Exhibit 2.01
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of March
30, 2004, among BluePhoenix Solutions Ltd., an Israeli company (the "Company"),
and the purchasers identified on the signature pages hereto (each, including its
successors and permitted assigns, a "Purchaser" and collectively the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144 under the Securities Act.
"Capital Shares" means the Ordinary Shares and any shares of any
other class of securities whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the
Company.
"Capital Shares Equivalents" means any securities, rights or
obligations that are convertible into or exchangeable for or give any
right to subscribe for or purchase, directly or indirectly, any Capital
Shares.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions
precedent to (i) each Purchaser's obligations to pay the Subscription
Amount have been satisfied or waived (ii) and the Company's obligations to
deliver the Securities have been satisfied or waived.
"Commission" means the Securities and Exchange Commission.
----------
"Company Counsel" means Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, with
offices at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, legal counsel to
the Company.
"Debentures" means, the 2% Convertible Debentures due thirty-two
months from their date of issuance, issued by the Company to the
Purchasers hereunder, in the form of Exhibit A.
"Disclosure Schedules" shall have the meaning ascribed to such term
in Section 3.1 hereof.
"Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Exempt Issuances" the issuance or sale of (a) Ordinary Shares or
options to purchase Ordinary Shares to employees, officers, directors or
consultants (but if to consultants, only up to 100,000 shares, subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Ordinary Shares that
occur after the date of this Agreement, in the aggregate among all
consultants during any 12 month period) of the Company or the Subsidiaries
pursuant to any stock or option plan duly adopted by the Board of
Directors of the Company, (b) securities upon the exercise of or
conversion of any securities issued hereunder, convertible securities,
options or warrants issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities (unless such amendment
results from the application of any anti dilution provisions applicable to
such securities), or (c) securities in connection with acquisitions,
strategic investments, or strategic partnering arrangements, the primary
purpose of which is not to raise capital.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form 6-K" shall have the meaning ascribed to such term in Section
3.1(g).
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices at 000 Xxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000, legal counsel to
Omicron Master Trust.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h) hereof.
"Liens" shall have the meaning ascribed to such term in Section
3.1(a) hereof.
2
"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of
preparation and reasonable attorneys' fees.
"Market Price" shall mean the average of the 5 VWAPs immediately
prior to the date in question.
"Material Adverse Effect" shall have the meaning assigned to such
term in Section 3.1(b) hereof.
"Ordinary Shares" means the ordinary shares of the Company, par
value NIS 0.01 per share, and any securities into which such ordinary
shares shall hereinafter have been reclassified into.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Principal Market" initially means the Nasdaq National Market and
shall also include the New York Stock Exchange, the NASDAQ Small-Cap
Market or the American Stock Exchange, whichever is at the time the
principal trading exchange or market for the Ordinary Shares, based upon
share volume.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers, in
the form of Exhibit B attached hereto.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale of the Underlying Shares by each Purchaser as provided for in
the Registration Rights Agreement.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e) hereof.
"Required Minimum" means, as of any date, the maximum aggregate
number of Ordinary Shares then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any Underlying
Shares issuable upon exercise or conversion in full of all Warrants and
Debentures (including Underlying Shares issuable as payment of interest),
ignoring any conversion or exercise limits set forth therein, and assuming
that the Set Price is at all times on and after the date of determination
75% of the then Set Price on the Trading Day immediately prior to the date
of determination.
3
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h) hereof.
"Securities" means the Debentures, the Warrants and the Underlying
Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Set Price" shall have the meaning ascribed to such term in the
Debentures.
"Shareholder Approval" means such approval as may be required by
applicable law or by the applicable rules and regulations of the Principal
Market (or any successor entity) from the shareholders of the Company with
respect to the transactions contemplated by the Transaction Documents,
including the issuance of all of the Underlying Shares and Ordinary Shares
issuable upon exercise of the Warrants in excess of 19.9% of the Company's
issued and outstanding Ordinary Shares on the Closing Date.
"Subscription Amount" means, as to each Purchaser, the aggregate
amount to be paid for Debentures and Warrants purchased hereunder as
specified below such Purchaser's name on the signature page of this
Agreement and next to the heading "Subscription Amount", in United States
Dollars and in immediately available funds.
"Subsequent Financing" shall have the meaning ascribed to such term
in Section 4.13.
"Subsidiary" means, for purposes of Section 3.1, any subsidiary of
the Company as set forth on Schedule 3.1(a) attached hereto, and for all
other purposes under the Transaction Documents, any subsidiary of the
Company as set forth on Schedule 3.1(a) attached hereto and any future
direct or indirect subsidiary of the Company.
"Trading Day" means any day during which the Principal Market shall
be open for business.
"Transaction Documents" means this Agreement, the Debentures, the
Warrants, the Registration Rights Agreement and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
"Underlying Shares" means the Ordinary Shares issuable upon
conversion of the Debentures and upon exercise of the Warrants and issued
and issuable in lieu of the cash payment of interest on the Debentures.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Ordinary Shares are then listed
or quoted on the Principal
4
Market, the daily volume weighted average price of the Ordinary Shares for
such date (or the nearest preceding date) as reported by Bloomberg
Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02
p.m. Eastern Time); (b) if the Ordinary Shares are not then listed or
quoted on the Principal Market and if prices for the Ordinary Shares are
then quoted on the OTC Bulletin Board, the volume weighted average price
of the Ordinary Shares for such date (or the nearest preceding date) on
the OTC Bulletin Board; (c) if the Ordinary Shares are not then listed or
quoted on the OTC Bulletin Board and if prices for the Ordinary Shares are
then reported in the "Pink Sheets" published by Pink Sheets LLC (or a
similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Ordinary Shares so
reported prior to the day in question; or (d) in all other cases, the fair
market value of an Ordinary Share as determined by the Company's Board of
Directors in good faith.
"Warrants" means collectively the Ordinary Shares purchase warrants,
in the form of Exhibit C delivered to the Purchasers at the Closing in
accordance with Section 2.2 hereof, which Warrants shall have a term of
exercise equal to 5 years beginning 6 months after the date hereof.
