EXHIBIT 99.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 31,
2004, (the "Execution Date") by and among Commtouch Software Ltd., a corporation
organized under the laws of the State of Israel, with headquarters located at 0X
Xxxxxxx Xxxxxx, Xxxxx Xxxxxxxxxx Xxxx, Xxxxxxx 00000, Xxxxxx (the "Company"),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act;
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate amount of
Series A Preferred Shares, NIS 0.05 nominal value per share (the "Preferred
Shares") set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers (the aggregate purchase price of which for all Buyers shall be no greater
than $3,300,000);
C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Preferred Shares and the Ordinary Shares
to be issued upon conversion of the Preferred Shares under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws; and
D. The Preferred Shares are also referred to herein as the "Securities".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
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(a) Purchase of Preferred Shares.
(i) Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6 and 7 below, the Company shall issue and sell to each
Buyer, and each Buyer severally, but not jointly, agrees to purchase from the
Company on the Closing Date (as defined below) the number of Preferred Shares as
is set forth opposite such Buyer's name in column (3) on the Schedule of Buyers
(the "Closing").
(ii) Additional Buyers. The parties hereto agree that
additional investors (the "Additional Buyers") may become a party to this
Agreement, provided that each such Additional Buyer delivers to the Company a
duly signed signature page in the form attached hereto as Exhibit D (the
"Additional Buyer Signature Page") no later than 1:00 PM (Pacific Time) of
November 5, 2004. Such Additional Buyer shall invest at the Closing the purchase
price set forth opposite such Additional Buyer's name in Column (3) of the
Schedule of Buyers, as shall be revised accordingly, and its respective
Additional Buyer Signature Page in consideration for the number of Preferred
Shares in the amount set forth opposite such Additional Buyer's name in Column
(4) of the Schedule of Buyers, as shall be revised accordingly, and its
respective Additional Buyer Signature Page. By delivering the duly signed
Additional Buyer Signature Page, the Additional Buyer shall have acknowledged,
agreed, and confirmed that it shall have joined the Agreement as an Additional
Buyer, and shall be deemed, pursuant to this Section 1 (ii), to be a Buyer for
all purposes hereunder.
(iii) Closing. The date and time of the Closing (the "Closing
Date") shall be 10:00 a.m., New York City Time, on the third Business Day (or
such later date as is mutually agreed to by the Company and each Buyer) after
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below at the offices of Pillsbury Winthrop LLP, 00
Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000.
(iv) Purchase Price. The purchase price for the Preferred
Shares to be purchased by each Buyer at the Closing shall be the amount set
forth opposite such Buyer's name in column (4) of the Schedule of Buyers (the
"Purchase Price"), which shall be equal to the amount of $0.50 per Preferred
Share.
(b) Form of Payment. On the Closing Date, (i) each Buyer shall pay
its Purchase Price to the Company for the Preferred Shares to be issued and sold
to such Buyer at the Closing, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions, and (ii) the Company
shall deliver to each Buyer one or more stock certificates (in such
denominations as the Company shall determine) which such Buyer is then
purchasing, duly executed on behalf of the Company and registered in the name of
such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself that:
(a) No Public Sale or Distribution. Such Buyer is acquiring the
Preferred Shares for its own account and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such
Buyer does not have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.
(b) Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D. The Buyer was
not formed for the specific purpose of acquiring the Securities.
(c) Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
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such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein. Such Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has had the opportunity to seek such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
(e) No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably acceptable to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, "Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the Person (as defined in Section 3(s)) through whom the
sale is made) may be deemed to be an underwriter (as that term is defined in the
0000 Xxx) may require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC thereunder; and (iii) neither the Company
nor any other Person is under any obligation to register the Securities under
the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
(g) Legends. Such Buyer understands that the certificates or other
instruments representing the Preferred Shares and the Ordinary Shares issued
upon conversion of the Preferred Shares, until such time as (i) the resale of
the Ordinary Shares issued upon conversion of the Preferred Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and (ii) such Buyer has confirmed in writing to the Company that it
has delivered the prospectus contained in the registration statement filed
pursuant to the Registration Rights Agreement (the "Registration Statement"), as
the same may have been supplemented by the Company, to any Person to whom such
Buyer is transferring any of the Securities, except as set forth below, shall
bear any legend as required by the "blue sky" laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
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NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO COMMTOUCH
SOFTWARE LTD., THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is stamped, if, unless otherwise required by state securities laws, (i)
such Securities are registered for resale under the 1933 Act and such Buyer
has confirmed in writing to the Company that it has delivered the
prospectus contained in the Registration Statement, as the same may have
been supplemented by the Company, to any Person to whom such Buyer is
transferring any of the Preferred Shares, (ii) in connection with a sale,
assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such sale, assignment or transfer of the Securities may be made
without registration under the applicable requirements of the 1933 Act, or
(iii) such holder provides the Company with reasonable assurance that the
Securities can be sold, assigned or transferred pursuant to Rule 144 or
Rule 144A.
(h) Validity; Enforcement. This Agreement and the Registration Rights
Agreement to which such Buyer is a party have been duly and validly authorized,
executed and delivered on behalf of such Buyer and shall constitute the legal,
valid and binding obligations of such Buyer enforceable against such Buyer in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(i) No Conflicts. The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement to which such
Buyer is a party and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of such Buyer or (ii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clause (ii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
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(j) Residency. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
(k) Nasdaq Delisting. Such Buyer is aware and understands that the
Company is in violation of the listing requirements of the The Nasdaq SmallCap
Market (the "Principal Market"), which may lead to delisting or suspension of
the Company's Ordinary Shares by the Principal Market in the near future.
(l) Convertible Notes. Such Buyer is aware and understands that there
exist first priority secured rights of certain note holders under the Share
Purchase Agreement of November 2003, the full terms of which have been made
available for the review of Buyer.
