which is acknowledged by the Previous 2006 Investors, in
consideration of the aggregate purchase price set forth below opposite such
Previous 2006 Investor's name, the receipt of which is acknowledged by the
Company, pursuant to the terms of the Agreement, as amended herein. Each of the
Previous 2006 Investors hereby becomes a party to the Agreement, as amended
herein, as an "Additional Investor" and "Buyer", and the Registration Rights
Agreement, as amended herein, as amended herein, as a "Buyer". The Schedule of
Buyers will be updated with the information contained in the table below.
NUMBER OF
PURCHASED NUMBER OF NUMBER OF AGGREGATE
NAME SHARES WARRANT X-0 XXXXXXX X-0 XXXXXXXX PRICE
---- ------ ----------- ----------- --------------
XXXXXX XXXXXXXXX 200,000 100,000 100,000 $ 50,000
XXXXXX BIN NUN 1,200,000 600,000 600,000 $ 300,000
YTZIK BABAYOF 400,000 200,000 200,000 $ 100,000
Furthermore, each Previous 2006 Investor hereby becomes a party to that
certain Voting Agreement between the Company and other parties dated as of
February 22, 2005 (the "VOTING AGREEMENT").
Each Previous 2006 Investor confirms that the aforementioned sums are the
only sums invested by such party, and any conflicting agreements executed prior
to the date hereof are hereby null and void.
8. NEW ADDITIONAL INVESTORS
Pursuant to Sub-Section 1(e)(i) of the Agreement, upon the receipt by the
Company, and delivery to the Additional Investors, of the Governmental Consents,
provided that such receipt and deliver occurs prior to March 15, 2006, the
Company shall sell and issue to each Additional Investor, and each Additional
Investor shall purchase from the Company, duly authorized, validly issued, and
upon payment to the Company of the consideration therefor, fully paid and non
assessable securities as set forth in Exhibit B attached hereto, opposite such
Additional Investor's name, free of any pre-emptive rights or any other liens,
claims, and other encumbrances or restrictions in consideration of the aggregate
purchase price set forth in Exhibit B attached hereto, opposite such Additional
Investor's name ("SUBSEQUENT SALE"). Each Additional Investor may, at its sole
discretion, by executing an instrument in writing to such effect, enter into an
arrangement with the Company (in a form to be agreed by the Company and such
Additional Investor) pursuant to which the Purchase Price of such Additional
Investor will be deposited into an escrow account, until the receipt by the
Company, and delivery to the Additional Investors, of the Governmental Consents.
Upon the Subsequent Sale, each Additional Investor shall become a party to the
Agreement, as amended herein, as an "Additional Investor" and "Buyer", and the
Registration Rights Agreement, as amended herein, as amended herein, as a
"Buyer". The Schedule of Buyers will be updated with the information contained
in the table below.
5
Furthermore, upon the Subsequent Sale, each Additional Investor hereby
becomes a party to the Voting Agreement.
On the date hereof, the Company shall pay (or, at the Company's election,
it may request to be withheld by the Buyers from the payment of its purchase
price) the fees and expenses incurred by the Buyers in connection with the
negotiation and execution of this Amendment in an amount not to exceed US$3,000
plus VAT.
9. CONFIRMATION
The undersigned acknowledge and agree that Xxxxxx Bin Nun will be appointed
to the Board of Directors of the Company as the representative of the Buyers
pursuant to that Voting Agreement.
10. EFFECTIVENESS OF AMENDMENT
Other than as amended hereby, the provisions of the Agreement and the
Registration Rights Agreement shall remain in full force and effect, insofar as
they do not contradict the terms of this Amendment.
6
IN WITNESS WHEREOF, the Parties have caused this Omnibus Amendment to
Securities Purchase Agreement and Registration Rights Agreement to be duly
executed as of the date first written above.
COMPANY:
ORGANITECH USA, INC.