"Warrant Shares" means the Ordinary Shares issuable upon exercise of
the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and the Purchasers
agree to purchase in the aggregate, severally and not jointly, $5,000,000
principal amount of the Debentures. Each Purchaser shall deliver to the Company
via wire transfer of immediately available funds equal to its Subscription
Amount and the Company shall deliver to each Purchaser its respective Debenture
and Warrants as determined pursuant to Section 2.2(a)(ii) and the other items
set forth in Section 2.2 issuable at the Closing. Upon satisfaction of the
conditions set forth in Section 2.2, the Closing shall occur at the offices of
FW, or such other location as the parties shall mutually agree.
2.2 Conditions to Closing.
----------------------
(a) At or prior to the Closing, unless otherwise indicated below,
the Company shall deliver or cause to be delivered to each Purchaser the
following:
(i) a Debenture with a principal amount equal to such
Purchaser's Subscription Amount, registered in the name of such
Purchaser;
(ii) a Warrant registered in the name of such Purchaser to
purchase up to a number of Ordinary Shares equal to 50% of such
Purchaser's Subscription Amount divided by the Set Price on the
Closing Date, with an exercise price equal to $6.50, subject to
adjustment therein;
5
(iii) the legal opinion of Company Counsel, in the form of
Exhibit D attached hereto, addressed to the Purchasers;
(iv) the Registration Rights Agreement duly executed by the
Company in the form of Exhibit B attached hereto; and
(v) this Agreement, duly executed by the Company.
(b) At or prior to the Closing, each Purchaser shall deliver or
cause to be delivered to the Company the following:
(i) such Purchaser's Subscription Amount;
(ii) this Agreement, duly executed by such Purchaser;
(iii) the Registration Rights Agreement duly executed by
such Purchaser; and
(iv) a completed Registration Rights Questionnaire, duly
executed by such Purchaser, in the form attached hereto as Exhibit
E.
(c) All representations and warranties of the other parties
contained herein shall remain true and correct as of the Closing Date and
all covenants of the other party shall have been performed if due prior to
such date.
(d) From the date hereof to the Closing Date, trading in the
Ordinary Shares shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and,
at any time prior to the Closing Date, trading in securities generally
shall not have been suspended or limited, or minimum prices shall not have
been established on securities whose trades are reported by such service,
or on the Principal Market.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.
(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any lien, charge or security interest
(collectively, "Liens"), and all the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully paid and
non-assessable.
6
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry
on its business as currently conducted, except with respect to the
Subsidiaries where the failure to meet any of these conditions would not
reasonably be expected to result in a Material Adverse Effect (as defined
below). No proceeding has been instituted by the Registrar of Companies in
Israel for the dissolution of the Company and, if applicable, any
Subsidiaries. Each of the Company and the Subsidiaries is duly qualified
to do business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where
the failure to be so qualified or in good standing, as the case may be,
would not reasonably be expected to, individually or in the aggregate: (i)
adversely affect the legality, validity or enforceability of any
Transaction Document, (ii) have or result in or be reasonably likely to
have or result in a material adverse effect on the results of operations,
assets, prospects, business or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, other than effects
resulting from conditions affecting the Company's or its Subsidiaries'
markets generally or from general economic conditions or (iii) adversely
impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents (any of (i), (ii) or
(iii), a "Material Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder or thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary action on
the part of the Company and no further consent or action is required by
the Company other than Required Approvals and no Company shareholder
approval is required under Section 274 of the Israeli Companies Law. Each
of the Transaction Documents has been (or upon delivery will be) duly
executed by the Company and, when delivered in accordance with the terms
hereof, assuming the due authorization, execution and delivery by the
other parties thereto, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or
articles of incorporation, by-laws or other organizational or charter
documents except where such violation would not reasonably be expected to,
individually or in the aggregate, constitute a Material Adverse Effect.
(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 thereby do not and will not: (i) conflict
with or violate any provision of the
7
Company's or any Subsidiary's certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii) subject to
obtaining the Required Approvals, conflict with, or constitute a default
(or an event that 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 (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result, in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which
any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii) with respect to the
Company and each of its Subsidiaries and in the case of clause (i) solely
with respect to the Subsidiaries, such as would not reasonably be expected
to, individually or in the aggregate, have or result in a Material Adverse
Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required under Section
4.7, (ii) the filing with the Commission of the Registration Statement,
(iii) the notice and/or application(s) to each applicable Principal Market
for the issuance and sale of the Debentures and Warrants and the listing
of the Underlying Shares for trading thereon in the time and manner
required thereby and (iv) the filing of Form D with the Commission and
applicable Blue Sky filings (collectively, the "Required Approvals").
(f) Issuance of the Securities. Other than Israeli stamp tax and
withholding tax, there is no tax, levy, impost, duty, fee, assessment or
other governmental charge, or any deduction or withholding, imposed by any
governmental agency or authority in or of Israel either (A) on or by
virtue of the execution or delivery of the Transaction Documents to which
the Company is a party, (B) the issuance of the Securities pursuant hereto
or (C) on any payment to be made by Company pursuant to the Transaction
Documents. The Securities are duly authorized and, when issued and paid
for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and non-assessable, free and clear of all
Liens. The Company has reserved from its duly authorized share capital a
number of Ordinary Shares for issuance of the Underlying Shares at least
equal to the Required Minimum on the date hereof. The Company has not, and
to the knowledge of the Company, no Affiliate of the Company has sold,
offered for sale or solicited offers to buy or otherwise negotiated in
respect of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale of the Securities to the Purchasers, or that would be integrated with
the offer or sale of the Securities for purposes of the rules and
regulations of any Principal Market.