(m) Acknowledgment Regarding Buyer's Purchase of Securities. Each
Buyer represents and warrants that it is acting solely in the capacity of an
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that it is not (i) an officer
or director of the Company, (ii) an "affiliate" of the Company (as defined in
Rule 144) or (iii) a "beneficial owner" of more than 10% of Preferred Shares
and/or Ordinary Shares (as defined for purposes of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "1934 Act")). Each Buyer further
represents and warrants that it is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by it or any of its representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to its purchase of the Securities. The Buyer
further represents to the Company that the Buyer's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Buyer and its representatives.
(n) Experience of Such Buyer. Such Buyer, 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 Buyer 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.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns more than 50% of the capital stock or
holds a more than 50% equity or similar interest) are entities duly organized
and validly existing and (in jurisdictions in which such concept is relevant) in
good standing under the laws of the jurisdiction in which they are formed, and
have the requisite power and authorization to own their properties and to carry
on their business as now being conducted. No proceeding has been instituted by
the Registrar of Companies in Israel for the dissolution of the Company. Each of
the Company and its Subsidiaries is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
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necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on the
business, properties, assets, operations, results of operations, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries, taken
as a whole, or on the transactions contemplated hereby and the other Transaction
Documents or by the agreements and instruments to be entered into in connection
herewith or therewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined below). For purpose
of clarification, the parties hereto agree that a delisting of the Company's
Ordinary Shares from the Principal Market shall not be considered an event
constituting a Material Adverse Effect. The Company has no Subsidiaries except
as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") and, subject to the approval of shareholders for the creation of the
class of Securities described in Section 4(m) below, to issue the Securities in
accordance with the terms hereof and thereof. The execution and delivery of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Preferred Shares, have been duly authorized by the Company's
Board of Directors and (other than (i) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) any required approval by the Office of Chief Scientist in
the Israeli Ministry of Industry and Trade (the "OCS") and the Investment Center
of the transactions contemplated hereunder, (iii) the Shareholder Approval
pursuant to Section 4(m) and (iv) the filing of a Form D and all filings and
reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States) no
further filing, consent, or authorization is required by the Company, its Board
of Directors or its shareholders. This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies. As of the Closing, the Transaction Documents
dated after the date hereof and required to have been executed and delivered
with respect to such Closing shall have been duly executed and delivered by the
Company, and shall constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditor's rights and remedies.
(c) Issuance of Securities. Upon shareholder approval of the creation
of the class of Securities as described under Section 4(m) below, the Preferred
Shares will be duly authorized. Other than Israeli stamp tax, which will be paid
by the Company, there is no tax, levy, impost, duty, fee, assessment or other
governmental charge, or any deduction or withholding, imposed by any
governmental agency or authority in or of Israel either (A) on or by virtue of
the execution or delivery of the Transaction Documents to which Company is a
party, (B) the issuance of the Securities pursuant hereto or (C) on any payment
to be made by Company pursuant to the Transaction Documents. As of the Closing,
a number of Ordinary Shares shall have been duly authorized and reserved for
issuance which equals the maximum number of Ordinary Shares issuable upon
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conversion of the Securities pursuant to Exhibit A hereto. The offer and
issuance by the Company of the Securities is exempt from registration under the
1933 Act. There are no prospectus delivery requirements under Israeli law in
connection with the offer and issuance of the Securities.
(d) No Conflicts. Subject to receipt of the Shareholder Approval for
the creation of the class of Securities, approval of this transaction as
described under Section 4(m) below and the closing of the transactions
contemplated by that certain Redemption, Amendment and Exchange Agreement
relating to the Securities Purchase Agreement of November 2003 to be signed by
the Company and investors under said agreement (the "Addendum to the November
2003 SPA"), the execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Preferred Shares and, upon conversion thereof in accordance with Exhibit A,
the issuance of Ordinary Shares) will not (i) result in a violation of the
Articles of Association of the Company ("Articles of Association")or Memorandum
of Association ("Memorandum") of the Company or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the Principal Market) applicable to the Company
or any of its Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected.
(e) Consents. The Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof, except for (i) the filing of a Form D with the
SEC and with the California Department of Corporations (ii) the filing of an
Amended and Restated Articles of Association, in the form attached hereto as
Exhibit C, with the Israel Registrar of Companies evidencing the creation of the
new class of Securities, plus receipt of the Registrar's clearance notification
in relation thereto, and (iii) such filings, consents and approvals listed in
Section 4(b) above. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the Closing Date and,
apart from the shareholder consent described under Section 4(m) below, the
Company and its Subsidiaries are unaware of any facts or circumstances which
might prevent the Company from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. Based on
the Buyers' representation under Section 2(m) above, the Company acknowledges
and agrees that each Buyer is acting solely in the capacity of arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is (i) an officer or director
of the Company, (ii) an "affiliate" of the Company (as defined in Rule 144) or
(iii) to the knowledge of the Company, a "beneficial owner" of more than 10% of
Preferred Shares and/or Ordinary Shares (as defined for purposes of Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the "1934 Act")). The
Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
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any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has not engaged any
placement agent in connection with the sale of the Securities.
(h) No Integrated Offering. None of the Company, its Subsidiaries,
any of their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or the Israel Securities Law, 1968-5728 (the
"Securities Law") or cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the 1933 Act or the Securities
Law. None of the Company, its Subsidiaries, their affiliates and any Person
acting on their behalf will take any action or steps referred to in the
preceding sentence that would require registration of any of the Securities
under the 1933 Act or the Securities Law or cause the offering of the Securities
to be integrated with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges that
the number of Ordinary Shares issuable upon conversion of the Preferred Shares
in accordance with this Agreement is not in any manner diminished due to any
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Articles of Association (as
defined in Section 3(r)) or the laws of the jurisdiction of its formation which
is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the Securities. The
Company has not adopted a shareholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Preferred Shares or a
change in control of the Company.
(k) SEC Documents; Financial Statements. Since December 31, 2001, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof, or in
connection with any Closing subsequent to the date hereof, filed prior to the
date of such Closing, and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents"). The Company has made available
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to the Buyers or their respective representatives true, correct and complete
copies of the SEC Documents not available on the XXXXX system. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.