By: ________________
Name:
Title:
7
IN WITNESS WHEREOF, the Parties have caused this Omnibus Amendment to
Securities Purchase Agreement and Registration Rights Agreement to be duly
executed as of the date first written above.
BUYERS
{NEEDS TO BE SIGNED BY HOLDERS OF A MAJORITY OF THE PURCHASED SHARES TO BE
EFFECTIVE}
By: ________________
Name:
Title:
8
ADDITIONAL INVESTORS
ZOVERET CENTRAL FUND FOR SEVERANCE PAY
By: ________________
NAME:
TITLE:
KASEFET PROVIDENT AND SEVERANCE PAY
By: ________________
NAME:
TITLE:
DIKAN STUDY FUND
By: ________________
NAME:
TITLE:
DEKEL PROVIDENT FUND
By: ________________
NAME:
TITLE:
BAZ PROVIDENT FUND
By: ________________
NAME:
TITLE:
NETZ STUDY FUND
By: ________________
NAME:
TITLE:
9
HAREL STUDY FUND
By: ________________
NAME:
TITLE:
HAREL CENTRAL FUND FOR SEVERANCE PAY
By: ________________
NAME:
TITLE:
HAREL PROVIDENT
By: ________________
NAME:
TITLE:
PREVIOUS 2006 INVESTORS
____________________
XXXXXX XXXXXXXXX
_____________________
XXXXXX BIN NUN
_____________________
YTZIK BABAYOF
10
FORM AMENDMENT NO. 1 TO SERIES A-1 WARRANT
ORGANITECH USA, INC.
AMENDMENT NO.1 TO WARRANT TO PURCHASE COMMON STOCK
JANUARY 31, 2006
WHEREAS, on February 22, 2005, Organitech USA, Inc. ("Company") issued to the
holder hereof, the Company's Warrant No. __, to purchase shares of Common Stock
of the Company ("Warrant");
WHEREAS, the Company desires to amend the Warrant in accordance with the terms
and conditions herein.
NOW, THEREFORE, it is agreed as follows:
1. The term "EXPIRATION DATE" is hereby deleted in its entirety and
replaced as follows:
"EXPIRATION DATE" means "the later date of (i) April 30, 2007; or (ii)
three (3) months after the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective by the SEC; provided,
however, that if such date falls on a day other than a Business Day or on
which trading does not take place on the Principal Market (a "Holiday"),
the next date that is not a Holiday."
2. As amended herein, the Warrant is hereby ratified, confirmed and
approved in all respects.
IN WITNESS WHEREOF, the Company has executed this Amendment No.1 as of the date
first appearing above.
ORGANITECH USA, INC.
By: ________________
Name:
Title:
11
FORM AMENDMENT NO. 1 TO SERIES A-2 WARRANT
ORGANITECH USA, INC.
AMENDMENT NO.1 TO WARRANT TO PURCHASE COMMON STOCK
JANUARY 31, 2006
WHEREAS, on February 22, 2005, Organitech USA, Inc. ("Company") issued to the
holder hereof, the Company's Warrant No. __, to purchase shares of Common Stock
of the Company ("Warrant");
WHEREAS, the Company desires to amend the Warrant in accordance with the terms
and conditions herein.
NOW, THEREFORE, it is agreed as follows:
1. The term "EXPIRATION DATE" is hereby deleted in its entirety and
replaced as follows:
""EXPIRATION DATE" means "the later date of (i) July 31, 2007; or (ii)
three (3) months after the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective by the SEC; provided,
however, that if such date falls on a day other than a Business Day or on
which trading does not take place on the Principal Market (a "Holiday"),
the next date that is not a Holiday."
2. As amended herein, the Warrant is hereby ratified, confirmed and
approved in all respects.
IN WITNESS WHEREOF, the Company has executed this Amendment No.1 as of the date
first appearing above.
ORGANITECH USA, INC.
By: ________________
Name:
Title:
12