8
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding share capital of the Company is set forth in the
Disclosure Schedules attached hereto. No securities of the Company are
entitled to preemptive or similar rights, and no Person has any right of
first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Securities,
there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any Ordinary
Shares, or contracts, commitments, understandings or arrangements by which
the Company or any Subsidiary is or may become bound to issue additional
Ordinary Shares, or securities or rights convertible or exchangeable into
Ordinary Shares. The issuance and sale of the Securities will not obligate
the Company to issue Ordinary Shares or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities. All of the outstanding Ordinary Shares
of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none
of such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities. Except
for the Required Approvals, no further approval or authorization of any
shareholder, the Board of Directors of the Company or others is required
for the issuance and sale of the Securities. Except as disclosed in the
SEC Reports or a Report of Foreign Issuer on Form 6-K ("Form 6-K"), there
are no shareholders agreements, voting agreements or other similar
agreements with respect to the Company's share capital to which the
Company is a party or, to the knowledge of the Company, between or among
any of the Company's shareholders.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the greater of the one
year preceding the date hereof or the period since and including the
filing of the last annual report on Form 20-F (or such shorter period as
the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Reports") on a
timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension. The Company has identified and made available to the Purchasers
a copy of all SEC Reports filed within the 10 days preceding the date
hereof. As of their respective dates, the SEC Reports complied in all
material respects with all applicable requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations of
the Commission promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally
accepted
9
accounting principles applied on a consistent basis during the periods
involved ("GAAP"), except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Material Changes. Since the date of the latest financial
statements included within a Form 6-K submitted to the Commission, except
as specifically disclosed in the SEC Reports or Form 6-K submitted to the
Commission: (i) there has been no event, occurrence or development that
has had or, to the knowledge of the Company, that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary
course of business consistent with past practice and (B) immaterial
liabilities, (iii) the Company has not altered its method of accounting or
the identity of its auditors, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its shareholders
or purchased, redeemed or made any agreements to purchase or redeem any
Ordinary Shares, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company
share option or similar plans.
(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which: (i)
has a Material Adverse Effect or (ii) if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor, to the knowledge of the Company, any director or officer
thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. The Company does not have pending
before the Commission any request for confidential treatment of
information. There has not been, and to the knowledge of the Company,
there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Compliance. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in
10
violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of
any governmental authority or any governmental grant received or expected
to be received by the Company or governmental program in which the Company
participates, including, but not limited to grants and programs originated
or administered by the Office of the Chief Scientist of Israel and the
Investment Center of the Israeli Ministry of Industry and Trade, except in
each case as would not reasonably be expected to, individually or in the
aggregate, have or result in a Material Adverse Effect.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits would not reasonably be
expected to, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect ("Material Permits"), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries.
Any real property and facilities held under lease by the Company and the
Subsidiaries are held under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in compliance, except where
such non-compliance would not reasonably be expected to, individually or
in the aggregate, have or result in a Material Adverse Effect.
(o) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses
and other similar rights necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have would reasonably be expected to have a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Neither the
Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable and
there is no existing infringement by another Person of any of the
Intellectual Property Rights.
11
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged. Neither the Company
nor any Subsidiary has any reason to believe it will not be able to renew
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business.
(q) Transactions With Affiliates and Employees. Except as required
to be set forth in the SEC Reports and Forms 6-K, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers
and 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 officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner
and any such transactions have been approved in accordance with the
requirements of the Israeli Companies Law, 1999.
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of the Closing Date. The Company has
established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material information
relating to the Company, including its subsidiaries, is made known to the
certifying officers by others within those entities, particularly during
the period in which the Company's most recently filed periodic report
under the Exchange Act, as the case may be, is being prepared. The
Company's certifying officers have evaluated the effectiveness of the
Company's disclosure controls and procedures as of the date prior to the
filing date of the most recently filed periodic report under the Exchange
Act (such date, the "Evaluation Date"). The Company presented in its most
recently filed periodic report under the Exchange Act the conclusions of
the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since
the Evaluation Date, there have been no significant changes in the
Company's internal controls (as such term is defined in Rule 13a-15(e) of
the Exchange Act) or, to the Company's knowledge, in other factors that
would reasonably be expected to significantly affect the Company's
internal controls.
(s) Solvency/Indebtedness. Based on the financial condition of the
Company as of December 31, 2003: (i) the fair value of the Company's
assets exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities (including
known contingent liabilities) as they mature; (ii) the Company's assets do
not constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the
12
Company, and projected capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such
amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of
its debt). Based on the financial condition of the Company as of the
Closing Date, the Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date. The SEC Reports set
forth as of the dates thereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary required to be set forth in
such SEC Reports. For the purposes of this Agreement, "Indebtedness" shall
mean (a) any liabilities for borrowed money or amounts owed in excess of
$150,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent
obligations, whether or not the same are or should be reflected in the
Company's balance sheet or the notes thereto, except guaranties by
endorsement of negotiable instruments for deposit or collection in the
ordinary course of business, and (c) the present value of any lease
payments in excess of $150,000 due under leases required to be capitalized
in accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness, where such default would
reasonably be expected to result in a Material Adverse Effect.
(t) Certain Fees. The Company has not retained any finder, broker,
agent, financial advisor or other intermediary in connection with the
transactions contemplated by this Agreement and agrees to indemnify and
hold harmless the Purchasers, their officers, directors, affiliates,
subsidiaries, employees and agents from liability for any compensation to
any such intermediary retained by the Company and the fees and expenses of
defending against such liability or alleged liability.
(u) Private Placement. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 3.2(c)-(j), the
offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act. The issuance and sale of the Securities hereunder do not
contravene the rules and regulations of the Principal Market.
(v) Listing and Maintenance Requirements. The Company's Ordinary
Shares are registered pursuant to Section 12(g) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Ordinary
Shares under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date
hereof, received notice from the Principal Market that the Company is not
in compliance with the listing or maintenance requirements of the
Principal Market. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.
13
(w) Registration Rights. The Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the
Commission or any other governmental authority or the Tel Aviv Stock
Exchange that have not been satisfied.