(l) Absence of Certain Changes. Since December 31, 2002, there has
been no Material Adverse Effect and no material adverse development in the
business, properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiaries. Since December 31,
2002, the Company has not (i) declared or paid any dividends, (ii) sold any
assets, individually or in the aggregate, in excess of $250,000 outside of the
ordinary course of business or (iii) had capital expenditures, individually or
in the aggregate, in excess of $250,000. The Company has not taken any steps to
seek protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section
3(l), "Insolvent" means (i) the present fair saleable value of the Company's
assets is less than the amount required to pay the Company's total Indebtedness
(as defined in Section 3(s)), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, or (iii) the Company intends to incur
or believes that it will incur debts that would be beyond its ability to pay as
such debts mature.
(m) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form F-1 filed with
the SEC relating to an issuance and sale by the Company of its Ordinary Shares
and/or Preferred Shares and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits.
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(i) Neither the Company nor its Subsidiaries is in violation
of any term of or in default under its Articles of Association or
Memorandum or their organizational charter or memorandum of association or
bylaws, respectively. To the best of its knowledge, neither the Company nor
any of its Subsidiaries is in violation of any judgment, decree or order or
any statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will
conduct its business in violation of any of the foregoing, except for
possible violations which would not, individually or in the aggregate, have
a Material Adverse Effect. Since December 31, 2002, (i) the Ordinary Shares
have been designated for quotation on the Principal Market, and (ii)
trading in the Ordinary Shares has not been suspended by the SEC or the
Principal Market. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
regulatory authorities necessary to conduct their respective businesses,
except where the failure to possess such certificates, authorizations or
permits would not have, individually or in the aggregate, a Material
Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
(ii) The Company is in compliance in all material respects with
all conditions and requirements stipulated by the instruments of approval
granted to it with respect to the "Approved Enterprise" status of any of
the Company's facilities by Israeli laws and regulations relating to such
"Approved Enterprise" status and other tax benefits received by the
Company; and the Company has not received any notice of any proceeding or
investigation relating to revocation or modification of any "Approved
Enterprise" status granted with respect to any of the Company's facilities.
(iii) The Company is not in violation of any condition or
requirement stipulated by the instruments of approval granted to the
Company by the OCS and any applicable laws and regulations with respect to
any research and development grants given to it by such office as to grants
for projects that the OCS has not confirmed as having been closed. All
information supplied by the Company with respect to such applications was
true, correct and complete in all material respects when supplied to the
appropriate authorities. Schedule 3(n)(iii) provides a correct and complete
list of the aggregate amount of pending and outstanding grants from the
OCS, net of royalties paid.
(o) Foreign Corrupt Practices. To the best of the Company's
knowledge, neither the Company, nor any of its Subsidiaries, nor any director,
officer, agent, employee or other Person acting on behalf of the Company or any
of its Subsidiaries has, in the course of its actions for, or on behalf of, the
Company (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
(p) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
- 10 -
(q) Transactions With Affiliates. Except for the grant of stock
options disclosed on Schedule 3(q), none of the officers, directors or employees
of the Company is presently a party to any transaction with the Company or any
of its Subsidiaries (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
(r) Equity Capitalization. As of the date of this Agreement, the
authorized share capital of the Company consists of 150,000,000 Ordinary Shares,
of which as of the date hereof, approximately 42,533,464 are issued and
outstanding, 13,750,000 shares are reserved for issuance pursuant to the
Company's stock option and purchase plans and 34,137,586 shares are reserved for
issuance pursuant to securities (other than the Securities) exercisable or
exchangeable for, or convertible into, Ordinary Shares, including convertible,
secured notes under the Securities Purchase Agreement of November 2003. All of
such outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable. Except as disclosed above and in the Company's
filings with the SEC available on XXXXX: (i) none of the Company's Ordinary
Shares is subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional share capital of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any share capital of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Company (apart from those filed in relation to the Securities Purchase
Agreement of November 2003, which is on file with the SEC); (v) there are no
agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act;
(vi) there are no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vii) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (viii) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement; and (ix) the Company and its Subsidiaries have no
liabilities or obligations required to be disclosed in the SEC Documents but not
so disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company's or its Subsidiaries' respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
- 11 -
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the aggregate,
in a Material Adverse Effect, or (iv) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which has or is
expected to have a Material Adverse Effect. Schedule 3(s) provides a detailed
description of the material terms of any such outstanding Indebtedness. For
purposes of this Agreement: (x) "Indebtedness" of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business), (C)
all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; (y) "Contingent Obligation" means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) "Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(t) Absence of Litigation. There is no material: action, suit,
proceeding, inquiry or investigation before any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or
directors in their capacities as such. For purposes of this s.3(t) "material"
means having a potential value or cost to the Company in excess of $50,000.
(u) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.
- 12 -
(v) Employee Relations.
(i) Neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or employs any member of a union.
The Company and its Subsidiaries believe that their relations with their
employees are good. No executive officer of the Company (as defined in Rule
501(f) of the 0000 Xxx) has notified the Company that such officer intends
to leave the Company or otherwise terminate such officer's employment with
the Company. No executive officer of the Company, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment of each
such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.
(ii) Except to the extent applicable to employers and employees
generally in Israel, neither the Company nor any of its Subsidiaries is
subject to, nor do any of its employees benefit from, extension orders
("tzavei harchava") or any agreement, arrangement, understanding or custom
with respect to employment (including, without limitation, termination
thereof). The severance pay due to the Employees is fully funded or
reserved against in accordance with generally accepted accounting
principles, consistently applied.
(iii) The Company and its Subsidiaries are in compliance with
all Israeli, U.S. federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms
and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(w) Title. The Company and its Subsidiaries have good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Notwithstanding the above and for purpose of clarification, the
Company notes that by Closing, subject to shareholder approval, it intends to
repay the Indebtedness to the extent incurred and reflected under the Securities
Purchase Agreement of November 2003, and related documents, and all interest and
costs, including additional costs required to be paid to secure the right to
fully prepay such notes, so that the note holders thereunder shall, upon
Closing, have no right to effect or exercise their first priority security
interests. Any real property and facilities held under lease by the Company and
any of its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries. The Company undertakes to remove all securities pertaining
to the Indebtedness on an as soon as possible basis following the Closing, and
to indemnify the Investors from any loss, or damage, they suffer because of the
Company's failure or inability to do so.
(x) Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("Intellectual Property Rights") necessary to conduct their respective
businesses as now conducted. Except for trademarks no longer being used, none of
- 13 -
the Company's Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the
Company or its Subsidiaries of Intellectual Property Rights of others. There is
no claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights. The Company is unaware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
(y) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, where the failure to so comply in each of the foregoing clauses
(i), (ii) and (iii) could be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect. The term "Environmental Laws" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(z) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
(aa) Tax Status. The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
(bb) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
- 14 -
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.
(cc) Form F-3 Eligibility; Foreign Private Issuer Status. The Company
is eligible to register the resale by the Buyers of the Ordinary Shares issued
on conversion of the Preferred Shares acquired pursuant to the Transaction
Documents on a registration statement on Form F-3 under the 1933 Act. The
Company qualifies as a "foreign private issuer" as such term is defined in the
1934 Act.
(dd) Taxes. No tax, levy, impost, duty, fee, assessment or other
governmental charge or any deduction or withholding imposed by any governmental
agency or authority in or of the State of Israel is payable by or on behalf of
the Buyers or any assignee of any of the Buyers as a result of the execution,
delivery or performance by the Company of any of the Transaction Documents,
including, but not limited to, the issuance by the Company of the Securities.
(ee) Encryption. Neither the Company, nor any of its Subsidiaries
"engage" in any "means of encryption" as such terms are defined in the Control
of Products and Services Declaration (Engagement in Encryption), 1974, as
amended, promulgated under the Law for Control of Products and Services of 1957.
(ff) Financial Position. After giving effect to the net proceeds to
the Company from the sale of Preferred Shares at the Closing hereunder, the
Company shall not be subject to receipt from the Company's independent auditors
of inclusion of a "going concern" or other qualification in their opinion with
respect to Company's financial statements for the year ended December 31, 2003.
4. COVENANTS.
----------
(a) Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement; provided however, that a failure by the Company to make
a required filing with the Israeli Registrar of Companies which is occasioned by
a strike or work stoppage shall result in postponement of the Closing Date until
such filing becomes practicable and shall not be considered a breach of this
Agreement.
(b) Form D and Blue Sky. The Company shall file a Form D with respect
to the Securities as required under Regulation D and provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before each of
the Closing Dates, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Securities for
sale to the Buyers at each of the Closings pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Buyers on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or "Blue Sky" laws of the states
of the United States following the Closing Date.
(c) Reporting Status. During the period in which the Company is
required to maintain the effectiveness of a resale registration statement under
the Registration Rights Agreement (the "Reporting Period"), the Company shall
- 15 -
file all reports required to be filed with the SEC pursuant to the 1934 Act,
and, except as the Company may determine in the case of a business combination
transaction with a third party, the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Securities for working capital purposes or for repayment of any
outstanding Indebtedness of the Company or any of its Subsidiaries, but not for
redemption or repurchase of any of its equity securities.
(e) Financial Information. The Company agrees to send the following
to each Investor during the Reporting Period unless the following are filed with
the SEC through XXXXX and are available to the public through the XXXXX system:
(i) within five (5) Business Days after the filing thereof with the SEC, a copy
of its Annual Reports on Form 20-F, any interim reports or any consolidated
balance sheets, income statements, shareholders' equity statements and/or cash
flow statements for any period other than annual, any Reports on Form 6-K and
any registration statements (other than those for benefit plans or dividend or
interest reinvestment plans) or amendments filed pursuant to the 1933 Act, and
(ii) copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.
(f) Listing. To the extent required in the Registration Rights
Agreement, the Company shall secure the listing of all of the Registrable
Securities (as defined in the Registration Rights Agreement) upon each national
securities exchange and automated quotation system, if any, upon which the
Ordinary Shares are then listed (subject to official notice of issuance) and
shall maintain, so long as any other Ordinary Shares shall be so listed, such
listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall pay all fees and expenses
imposed on the Company by each relevant national securities exchange (including
the Principal Market) and automated quotation system in connection with
satisfying its obligations under this Section 4(f).
(g) Fees. The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or broker's commissions (other
than for Persons engaged by any Buyer) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyers.
(h) Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by an Investor (as defined in the Registration
Rights Agreement) in connection with a bona fide margin agreement or other loan
or financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(f) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
- 16 -
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
(i) Disclosure of Transactions and Other Material Information. On or
before 4:00 p.m., New York Time, on November 1, 2004, and subject to any
necessary approval of the content thereof by The Principal Market, the Company
shall issue a press release describing the terms of the transactions
contemplated by the Transaction Documents and on or before 8:30 a.m., New York
Time, on November 5, 2004, the Company shall file a Report on Form 6-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement (and all
schedules to this Agreement) and the Registration Rights Agreement) as exhibits
to such filing (including all attachments, the "6-K Filing"). Subject to the
foregoing, neither the Company nor any Buyer shall issue any press releases or
any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions as is determined by the Company to be necessary to
comply with applicable law and regulations (including those of the Principal
Market).
(j) Corporate Existence. So long as any Buyer beneficially owns any
Preferred Shares, the Company shall take all reasonable measures to maintain its
corporate existence.
(k) Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, from and after the Closing Date the number of Ordinary Shares issuable
on conversion of the Preferred Shares under Exhibit A.