(x) Application of Takeover Protections. The execution, delivery and
performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated thereby,
including, without limitation, the issuance of the Debentures, the
Warrants and the Underlying Shares, do not and will not result in the
application or triggering of any control share acquisition, business
combination, poison xxxx (including any distribution under a rights
agreement) or other similar anti-takeover provision pursuant to Israeli
law or the Company's Memorandum of Association or Articles of Association.
(y) Seniority. As of the Closing Date, no indebtedness of the
Company is senior to the Debentures in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise,
other than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and capital
lease obligations (which is senior only as to the property covered
thereby).
(z) Disclosure. The Company confirms that neither it nor, the to the
best of the Company's knowledge and belief (without any independent
investigation on the part of the Company), any other Person acting on the
Company's behalf, has provided any of the Purchasers or their agents or
counsel with any information that constitutes or might constitute
material, nonpublic information with respect to the Company. The Company
understands and confirms that the Purchasers will rely on the foregoing
representations in effecting transactions in securities of the Company.
All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules
to this Agreement, furnished by or on behalf of the Company with respect
to the representations and warranties made herein are true and correct
with respect to such representations and warranties 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.
(aa) Tax Status. The Company and each of its Subsidiaries has made
or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company and each of its
Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and
other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provisions 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
14
Company know of no basis for any such claim. The Company has not executed
a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local tax.
Except for the customary review of corporate tax returns (of entities
doing business outside of the United States) by local taxing authorities,
none of the Company's tax returns is presently being audited by any taxing
authority.
(bb) Acknowledgment Regarding Purchasers' Purchase of Securities.
The Company acknowledges and agrees that the Purchasers are acting solely
in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any statement made by any
Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each
Purchaser that the Company's decision to enter into this Agreement has
been based solely on the independent evaluation of the Company and its
representatives.
(cc) No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor, to the knowledge of the Company, any
of its directors or officers (i) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or
general advertising with respect to the sale of the Debentures or the
Warrants, or (ii) made any offers or sales of any security or solicited
any offers to buy any security under any circumstances that would require
registration of the Debentures, the Underlying Shares or the Warrants
under the Securities Act or made any "directed selling efforts" as defined
in Rule 902 of Regulation S.
(dd) [RESERVED].
(ee) Form F-3 Eligibility. The Company is eligible to register the
resale of the Underlying Shares for resale by the Purchasers on Form F-3
promulgated under the Securities Act. The Company qualifies as a "foreign
private issuer" as such term is defined in the Exchange Act.
(ff) No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or which would reasonably be
expected to violate any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of the
Principal Market.
(ff) Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly
15
or indirectly, used any funds of the Company for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or
domestic political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to any foreign or domestic
political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, limited
liability company, trust or partnership power and authority, as
appropriate, to enter into and to consummate the transactions contemplated
by the Transaction Documents and otherwise to carry out its obligations
thereunder. The purchase by such Purchaser of the Securities hereunder has
been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement
has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof and thereof, will constitute
a valid and legally binding obligation of such Purchaser, enforceable
against it in accordance with their terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
(b) Approvals and Consents. No action, approval, consent or
authorization, including, but not limited to, any action, approval,
consent or authorization by any governmental or quasi-governmental agency,
commission, board, bureau, or instrumentality is necessary or required as
to such Purchaser in order to constitute this Agreement as a valid,
binding and enforceable obligation of such Purchaser in accordance with
its terms.
(c) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account and not with a view to or for distributing
or reselling such Securities or any part thereof, without prejudice,
however, to such Purchaser's right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all or any part of
such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing
contained herein shall be deemed a representation or warranty by such
Purchaser to hold Securities for any period of time or limit such
Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws. Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser
16
does not have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.
(d) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants or converts any Debentures it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
Such Purchaser has not been formed solely for the purpose of acquiring the
Securities. Such Purchaser is not a registered broker-dealer under Section
15 of the Exchange Act.
(e) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(f) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement
(g) Available Information. Such Purchaser (i) has been furnished
with any and all documents that may have been made available by the
Company upon request of the Purchaser for a reasonable time prior to the
date hereof including, but not limited to, the Company's most recent SEC
Reports; (ii) has been provided an opportunity for a reasonable time prior
to the date hereof to obtain additional information concerning the
purchase of the Debentures and the Warrants (the "Offering"), the Company
and all other information to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense;
(iii) has been given the opportunity for a reasonable time prior to the
date hereof to ask questions of, and receive answers from, the Company or
its representatives concerning the terms and conditions of the Offering
and other matters pertaining to an investment in the Securities, or that
which was otherwise provided in order for them to evaluate the merits and
risks of a purchase of the Securities to the extent the Company possesses
such information or can acquire it without unreasonable effort or expense;
(iv) has not been furnished with any oral representation or oral
information in connection with the Offering; and (v) has determined that
the Securities are a suitable investment for such Purchaser.
(h) Purchaser Information. Any information that such Purchaser has
previously furnished in writing, or is now furnishing to the Company in
writing with respect to such Purchaser's financial position and business
experience is correct and complete as of the date of this Agreement and,
if there should be any material change in such information, such Purchaser
will immediately furnish revised or corrected information to the Company.
17
(i) Finders. Such Purchaser has not retained any finder, broker,
agent, financial advisor or other intermediary in connection with the
transactions contemplated by this Agreement and agrees to indemnify and
hold harmless the Company, its officers, directors, affiliates,
subsidiaries, employees and agents from liability for any compensation to
any such intermediary retained by such Purchaser and the fees and expenses
of defending against such liability or alleged liability.
(j) Open Short Position. From February 13, 2004 until such time as
the transactions contemplated hereunder are publicly announced pursuant to
Section 4.7 or otherwise, each Purchaser, for itself only, represents and
warrants that neither it, nor any person or entity acting at the direction
of such Purchaser, holds, or has held at any time during such period, an
open short position in the Company's Ordinary Shares.
(k) Beneficial Ownership. Such Purchaser does not, directly or
indirectly, beneficially own any Ordinary Shares or such other securities
that are or may become convertible into Ordinary Shares.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
----------------------
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement, Rule 144 or to
the Company or an Affiliate of the Purchaser, the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer other than pursuant to an effective registration
statement or Rule 144, any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement.
(b) Each Purchaser agrees to the imprinting, so long as is required
by this Section 4.1(b), of the following legend on any certificate
evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO,
18
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities to a financial
institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties. Such pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel
of the pledgee, secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge. At the
appropriate Purchaser's expense, if a Purchaser pledges some or all of its
Securities pursuant to this paragraph, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer
of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list
of "Selling Shareholders" thereunder.
(c) Certificates evidencing the Underlying Shares shall not contain
any legend (including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Underlying Shares pursuant to Rule
144, or (iii) if such Underlying Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission); provided, however,
in connection with the issuance of the Underlying Shares, each Purchaser,
severally and not jointly with the other Purchasers, hereby agrees to
adhere to and abide by all prospectus delivery requirements under the
Securities Act and rules and regulations of the Commission. The Company
shall cause its counsel to issue a legal opinion to the Company's transfer
agent promptly after the Effective Date if required by the Company's
transfer agent to effect the removal of the legend hereunder. If all or
any portion of a Debenture or Warrant is converted or exercised (as
applicable) at a time when there is an effective registration statement to
cover the resale of the Underlying Shares, or if such Underlying Shares
may be sold under Rule 144(k) or if such legend is not otherwise required
under applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Underlying Shares shall be issued free
of all legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c),
it will, no later than five Trading Days following the delivery by a
Purchaser to the Company or the
19
Company's transfer agent of a certificate representing Underlying Shares,
as applicable, issued with a restrictive legend (such fifth Trading Day,
the "Legend Removal Date"), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section.
(d) In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $10,000 of Underlying Shares (based on the
VWAP of the Ordinary Shares on the date such Securities are submitted to
the Company's transfer agent) delivered for removal of the restrictive
legend and subject to this Section 4.1(c), $50 per Trading Day (increasing
to $100 per Trading Day 3 Trading Days after such damages have begun to
accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered without a legend. Notwithstanding anything
hereunder to the contrary, for any periods during which partial liquidated
damages are accruing under both this Section 4.1(d) and Section 4(b)(ii)
of the Debenture, the holder of the Debenture shall only have the right to
recover partial liquidated damages, at the option of such holder, under
one such provision. Nothing herein shall limit such Purchaser's right to
pursue actual damages for the Company's failure to deliver certificates
representing any Securities as required by the Transaction Documents, and
such Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
(e) Notwithstanding anything to the contrary contained herein, each
Purchaser, severally and not jointly with the other Purchasers, covenants
with the Company that such Purchaser's trading and distribution activities
with respect to the Securities will be in compliance with Regulation M
promulgated under the Securities Act. Additionally, each Purchaser
understands and acknowledges, severally and not jointly with the other
Purchasers, that the SEC currently takes the position that coverage of
short sales of Ordinary Shares "against the box" prior to the Effective
Date of the Registration Statement with such Ordinary Shares included for
registration thereon is a violation of Section 5 of the Securities Act, as
set forth in Item 65, Section 5 under Section A, of the Manual of Publicly
Available Telephone Interpretations, dated July 1997, compiled by the
Office of Chief Counsel, Division of Corporation Finance. Accordingly,
each Purchaser, severally and not jointly with the other Purchasers,
hereby agrees not to use any of the Underlying Shares to cover any short
sales made prior to the Effective Date. Each Purchaser, severally and not
jointly with the other Purchasers, agrees that the removal of the
restrictive legend from certificates representing Securities as set forth
in this Section 4.1 is predicated upon the Company's reliance that the
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities may result in dilution of the outstanding Ordinary Shares,
which dilution may be substantial under certain market conditions. The Company
further acknowledges that its
20
obligations under the Transaction Documents, including without limitation
its obligation to issue the Underlying Shares pursuant to the Transaction
Documents, are, subject to the terms and conditions of the Transaction
Documents, unconditional and absolute and not subject to any right of set
off, counterclaim, delay or reduction, regardless of the effect of any
such dilution or any claim the Company may have against any Purchaser and
regardless of the dilutive effect that such issuance may have on the
ownership of the other shareholders of the Company.
4.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
4.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of the Principal Market.
4.5 Reservation and Listing of Securities.
-------------------------------------
(a) The Company shall maintain a reserve from its duly authorized
Ordinary Shares for issuance pursuant to the Transaction Documents in such
amount as may be required to fulfill its obligations in full under the
Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) Ordinary Shares are less than the Required Minimum
on such date, then the Board of Directors of the Company shall take all
actions necessary to convene a general meeting of shareholders to approve
an increase of the number of authorized but unissued Ordinary Shares to at
least the Required Minimum at such time, as soon as possible and in any
event not later than the 75th day after such date.
(c) The Company shall, if applicable: (i) in the time and manner
required by the Principal Market, prepare and file with such Principal
Market an additional shares listing application covering a number of
Ordinary Shares at least equal to the Required Minimum on the date of such
application (the "Listing Application"), (ii) take all steps necessary to
cause such number of Ordinary Shares to be approved for listing on the
Principal Market as soon as possible thereafter, (iii) provide to the
Purchasers with evidence of the Company having filed the Listing
Application, and (iv) maintain the listing of such number of Ordinary
Shares on any date at least equal to the Required
21
Minimum on such date on the Principal Market. In addition, the Company
shall hold a special meeting of shareholders (which may also be at the
annual meeting of shareholders) at the earliest practical date after the
date the number of Ordinary Shares issuable pursuant to this Agreement is
reasonably expected to exceed 19.99% of the issued and outstanding
Ordinary Shares on the Closing Date for the purpose of obtaining
Shareholder Approval, with the recommendation of the Company's Board of
Directors that such proposal be approved, and the Company shall solicit
proxies from its shareholders in connection therewith in the same manner
as all other management proposals in such proxy statement.
4.6 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Debentures set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.