(l) Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
(m) Shareholder Approval. The Company shall provide each shareholder
entitled to vote at a special or general meeting of shareholders of the Company
(the "Shareholder Meeting"), which shall be promptly called and held not later
than December 14, 2004 (the "Shareholder Meeting Deadline"), a proxy statement,
substantially in the form which has been previously received by the Buyers and a
counsel of their choice, soliciting each such shareholder's affirmative vote at
the Shareholder Meeting for approval of resolutions providing for the following
(the "Resolutions"): (i) creation of the new class of Securities and to allow,
at a minimum, the Company to reserve for issuance the number of Ordinary Shares
required to be reserved hereunder for issuance of the Ordinary Shares issuable
upon conversion of the Securities pursuant to the terms of Exhibit A, (ii) an
increase in the authorized share capital of the Company to allow for an issuance
of Preferred Shares in at least the amount as set forth under Column (3) to the
Schedule of Buyers attached to this Agreement, (iii) the amendment to the
Articles of Association in accordance with the Amended and Restated Articles of
Association, in the form attached hereto as Exhibit C, (iv) the Company's
issuance of all of the Securities as described in the Transaction Documents in
accordance with applicable law and the rules and regulations of the Principal
Market and (v) the amendments to the terms of the SPA of November 2003 (such
affirmative approval of the Resolutions being referred to herein as the
"Shareholder Approval"), and the Company shall use its best efforts to solicit
its shareholders' approval of the Resolutions and to cause the Board of
Directors of the Company to recommend to the shareholders that they approve the
Resolutions. The Company shall be obligated to seek to obtain the Shareholder
- 17 -
Approval by the Shareholder Meeting Deadline or any extension thereof due to
circumstances beyond the control of the Company.
(n) First Priority. Following the Closing and until such time as an
aggregate of at least 75% of the outstanding Preferred Shares issued under this
Agreement are converted into Ordinary Shares or exchanged in connection with and
Organic Change as described in Section 9(g) below, the Company shall not create
or issue any debt or any new class of securities, or issue any additional
Preferred Shares (except as necessary in relation to the Addendum to the SPA of
November 2003), that shall enjoy priority or shared (pari passu) rights with the
Preferred Shares purchased pursuant to this Agreement, to the extent any such
rights are described in Article 3.3 of the Amended and Restated Articles of
Association of the Company.
(o) Restrictions on Changes in Preferred Rights. Following the
Closing and until all outstanding Preferred Shares are converted into Ordinary
Shares or exchanged in connection with an Organic Change as described in Section
9(g) below, the Company shall not modify any of the rights associated with the
Preferred Shares, by way of amendment of the Amended and Restated Articles of
Association or otherwise as applicable law may allow, without first receiving
the approval of the holders of at least a majority of the Preferred Shares.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
--------------------------------------
(a) Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Preferred Shares, a register for the Preferred Shares,
in which the Company shall record the name and address of the Person in whose
name the Preferred Shares have been issued (including the name and address of
each transferee), and the number of Ordinary Shares issuable upon conversion of
the Preferred Shares in accordance with Exhibit A hereto. The Company shall keep
the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at The Depository Trust
Company ("DTC"), registered in the name of each Buyer or its respective
nominee(s), for the Preferred Shares issued at Closing. The Company warrants
that the Securities shall be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the other
Transaction Documents, and in accordance with applicable law. If a Buyer effects
a sale, assignment or transfer of the Securities in accordance with Section
2(f), the Company shall permit the transfer and shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves Preferred Shares or, if
such Preferred Shares are converted into Ordinary Shares, the resulting Ordinary
Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144, the transfer agent shall issue such
Securities or Ordinary Shares to the Buyer, assignee or transferee, as the case
may be, without any restrictive legend provided, in the case of sale, assignment
or transfer pursuant to an effective registration statement, that the Buyer has
confirmed in writing to the Company that it has delivered the prospectus
included in the Registration Statement, as the same may have been supplemented
by the Company, to any Person to whom such Buyer is selling, assigning or
transferring any of the Preferred Shares and/or Ordinary Shares. In addition to
- 18 -
the foregoing, following the date that a legend is no longer required for
certain Securities or Ordinary Shares issued on conversion of the Securities,
the Company will no later than five Business Days following the delivery by a
Buyer to the Company or the Company's transfer agent of a legended certificate
representing such Securities and/or Ordinary Shares, deliver or cause to be
delivered to such Buyer a certificate representing such Securities and/or
Ordinary Shares that is free from all restrictive and other legends. Following
the date that a Registration Statement is declared effective and upon the
delivery to any Buyer of any certificate representing Securities and/or Ordinary
Shares, such Buyer agrees that any sale of such Securities and/or Ordinary
Shares shall be made pursuant to the Registration Statement and in accordance
with the plan of distribution described therein or pursuant to an available
exemption from the registration requirements of the 1933 Act. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that a Buyer shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------
Closing Date. The obligation of the Company hereunder to issue and
sell the Preferred Shares to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) Such Buyer and each other Buyer shall have delivered to
the Company the Purchase Price for the Preferred Shares being purchased by
such Buyer and each other Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by
the Company.
(iii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to the
Closing Date.
(iv) The Company shall have obtained the Shareholder Approval.
(v) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the
sale of the Preferred Shares. Without limiting the generality of the
foregoing, the Company shall also have obtained approval by the OCS and the
Investment Center of the transactions contemplated hereunder.
- 19 -
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
--------------------------------------------------
Closing Date. The obligation of each Buyer hereunder to purchase the
Preferred Shares listed opposite its name under Column (3) to the Schedule of
Buyers at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:
(i) The Company shall have executed and delivered to such
Buyer (i) each of the Transaction Documents, and (ii) certificates for the
Preferred Shares (in such denominations as the Company may determine) being
purchased by such Buyer at the Closing pursuant to this Agreement).
(ii) Such Buyer shall have received the opinions of Pillsbury
Winthrop LLP, the Company's United States outside counsel, and Naschitz,
Xxxxxxx & Co., the Company's Israeli outside counsel, each dated as of the
Closing Date, in a form reasonably acceptable to such Buyer and its
respective counsel.
(iii) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed,
satisfied and complied in all respects with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and
as to such other matters as may be reasonably requested by such Buyer in
the form attached hereto as Exhibit B.
(iv) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the
sale of the Preferred Shares. Without limiting the generality of the
foregoing, the Company shall also have obtained approval by the OCS and the
Investment Center of the transactions contemplated hereunder.