4.7 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date of this Agreement, issue a
press release or submit a Form 6-K reasonably acceptable to the holders of a
majority, in value, of the then outstanding Securities disclosing all material
terms of the transactions contemplated hereby. The Company and the Purchasers
shall consult with each other in issuing any press releases with respect to the
transactions contemplated hereby and neither the Company nor any Purchaser shall
issue any such press release or otherwise make any such public statement without
the prior consent of the Company, with respect to any press release of any
Purchaser, with respect to any press release of the Company, which consent shall
not unreasonably be withheld, except if such disclosure is required by law, in
which case the disclosing party shall promptly provide the other party with
prior notice of such public statement or communication. Notwithstanding the
foregoing, other than in any registration statement filed pursuant to the
Registration Rights Agreement and filings related thereto, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or
Principal Market, without the prior written consent of such Purchaser, except to
the extent such disclosure is required by law or Principal Market regulations,
in which case the Company shall provide each Purchaser with prior notice of such
disclosure.
4.8 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.9 Use of Proceeds. Except as set forth on Schedule 4.9, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not for
22
the satisfaction of any portion of the Company's debt (other than payment of
trade payables, capital lease obligations and accrued expenses in the ordinary
course of the Company's business and prior practices), to redeem any Company
equity or equity-equivalent securities or to settle any outstanding litigation.
4.10 [RESERVED]
----------
4.11 Indemnification. The Company will indemnify and hold the Purchasers
and their directors, officers, shareholders, partners, employees and agents
(each, a "Purchaser Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation that any such Purchaser Party may suffer or
incur as a result of or relating to: (a) any misrepresentation, breach or
inaccuracy, or any allegation by a third party that, if true, would constitute a
breach or inaccuracy, of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction
Documents; or (b) absent the gross negligence or willful misconduct on the part
of any Purchaser, any cause of action, suit or claim brought or made against
such Purchaser Party and arising solely out of or solely resulting from the
execution, delivery, performance or enforcement of this Agreement or any of the
other Transaction Documents and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser. The Company
will reimburse such Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred.
4.12 Shareholders Rights Plan. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company
or any other Person that any Purchaser is an "Acquiring Person" under the plan
or in any way would reasonably be expected to be deemed to trigger the
provisions of such plan solely by virtue of receiving Securities under the
Transaction Documents.
4.13 Participation in Future Financing. From the date hereof until 12
months after the Effective Date, upon any financing by the Company or any of its
Subsidiaries through the issuance of Capital Shares or Capital Shares
Equivalents (a "Subsequent Financing"), the Purchasers shall have the right to
participate, in the aggregate, in up to 25% of such Subsequent Financing. At
least 10 Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its intention to
effect a Subsequent Financing ("Pre-Notice"), which Pre-Notice shall ask such
Purchaser if it wants to review the details of such financing (such additional
notice, a "Subsequent Financing Notice"). Upon the request of a Purchaser, and
only upon a request by such Purchaser within 3 Trading Days of receipt of a
Pre-Notice, for a Subsequent Financing Notice, the Company shall promptly, but
no later than 3 Trading Days after such request, deliver a Subsequent Financing
Notice to such Purchaser. The Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder, the Person with whom such Subsequent
Financing is proposed to be effected, and attached to which shall be a term
sheet or similar document relating thereto. If by 6:30 p.m. (New York City time)
on the 10th Trading Day after all of the Purchasers have received the
Pre-Notice,
23
notifications of the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to provide) is, in the
aggregate, less than 25% of the total amount of the Subsequent Financing, then
the Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 10th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate. The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.13, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason
substantially on terms no more favorable to the Purchasers than those set forth
in such Subsequent Financing Notice within 60 Trading Days after the date of the
initial Subsequent Financing Notice. In the event the Company receives responses
to Subsequent Financing Notices from Purchasers seeking to purchase more than
25% of the aggregate amount of the Subsequent Financing, each such Purchaser
shall have the right to purchase its Pro Rata Portion (as defined below) of 25%
of the Subsequent Financing. "Pro Rata Portion" is the ratio of (x) the
Subscription Amount of a participating Purchaser and (y) the sum of the
aggregate Subscription Amount of all participating Purchasers. Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of an Exempt
Issuance or an issuance, or series of issuances, for up to, in the aggregate,
300,000 Ordinary Shares, which sales are made pursuant to Regulation S under the
Securities Act.
4.14 Prohibition on Subsequent Financings. From the date hereof until 90
days after the Effective Date, other than as contemplated by this Agreement,
neither the Company nor any Subsidiary shall issue or sell any Capital Shares or
Capital Shares Equivalents other than Exempt Issuances. Notwithstanding anything
herein to the contrary, the 90 day period set forth in this Section 4.14 shall
be extended for the number of Trading Days during such period in which (y)
trading in the Ordinary Shares is suspended by any Principal Market, or (z)
following the Effective Date, the Registration Statement is not effective or the
prospectus included in the Registration Statement may not be used by the
Purchasers for the resale of the Underlying Shares. Notwithstanding anything to
the contrary herein, this Section 4.14 shall not apply in respect to any Exempt
Issuances or an issuance, or series of issuances, for up to, in the aggregate,
300,000 Ordinary Shares, which sales are made pursuant to Regulation S under the
Securities Act. In additional to the limitations set forth herein, from the date
hereof until such time as no more than 20% of the principal amount of the
Debentures issued on the date hereof remains outstanding, the Company shall be
prohibited from effecting or enter into an agreement to effect any Subsequent
Financing involving a "Variable Rate Transaction (as defined below). The term
"Variable Rate Transaction" shall mean a transaction in which the Company issues
or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional Ordinary Shares
either (A) at a conversion, exercise or exchange rate or other price that is
based upon and/or varies with the trading prices of or quotations for the
Ordinary Shares at any time after the initial issuance of such debt or equity
securities, or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Ordinary Shares. In addition, unless Shareholder Approval has been obtained
and deemed effective, the Company shall not make any issuance whatsoever of
Capital Shares or Capital
24
Shares Equivalents which would cause any adjustment of the Set Price to the
extent the holders of Debentures would not be permitted, pursuant to Section
4(a)(ii)(B) of the Debenture, to convert their respective outstanding Debentures
and exercise their respective Warrants in full, ignoring for such purposes any
conversion or exercise limitations therein.
4.15 Equal Treatment of Purchasers. 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 is
also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal or interest on the Debentures in
amounts which are disproportionate to the respective principal amounts
outstanding on the Debentures at any applicable time. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended to
treat for the Company the Debenture holders as a class and shall not in any way
be construed as the Purchasers acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.
4.16 Additional Investment.
(a) Purchaser Right. From the date hereof until 180 days after the
Effective Date, and provided that the VWAP on the date of such Purchaser's
exercise equals or exceeds the Market Price on the date hereof, each
Purchaser may, on one occasion, in its sole determination and severally
and not jointly with the other Purchasers, in the ratio of such
Purchaser's Subscription Amount on the Closing Date to the aggregate
Subscription Amounts of all of the Purchasers, purchase additional
debentures and warrants for an aggregate purchase price of up to
$3,000,000 for all Purchasers in the aggregate by delivery of a written
notice of such election to the Company. Any additional investment will be
on terms and prices identical to those set forth in the Transaction
Documents, mutatis mutandis, except that (i) (A) the Set Price for any
debentures issued under this additional investment shall be equal to
$5.70, (B) the exercise price of the warrants shall be $6.50, provided
that the set price and exercise price set forth above shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Ordinary Shares that
occur after the date of this Agreement, (ii) the Filing Date shall be the
earlier of (A) 45 days after all Purchasers have exercised their right to
purchase additional debentures and warrants hereunder and (B) the later of
(1) the Company's fiscal quarter end and (2) the 45th day following the
date such a subsequent financing occurs with a Purchaser, (iii) the
Effectiveness Date shall be 60 days after the Filing Date (90 days in the
event of a review by the Commission) and (iv) this Section 4.16, along
with Sections 4.13, 4.14, 4.17, 5.1 and Section 5.2 (with respect to
payments to Omicron only), shall not be included in the securities
purchase agreement. In order to effectuate a purchase and sale of the
additional debentures and warrants, the Company and the Purchasers shall
enter into the following agreements: (x) a securities purchase agreement
identical to this Agreement, mutatis mutandis, except as set forth above,
and shall include updated disclosure schedules and (y) a registration
rights agreement identical to the Registration Rights Agreement, mutatis
mutandis, except as set forth above, and shall include updated disclosure
schedules. Any such additional investment shall close within 10 Trading
Days
25
of notice to the Company by a Purchaser that such Purchaser elects to
exercise its rights hereunder. The parties hereby agree and acknowledge
that the rights granted hereunder to a Purchaser are independent and
separate of the rights granted to any other Purchaser and a Purchaser's
election to exercise its right to an additional investment hereunder does
not obligate any other Purchaser to also elect at such time nor does it
waive any Purchaser's right to elect to exercise at a later date.
(b) Company Right. From the Effective Date until 180 days after the
Effective Date ("Company Exercise Period"), if each VWAP during any 10
consecutive Trading Days during the Company Exercise Period exceeds
$12.825, subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions in the
Ordinary Shares that occur after the date of this Agreement, the Company
may, in its sole determination and by notice within 2 Trading Days of the
end of any such 10 consecutive Trading Day period, on one occasion,
require the Purchasers to purchase, in the ratio of such Purchaser's
Subscription Amount on the Closing Date to the aggregate Subscription
Amounts of all Purchasers on the Closing Date, additional Debentures and
Warrants for an aggregate purchase price among all Purchasers of up to
$3,000,000. Any additional investment will be on terms and prices
identical to those set forth in the Transaction Documents, mutatis
mutandis, except (i) (A) the Set Price for any Debentures issued under
this additional investment shall be equal to $5.70 and (B) the exercise
price of the warrants shall be $6.50; provided that the set price and
exercise price set forth above shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Ordinary Shares that occur after the date of
this Agreement and (ii) this Section 4.16, along with Sections 4.13, 4.14,
4.17, 5.1 and Section 5.2 (with respect to payments to Omicron only),
shall not be included in the securities purchase agreement. In order to
effectuate a purchase and sale of the additional debentures and warrants,
the Company and the Purchasers shall enter into the following agreements:
(x) a securities purchase agreement identical to this Agreement, mutatis
mutandis, except as set forth above, and shall include updated disclosure
schedules and (y) a registration rights agreement identical to the
Registration Rights Agreement, mutatis mutandis, except as set forth
above, and shall include updated disclosure schedules. Any such additional
investment shall close within 10 Trading Days of notice to the Purchasers
by the Company that the Company elects to exercise its rights hereunder.
The Company's right hereunder shall be applied ratably to all Purchasers
as set forth above. The Purchasers shall not be obligated to purchase such
securities, notwithstanding this right, if a Material Adverse Effect has
occurred during the period from the Closing Date to the date of such
exercise or if from the commencement of the applicable 10 consecutive
Trading Day period until the additional investment is closed the Equity
Conditions (as defined in the Debentures) are satisfied.
(c) Notwithstanding anything herein to the contrary, in the event a
Purchaser exercises its right to purchase additional debentures and
warrants pursuant to Section 4.16(a), the Company's right to cause such
Purchaser to purchase additional debentures and warrants pursuant to
Section 4.16(b) shall be in addition to such amount. Notwithstanding
anything herein to the contrary, in the event the Company exercises its
26
right to sell additional debentures and warrants to the Purchasers
pursuant to Section 4.16(b), each Purchaser's right to purchase additional
debentures and warrants pursuant to Section 4.16(a) shall be in addition
to such amount.
4.17 Restriction on Increases in Existing Debt. Excluding for such
purposes the debt incurred pursuant to this Agreement and for as long as at
least 20% of the principal amount of the Debentures issued on the date hereof
remains outstanding, the Company shall not increase its aggregate outstanding
Net Short-Term Debt beyond $5,000,000. "Net Short Term Debt" is the result of
the negative of the sum of cash, cash equivalents and marketable securities less
the total amount of outstanding short term loans. The figure shall be calculated
on a consolidated basis in the same manner as in the quarterly financial
statement of the Company and in accordance with GAAP.
4.18. Maximum Issuance of Ordinary Shares Pursuant to Weighted Average
Anti-Dilution Provision. After the 6th month anniversary of the Effective Date
(if the Registration Statement is unavailable for use by the Purchaser during
such period, such period shall be extended for such number of unavailable days),
the Set Price of the Debentures and the debentures issued pursuant to Section
4.16 shall not be reduced by virtue of the weighted average anti-dilution
provision in Section 4(c)(iii)(B) of such debentures and the Exercise Price (as
defined in the first paragraph of the Warrant and the warrants issued pursuant
to Section 4.16) of the Warrants and the warrants issued pursuant to Section
4.16 shall not be reduced by virtue of the weighted average anti-dilution
provision in Section 11(b)(i)(b) of such warrants to the extent that the
aggregate Effective Issuance (as defined below) resulting from a Dilutive
Issuance (as defined in Section 11(b)(i) of the Warrant and Section 4(c)(iii) of
the Debenture) pursuant to such provisions exceeds 250,000 Ordinary Shares,
subject to adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Ordinary Shares that
occur after the date of this Agreement. "Effective Issuance" shall mean, with
respect to the Debentures and debentures issued pursuant to Section 4.16, the
number of additional shares of Common Stock issuable upon conversion of such
debentures as a result of the adjustments to the set prices pursuant to Section
4(c)(iii)(B) of such debentures as a result of a Dilutive Issuance and, with
respect to the Warrants and warrants issued pursuant to Section 4.16, shall mean
the result of dividing (a) the product of (i) the difference between the
Exercise Price in the aggregate for the exercise of all such warrants
outstanding immediately prior to the applicable Dilutive Issuance and (ii) the
adjusted Exercise Price in the aggregate for the exercise of all such warrants
outstanding immediately after giving effect to the Dilutive Issuance by (b)
$_____1, subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Ordinary
Shares that occur after the date of this Agreement. Any limitations on
adjustments that occur as a result of this provision shall be applied ratably to
all Purchasers based on the number of shares of Common Stock underlying the
Debenture, Warrants and debentures and warrants issued pursuant to Section 4.16
then held by such Purchasers. The Company shall notify the Purchasers promptly
after any dilutive issuance that is subject to this Section 4.18, including a
summary of all Purchasers' pro-rata allocations.
27
ARTICLE V
MISCELLANEOUS
5.1 Termination. Purchasers committed to purchase 51% of the aggregate
principal amount of Debentures may terminate this Agreement by written notice to
the other parties if the Closing has not been consummated on or before March
___, 2004; provided that no such termination will affect the right of any party
to xxx for any breach by the other party (or parties).
5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Omicron Master Trust ("Omicron") up to $45,000 ($20,000 of which has been
advanced to Omicron prior to the Closing Date) for its actual, reasonable,
out-of-pocket legal fees and expenses. Accordingly, in lieu of the foregoing
payments, on the Closing Date, Omicron will reduce its Subscription Amount by
$25,000. Except as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day and an electronic confirmation of delivery is
received by the sender, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) three Trading Days
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such notices and communications are
those set forth on the signature pages hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed by the Company and Purchasers
holding at least 51% in value of the Securities issued hereunder. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
28
5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Registration Rights Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.
5.9 Governing Law; Venue; Waiver of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.
29
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) such document with the same force and effect as if such facsimile
signature page were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may, in lieu of the receipt of applicable liquidated damages, rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, in the case of a
rescission of a conversion of a Debenture or exercise of a Warrant, the
Purchaser shall be required to return any Ordinary Shares subject to any such
rescinded conversion or exercise notice.
5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights 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
30
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.
5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers 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
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Omicron. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.
31
5.19 Liquidated Damages. Absent a Purchaser's exercise of its rescission
rights under the Debentures or Warrants, the Company's obligations to pay any
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such liquidated damages or
other amounts are due and payable shall have been canceled.
(Signature Pages Follow)
32
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
BLUEPHOENIX SOLUTIONS LTD. Address for Notice:
-------------------
By: /s/Xxxx Xxxxxx 0 Xxxxxx Xxxxxx
------------------
Name: Xxxx Xxxxxx Herzlia, Israel
Title: CEO 46120
Attention: Iris Yahal and
Xxxx Xxxxxx
With a copy to (which shall not constitute notice):
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
33
[PURCHASER SIGNATURE PAGES TO BPHX SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity: Omicron Master Trust
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx Xxxxxxxxx
Name of Authorized Signatory: Xxxxx Xxxxxxxxx
Title of Authorized Signatory: Manager Partner
Email Address of Authorized Entity:________________________________________
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: $2,750,000
Shares:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
34
[PURCHASER SIGNATURE PAGES TO BPHX SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity: Smithfield Fiduciary LLC
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx X. Xxxxxxx
Name of Authorized Signatory: Xxxxx X. Xxxxxxx
Title of Authorized Signatory: Authorized Signatory
Email Address of Authorized Entity:_________________________________________
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: $1,000,000
Shares:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
35
[PURCHASER SIGNATURE PAGES TO BPHX SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity: Cranshire Capital L.P.
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxx Xxxxxxx
Name of Authorized Signatory: Xxxxx Xxxxxxx
Title of Authorized Signatory: CFO of the General Partner
Email Address of Authorized Entity:_______________________________________
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: $500,000
Shares:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
36
[PURCHASER SIGNATURE PAGES TO BPHX SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Investing Entity: Iroquois Capital L.P.
---------------------
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxx Xxxxxx
Name of Authorized Signatory: Xxxxxx Xxxxxx
Title of Authorized Signatory:
Email Address of Authorized Entity:_____________________________________
Address for Notice of Investing Entity:
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: $750,000
Shares:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
37