(v) The Company shall have fully repaid the indebtedness
arising out of the November 2003 transactions, plus all interest, penalties
and costs, and any additional fees required to be paid in order to secure
the right to prepay the indebtedness.
(vi) The Company shall have obtained from each "Buyer" (as
defined in the Share Purchase Agreement of May 2004 between the Company and
certain buyers named thereunder (the "Prior SPA")) a waiver satisfactory in
form and substance to the Buyers and their respective counsel with respect
to the application of the provisions of Section 4(n) of the Prior SPA in
connection with the offer of the Securities hereunder.
(vii) The Company shall have obtained from the each "Buyer" (as
defined in the Prior SPA) the Addendum to the SPA of November 2003.
8. TERMINATION.
------------
(a) In the event that the Closing shall not have occurred with
respect to a Buyer on or before December 20, 2004 due to the Company's or such
Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
- 20 -
(and the nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date or
thereafter without liability to the party that failed to satisfy the conditions.
Nothing herein makes either party liable to the other party or parties, for a
failure to Close arising from the shareholders or any other third party not
under the control of the parties hereto, failing to provide approval or consent
or take any actions necessary to allow the parties to achieve the Closing.
(b) Furthermore, the Company shall be entitled to terminate this
Agreement prior to the Closing due to its desire to proceed with an Organic
Change, as defined in Section 9(g) below, provided that it pays each Buyer a
termination fee of 7.5% of the amount to be invested by each such Buyer as
listed in Column (4) to the Schedule of Buyers, with such payment being in full
satisfaction of any and all obligations of the Company to the Investors in
connection with this Agreement.
9. MISCELLANEOUS.
--------------
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
- 21 -
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of Preferred Shares representing at least a majority of
the aggregate number of Preferred Shares purchased hereunder, or, if prior to
the Closing Date, the Company and the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least a majority of the Preferred Shares
hereunder, and any amendment to this Agreement made in conformity with the
provisions of this Section 9(e) shall be binding on all Buyers. No provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Preferred Shares
purchased hereunder then outstanding. No consideration shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration also is
offered to all of the parties to the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Commtouch Software Ltd.
0X Xxxxxxx Xxxxxx
Xxxxx Xxxxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxx 00000
Xxxxxx
Telephone: (000) 000-0-000-0000
Facsimile: (000) 000-0-000-0000
Attention: Chief Executive Officer
- 22 -
Copy to:
Commtouch Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxx #000
Xxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx, Esq.
and
Pillsbury Winthrop LLP
00 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxx Xxxxxxxx, Esq.
If to the Transfer Agent:
Xxxxx Fargo Shareholder Services
000 Xxxxx Xxxxxxx Xxxxxxxx Xx.
Xxxxx Xx. Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx,
Account Manager, Shareowner Services
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers, or to such other address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
The Company hereby irrevocably appoints Xxxx Xxxxx, Esq. at Commtouch Inc,
0000 Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000, Telephone:
(000) 000-0000, Facsimile: (000) 000-0000, as its agent for the receipt of
service of process in connection with any action pursuant to any Transaction
Document in the United States. The Company agrees that any document may be
effectively served on it in the United States in connection with any action,
suit or proceeding relating to the Transaction Documents by service on its
agents.
Any document shall be deemed to have been duly served if marked for the
attention of the agent at its address (as set out above) or such other address
in the United States as may be notified to the party wishing to serve the
document and delivered in accordance with the notice provisions set forth in
this Section 9(f).
If the Company's agent at any time ceases for any reason to act as such,
the Company shall appoint a replacement agent having an address for service in
the United States and shall notify each Buyer in writing of the name and address
- 23 -
of the replacement agent. The provisions of this Section 9(f) applying to
service on an agent apply equally to service on a replacement agent.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Preferred Shares issued hereunder. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of Preferred Shares representing at
least a majority of the number of Preferred Shares purchased hereunder, except
pursuant to an Organic Change, as defined below. Any recapitalization,
reorganization, reclassification, consolidation, merger, scheme of arrangement,
sale of all or substantially all of the Company's assets to another Person or
other transaction, in each case which is effected in such a way that holders of
Ordinary Shares are entitled to receive securities and/or assets with respect to
or in exchange for Ordinary Shares is referred to herein as an "Organic Change."
A Buyer may assign some or all of its rights hereunder without the consent of
the Company, in which event such assignee shall be deemed to be a Buyer
hereunder with respect to such assigned rights, but only if the assignee has
assumed all obligations (as well as all rights) of the assignor/Buyer.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person. For purposes of clarification, the representations and
warranties of the Company hereunder and the Company's delivery requirements of
closing documentation also inure to the benefit of the parties under the
Addendum to the November 2003 SPA.
(i) Survival. Unless this Agreement is terminated under Section 8,
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
9 that, by their terms are intended to continue in effect following the Closing,
shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their shareholders,
partners, members, officers, directors and employees (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
- 24 -
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby and
(c) a final determination by a court of law possessing proper jurisdiction over
the Indemnitees that the participation by the Buyers in the transactions
contemplated by this Agreement violates the securities laws of the United States
as existing on the Closing Date.
(l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
(m) Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, each
party recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the other party. Therefore
the parties agree that the other party shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security.
(n) Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.
[Signature Pages Follow]
- 25 -
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
COMPANY:
COMMTOUCH SOFTWARE LTD.
By: /s/ XXXXXX XXXXXX
--------------------------------
Name: XXXXXX XXXXXX
Title: Chief Executive Officer
Date: November 4, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
BUYERS:
XDL CAPITAL CORP.
By: /s/ XXXXX XXXXXX
--------------------------------
Name: XXXXX XXXXXX
Title: A.S.O.
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
OZF LTD.
By: /s/ TIS PRAGER
--------------------------------
Name: TIS PRAGER
Title: Director
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
CLARENVILLE LTD.
By: /s/ XXXXXX XXXXXXXXX
--------------------------------
Name: XXXXXX XXXXXXXXX
Title: Director
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
DIRAD INVESTMENTS LTD.
By: /s/ DORON
--------------------------------
Name: DORON
Title: Director
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
NIR TARLOVSKY
By: /s/ NIR TARLOVSKY
--------------------------------
Name: NIR TARLOVSKY
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
AVIV RAIZ
By: /s/ AVIV RAIZ
-------------------------------
Name: AVIV RAIZ
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXXXXX XXXXX
By: /s/ XXXXXX XXXXX
-------------------------------
Name: XXXXXX XXXXX
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXXX XXXXX
By: /s/ XXXX XXXXX
-------------------------------
Name: XXXX XXXXX
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
CHEN BARDICHEV
By: /s/ CHEN BARDICHEV
-------------------------------
Name: CHEN BARDICHEV
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXXXX BARDICHEV
By: /s/ XXXXX BARDICHEV
--------------------------------
Name: XXXXX BARDICHEV
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
AGORA INVESTMENTS, LLC
By: /s/ XXXX XXXXXXXXX
--------------------------------
Name: XXXX XXXXXXXXX
Title: Investor
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXXXXX XXXXX
By: /s/ XXXXXX XXXXX
--------------------------------
Name: XXXXXX XXXXX
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXX XXXXXX
By: /s/ XXX XXXXXX
--------------------------------
Name: XXX XXXXXX
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXXXX XXXXXXXX
By: /s/ XXXXX XXXXXXXX
--------------------------------
Name: XXXXX XXXXXXXX
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXXXX X. XXXXXXX
By: /s/ XXXXX X. XXXXXXX
--------------------------------
Name: XXXXX X. XXXXXXX
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
APOLLO NOMINEES INC.
By: /s/ XXXXXXXX X. XXXXX
--------------------------------
Name: XXXXXXXX X. XXXXX
Title: Director
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
DELTA CAPITAL INVESTMENTS LTD.
By: /s/ XXXXX TEACHER
-------------------------------
Name: XXXXX TEACHER
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
ASAF MOAR
By: /s/ ASAF MOAR
--------------------------------
Name: ASAF MOAR
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
NEY 1, L.P.
By: /s/ XXXXXXX XXXX YORAN
--------------------------------
Name: XXXXXXX XXXX YORAN
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXXXXX XXXXXXXX
By: /s/ XXXXXX XXXXXXXX
--------------------------------
Name: XXXXXX XXXXXXXX
Title:
Date: November 1, 2004
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
XXXXXXXX XXXXXX
By: /s/ XXXXXXXX XXXXXX
--------------------------------
Name: XXXXXXXX XXXXXX
Title:
Date: November 1, 2004
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5)
Number of Legal Representative's
Preferred Address and Facsimile
Buyer Address and Facsimile Number Shares Purchase Price Number
------------------------------------------------------------------------------------------------------------------------------------
XDL Capital Corp. 00 Xx. Xxxxx Xxxxxx Xxxx, Xxx. 000, 200,000 US$100,000 Xxxxx Xxxxx & Xx,
Xxxxxxx, X0X 0X0 00 Xxxxxx Xxxxxx
Xxxxxxxxx 00000
Attn: Xxxxx Xxxxxx, ASO & Xxxxxx Xxxxxx Attn: Xxxxx X. Xxxxxxxxx, Adv.
Residence: Canada
Clarenville Ltd. Xxxx Xxxxx 00, XX-0000 300,000 XXx000,000
Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
Attn: Xxxxxx Xxxxxxxxx
Attn: Mr. Elikos Xxxx
Residence: Cyprus
Dirad Investments 28 Bezalel St. 300,000 US$150,000
Ltd. Ramat Gan
Attn: Offer Xxxxxxx
Xxx Xxxxxxxxx XX Xxx 000 000,000 US$150,000
Benai Zion, Israel
Residence: Israel
OZF Ltd. Tropic Isle Building 600,000 US$300,000 Tis Prager
Wickhams Cay, P.O. Box 964 Prager Dreifuss
Road Town, Tortola, Attorneys at law
British Virgin Islands Xxxxxxxxxxxxxxxxx 0
Attn: Tis Xxxxxx XX-0000 Xxxxxx,
Xxxxxxxxx: BVI SWITZERLAND
(1) (2) (3) (4) (5)
Number of Legal Representative's
Preferred Address and Facsimile
Buyer Address and Facsimile Number Shares Purchase Price Number
------------------------------------------------------------------------------------------------------------------------------------
Aviv Raiz 6 Sinai St. 500,000 US$250,000
Ramat Hasharon , Israel
Residence: Israel
Xxxxxx Xxxxx 13 Hashoftim St. 100,000 US$50,000
Ramat Hasharon , Israel
Residence: Israel
Xxxx Xxxxx 16 Xxxxxx Xxxxx St. 50,000 US$25,000
Ramat Hasharon, Israel
Residence: Xxxxxx
Xxxx Bardichev Ein Vered, 150,000 US$75,000
00000
Xxxxxx
Residence: Israel
Xxxxx Bardichev Ein Vered, 150,000 US$75,000
00000
Xxxxxx
Email - none
Residence: Israel
Agora Investments, 19261 Xxxx Xxxx 150,000 US$75,000
LLC Xxxxxxxxx, XX 00000
Residence: U.S.
Xxxxxx Xxxxx Marcus St. 8 400,000 US$200,000
Jerusalem, 00000 Xxxxxx
Residence: Israel
Xxx Xxxxxx 0000 Xxxxxxxxx Xxxxx 200,000 US$100,000
Xxxxxx, XX 00000
Residence: U.S.
(1) (2) (3) (4) (5)
Number of Legal Representative's
Preferred Address and Facsimile
Buyer Address and Facsimile Number Shares Purchase Price Number
------------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxx 22 Hameyasdim St. 400,000 US$200,000
Xxxxxx, Xxxxxx 00000
Residence: Israel
Xxxxx Xxxxxxx 000 X. Xxxxxxxx Xxx. 100,000 US$50,000
Xxxxxxx, XX 00000
Residence: U.S.
Apollo Nominees Inc. Suite 100 200,000 US$100,000
One Financial Place,
Lower Xxxxxxxxx Rock,
St.Xxxxxxx, Barbados
Residence: Barbados
Delta Capital Delta Capital Investments Ltd. 200,000 US$100,000
Investments Ltd. 00-00 Xxxxxxx Xxx
Xxxxxx
XX0X0XX
Xxxxxx Xxxxxxx
Residence: U.K.
Asaf Moar 00x Xxxxxxxxxx Xx. 100,000 US$50,000
Hod Hasharon , Israel
Residence: Xxxxxx
Xxx 1, L.P. c/o Xxxx Xxxxx 100,000 US$50,000
000 Xxxxx Xxxxx Xx.
Xxxxxxx, XX 00000
With copy to:
Chain Bridge Advisors
Attn: Xxxxxxx Xxxx
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Residence: New York
(1) (2) (3) (4) (5)
Number of Legal Representative's
Preferred Address and Facsimile
Buyer Address and Facsimile Number Shares Purchase Price Number
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxxx c/o Orex Computed Radiography 150,000 US$75,000
0000 Xxxxxxxxxxxx Xxx. (#000)
Xxxxxxxxxx, XX 00000
Residence: U.S.
Xxxxxxxx Xxxxxx 000 Xxxxxx Xxxxxx 100,000 US$50,000
Xxxxxxxxx XX 00000
Residence: United States
Cranshire Capital c/o Downsview Capital, Inc. 100,000 US$50,000
L.P. The General Partner
000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx
Residence: Illinois
Smithfield c/o Highbridge Capital Management, LLC 200,000 US$100,000
Fiduciary LLC 0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxx
Xxxx X. Chill
Residence: Cayman Islands
Omicron Master Trust c/o Omicron Capital 100,000 US$50,000
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx
Residence: Bermuda
(1) (2) (3) (4) (5)
Number of Legal Representative's
Preferred Address and Facsimile
Buyer Address and Facsimile Number Shares Purchase Price Number
------------------------------------------------------------------------------------------------------------------------------------
Iroquois Capital LP c/o Vertical Ventures, LLC 300,000 US$150,000
000 Xxxxxxxxx Xxxxxx, 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Residence: New York
Xxxxx Xxxxxxxx 000 Xxxxxxxxx Xxxx 100,000 US$50,000
Xxxxxxx, XX 00000
Xxx Xxxxxxx Xxxxxx 00 Xxx Xxxx , Xxxxxx 100,000 US$ 50,000
Residence: Israel
Xxxxx Xxxxxxxxx Haduhifat 41 100,000 US$ 50,000
Raanana , Israel
Residence: Israel
Itzik Babayov 5 Shahaf st. 100,000 US$ 50,000
Hod Hasharon 45351 , Israel
Residence: Israel
Shem Basum, Ltd. Xxxx Xxxxxx 8 80,000 US$ 40,000
Kfar Saba , Israel
Xxxx Xxxxxx
Xxxx Xxxxxx 0 Xxxxxxx Xx., #00 300,000 US$150,000
Xxx Xxxx, Xxxxxx 00000
EXHIBITS
--------
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Officer's Certificate
Exhibit C Form of Amended and Restated Articles of Association
Exhibit D Form of Additional Buyer Signature Page
SCHEDULES
---------
Schedule 3(a) Subsidiaries
Schedule 3(n)(iii) OCS Grants
Schedule 3(q) Transactions With Affiliates
Schedule 3(s) Indebtedness and Other Contracts
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
CRANSHIRE CAPITAL L.P.
By: /s/ XXXXXXXX XXXXX
--------------------------------
Name: XXXXXXXX XXXXX
Title: President,
Downsview Capital
The General Partner
Date: November 3, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
SMITHFIELD FIDUCIARY LLC
By: /s/ XXXX X. CHILL
--------------------------------
Name: XXXX X. CHILL
Title: Authorized Signatory
Date: November 3, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
OMICRON MASTER TRUST
By: /s/ XXXXX XXXXXXXXX
--------------------------------
Name: XXXXX XXXXXXXXX
Title: Managing Partner
Date: November 3, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
IROQUOIS CAPITAL LP
By: /s/ XXXXXX XXXXXXXXX
--------------------------------
Name: XXXXXX XXXXXXXXX
Title: Partner
Date: November 3, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
XXXXX XXXXXXXX
By: /s/ XXXXX XXXXXXXX
--------------------------------
Name: XXXXX XXXXXXXX
Title:
Date: November 3, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
XXXX XXXXXXX
By: /s/ XXXX XXXXXXX
--------------------------------
Name: XXXX XXXXXXX
Title:
Date: November 2, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
XXXXX XXXXXXXXX
By: /s/ XXXXX XXXXXXXXX
--------------------------------
Name: XXXXX XXXXXXXXX
Title:
Date: November 2, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
ITZIK BABAYOV
By: /s/ ITZIK BABAYOV
--------------------------------
Name: ITZIK BABAYOV
Title:
Date: November 2, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
SHEM BASUM, LTD.
By: /s/ XXXX XXXXXX
--------------------------------
Name: XXXX XXXXXX
Title: Chairman
Date: November 2, 2004
Purchase Price:
Number of Preferred Shares:
EXHIBIT D
---------
IN WITNESS WHEREOF, the undersigned hereby acknowledges, agrees, and confirms
that by its signature below, it hereby joins the Agreement as an Additional
Buyer, and shall be deemed, pursuant to Section 1(ii) of the Agreement, to be a
Buyer for all purposes thereunder as of the date set forth below and shall
invest at the Closing the purchase price for the number of Preferred Shares in
the amounts set forth below and opposite the undersigned's name in Columns (3)
and (4) of the Schedule of Buyers, as revised accordingly.
XXXX XXXXXX
By: /s/ XXXX XXXXXX
--------------------------------
Name: XXXX XXXXXX
Title:
Date: November 3, 2004
Purchase Price:
Number of Preferred Shares:
