EXHIBIT 10.53
ON TRACK INNOVATIONS LTD.
NOTE AND WARRANT PURCHASE AGREEMENT
Dated as of
September 8, 2003
NOTE AND WARRANT PURCHASE AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of September 8, 2003, by and among On Track Innovations Ltd., an
Israeli company (the "Company"), and the other parties listed on Schedule 1
hereto (each a "Lender" and collectively, the "Lenders").
WHEREAS, subject to the terms and conditions herein, the Lenders desire
to acquire from the Company, and the Company desires to issue to the Lenders,
Convertible Promissory Notes of the Company in the aggregate principal face
amount of $999,000 and warrants to purchase Ordinary Shares of the Company, par
value NIS 0.1 each (each, a "Share"), as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Lenders hereby
agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
1.1 Subject to the satisfaction of the terms and conditions described
in Section 6 of this Agreement, at the Closing (as defined below) the Company
agrees to sell to each Lender, and each Lender severally agrees to purchase from
the Company, a Convertible Promissory Note in the form attached to this
Agreement as Exhibit A (each, a "Note" and collectively, the "Notes") in the
principal amount set forth opposite such Lender's name in the column labeled
"Loan" on Schedule 1 hereto.
1.2 Subject to the satisfaction of the terms and conditions described
in Section 6 of this Agreement, at the Closing, the Company agrees to issue to
each Lender:
1.2.1 A warrant, in the form of Exhibit B-1 attached hereto, to acquire
that number of Shares set forth opposite such Lender's name in the column
labeled "Warrants" on Schedule 1 (each, a "Warrant" and collectively,
"Warrants");
1.2.2 A warrant, in the form of Exhibit B-2 attached hereto, to acquire
that number of Shares set forth opposite such Lender's name in the column
labeled "Payback Warrants" on Schedule 1 (each, a "Payback Warrant" and
collectively, "Payback Warrants"). If the Payback Warrants have expired in
accordance with their terms, they shall be of no further force or effect
and will be returned to or as directed by the Company.
2. CLOSING.
2.1 The purchase and sale of the Notes will take place at the offices
of ZAG/S&W LLP, counsel to the Company, located at 0 Xxxx Xxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 at 4:00 p.m., Eastern time, on the date that the conditions
set forth in Section 6 are satisfied in full or waived by the appropriate party
thereunder, or at such other place or different time or day as may be mutually
acceptable to the Lenders and the Company (which time and place are referred to
as the "Closing"). At the Closing, each Lender shall deliver to the Company
payment in full for the Note to be purchased by such Lender in the amount set
forth opposite such Lender's
name in the column labeled "Loan" on Schedule 1, via wire transfer of
immediately available funds or bank or cashier's check. At the Closing, the
Company will deliver to each Lender a duly executed Note in the principal amount
set forth opposite such Lender's name in the column labeled "Loan" on Schedule
1.
2.2 The issuance of the Warrants and the Payback Warrants shall take
place at the Closing. At the Closing, each Lender shall be delivered a Warrant
to acquire that number of Shares set forth opposite such Lender's name in the
column labeled "Warrants" on Schedule 1 and Payback Warrant to acquire that
number of Shares set forth opposite such Lender's name in the column labeled
"Payback Warrants" on Schedule 1.
3. USE OF PROCEEDS. The Company shall use the proceeds from the transactions
contemplated hereby to enhance the general working capital of the Company.
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. To induce each of the Lenders
to enter into this Agreement and to purchase the Notes, Warrants and Payback
Warrants, the Company hereby represents and warrants to each Lender that, except
as set forth on the Schedule of Exceptions attached hereto as Schedule 2 (the
"Schedule of Exceptions"), which Schedule of Exceptions describes exceptions to
these representations and warranties and is arranged in paragraphs corresponding
to the numbered and lettered paragraphs in this Section 4:
4.1 Organization. The Company is a corporation duly organized and
validly existing and in good standing under the laws of Israel, and has the
corporate power to own its properties and to carry on its business as now being
conducted and as currently proposed to be conducted as set forth in its most
recent 20-F filed with the Securities and Exchange Commission (the "SEC") (the
"Exchange Act Documents"). The Company is qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business transacted by it or the character of the properties owned or leased
by it requires such licensing or qualification, except where the failure so to
qualify would not have a materially adverse effect on its business or financial
condition. The Company has the corporate power and authority to execute, deliver
and perform each of the Transaction Documents (as defined below) to which it is
a party. The execution, delivery and performance of this Agreement and all
Exhibits hereto (the "Transaction Documents") have been duly authorized by the
Company.
4.2 Due Authorization and Valid Issuance. The Company has all requisite
power and authority to execute, deliver and perform its obligations under the
Transaction Documents, all of which have been duly authorized and validly
executed and delivered by the Company and constitute legal, valid and binding
agreements of the Company enforceable against the Company in accordance with
their terms, except (i) as rights to indemnity and contribution may be limited
by state or federal securities laws or the public policy underlying such laws,
(ii) enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and (iii) enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Notes, the Warrants and the Payback
Warrants being purchased by the Lenders hereunder and the Shares convertible or
issuable (as the case may be) pursuant to the Notes, Warrants or the Payback
Warrants (as the case may be), will,
-2-
upon conversion or issuance (as the case may be) and payment therefor pursuant
to the terms hereof and thereof, be duly authorized, validly issued, fully-paid
and nonassessable.
4.3 Non-Contravention. The execution and delivery of the Transaction
Documents, the conversion, issuance and sale of the Notes, the Warrants and the
Payback Warrants under the Agreements and the Shares convertible or issuable (as
the case may be) under the Notes, Warrants or the Payback Warrants in accordance
with their terms, the fulfillment of the terms of the Agreement, the Note the
Warrants and the Payback Warrants and the consummation of the transactions
contemplated thereby do not and will not (A) conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, (i) any
agreement or instrument of the Company or any of its subsidiaries, including as
have been filed or incorporated by reference as an exhibit to the Exchange Act
Documents, (ii) the Articles of Association, by-laws or other organizational
documents of the Company, or (iii) any law, administrative regulation, ordinance
or order of any court or governmental agency, arbitration panel or authority
applicable to the Company or any of its subsidiaries, or (iv) the rules and
regulations of the Nasdaq Stock Market or any other stock market or trading
facility on which the Ordinary Shares are listed for trading, except in the case
of clauses (i) and (iii) for any such conflicts, violations or defaults which
are not reasonably likely to have (A) a material adverse effect upon the
condition (financial or otherwise), earnings, business or business prospects,
properties or operations of the Company and its subsidiaries (taken as a whole)
(a "Material Adverse Effect"), or (B) result in the creation or imposition of
any lien, encumbrance, claim, security interest or restriction whatsoever upon
any of the material properties or assets of the Company or its subsidiaries or
an acceleration of indebtedness pursuant to any obligation, agreement. No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body in the United States or Israel or any other person is
required for the execution and delivery of the Agreements, the Notes, the
Warrants and the Payback Warrants in accordance with their terms, and the valid
issuance and sale of the Shares, Warrants and Payback Warrants to be sold
pursuant to the Agreements, and the valid conversion or issuance of the Shares
under the Notes, Warrants or the Payback Warrants (as the case may be), in
accordance with their terms, other than such as have been made or obtained,
except for (a) the filing of one or more Registration Statements in accordance
with the Registration Rights Agreement, (b) the filing of a Form D under the
Securities Act, (c) necessary state law securities filings permitted to be
delivered post Closing and (d) approvals (if any) of the transactions
contemplated by this Agreement under the rules and regulations of the Nasdaq
Stock Market.
4.4 Capitalization. The authorized share capital of the Company
consists of 5,000,000 shares, all of which are Ordinary Shares, par value NIS
0.1 per share, of which 2,715,526 shares are issued and outstanding. The
Schedule of Exceptions sets forth the Company's complete capitalization chart on
a fully diluted basis as of the date of this Agreement, including all
outstanding share options, share purchase warrants and any other rights to
acquire shares of the Company. Except as set forth in the Schedule of
Exceptions, there are no material outstanding rights (including, without
limitation, preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of the Company or
other equity interest in the Company, or any contract, commitment, agreement,
understanding or arrangement of any kind to which the Company is a party or of
which the Company has knowledge and relating to the issuance or sale of any
share capital of the Company, any such convertible or exchangeable securities or
any such rights, warrants or options. Without limiting
-3-
the foregoing, no preemptive right, co-sale right, right of first refusal,
registration right, or other similar right exists with respect to the Notes, the
Warrants, the Payback Warrants or the Shares issuable upon conversion of the
Notes or the exercise of Warrants or the Payback Warrants (as the case may be)
or the issuance and sale thereof, other than as provided in the Transaction
Documents. Except as set forth in the Transaction Documents, no further approval
or authorization of any shareholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Notes, the Warrants and the
Warrant Shares (pursuant to their terms). Except as disclosed in the Schedule of
Exceptions, there are no shareholders agreements, voting agreements or other
similar agreements with respect to the Shares to which the Company is a party
or, to the knowledge of the Company, between or among any of the Company's
shareholders.
4.5 Legal Proceedings. Except as disclosed in the Schedule of
Exceptions, there is no material legal or governmental proceeding pending or, to
the knowledge of the Company, threatened to which the Company is or may be a
party or of which the business or property of the Company is subject.
4.6 No Violations. The Company is not in violation of its Articles of
Association, bylaws, or other organizational document, or in violation of any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company, which
violation, individually or in the aggregate, would have a Material Adverse
Effect.
4.7 Governmental Permits, Etc. With the exception of the matters which
are dealt with separately in Sections 4.1, 4.12, 4.13, and 4.14, to the
Company's best knowledge, it has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department, or body that are currently
necessary for the operation of the business of the Company as currently
conducted and as described in the Exchange Act Documents, except where the
failure to currently possess could not reasonably be expected to have a Material
Adverse Effect.
4.8 Intellectual Property. The Company, either directly or through its
subsidiaries, owns or possesses sufficient rights to use all material patents,
patent rights, trademarks, copyrights, licenses, inventions, trade secrets,
trade names and know-how (collectively, "Intellectual Property") described or
referred to in the Exchange Act Documents as owned or possessed by it or that
are necessary for the conduct of its business as now conducted or as proposed to
be conducted as described in the Exchange Act Documents, except where the
failure to currently own or possess would not have a Material Adverse Effect,
(ii) to the knowledge of the Company, neither the Company nor any of its
Subsidiaries is infringing, or has received any notice of, or has any knowledge
of, any asserted infringement by the Company or any of its subsidiaries of, any
rights of a third party with respect to any Intellectual Property that,
individually or in the aggregate, would have a Material Adverse Effect and (iii)
neither the Company nor any of its subsidiaries has received any notice of, or
has any knowledge of, infringement by a third party with respect to any
Intellectual Property rights of the Company or of any subsidiary that,
individually or in the aggregate, would have a Material Adverse Effect.
-4-
4.9 Financial Statements. The financial statements of the Company and
the related notes contained in the Exchange Act Documents present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company and its subsidiaries as of the dates indicated, and the results
of its operations and cash flows for the periods therein specified consistent
with the books and records of the Company and its subsidiaries except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which are not expected to be material in amount.
Such financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified, except as may be disclosed in
the notes to such financial statements, or in the case of unaudited statements,
as may be permitted by the SEC and except as disclosed in the filing the Company
made in connection with such unaudited statements, if any.
4.10 No Material Adverse Change. Since June 30, 2003, there has not
been (i) any material adverse change in the financial condition or earnings of
the Company and its subsidiaries considered as one enterprise, (ii) any material
adverse event affecting the Company or its subsidiaries, (iii) any obligation,
direct or contingent, that is material to the Company and its subsidiaries
considered as one enterprise, incurred by the Company, except obligations
incurred in the ordinary course of business, (iv) any dividend or distribution
of any kind declared, paid or made on the share capital of the Company, or (v)
any loss or damage (whether or not insured) to the physical property of the
Company which has been sustained which has a Material Adverse Effect.
4.11 Disclosure. The representations and warranties of the Company
contained in this Section 4 as of the date hereof and as of the Closing Date, do
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Except
with respect to the material terms and conditions of the transaction
contemplated by the Agreements, which shall be publicly disclosed by the Company
pursuant to Section 16 hereof, the Company confirms that neither it nor any
person acting on its behalf has provided the Lenders with any information that
the Company believes constitutes material, non-public information. The Company
understands and confirms that the Lenders will rely on the foregoing
representations in effecting transactions in securities of the Company.
4.12 NASDAQ Compliance. The Company's Ordinary Shares are registered
pursuant to Section 12(g) of the Exchange Act and is listed on The Nasdaq Stock
Market, Inc. Small-Cap Market (the "Nasdaq Market"), and the Company has taken
no action designed to, or likely to have the effect of, terminating the
registration of the Company's Ordinary Shares under the Securities and Exchange
Act of 1934 as amended (the "Exchange Act"), or de-listing the Company's
Ordinary Shares from the Nasdaq Market, nor has the Company received any
notification that the SEC or the Nasdaq Stock Market is currently contemplating
terminating such registration or that the Company is in violation of any of the
rules or regulations of the Nasdaq Stock Market.
4.13 Reporting Status. To the Company's best knowledge, the Company has
filed in a timely manner all documents that the Company is required to file
under the Exchange Act as a foreign private issuer. As of their respective
dates, the Exchange Act Documents complied in all
-5-
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC promulgated thereunder, and none of
the Exchange Act Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.14 Listing. The Company shall comply with all requirements of the
Nasdaq Stock Market with respect to the issuance of the Notes, the Warrant, the
Payback Warrants and the Shares convertible or issuable under the Notes, the
Warrants or the Payback Warrants (as the case may be), and the listing of the
Shares convertible or issuable under the Notes, the Warrants or the Payback
Warrants (as the case may be).
4.15 No Manipulation of Shares. The Company has not taken and will not,
in violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Shares to facilitate the sale or resale of the Shares or the
exercise of the Payback Warrants (if any).
4.16 "Investment Company". The Company has been advised of the rules
and requirements under the Investment Company Act of 1940, as amended (the
"Investment Company Act"). The Company is not, and immediately after receipt of
payment for the Notes, the Warrants and the Payback Warrants (and the exercise
of such warrants) will not be, an "investment company" or an entity "controlled"
by an "investment company" within the meaning of the Investment Company Act and
shall conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.17 Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any corrupt funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) that is in violation of law,
or (iv) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
4.18 Contracts. The contracts described in the Exchange Act Documents
that are material to the Company are in full force and effect on the date
hereof, and neither the Company nor, to the Company's knowledge, any other party
to such contracts is in breach of or default under any of such contracts which
would have a Material Adverse Effect.
4.19 Taxes. The Company has filed all necessary federal, state and
foreign income and franchise tax returns and has paid or accrued all taxes shown
as due thereon, and the Company has no knowledge of a tax deficiency that has
been or might reasonably be asserted or threatened against it which would have a
Material Adverse Effect.
4.20 Transfer Taxes. On the Closing Date, all taxes (other than income
taxes) which are required to be paid in connection with the sale and issuance of
the Notes, the Warrants and
-6-
the Payback Warrants to be sold to the Lenders hereunder will be, or will have
been, fully paid or provided for by the Company and all laws imposing such taxes
will be or will have been fully complied with. Upon the issuance of the Shares
pursuant to the Notes, Warrants or Payback Warrants (as the case may be), all
stamp duty or other taxes (other than income taxes) that are required to be paid
in connection therewith will be, or will have been, fully paid or provided for
by the Company and all laws imposing such taxes will be or will have been fully
complied with.
4.21 Private Offering. Assuming the correctness of the representations
and warranties of the Lenders set forth in Section 5 hereof, the offer and sale
of Notes, the Warrants and the Payback Warrants hereunder is and, upon the
conversion of the Notes or the exercise of the Warrants or the Payback Warrants
(as the case may be), the issuance of the Shares will be exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"). The Company has not distributed and will not distribute prior to the
Closing any offering material in connection with this offering and sale of the
Notes, Warrants and the Payback Warrants other than the documents of which this
Agreement is a part or and filing by the Company required under the Exchange
Act. The Company has not in the past nor will it hereafter take any action
independent of the placement agent to sell, offer for sale or solicit offers to
buy any securities of the Company which would bring the offer, issuance or sale
of the Notes, Warrants and Payback Warrants as contemplated by this Agreement,
or the issuance of the Shares pursuant to the Notes, Warrants or the Payback
Warrants, within the provisions of Section 5 of the Securities Act, unless such
offer, issuance or sale was or shall be within the exemptions of Section 3 or
Section 4 of the Securities Act. Except as set forth in the Schedule of
Exceptions, the Company will not conduct any offering other than the
transactions contemplated hereby that it believes, upon consultation with its
securities counsel, will be integrated with the offer or issuance of the
securities issuable under the Transaction Documents, provided, however, that
this provision set forth in this sentence shall not apply if such proposed
offering has been approved by the Shareholders of the Company and as a result,
neither the transaction contemplated by this Agreement nor the proposed
transaction will violate the rules of the Nasdaq Stock Market (including Rule
4350 thereof).
4.22 Disclosure Controls and Procedures; Internal Controls. At all
times since first required by all applicable Exchange Act rules, the Company's
has established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the Company,
including its subsidiaries, is made known to the certifying officers by others
within those entities, particularly during the period in which the Form 20-F, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's disclosure controls and procedures as of a date
within ninety (90) days prior to the filing date of its most recent Form 20-F
for which such evaluation was required by applicable Exchange Act rules, as the
case may be (each such date, the "Evaluation Date"). The Company presented in
such Form 20-F, as the case may be, the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the most recent Evaluation Date,
there have been no significant changes in the Company's internal controls (as
such term is used in Item 307(b) of Regulation S-K under the Exchange Act) or,
to the Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
-7-
4.23 Transactions With Affiliates. None of the current officers or
directors of the Company is presently a party to any transaction with the
Company or any of its subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer or director or, to the knowledge of the Company, any entity in which any
officer or director has a substantial interest or is an officer, director,
trustee or partner.
5. REPRESENTATIONS OF THE LENDERS. Each of the Lenders severally represents to
the Company that:
5.1 Enforceability. If a Lender is a corporation, partnership, limited
liability company, trust or other entity, (i) it is authorized and qualified and
has full right and power to become a Lender to and Investors in the Company, and
is authorized to purchase the Notes, Warrants and Payback Warrants and the
Shares convertible and exercisable thereunder and to perform its obligations
pursuant to the provisions hereof, (ii) the person signing the Transaction
Documents, to which such Lender is a party and any other instrument executed and
delivered herewith on behalf of such Lender has been duly authorized by such
entity and has full power and authority to do so, and (iii) such Lender has not
been formed for the specific purpose of acquiring an interest in the Company,
unless each owner of such Lender is an accredited investor under Regulation D of
the SEC under the 1933 Act.
5.2 Restrictions on Transferability.
5.2.1 Such Lender understands that the Notes, Warrants and
Payback Warrants and the Shares issuable upon conversion of the Notes
and exercise of the Warrants or the Payback Warrants (as the case may
be) have not yet been registered under the Securities Act, or under the
laws of any other jurisdiction. Each Lender understands and agrees that
the Notes, Warrants and Payback Warrants and the Shares issuable upon
conversion of the Notes and the exercise of the Warrants or the Payback
Warrants (as the case may be) must be held indefinitely unless they are
subsequently registered under the Securities Act and, where required,
under the laws of other jurisdictions or unless an exemption from
registration is available.
5.2.2 Such Lender acknowledges and agrees that the certificate
representing the Notes, the Warrants, the Payback Warrants and the
Shares convertible or exercisable thereunder shall bear a restrictive
legend as counsel to the Company may determine is necessary or
appropriate under applicable securities laws substantially to the
effect of the following:
The Securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, transferred, pledged or hypothecated unless
subsequently registered under said Securities Act or an
exemption from registration is available.
-8-
5.3 Investment Purposes. The Notes, the Warrants and the Payback
Warrants are being acquired solely for the such Lender's own account for
investment and are not being purchased with a view to or for resale,
distribution or other disposition, and the undersigned has no present plans to
enter into any contract, undertaking, agreement or arrangement for any such
resale, distribution or other disposition, except as set forth in the
Transaction Documents.
5.4 Information and Advice.
5.4.1 Such Lender has carefully reviewed and understands the
risks of a purchase of the Notes, Warrants, Payback Warrants and the
Shares convertible and exercisable thereunder. In connection with such
Lender's investment in the Company, it has obtained the advice of its
own investment advisors, counsel and accountants (the "Advisors"). It
and the Advisors have been furnished all materials relating to the
Company or the offering of Notes, Warrants, Payback Warrants and the
Shares convertible and exercisable thereunder (the "Offering") that it
and its Advisors have requested. Such Lender and its Advisors have been
afforded the opportunity to ask questions of the Company concerning the
terms and conditions of the Offering and to obtain any additional
information necessary to verify the accuracy of any representations or
information set forth about the Notes, Warrants, Payback Warrants and
the Shares.
5.4.2 The Company has answered all inquiries that such Lender
and its Advisors have made concerning the Company or any other matters
relating to the creation and operations of the Company and the terms
and conditions of the Offering. The foregoing, however, does not limit
the representations and warranties of the Company under Section 4
hereof or the right of the Lenders to rely thereon.
5.5 Sophistication and Risk.
5.5.1 It has such knowledge and experience in financial and
business matters that it is capable of evaluating, and has evaluated,
the merits and risks of the Offering. By reason of the its business or
financial experience, it has the capacity to protect its interests in
connection with an investment in the Company.
5.5.2 Such Lender understands that no federal or state agency
has passed upon the Notes or Warrants or Payback Warrants or made any
finding or determination as to the fairness of the transactions
contemplated in the Transaction Documents.
5.5.3 Such Lender understands that the Notes, the Warrants and
the Payback Warrants are speculative investments which involve a high
degree of risk, including the risk that such Lender might lose its
entire amount loaned or invested in the Company, as the case may be.
5.5.4 Such Lender understands that any federal income tax
benefits that may be available to such Lender may be lost through
adoption of new laws, amendments to existing laws or regulations, or
changes in the interpretation of existing laws and regulations.
-9-
5.5.5 It has the financial ability to bear the economic risk
of its loan to and investment in the Company and has adequate net worth
and means of providing for the Lender's current needs and contingencies
to sustain a complete loss of the Lender's investment and has no need
for liquidity in the Lender's loan to and investment in the Company.
5.5.6 It is an "accredited investor," as that term is defined
in Rule 501 of Regulation D under the 1933 Act. The information
provided by it in the Investor Suitability Questionnaire and the
Transaction Documents delivered by the such Lender to the Company is
incorporated herein by reference and made a part hereof, and such
Lender represents and warrants that such information is true and
complete and fairly reflects the current financial condition and
affairs of the undersigned.
5.6 Jurisdiction. The only jurisdiction in which an offer to sell the
Notes, Warrants, Payback Warrants and the Shares convertible or issuable
thereunder was made to such Lender is the jurisdiction in which such residence
or principal place of business is situated. Such Lender has no present intention
of becoming a resident of (or moving its principal place of business to) any
other state or jurisdiction.
5.7 No solicitation. At no time was such Lender presented with or
solicited by any leaflet, public promotional meeting, newspaper or magazine
article, radio or television advertisement or any other form of general
advertising or general solicitation concerning the Offering.
5.8 NASD Rules. It is not registered as a broker-dealer under the
Exchange Act.
5.9 Further Indebtedness. Such Lender acknowledge that no provision of
this Agreement or of any other Transaction Document executed and delivered by
the Company in connection with this Agreement restricts, or shall be construed
to restrict, in any way the ability of the Company to incur indebtedness or to
issue share capital or other equity securities (or securities convertible into
equity securities) of the Company or to grant liens on its property and assets.
6. CONDITIONS OF EACH LENDER'S OBLIGATION AT THE CLOSING. The obligation of each
Lender to purchase its respective Note, Warrant and Payback Warrant at the
Closing is subject to the fulfillment or waiver by such Lender prior to or on
the date of the Closing (the "Closing Date") of the conditions set forth in this
Section 6. In the event that any such condition is not satisfied to the
satisfaction of a Lender, then such non-satisfied Lender shall not be obligated
to proceed with the purchase of such securities.
6.1 Representations and Warranties. The representations and warranties
of the Company under this Agreement shall be true in all material respects as of
the Closing, with the same effect as though made on and as of such date.
6.2 Compliance with Agreements. The Company shall have performed and
complied in all respects with all agreements or conditions required by this
Agreement and the Transaction Documents to be performed and complied with by it
prior to or as of the Closing.
-10-
6.3 Qualification under State Securities Laws. All registrations,
qualifications, permits and approvals required under applicable state securities
laws for the lawful execution and delivery of this Agreement and the offer,
sale, issuance and delivery of the securities to the Lenders at the Closing
shall have been obtained or will be obtained by the Company in compliance with
such laws.
6.4 Registration Rights Agreement. As of the Closing, the Registration
Right Agreement in the form attached hereto as Exhibit C (the "Registration
Rights Agreement") shall have been executed and delivered by the Company.
6.5 Voting Undertaking. As of the Closing, the Voting Undertaking in
the form attached hereto as Exhibit D shall have been executed and delivered by
Xxxx Xxxxxx and Xxxxxx Xxxxxx (the "Voting Undertaking").
6.6 Nasdaq Approvals. The Lenders (and their counsel) and the Company
(and their counsel), shall have received a reasonably satisfactory statement via
telephone of an appropriate official of the Nasdaq Stock Market stating, in
substance, that the Nasdaq Stock Market will not object, as contrary to Rule
4350 (including official Nasdaq Stock Market interpretations) or other Nasdaq
rules and regulations relating to the listing of securities, to the listing of
the Ordinary Shares issuable upon conversion of the Notes and upon exercise of
the Warrants and Payback Warrants, in the manner set forth in the Transaction
Documents.
6.7 The Ordinary Shares shall not have been suspended from trading at
any time prior to the Closing Date from the Nasdaq SmallCap Market.
6.8 No events or circumstances shall have occurred prior to the Closing
Date that would, individually or in the aggregate, reasonably be expected to
have or result in a Material Adverse Effect.
7. CONDITIONS OF THE COMPANY'S OBLIGATION AT THE CLOSING. The obligation of the
Company to issue to the Lenders the Notes, Warrants and Payback Warrants at the
Closing is subject to the fulfillment or waiver by the Company prior to or on
the Closing of the conditions set forth in this Section 7. In the event that any
such condition is not satisfied to the satisfaction of the Company, then the
Company shall not be obligated to proceed with the sale of the securities under
this Agreement.
7.1 Representations and Warranties. The representations and warranties
of all Lenders under this Agreement shall be true in all material respects as of
the Closing Date, with the same effect as though made on and as of such date.
7.2 Compliance with Agreements. All Lenders shall have performed and
complied in all respects with all agreements or conditions required by this
Agreement and the Transaction Documents to be performed and complied with by it
prior to or as of the Closing.
7.3 Registration Rights Agreement. As of the Closing, the Registration
Rights Agreement shall have been executed and delivered by all the Lenders.
-11-
7.4 Voting Agreement. Each Lender shall have executed and delivered to
Xxxx Xxxxxx a Proxy in the form attached hereto as Exhibit E.
8. AFFIRMATIVE COVENANTS OF THE COMPANY.
8.1 Shareholders Meeting. The Company shall, within twenty-one (21)
days after the Closing Date, convene a shareholders meeting, which will take
place no later than sixty (60) days from the Closing Date, or if such period is
legally impracticable, as soon as practicable thereafter, for, among other
things, the performance of the Transaction Documents and for the issuance to the
Lenders of the securities issuable thereunder, and any actions related thereto.
If the shareholders shall not provide such approval at the said shareholders'
meeting, the Company shall use commercially reasonable efforts to obtain the
necessary vote until the Maturity Date of the Notes (as defined therein).
8.2 Not later than the 14th day following the date of this Agreement,
the Company shall prepare and deliver to the Nasdaq Stock Market a letter
requesting guidance on whether a vote of the Company's shareholders as described
in Section 8.1 above is required in order to complete the transactions
contemplated by the Transaction Documents in accordance with the rules and
regulations of the Nasdaq Stock Market.
8.3 After the Closing, the Company shall use its commercially
reasonable efforts to cause the Shares convertible or exercisable under the
Notes, the Warrants or the Payback Warrants to be listed for trading on the
Nasdaq Small Cap Market.
8.4 After the Closing, the Company shall use its commercially
reasonable efforts to cause the Shares convertible or exercisable under the
Notes, the Warrants or the Payback Warrants to be listed for trading on the
Nasdaq Small Cap Market.
8.5 As long as any Lender owns any securities issuable hereunder, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. If the Company is
not required to file reports pursuant to such laws, it will prepare and furnish
to the Lenders and make publicly available in accordance with Rule 144(c) such
information as is required for the Lenders to sell such securities under Rule
144.
8.6 The Company covenants and agrees that neither it nor any other
Person acting on its behalf will provide any Lender or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Lender shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Lender shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
9. MISCELLANEOUS.
9.1 Waivers, Amendments and Approvals. In each case in which approval
of the Lenders is required by the terms of this Agreement, such requirement
shall be satisfied by a vote or the written action of a majority of the Shares
issuable upon conversion of the Notes (the "Majority in Interest of the
Lenders"). With the written consent of Majority in Interest of the
-12-
Lenders, the obligations of the Company under this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) or the Company and the Lenders may enter into a supplementary
agreement for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or any other Transaction
Document. Written notice of any such waiver, consent or agreement of amendment,
modification or supplement shall be given to the record holders of the Notes who
have not previously consented thereto in writing.
9.2 Oral Changes, Waivers, Etc. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought, except to the extent
provided in Section 9.1.
9.3 Notice. Any notice that is required or provided to be given under
this Agreement shall be deemed to have been sufficiently given and received for
all purposes when delivered in writing by hand, facsimile, or five (5) business
days after being sent by certified or registered mail, postage and charges
prepaid, return receipt requested, or three (3) business days after being sent
by internationally overnight delivery providing receipt of delivery, to the
following addresses: if to the Company, On Track Innovations Ltd., X.X.X 00,
Xxxx Xxxx, Xxxxxx, 00000, attn. Xxxx Xxxxxx, facsimile: (000) 0 0000-000, with a
copy to ZAG/S&W LLP, 0 Xxxx Xxxxxx Xxxxxx, Xxxxxx, XX 00000, attn. Xxxxxx X.
Xxxx, Esq., facsimile: (000) 000-0000; or at any other address designated by the
Company, to the Lenders; if to a Lender, to its address listed on Schedule 1 or
at any other address designated by the Lender to the Company in writing.
(a) Copies of all correspondence to the Lenders shall be delivered to
Xxxx X. Xxxxx, Esq.
Xxxxx Xxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
9.4 Survival of Representations and Warranties. All representations and
warranties, contained herein or in any Transaction Document shall survive after
the execution and delivery of this Agreement or such certificate or document, as
the case may be, for a period of 24 months from the date hereof. All covenants
and agreements in any Transaction Documents shall survive in accordance with its
terms.
9.5 Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party under
this Agreement shall impair any such right, power or remedy of such party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence thereto, or of a similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party hereto of
any breach or default under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this
-13-
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing.
9.6 Other Remedies. Any and all remedies herein expressly conferred
upon a party shall be deemed cumulative with, and not exclusive of, any other
remedy conferred hereby or by law on such party, and the exercise of any one
remedy shall not preclude the exercise of any other.
9.7 Entire Agreement. This Agreement, the Transaction Documents and
other documents referenced therein and the exhibits thereto, constitute the
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto and thereto, including
without limitation the August 26, 2003 term sheet. The express terms hereof
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
9.8 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby. The parties
further agree to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision which will achieve, to the extent
possible, the economic, business and other purposes of the void or unenforceable
provision.
9.9 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon and be enforceable by the
respective heirs, successors and assigns of the parties hereto, including the
holder or holders from time to time of any of the Shares issued upon conversion
of the Notes or exercise of the Warrants or the Payback Warrants (as the case
may be).
9.10 Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws of the State of New York, without regard
to conflict of laws provisions. Each party agrees that all actions, claims,
suits, investigations or proceedings (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened (each a "Proceeding" and, collectively, the "Proceedings") concerning
the interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the "New York Courts"). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
-14-
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Each party hereto hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to
enforce any provisions of a Transaction Document, then the prevailing party in
such Proceeding shall be reimbursed by the other party for its attorney's fees
and other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
9.11 Counterparts. This Agreement may be executed concurrently in two
(2) or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.12 Legal Fees. The Company shall bear its own expenses incurred with
respect to the transactions set forth herein and shall pay $5,000 of the legal
fees and expenses of the lead Lender.
9.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Lender under any Transaction Document are several and not
joint with the obligations of any other Lender, and no Lender shall be
responsible in any way for the performance of the obligations of any other
Lender under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Lender pursuant thereto, shall
be deemed to constitute the Lenders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Lenders
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Document. Each Lender shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and (except with respect to actions independently taken
as required by a Majority-in-Interest) it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
(Balance of page intentionally left blank.)
-15-
IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement
as of the date first set forth above.
ON TRACK INNOVATIONS LTD.
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: CEO, Chairman and President
PLATINUM PARTNERS VALUE ARBITRAGE FUND PLATINUM GLOBAL MACRO FUND
By: /s/ Xxxxx Giorgie By: /s/ Xxxxx Giorgie
Name: Xxxxx Giorgie Name: Xxxxx Giorgie
Title: CFO Title: CFO
WEST END CONVERTIBLE FUND L.P. WEC PARTNERS LLC
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx Name: Xxxxx Xxxxxxxx
Title: Managing Member Title: Managing Member
XXXXXXX X. XXXXX
/s/ XXXXXXX X. XXXXX
-16-
Schedule 1
LENDERS AND ADDRESS LOAN WARRANTS PAYBACK
WARRANTS
PLATINUM PARTNERS VALUE ARBITRAGE FUND $500,000 90,000 235,294
c/o Platinum Partners LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel. 000-000-0000 Fax. 000-000-0000
PLATINUM GLOBAL MACRO FUND $250,000 45,090 117,647
c/o Platinum Partners LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel. 000-000-0000 Fax. 000-000-0000
WEST END CONVERTIBLE FUND L.P. $75,000 13,500 35,294
c/o WEC Partners LLC
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxx, XX 00000
Tel. 000-000-0000
Fax. 000-000-0000
WEC PARTNERS LLC $75,000 13,500 35,294
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxx, XX 00000
Tel. 000-000-0000
Fax. 000-000-0000
XXXXXXX X. XXXXX $99,000 17,820 46,588
00 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Tel. 000-000-0000
Fax. 000-000-0000
-17-
SCHEDULE OF EXCEPTION
The Schedule of Exceptions has been omitted and will be furnished to the
Securities and Exchange Commission upon request.
EXHIBIT A
CONVERTIBLE PROMISSORY NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR APPLICABLE BLUE SKY LAWS, AND IS SUBJECT TO CERTAIN
INVESTMENT REPRESENTATIONS. THIS SECURITY MAY NOT BE SOLD, OFFERED FOR SALE OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT AND
APPLICABLE BLUE SKY LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
ON TRACK INNOVATIONS LTD.
CONVERTIBLE PROMISSORY NOTE
$------------ September 8, 2003
FOR VALUE RECEIVED, On Track Innovations Ltd., an Israeli company (the
"Company"), promises to pay to the order of ___________________, its successors
and assigns (the "Holder"), at the address set forth on Annex 1 hereto, or at
such other place designated at any time by the Holder hereof, in lawful money of
the United States of America and in immediately available funds, the principal
sum of ___________________ Dollars ($___________), together with interest
thereon as set forth in this Convertible Promissory Note (this "Note"). This
Note is one of a series of Notes issued pursuant to the Note and Warrant
Purchase Agreement dated as the date hereof (to which a form of this Note is
attached as Exhibit A) (the "Purchase Agreement"), which are collectively
referred to as the "Notes."
1. Definitions. For the purposes of this Note, the following terms
shall have the definitions set forth below:
(a) "Acquisition Transaction" means the occurrence of any one of
the following (exclusive of any transfer or assignment by the
Holder to any affiliate of the Holder): (i) any consolidation
or merger to which the Company is a party other than a merger
or consolidation in which the Company is the continuing
corporation; (ii) any sale, lease, exclusive license, transfer
or conveyance to another entity or person of all or
substantially all of the assets of the Company or a
liquidation of the Company; (iii) any statutory exchange of
securities with another entity (except where the Company is
the acquiring entity); (iv) the acquisition of ownership by
any person or group (except as a result of one or more private
placement financings) of more than 50% of the Company's voting
shares (whether or not approved by the Company's Board of
Directors) after the date hereof (whether or not such
acquisition is by the Company or its existing shareholders);
(v) the "Continuity Directors" (as defined below) cease to
constitute a majority of the Company's Board of Directors; or
(vi) any other change of control (except as a result of one or
more private placement financings) that would be required by
the Securities and Exchange Commission to be reported by the
Company, including successive series of such transactions. The
term "Continuity Directors" includes any individuals who are
members of the Company's Board of Directors as of the date
hereof and any individual who subsequently becomes a member of
the Company's Board of Directors whose
election, or nomination for election, by the Company's
shareholders was approved by a vote of at least a majority of
the Continuity Directors.
(b) "Approvals" means either (A)(i) the approval of the
shareholders of the Company pursuant to Israeli law and the
NASDAQ Rules of the transaction pursuant to which this Note is
issued, together with (ii) any other approvals and consents
under any and all applicable laws, rules and regulation, all
of which are required to allow the lawful conversion of all
the Notes issued under the Purchase Agreement into Shares (as
defined below) and the exercisability of all the Warrants
issued under the Purchase Agreement; or (B)(i) the receipt of
written confirmation from the Nasdaq Stock Market to the
effect that the approval of the shareholders of the Company is
not required in order for the Company to issue the Notes and
Warrants or to honor exercises of the Warrants and conversions
of the Notes) and (ii) the expiration of the 15 day notice
period for the listing of the Shares pursuant to the rules of
the Nasdaq Stock Market. In the event the Company obtains the
Approvals, it shall forthwith provide a notice with respect
thereto to the Holder.
(c) "Conversion Price" shall mean $2.75 per Share (subject to
equitable adjustment for any share splits, share dividends,
recapitalizations, or the like with respect to the Shares
prior to the date of the conversion of this Note pursuant to
Section 6 hereof).
(d) "Shares" means the Ordinary Shares of the Company, par value
NIS 0.1 per share.
2. Maturity. The entire outstanding principal balance hereof, together
with all accrued and unpaid interest thereon (the "Note Amount"), shall be due
and payable at 5:00 P.M., Israel time, on May 8, 2004 (the "Maturity Date"),
unless the Note Amount has been automatically converted pursuant to the
provisions of Section 6 below.
3. Interest. This Note shall bear interest on the outstanding principal
amount at four percent (4%) per annum from the date of this Note until the date
that this Note is paid in full.
4. No Security. This Note is not secured by a security interest.
5. No Prepayment. This Note may not be prepaid by the Company prior to
the Maturity Date without the written consent of a Majority in Interest of the
Lenders, as such term is defined in the Purchase Agreement (the "Majority
Interest"). Any payments made by the Company with regard to any of the Notes
will be made simultaneously with regard to all of the Notes in an amount
prorated among the Notes in proportion to the principal amounts of each of the
Notes and shall be first applied to accrued but unpaid interest and then to the
principal amounts due.
6. Automatic Conversion.
(a) On the date that the Approvals are obtained by the Company,
the Note shall be converted into that number of whole Shares
as is equal to the quotient of which is
-2-
(x) the Note Amount divided by (y) the Conversion Price. Any
remainder shall be paid by check to the Holder.
(b) Concurrently with its receipt of the Shares issuable upon such
conversion, the Holder shall surrender this Note in exchange
for share certificates representing the appropriate number of
Shares. The number of such Shares shall be rounded down to the
nearest whole number, such that no fractional shares shall be
issued.
7. Events of Default and Acceleration. Upon notice to the Company of
the occurrence of any of the following events of default (each, an "Event of
Default") by a Majority Interest, any part or all of the Note Amount due to the
Holder hereunder shall become immediately due and payable; provided, however,
that the occurrence of any event described in paragraphs (d), (e), (f) and (h)
below shall be an automatic Events of Default and shall not require the delivery
of any notice:
(a) the Company fails to make the payment of principal or interest
under this Note when the same becomes due and payable on the
Maturity Date; or
(b) any representation or warranty set forth in the Note and
Warrant Purchase Agreement, shall be untrue in any material
respect on the date as of which the facts set forth are stated
or certified; or
(c) the Company violates any material provision of the Note and
Warrant Purchase Agreement; or
(d) the Company shall generally fail to pay or admit in writing
its inability to pay its debts as they become due; or the
Company shall apply for, consent to, or acquiesce in the
appointment of a trustee, receiver or other custodian for
itself or any of its property, or make a general assignment
composition, or similar device for the benefit of its
creditors; or a trustee, receiver or other custodian shall
otherwise be appointed for the Company or any of its assets;
an attachment or receivership of assets or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding shall be commenced by or against the
Company; or the Company shall take any corporate action to
authorize, or in furtherance of, any of the foregoing.
(e) the Company shall enter into or there shall have occurred any
Acquisition Transaction; or
(f) there shall occur any Event of Default under any other
Convertible Promissory Note of the Series to which this Note
is a part; or
(g) the Company's Ordinary Shares are suspended from trading on,
or delisted from, the Nasdaq Stock Market for more than three
business days; or
(h) the Nasdaq Stock Market notifies the Company that the
transactions under which this Note was issued violate the
rules and regulations of the Nasdaq Stock Market
-3-
or the Securities and Exchange Commission notifies the Company
that the offer or issuance of this Note violates any provision
of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder; or
8. Remedies. The remedies of the Holder as provided herein shall be
cumulative and concurrent with all other remedies provided by law or in equity
and may be pursued singly, successively or together at the sole direction of the
Holder and may be exercised as often as occasion therefor shall arise. No act or
omission or commission by the Holder, including, specifically, any failure to
exercise any right, remedy or recourse, shall be deemed a waiver or release of
the same, such waiver or release to be effective only as set forth in a written
document executed by the Holder and then only to the extent specifically recited
therein. A waiver or release with reference to one event shall not be construed
as continuing as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to any subsequent event.
9. Waiver, Consent and Enforcement.
(a) All payments by the Company under this Note shall be made
without setoff, defense or counterclaim and be free and clear
and without any deduction or withholding for any taxes or fees
of any nature whatever, unless the obligation to make such
deduction or withholding is imposed by law.
(b) No delay or omission on the part of the Holder in exercising
any right under this Note shall operate as a waiver of such
right or of any other right of the Holder, nor shall any
delay, omission or waiver on any one occasion be deemed a bar
to or waiver of the same or any other right on any future
occasion.
(c) The Company hereby represents and warrants that the issue and
performance of this Note by the Company has been duly
authorized by all necessary action on the part of the Company,
and that this Note constitutes the legal obligation of the
Company, binding upon the Company in accordance with its
terms.
10. Governing Law. This Note shall be construed in accordance with and
governed by the internal laws of the State of New York, without regard to
conflict of laws provisions. Each party agrees that all legal proceedings
concerning this Note shall be commenced exclusively in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the "New York
Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for any such legal proceeding, and hereby
irrevocably waives, and agrees not to assert in any such legal proceeding, any
claim that it is not personally subject to the jurisdiction of any New York
Court or that a New York Court is an inconvenient forum for such legal
proceeding. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such legal proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Each of the Company, and the
Holder by its acceptance of this Note, hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding. The prevailing party in a legal proceeding concerning this
Note shall be reimbursed by the other party for its attorney's
-4-
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such legal proceeding.
11. No Conversion upon Registration. Subject to the Holder's rights
under Section 6, neither the filing of the registration statement covering the
Shares issuable upon conversion of this Note nor the effectiveness of such
registration statement shall be interpreted to permit the conversion of the Note
in the absence of the Approvals.
12. Miscellaneous Provisions.
(a) This Note shall be binding upon the successors and assigns of
the Company and inure to the benefit of the Holder, its
successors, endorsees and assigns. If any term or provision of
this Note is deemed invalid, the validity of all other terms
and provisions hereof shall in no way be affected thereby.
This Note may not be changed orally, but only by a written
agreement signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
(b) The Company covenants that it will at all times reserve and
keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Ordinary Shares, solely for
the purpose of enabling it to issue Shares as required
hereunder, the number of Shares which are then issuable and
deliverable upon the conversion of (and otherwise in respect
of) this entire Note, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder.
The Company covenants that all Shares so issuable and
deliverable shall, upon issuance in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid
and nonassessable.
(c) In case any one or more of the provisions of this Note shall
be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this
Note shall not in any way be affected or impaired thereby and
the parties will attempt in good faith to agree upon a valid
and enforceable provision which shall be a commercially
reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Note.
13. Notice. Any notice that is required or provided to be given under
this Note shall be deemed to have been sufficiently given and received for all
purposes when delivered in writing by hand, facsimile, or five (5) business days
after being sent by certified or registered mail, postage and charges prepaid,
return receipt requested, or three (3) business days after being sent by
internationally overnight delivery, to the following addresses: if to the
Company, On Track Innovations Ltd., X.X.X 00, Xxxx Xxxx, Xxxxxx, 00000, attn.
Xxxx Xxxxxx, facsimile: (000) 0 0000-000, with a copy to ZAG/S&W LLP, 0 Xxxx
Xxxxxx Xxxxxx, Xxxxxx, XX 00000, attn. Xxxxxx X. Xxxx, Esq., facsimile: (617)
338-2880; or at any other address designated by the Company, to Holder; if to
Holder, to the address for notice set forth on Annex A to this Note, or at any
other address designated by Holder to the Company in writing.
-5-
IN WITNESS WHEREOF, the Company has signed this Note as of the date
written above.
ON TRACK INNOVATIONS LTD.
By: _________________________
Name: __________________
Title: __________________
Agreed and Accepted:
By: __________________________
Name: __________________
Title: __________________
-6-
Annex A
Holder's Address for Notice:
-7-
EXHIBIT B-1
FORM OF WARRANT
WARRANT TO PURCHASE ORDINARY SHARES
OF
ON TRACK INNOVATIONS LTD.
THIS WARRANT AND THE UNDERLYING SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES AND (2) IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE UNDERLYING SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT ARE SUBJECT TO THE PROVISIONS OF A CERTAIN NOTE AND WARRANT PURCHASE
AGREEMENT, DATED AS OF SEPTEMBER 8, 2003, INCLUDING CERTAIN RESTRICTIONS ON
TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Warrant No. ___ September 8, 2003
On Track Innovations, Ltd., an Israeli company (the "Company"), hereby
certifies that, for value received and pursuant to the Note and Warrant Purchase
Agreement, dated as of the date hereof, by and among the Company and the Lenders
named therein (the "Purchase Agreement"), _____________________ (together with
its successors and assigns and any transferee of this Warrant, and its
successors and assigns, the "Holder"), is entitled, subject to the terms and
conditions set forth in this warrant (this "Warrant"), to purchase from the
Company, at any time or times on or after the Exercisability Date (as defined in
Section 5.14 below), but not after the earlier of: (i) 5:00 P.M., Israel time on
the fifth anniversary of the Exercisability Date, or (ii) the occurrence of an
Acquisition Transaction (as defined in the Convertible Promissory Notes issued
pursuant to the Purchase Agreement), (the "Expiration Date"), __________ duly
authorized, validly issued, fully paid, nonassessable Ordinary Shares (as
defined below) (the "Warrant Shares"), which shall be adjusted or readjusted
from time to time as provided in this Warrant, at an initial purchase price per
share equal to $5.75 (the "Initial Warrant Price"), which shall be adjusted or
readjusted from time to time as provided in this Warrant (as adjusted, the
"Warrant Price").
Notwithstanding anything to the contrary herein, if the Approvals (as
defined in the Convertible Promissory Notes issued pursuant to the Purchase
Agreement), shall not be obtained by May 8, 2004, this Warrant shall not be
exercisable at all and shall expire immediately.
This Warrant is one of the warrants to purchase Ordinary Shares
(collectively, the "Warrants" such term to include any warrants issued in
substitution therefor) issued pursuant to the Purchase Agreement, and the
holders of the Warrants shall be collectively referred to herein
as the "Holders". The Warrants evidence rights to purchase an aggregate of
________ of the Company's ordinary shares, par value NIS 0.1 per share (each, an
"Ordinary Share"), subject to adjustment as provided herein and therein. All
capitalized terms used herein and not otherwise defined herein, either within
the text in which it first appears or in Section 5.14, shall have the meanings
set forth in the Purchase Agreement.
Section 1. EXERCISE; EXCHANGE OF WARRANT
1.1. Manner of Exercise; Exchange.
(a) Exercise. The Holder may exercise this Warrant, in whole or in
part (except as to a fractional share), at any time and from time to time during
normal business hours on any Business Day on or prior to the Expiration Date, by
(i) delivering to the Company a written notice, in the form attached hereto as
Schedule A (the "Exercise Notice"), duly executed by the Holder, specifying the
number of Warrant Shares (without giving effect to any adjustment thereto) to be
issued to the Holder as a result of such exercise, (ii) surrendering this
Warrant to the Company, properly endorsed by the Holder (or if this Warrant has
been destroyed, stolen or has otherwise been misplaced, by delivering to the
Company an affidavit of loss and indemnification undertaking duly executed by
the Holder), and (iii) unless the Holder is exercising its cashless exercise
option pursuant to the terms hereof, by tendering payment for the shares of
Ordinary Shares designated by the Exercise Notice in lawful money of the United
States in the form of cash, bank or certified check made payable to the order of
the Company, or by wire transfer of immediately available funds, or in any
combination thereof, of an amount equal to the product of (A) the Warrant Price
and (B) the number of Warrant Shares (without giving effect to any adjustment
thereof) as to which this Warrant is being exercised.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall be deemed to have been surrendered to
the Company as provided in Section 1.1, and at such time the Person or Persons
in whose name or names any certificate or certificates for shares of Ordinary
Shares shall be issuable upon such exercise as provided in Section 1.3 shall be
deemed to have become the Holder or Holders of record thereof.
1.3. Delivery of Share Certificates Upon Exercise. As soon as
practicable after exercise of this Warrant in accordance with this Section 1,
but in no event later than ten (10) Business Days (as defined below) after such
exercise, the Company shall at its expense, cause to be issued in the name of
and delivered to the Holder or, subject to Section 5 of this Warrant, as the
Holder may direct: (a) a certificate or certificates for the number of Warrant
Shares, determined as provided in Section 2 of this Warrant, to which the Holder
shall be entitled upon such exercise and, (b) unless this Warrant has expired or
has been exercised in full, a new Warrant (or Warrants) substantially in the
form of, and on the terms in, this Warrant, for the number of Warrant Shares
remaining following such exercise (without giving effect to any adjustment
thereto), and shall be subject to adjustment as provided for in this Warrant as
of the date hereof. For the purpose of this Agreement, the term "Business Day"
shall mean any day which is neither a Saturday or Sunday nor legal holiday on
which commercial banks are authorized or required to be closed in the State of
New York or the State of Israel.
-2-
1.4. If by the tenth Business Day after a date of exercise the Company
fails to deliver the required number of Warrant Shares in the manner required
pursuant to Section 5(a), then the Holder will have the right to rescind such
exercise.
1.5. If by the tenth Business Day after a date of exercise the Company
fails to deliver the required number of Warrant Shares in the manner required
pursuant to the terms hereof, and if after such tenth Business Day and prior to
the receipt of such Warrant Shares, the Holder purchases (in an open market
transaction or otherwise) Ordinary Shares to deliver in satisfaction of a sale
by the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a "Buy-In"), then the Company shall (1) pay in cash to the Holder
the amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Ordinary Shares so purchased exceeds (y) the amount
obtained by multiplying (A) the number of Warrant Shares that the Company was
required to deliver to the Holder in connection with the exercise at issue by
(B) the closing bid price of the Common Stock at the time of the obligation
giving rise to such purchase obligation and (2) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.
Section 2. ADJUSTMENTS TO WARRANT PRICE AND WARRANT SHARES
2.1. General. The number of Warrant Shares that the Holder shall be
entitled to receive upon exercise of this Warrant shall be determined by
multiplying the number of Warrant Shares which would otherwise (but for the
provisions of this Section 2) be issuable upon such exercise, as designated by
the Holder in the Exercise Notice, by a fraction, (i) the numerator of which
shall be the Initial Warrant Price, and (ii) the denominator of which shall be
Warrant Price in effect on the date of such exercise, after giving affect to
this Section 2.
2.2. Adjustments.
(a) Subdivision or Combination of Ordinary Shares. If the Company
shall at any time after the date hereof subdivide its outstanding shares of
Ordinary Shares into a greater number of shares (by any share split, share
dividend or otherwise), then the Warrant Price in effect immediately prior to
such subdivision shall be proportionately reduced, and, conversely, if the
Company shall at any time after the date hereof combine its outstanding shares
of Ordinary Shares into a smaller number of shares (by any reverse share split
or otherwise), then the Warrant Price in effect immediately prior to such
combination shall be proportionately increased.
(b) Reorganization or Reclassification. If any capital
reorganization or reclassification of the share capital of the Company shall be
effected in such a way that Holders of Ordinary Shares shall be entitled to
receive shares, securities or assets with respect to or in exchange for Ordinary
Shares, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby the Holder shall thereupon have
the right to receive, upon the basis and upon the terms and conditions specified
herein and in lieu of the
-3-
Warrant Shares immediately theretofore receivable upon the exercise of this
Warrant in full, as the case may be, such shares, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Ordinary Shares equal to the number of shares of such Ordinary
Shares immediately theretofore receivable upon such exercise of this Warrant in
full had such reorganization or reclassification not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Warrant Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares,
securities or assets thereafter deliverable upon the exercise of such conversion
rights.
(c) Dividends and Distributions. If the Company shall make or
issue, or shall fix a record date for the determination of eligible holders
entitled to receive, a dividend or other distribution with respect to the
Warrant Shares (or any shares or other securities at the time issuable upon
exercise of the Warrant) payable in (a) securities of the Company or (b) assets
(excluding cash dividends paid or payable solely out of retained earnings),
then, in each such case, the Holder of this Warrant on exercise hereof at any
time after the consummation, effective date or record date of such dividend or
other distribution, shall receive, in addition to the Warrant Shares (or such
other shares or securities) issuable on such exercise prior to such date, and
without the payment of additional consideration therefor, the securities or such
other assets of the Company to which such Holder would have been entitled upon
such date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional shares available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section 2.
(d) Adjustment for Capital Reorganization, Merger or
Consolidation. In case of any capital reorganization of the share capital of the
Company (other than a combination, reclassification, exchange or subdivision of
shares otherwise provided for herein), or any merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all the assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Warrant Price then in effect, the number of shares or other
securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 2.2 and Section 2.1 shall not apply in such event. The foregoing
provisions of this Section 2.2(d) shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the shares
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the
-4-
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
Section 3. COVENANTS OF THE COMPANY
3.1. The Company covenants and agrees that:
(a) all Ordinary Shares that may be issued upon the exercise of
the rights represented by this Warrant shall, upon issuance and payment
therefore by the Holder, be duly authorized, validly issued, fully paid and
nonassessable;
(b) during the period within which this Warrant may be exercised,
it will at all times have authorized and reserved a sufficient number of
Ordinary Shares to provide for the exercise of rights represented by this
Warrant;
(c) if any Ordinary Shares reserved or to be reserved to provide
for the exercise of this Warrant require registration with or approval of any
governmental or self-regulatory authority under any federal or state law or
stock exchange or NASDAQ rule before such Shares may be validly issued, then it
shall in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be, all as set forth in the Purchase
Agreement;
(d) if it shall have filed a registration statement pursuant to
the requirements of Section 12 of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), or a registration statement pursuant to the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Company shall comply with the reporting requirements of Sections 13 and
15(d) of the Exchange Act and shall comply with all other public information
reporting requirements the securities and exchange commission (including Rule
144 promulgated by such commission under the Securities Act) from time to time
in effect and relating to the availability of an exemption from the Securities
Act for the sale of any restricted securities; and
(e) it shall not, by amendment to its Articles of Association
(whether by way of merger, operation of law, or otherwise) or through other
reorganization, transfer of assets, consolidation, merger, dissolution, issuance
or sale of securities, agreement or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company and shall at all times in good faith assist
in the carrying out of all the provisions of this Warrant. Any successor to the
Company shall agree in writing, as a condition to such succession, to carry out
and observe the obligations of the Company hereunder with respect to the
Warrants.
Section 4. RESTRICTIONS ON TRANSFER
4.1. Restrictive Legend.
-5-
(a) This Warrant and the Warrant Shares issuable upon exercise
thereof, are subject to certain restrictions on transfer as set forth in the
Purchase Agreement. Each certificate representing the Ordinary Shares issued
upon exercise of this Warrant and each certificate representing the Ordinary
Shares issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the form as
follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1)
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE SECURITIES ACT OR TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO
THE DISPOSITION OF SECURITIES AND (2) IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE UNDERLYING SECURITIES ISSUABLE UPON EXERCISE
OF THIS WARRANT ARE SUBJECT TO THE PROVISIONS OF A CERTAIN NOTE
AND WARRANT PURCHASE AGREEMENT, DATED AS OF THE DATE HEREOF,
INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A
COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
If at any time any securities other than shares of Ordinary Shares shall be
issuable upon the exercise of this Warrant, such securities shall bear a legend
similar to the one set forth above. Whenever the legend requirement imposed by
the Note and Warrant Purchase Agreement shall terminate, the Holder shall be
entitled to receive within five (5) Business Days from the Company, at the
Company's expense, a new Warrant certificate or certificates and new share
certificates representing the Ordinary Shares issued upon exercise of this
Warrant, in each case, without such legends.
Section 5. MISCELLANEOUS
5.1. Notice of Adjustments.
(a) In each case of any adjustment or readjustment in the Warrant
Price and the Warrant Shares issuable upon exercise of this Warrant, the Company
shall promptly thereafter compute such adjustment or readjustment in accordance
with the terms of this Warrant and provide written report thereof certified by
the Chief Financial Officer of the Company to the Holder stating the number of
Warrant Shares and the Warrant Price, after giving effect to such adjustment or
readjustment, and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
-6-
(b) The Company shall, within (10) days of receipt of a written
request by Holder or Holders who retain the right to receive greater than fifty
percent (50%) of the Ordinary Shares issuable upon exercise of this Warrant,
cause independent certified public accountants of recognized national standing,
which may be the regular auditors of the Company, selected by the Company to
verify such computations reported pursuant to Section 5.1(a), other than any
computation that pursuant to the provisions of this Warrant are to be determined
reasonably and in good faith by the Board of Directors. The Company shall
promptly prepare, and remit to Holder, a copy of such independent accountant's
report setting forth such adjustment or readjustment, showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based.
(c) The Company shall also keep copies of all such reports
generated pursuant to this Section 5.1 at its principal offices and will cause
the same to be available for inspection at such offices during normal business
hours by Holder any prospective purchaser of this Warrant designated by Holder.
5.2. Notice of Certain Events. If at any time:
(a) The Company obtains the Approvals by May 8, 2004;
(b) the Company shall pay any dividend upon, or make any
distribution in respect of, its shares of the Company;
(c) there shall be any capital reorganization, or reclassification
of the share capital, of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another person;
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the occurrence of an Acquisition Transaction.
then, in any one or more of said cases, the Company shall give notice to Holder
of the date on which (i) the Approvals have been obtained, (ii) the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights, (iii) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up shall take
place, or (iv) the Acquisition Transaction shall take place, as the case may be.
Such notice shall be given within five (5) days after the Approvals have been
obtained; not less than five (5) days prior to the record date or the date on
which the transfer books of the Company are to be closed in respect thereto in
the case of an action specified in clause (ii), at least ten (10) days prior to
the action in question in the case of an action specified in clause (iii), and
at least thirty (30) days prior to the occurrence of an Acquisition Transaction
specified in clause (iv).
5.3. Notice. Any notice that is required or provided to be given under
this Warrant shall be deemed to have been sufficiently given and received for
all purposes when delivered in writing by hand, facsimile, or five (5) business
days after being sent by certified or registered mail, postage and charges
prepaid, return receipt requested, or three (3) business days after being sent
by internationally overnight delivery providing receipt of delivery, to the
following
-7-
addresses: if to the Company, On Track Innovations Ltd., X.X.X 00, Xxxx Xxxx,
Xxxxxx, 00000, attn. Xxxx Xxxxxx, facsimile: (000) 0 0000-000, with a copy to
ZAG/S&W LLP, 0 Xxxx Xxxxxx Xxxxxx, Xxxxxx, XX 00000, attn. Xxxxxx X. Xxxx, Esq.,
facsimile: (000) 000-0000; or at any other address designated by the Company, to
Holder; if to Holder, at to the address set forth for such Holder in the
Purchase Agreement, or at any other address designated by Holder to the Company
in writing.
5.4. No Change in Warrant Terms on Adjustment. Irrespective of any
adjustment in the Warrant Price or the number of Ordinary Shares, this Warrant,
whether theretofore or thereafter issued or reissued, may continue to express
the same Warrant Price and Ordinary Shares as are stated herein and the Warrant
Price and such number of Ordinary Shares specified herein shall be deemed to
have been so adjusted.
5.5. Issuance and Transfer Taxes. The issuance of certificates for
Ordinary Shares upon any exercise of this Warrant shall be made without charge
to Holder for any issuance tax in respect thereto; provided, that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of Holder or upon any transfer of this Warrant.
5.6. Exchange of Warrant. This Warrant is exchangeable at no cost to
Holder upon the surrender hereof by Holder at such office or agency of the
Company, for a new warrant of like tenor representing in the aggregate the right
to subscribe for and purchase the number of shares that may be subscribed for
and purchased hereunder from time to time after giving effect to all the
provisions hereof, each of such new warrants to represent the right to subscribe
for and purchase such number of shares as shall be designated by said Holder
hereof at the time of such surrender.
5.7. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is
lost, stolen, mutilated or destroyed, the Company shall at no cost to the
Holder, on such terms as to indemnity or otherwise as it may in its discretion
impose (which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
5.8. Governing Law. This Warrant shall be deemed to be a contract made
under, and shall be construed in accordance with, the internal laws of the State
of New York, without giving effect to conflict of laws principles thereof.
5.9. Section Headings; Construction. The descriptive headings in this
Warrant have been inserted for convenience only and shall not be deemed to limit
or otherwise affect the construction of any provision thereof or hereof. The
parties have participated jointly in the negotiation and drafting of this
Warrant and the other agreements, documents and instruments executed and
delivered in connection herewith with counsel sophisticated in investment
transactions. In the event an ambiguity or question of intent or interpretation
arises, this Warrant shall be construed as if drafted jointly by the parties and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any provisions of this
-8-
Warrant and the agreements, documents and instruments executed and delivered in
connection herewith.
5.10. Integration. This Warrant, including the exhibits referred to
herein, constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
5.11. No Rights or Liabilities as Shareholder. Except as expressly set
forth herein, nothing contained in this Warrant shall be construed as conferring
upon Holder any rights as a shareholder of the Company or as imposing any
obligation on Holder to purchase any securities or as imposing any liabilities
on Holder as a shareholder of the Company, whether such obligation or
liabilities are asserted by the Company or creditors of the Company.
5.12. Waivers and Consents; Amendments.
(a) For the purposes of this Warrant and all documents executed
pursuant hereto, no course of dealing between or among any of the parties hereto
and no delay on the part of any party hereto in exercising any rights hereunder
or thereunder shall operate as a waiver of the rights hereof or thereof. No
covenant or provision hereof may be waived otherwise than by a written
instrument signed by the party or parties so waiving such covenant or other
provision contemplated herein.
(b) No amendment to this Warrant may be made without the written
consent of the Company and a Majority Interest of the Lenders.
(c) Any actions required to be taken with respect to consents,
approvals or waivers required or contemplated to be given by Holder, shall
require the vote of a Majority Interest of the Lenders, and any such action by
such majority interest vote shall bind all Holders.
5.13. No Exercise upon Registration. Neither the filing of the
registration statement covering the Warrant Shares issued upon conversion of
this Warrant nor the effectiveness of such registration statement shall be
interpreted to permit the exercise of this Warrant.
5.14. Certain Definitions. The following terms as used in this Warrant
shall have the following meanings:
(a) "Affiliate" means any person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with the first mentioned person. A person shall be deemed to
control another person if such first person possesses directly or indirectly the
power to direct, or cause the direction of, the management and policies of the
second person, whether through the ownership of voting securities, by contract
or otherwise.
(b) "Continuity Directors" includes any individuals who are
members of the Company's Board of Directors as of the date hereof and any
individual who subsequently becomes a member of the Company's Board of Directors
whose election, or nomination for election, by the Company's shareholders was
approved by a vote of at least a majority of the Continuity Directors.
-9-
(c) "Exercisability Date" means the date when the Approvals were
obtained, provided, however, that such date shall be no later than eight months
after the date of this Warrant.
5.15. Other Definitional Provisions.
(a) Except as otherwise specified herein, all references herein:
(i) to any person other than the Company, shall be deemed to
include such person's successors and assigns;
(ii) to the Company shall be deemed to include the Company's
successors; and
(iii) to any applicable law defined or referred to herein,
shall be deemed references to such applicable law as the same may have
been or may be amended or supplemented from time to time.
(b) When used in this Warrant, the words "herein", "hereof' and
"hereunder", and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words "Section" and "Exhibit"
shall refer to Sections of, and Exhibits to, this Warrant unless otherwise
specified.
(c) Whenever the context so requires the neuter gender includes
the masculine or feminine, and the singular number includes the plural, and vice
versa.
5.16. Payment of Warrant Price. The Holder may pay the Warrant Price in
one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available
funds; or
(b) Cashless Exercise. If the Warrant Shares are not registered
under an effective registration statement, the Holder may notify the Company in
an Exercise Notice of its election to utilize cashless exercise, in which event
the Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
A = the average of the closing prices for
the Common Stock for the five Trading Days
immediately prior to (but not including) the
Exercise Date.
-10-
B = the Warrant Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended that the Warrant Shares issued in a cashless exercise transaction shall
be deemed to have been acquired by the Holder, and the holding period for the
Warrant Shares shall be deemed to have commenced, on the date this Warrant was
originally issued.
5.17. Limitations on Exercise. Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such exercise
(or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder's for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the
total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
Each delivery of an Exercise Notice hereunder will constitute a representation
by the Holder that it has evaluated the limitation set forth in this paragraph
and determined that issuance of the full number of Warrant Shares requested in
such Exercise Notice is permitted under this paragraph. This provision shall not
restrict the number of shares of Common Stock which a Holder may receive or
beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a merger or other
business combination or reclassification involving the Company. By written
notice to the Company, the Holder may waive the provisions of this Section but
(i) any such waiver will not be effective until the 61st day after such notice
is delivered to the Company, and (ii) any such waiver will apply only to the
Holder and not to any other holder of Warrants.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
-11-
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized as of the date first written above.
ON TRACK INNOVATIONS LTD.
By: _____________________________
Name:
Title:
-12-
SCHEDULE A
FORM OF EXERCISE NOTICE
[To be executed only upon exercise of Warrant pursuant to Section 1.1(a)]
To On Track Innovations Ltd.
The undersigned registered Holder of the Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ____ Ordinary Shares and
herewith makes payment of $__________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to
___________________, whose address is ________________________.
Dated: ________________ _________________________________________
(Signature must conform in all respects
to name of Holder as specified on the face
of Warrant)
_______________________________________
(Street Address)
_______________________________________
(City) (State) (Zip Code)
-13-
EXHIBIT B-2
FORM OF PAYBACK WARRANT
WARRANT TO PURCHASE ORDINARY SHARES
OF
ON TRACK INNOVATIONS LTD.
THIS WARRANT AND THE UNDERLYING SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES AND (2) IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE UNDERLYING SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT ARE SUBJECT TO THE PROVISIONS OF A CERTAIN NOTE AND WARRANT PURCHASE
AGREEMENT, DATED AS OF SEPTEMBER 8, 2003, INCLUDING CERTAIN RESTRICTIONS ON
TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Warrant No. ___ September 8, 2003
On Track Innovations, Ltd., an Israeli company (the "Company"), hereby
certifies that, for value received and pursuant to the Note and Warrant Purchase
Agreement, dated as of the date hereof, by and among the Company and the Lenders
named therein (the "Purchase Agreement"), ________________ (together with its
successors and assigns and any transferee of this Warrant, and its successors
and assigns, the "Holder"), is entitled, subject to the terms and conditions set
forth in this warrant (this "Warrant"), to purchase from the Company, at any
time or times on or after 5:00 P.M., Israel time on May 8, 2004, if and only if
the Approvals (as defined in the Convertible Promissory Notes issued pursuant to
the Purchase Agreement) have not been obtained (the "Exercise Date"), until the
Expiration Date (as defined below). The Expiration Date of this Warrant shall be
the earliest to occur of: (i) 5:00 P.M., Israel time on the third anniversary of
the Exercise Date, (ii) the termination of a seven (7) day period after delivery
of a written notice by the Company to the Holder of an notice indicating the
occurrence of an Acceleration Date (as defined in Section 5.14 below), or (iii)
the occurrence of an Acquisition Transaction (as defined in the Convertible
Promissory Notes issued pursuant to the Purchase Agreement), __________ duly
authorized, validly issued, fully paid, nonassessable shares of Ordinary Shares
(as defined below) (the "Warrant Shares"), which shall be adjusted or readjusted
from time to time as provided in this Warrant, at an initial purchase price per
share equal to $______ (the "Initial Warrant Price"), which shall be adjusted or
readjusted from time to time as provided in this Warrant (as adjusted, the
"Warrant Price").
Notwithstanding anything to the contrary herein, if the Approvals, have
been obtained by or before May 8, 2004, the Warrant shall not be exercisable at
all and shall expire immediately upon obtaining the Approvals.
This Warrant is one of the warrants to purchase Ordinary Shares
(collectively, the "Warrants" such term to include any warrants issued in
substitution therefor) issued pursuant to the Purchase Agreement, and the
holders of the Warrants shall be collectively referred to herein as the
"Holders". The Warrants evidence rights to purchase an aggregate of ________ of
the Company's ordinary shares, par value NIS 0.1 per share (each, an "Ordinary
Share"), subject to adjustment as provided herein and therein. All capitalized
terms used herein and not otherwise defined herein, either within the text in
which it first appears or in Section 5.14, shall have the meanings set forth in
the Purchase Agreement.
Section 1. EXERCISE; EXCHANGE OF WARRANT
1.1. Manner of Exercise; Exchange.
(a) Exercise. The Holder may exercise this Warrant, in whole or in
part (except as to a fractional share), at any time and from time to time during
normal business hours on any Business Day on or prior to the Expiration Date, by
(i) delivering to the Company a written notice, in the form attached hereto as
Schedule A (the "Exercise Notice"), duly executed by the Holder, specifying the
number of Warrant Shares (without giving effect to any adjustment thereto) to be
issued to the Holder as a result of such exercise, (ii) surrendering this
Warrant to the Company, properly endorsed by the Holder (or if this Warrant has
been destroyed, stolen or has otherwise been misplaced, by delivering to the
Company an affidavit of loss and indemnification undertaking duly executed by
the Holder), and (iii) unless the Holder is exercising its cashless exercise
option pursuant to the terms hereof, by tendering payment for the shares of
Ordinary Shares designated by the Exercise Notice in lawful money of the United
States in the form of cash, bank or certified check made payable to the order of
the Company, or by wire transfer of immediately available funds, or in any
combination thereof, of an amount equal to the product of (A) the Warrant Price
and (B) the number of Warrant Shares (without giving effect to any adjustment
thereof) as to which this Warrant is being exercised.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall be deemed to have been surrendered to
the Company as provided in Section 1.1, and at such time the Person or Persons
in whose name or names any certificate or certificates for shares of Ordinary
Shares shall be issuable upon such exercise as provided in Section 1.3 shall be
deemed to have become the Holder or Holders of record thereof.
1.3. Delivery of Share Certificates Upon Exercise. As soon as
practicable after exercise of this Warrant in accordance with this Section 1,
but in no event later than ten (10) Business Days (as defined below) after such
exercise, the Company shall at its expense, cause to be issued in the name of
and delivered to the Holder or, subject to Section 5 of this Warrant, as the
Holder may direct: (a) a certificate or certificates for the number of Warrant
Shares, determined as provided in Section 2 of this Warrant, to which the Holder
shall be entitled upon such exercise and, (b) unless this Warrant has expired or
has been exercised in full, a new Warrant (or Warrants) substantially in the
form of, and on the terms in, this Warrant, for the number of Warrant Shares
remaining following such exercise (without giving effect to any adjustment
thereto), and shall be subject to adjustment as provided for in this Warrant as
of the
-2-
date hereof. For the purpose of this Agreement, the term "Business Day" shall
mean any day which is neither a Saturday or Sunday nor legal holiday on which
commercial banks are authorized or required to be closed in the State of New
York or the State of Israel.
1.4. If by the tenth Business Day after a date of exercise the Company
fails to deliver the required number of Warrant Shares in the manner required
pursuant to Section 5(a), then the Holder will have the right to rescind such
exercise.
1.5. If by the tenth Business Day after a date of exercise the Company
fails to deliver the required number of Warrant Shares in the manner required
pursuant to the terms hereof, and if after such tenth Business Day and prior to
the receipt of such Warrant Shares, the Holder purchases (in an open market
transaction or otherwise) Ordinary Shares to deliver in satisfaction of a sale
by the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a "Buy-In"), then the Company shall (1) pay in cash to the Holder
the amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Ordinary Shares so purchased exceeds (y) the amount
obtained by multiplying (A) the number of Warrant Shares that the Company was
required to deliver to the Holder in connection with the exercise at issue by
(B) the closing bid price of the Common Stock at the time of the obligation
giving rise to such purchase obligation and (2) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.
Section 2. ADJUSTMENTS TO WARRANT PRICE AND WARRANT SHARES
2.1. General. The number of Warrant Shares that the Holder shall be
entitled to receive upon exercise of this Warrant shall be determined by
multiplying the number of Warrant Shares which would otherwise (but for the
provisions of this Section 2) be issuable upon such exercise, as designated by
the Holder in the Exercise Notice, by a fraction, (i) the numerator of which
shall be the Initial Warrant Price, and (ii) the denominator of which shall be
Warrant Price in effect on the date of such exercise, after giving affect to
this Section 2.
2.2. Adjustments.
(a) Subdivision or Combination of Ordinary Shares. If the Company
shall at any time after the date hereof subdivide its outstanding shares of
Ordinary Shares into a greater number of shares (by any share split, share
dividend or otherwise), then the Warrant Price in effect immediately prior to
such subdivision shall be proportionately reduced, and, conversely, if the
Company shall at any time after the date hereof combine its outstanding shares
of Ordinary Shares into a smaller number of shares (by any reverse share split
or otherwise), then the Warrant Price in effect immediately prior to such
combination shall be proportionately increased.
(b) Reorganization or Reclassification. If any capital
reorganization or reclassification of the share capital of the Company shall be
effected in such a way that Holders of Ordinary Shares shall be entitled to
receive shares, securities or assets with respect to or in
-3-
exchange for Ordinary Shares, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby the
Holder shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the Warrant Shares
immediately theretofore receivable upon the exercise of this Warrant in full, as
the case may be, such shares, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such
Ordinary Shares equal to the number of shares of such Ordinary Shares
immediately theretofore receivable upon such exercise of this Warrant in full
had such reorganization or reclassification not taken place, and in any such
case appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Warrant Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares,
securities or assets thereafter deliverable upon the exercise of such conversion
rights.
(c) Dividends and Distributions. If the Company shall make or
issue, or shall fix a record date for the determination of eligible holders
entitled to receive, a dividend or other distribution with respect to the
Warrant Shares (or any shares or other securities at the time issuable upon
exercise of the Warrant) payable in (a) securities of the Company or (b) assets
(excluding cash dividends paid or payable solely out of retained earnings),
then, in each such case, the Holder of this Warrant on exercise hereof at any
time after the consummation, effective date or record date of such dividend or
other distribution, shall receive, in addition to the Warrant Shares (or such
other shares or securities) issuable on such exercise prior to such date, and
without the payment of additional consideration therefor, the securities or such
other assets of the Company to which such Holder would have been entitled upon
such date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional shares available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section 2.
(d) Adjustment for Capital Reorganization, Merger or
Consolidation. In case of any capital reorganization of the share capital of the
Company (other than a combination, reclassification, exchange or subdivision of
shares otherwise provided for herein), or any merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all the assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Warrant Price then in effect, the number of shares or other
securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 2.2 and Section 2.1 shall not apply in such event. The foregoing
provisions of this Section 2.2(d) shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the shares
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be
-4-
determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
Section 3. COVENANTS OF THE COMPANY
3.1. The Company covenants and agrees that:
(a) all Ordinary Shares that may be issued upon the exercise of
the rights represented by this Warrant shall, upon issuance and payment
therefore by the Holder, be duly authorized, validly issued, fully paid and
nonassessable;
(b) during the period within which this Warrant may be exercised,
it will at all times have authorized and reserved a sufficient number of
Ordinary Shares to provide for the exercise of rights represented by this
Warrant;
(c) if any Ordinary Shares reserved or to be reserved to provide
for the exercise of this Warrant require registration with or approval of any
governmental or self-regulatory authority under any federal or state law or
stock exchange or NASDAQ rule before such Shares may be validly issued, then it
shall in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be, all as set forth in the Purchase
Agreement;
(d) if it shall have filed a registration statement pursuant to
the requirements of Section 12 of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), or a registration statement pursuant to the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Company shall comply with the reporting requirements of Sections 13 and
15(d) of the Exchange Act and shall comply with all other public information
reporting requirements the securities and exchange commission (including Rule
144 promulgated by such commission under the Securities Act) from time to time
in effect and relating to the availability of an exemption from the Securities
Act for the sale of any restricted securities; and
(e) it shall not, by amendment to its Articles of Association
(whether by way of merger, operation of law, or otherwise) or through other
reorganization, transfer of assets, consolidation, merger, dissolution, issuance
or sale of securities, agreement or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company and shall at all times in good faith assist
in the carrying out of all the provisions of this Warrant. Any successor to the
Company shall agree in writing, as a condition to such succession, to carry out
and observe the obligations of the Company hereunder with respect to the
Warrants.
-5-
Section 4. RESTRICTIONS ON TRANSFER
4.1. Restrictive Legend.
(a) This Warrant and the Warrant Shares issuable upon exercise
thereof, are subject to certain restrictions on transfer as set forth in the
Purchase Agreement. Each certificate representing the Ordinary Shares issued
upon exercise of this Warrant and each certificate representing the Ordinary
Shares issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the form as
follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1)
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE SECURITIES ACT OR TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO
THE DISPOSITION OF SECURITIES AND (2) IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE UNDERLYING SECURITIES ISSUABLE UPON EXERCISE
OF THIS WARRANT ARE SUBJECT TO THE PROVISIONS OF A CERTAIN NOTE
AND WARRANT PURCHASE AGREEMENT, DATED AS OF THE DATE HEREOF,
INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A
COMPLETE AND CORRECT COPY OF SUCH AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
If at any time any securities other than shares of Ordinary Shares shall be
issuable upon the exercise of this Warrant, such securities shall bear a legend
similar to the one set forth above. Whenever the legend requirement imposed by
the Note and Warrant Purchase Agreement shall terminate, the Holder shall be
entitled to receive within five (5) Business Days from the Company, at the
Company's expense, a new Warrant certificate or certificates and new share
certificates representing the Ordinary Shares issued upon exercise of this
Warrant, in each case, without such legends.
Section 5. MISCELLANEOUS
5.1. Notice of Adjustments.
(a) In each case of any adjustment or readjustment in the Warrant
Price and the Warrant Shares issuable upon exercise of this Warrant, the Company
shall promptly thereafter compute such adjustment or readjustment in accordance
with the terms of this Warrant and provide written report thereof certified by
the Chief Financial Officer of the Company to the Holder stating the number of
Warrant Shares and the Warrant Price, after giving effect to such
-6-
adjustment or readjustment, and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(b) The Company shall, within (10) days of receipt of a written
request by Holder or Holders who retain the right to receive greater than fifty
percent (50%) of the Ordinary Shares issuable upon exercise of this Warrant,
cause independent certified public accountants of recognized national standing,
which may be the regular auditors of the Company, selected by the Company to
verify such computations reported pursuant to Section 5.1(a), other than any
computation that pursuant to the provisions of this Warrant are to be determined
reasonably and in good faith by the Board of Directors. The Company shall
promptly prepare, and remit to Holder, a copy of such independent accountant's
report setting forth such adjustment or readjustment, showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based.
(c) The Company shall also keep copies of all such reports
generated pursuant to this Section 5.1 at its principal offices and will cause
the same to be available for inspection at such offices during normal business
hours by Holder any prospective purchaser of this Warrant designated by Holder.
5.2. Notice of Certain Events. If at any time:
(a) The Company obtains the Approvals by May 8, 2004;
(b) the Company shall pay any dividend upon, or make any
distribution in respect of, its shares of the Company;
(c) there shall be any capital reorganization, or reclassification
of the share capital, of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another person;
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the occurrence of an Acquisition Transaction;
then, in any one or more of said cases, the Company shall give notice to Holder
of the date on which (i) the Approvals have been obtained, (ii) the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights, (iii) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up shall take
place, or (iv) the Acquisition Transaction shall take place, as the case may be.
Such notice shall be given within five (5) days after the Approvals have been
obtained; not less than five (5) days prior to the record date or the date on
which the transfer books of the Company are to be closed in respect thereto in
the case of an action specified in clause (ii), at least ten (10) days prior to
the action in question in the case of an action specified in clause (iii), and
at least thirty (30) days prior to the occurrence of an Acquisition Transaction
specified in clause (iv).
5.3. Notice. Any notice that is required or provided to be given under
this Warrant shall be deemed to have been sufficiently given and received for
all purposes when delivered in
-7-
writing by hand, facsimile, or five (5) business days after being sent by
certified or registered mail, postage and charges prepaid, return receipt
requested, or three (3) business days after being sent by internationally
overnight delivery providing receipt of delivery, to the following addresses: if
to the Company, On Track Innovations Ltd., X.X.X 00, Xxxx Xxxx, Xxxxxx, 00000,
attn. Xxxx Xxxxxx, facsimile: (000) 0 0000-000, with a copy to ZAG/S&W LLP, 0
Xxxx Xxxxxx Xxxxxx, Xxxxxx, XX 00000, attn. Xxxxxx X. Xxxx, Esq., facsimile:
(000) 000-0000; or at any other address designated by the Company, to Holder; if
to Holder, at to the address set forth for such Holder in the Purchase
Agreement, or at any other address designated by Holder to the Company in
writing.
5.4. No Change in Warrant Terms on Adjustment. Irrespective of any
adjustment in the Warrant Price or the number of Ordinary Shares, this Warrant,
whether theretofore or thereafter issued or reissued, may continue to express
the same Warrant Price and Ordinary Shares as are stated herein and the Warrant
Price and such number of Ordinary Shares specified herein shall be deemed to
have been so adjusted.
5.5. Issuance and Transfer Taxes. The issuance of certificates for
Ordinary Shares upon any exercise of this Warrant shall be made without charge
to Holder for any issuance tax in respect thereto; provided, that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of Holder or upon any transfer of this Warrant.
5.6. Exchange of Warrant. This Warrant is exchangeable at no cost to
Holder upon the surrender hereof by Holder at such office or agency of the
Company, for a new warrant of like tenor representing in the aggregate the right
to subscribe for and purchase the number of shares that may be subscribed for
and purchased hereunder from time to time after giving effect to all the
provisions hereof, each of such new warrants to represent the right to subscribe
for and purchase such number of shares as shall be designated by said Holder
hereof at the time of such surrender.
5.7. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is
lost, stolen, mutilated or destroyed, the Company shall at no cost to the
Holder, on such terms as to indemnity or otherwise as it may in its discretion
impose (which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
5.8. Governing Law. This Warrant shall be deemed to be a contract made
under, and shall be construed in accordance with, the internal laws of the State
of New York, without giving effect to conflict of laws principles thereof.
5.9. Section Headings; Construction. The descriptive headings in this
Warrant have been inserted for convenience only and shall not be deemed to limit
or otherwise affect the construction of any provision thereof or hereof. The
parties have participated jointly in the negotiation and drafting of this
Warrant and the other agreements, documents and instruments executed and
delivered in connection herewith with counsel sophisticated in investment
-8-
transactions. In the event an ambiguity or question of intent or interpretation
arises, this Warrant shall be construed as if drafted jointly by the parties and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any provisions of this Warrant and the
agreements, documents and instruments executed and delivered in connection
herewith.
5.10. Integration. This Warrant, including the exhibits referred to
herein, constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
5.11. No Rights or Liabilities as Shareholder. Except as expressly set
forth herein, nothing contained in this Warrant shall be construed as conferring
upon Holder any rights as a shareholder of the Company or as imposing any
obligation on Holder to purchase any securities or as imposing any liabilities
on Holder as a shareholder of the Company, whether such obligation or
liabilities are asserted by the Company or creditors of the Company.
5.12. Waivers and Consents; Amendments.
(a) For the purposes of this Warrant and all documents executed
pursuant hereto, no course of dealing between or among any of the parties hereto
and no delay on the part of any party hereto in exercising any rights hereunder
or thereunder shall operate as a waiver of the rights hereof or thereof. No
covenant or provision hereof may be waived otherwise than by a written
instrument signed by the party or parties so waiving such covenant or other
provision contemplated herein.
(b) No amendment to this Warrant may be made without the written
consent of the Company and a Majority Interest of the Lenders.
(c) Any actions required to be taken with respect to consents,
approvals or waivers required or contemplated to be given by Holder, shall
require the vote of a Majority Interest of the Lenders, and any such action by
such majority interest vote shall bind all Holders.
5.13. No Exercise upon Registration. Neither the filing of the
registration statement covering the Warrant Shares issued upon conversion of
this Warrant nor the effectiveness of such registration statement shall be
interpreted to permit the exercise of this Warrant.
5.14. Certain Definitions. The following terms as used in this Warrant
shall have the following meanings:
(a) "Acceleration Date" means the date upon which the closing
price on the Nasdaq Small Cap Market of Warrants Shares for ten consecutive
trading days is at least two times the Initial Warrant Price, provided that
there is a registration statement in effect, naming the Holder as selling
shareholder thereunder, for the resale of the Warrants Shares.
(b) "Affiliate" means any person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with the first mentioned person. A person shall be deemed to
control another person if such first person possesses directly or indirectly the
power to direct, or cause the direction of, the management
-9-
and policies of the second person, whether through the ownership of voting
securities, by contract or otherwise.
(c) "Continuity Directors" includes any individuals who are
members of the Company's Board of Directors as of the date hereof and any
individual who subsequently becomes a member of the Company's Board of Directors
whose election, or nomination for election, by the Company's shareholders was
approved by a vote of at least a majority of the Continuity Directors.
5.15. Other Definitional Provisions.
(a) Except as otherwise specified herein, all references herein:
(i) to any person other than the Company, shall be deemed to
include such person's successors and assigns;
(ii) to the Company shall be deemed to include the Company's
successors; and
(iii) to any applicable law defined or referred to herein,
shall be deemed references to such applicable law as the same may have
been or may be amended or supplemented from time to time.
(b) When used in this Warrant, the words "herein", "hereof' and
"hereunder", and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words "Section" and "Exhibit"
shall refer to Sections of, and Exhibits to, this Warrant unless otherwise
specified.
(c) Whenever the context so requires the neuter gender includes
the masculine or feminine, and the singular number includes the plural, and vice
versa.
5.16. Payment of Warrant Price. The Holder may pay the Warrant Price in
one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately available
funds; or
(b) Cashless Exercise. The Holder may notify the Company in an
Exercise Notice of its election to utilize cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
-10-
A = the average of the closing prices for
the Common Stock for the five Trading Days
immediately prior to (but not including) the
Exercise Date.
B = the Warrant Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended that the Warrant Shares issued in a cashless exercise transaction shall
be deemed to have been acquired by the Holder, and the holding period for the
Warrant Shares shall be deemed to have commenced, on the date this Warrant was
originally issued.
5.17. Limitations on Exercise. Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such exercise
(or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder's for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the
total number of issued and outstanding shares of Common Stock (including for
such purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
Each delivery of an Exercise Notice hereunder will constitute a representation
by the Holder that it has evaluated the limitation set forth in this paragraph
and determined that issuance of the full number of Warrant Shares requested in
such Exercise Notice is permitted under this paragraph. This provision shall not
restrict the number of shares of Common Stock which a Holder may receive or
beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a merger or other
business combination or reclassification involving the Company. By written
notice to the Company, the Holder may waive the provisions of this Section but
(i) any such waiver will not be effective until the 61st day after such notice
is delivered to the Company, and (ii) any such waiver will apply only to the
Holder and not to any other holder of Warrants.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
-11-
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized as of the date first written above.
ON TRACK INNOVATIONS LTD.
By: _____________________________
Name:
Title:
-12-
SCHEDULE A
FORM OF EXERCISE NOTICE
[To be executed only upon exercise of Warrant pursuant to Section 1.1(a)]
To On Track Innovations Ltd.
The undersigned registered Holder of the Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ____ Ordinary Shares and
herewith makes payment of $__________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to
___________________, whose address is _____________________.
Dated: ________________ _________________________________________
(Signature must conform in all respects
to name of Holder as specified on the face
of Warrant)
_______________________________________
(Street Address)
_______________________________________
(City) (State) (Zip Code)
-13-
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of the 8th day of September 2003
(this "Agreement") by and between ON TRACK INNOVATIONS LTD., an Israeli company
(the "Company"), and the lenders identified on Exhibit 1 hereto (each a "Lender"
and together, the "Lenders").
WHEREAS, the Lenders and the Company have entered into a Note and
Warrant Purchase Agreement (the "Purchase Agreement") pursuant to which
concurrently herewith the Lenders own or have the right to purchase or otherwise
acquire shares of the Ordinary Shares (as hereinafter defined) of the Company;
WHEREAS, the Company and the Lenders deem it to be in their respective
best interests to set forth the rights of the Lenders in connection with the
public offerings and sales of the Ordinary Shares;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the Company and the Lender hereby agree
as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement the following terms shall have the following
meanings:
(a) "Commission" means the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
(b) "Exchange Act" means the Securities Exchange Act of 1934 or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
(c) "Lenders" means the persons identified on Exhibit 1 hereto.
(d) "Ordinary Shares" means the ordinary shares of the Company, NIS 0.1
nominal value.
(e) "Other Shares" means at any time those shares of Ordinary Shares
that do not constitute Primary Shares or Registrable Shares.
(f) "Primary Shares" means at any time the authorized but unissued
shares of Ordinary Shares held by the Company in its treasury.
(g) "Registrable Shares" means Ordinary Shares issuable to the Lenders
upon conversion of the Notes and exercise of the Warrants or the Payback
Warrants (as the case may be), as such terms are defined in the Purchase
Agreement, all as described on Exhibit 1. As to any particular Registrable
Shares, such Registrable Shares shall cease to be Registrable Shares when (i)
they have been registered under the Securities Act, the registration statement
in connection therewith has been declared effective and they have been disposed
of pursuant to
such effective registration statement, (ii) they are eligible to be sold or
distributed without volume limitations pursuant to Rule 144(k), or (iii) they
shall have ceased to be outstanding.
(h) "Rule 144" means Rule 144 promulgated under the Securities Act or
any successor rule thereto or any complementary rule thereto (such as Rule
144A).
(i) "Securities Act" means the Securities Act of 1933 or any successor
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect from time to time.
SECTION 2. REQUIRED REGISTRATION.
2.1 The Company shall include all the Registrable Shares in the first
Form F-1 registration statement under the Securities Act that the Company shall
file after the date hereof and in any event no later than 5 business days from
the date hereof (the "Registration Statement"), to the extent that all
Registrable Shares can be included in such registration statement in accordance
with applicable securities laws, and shall use its commercially reasonable
efforts to cause such registration statement to become effective as soon as
practicable thereafter but in any event later than 90 days after the date
hereof.
2.2 Notwithstanding the provisions of Section 2.1 above, the Company
shall not be obligated to file any registration under the Securities Act except
in accordance with the following provisions:
(a) the Company may delay the filing or effectiveness of any
registration statement for a period of up to 90 days if the Company is engaged
in a firm commitment underwritten public offering of Primary Shares in which the
holders of Registrable Shares may include Registrable Shares pursuant to Section
3.
(b) With respect to any registration pursuant to this Section 2.2(a),
the Company shall give notice of such registration to the holders of all Other
Shares that are entitled to registration rights and the Company may include in
such registration any Primary Shares or Other Shares; provided, however, that if
the managing underwriter advises the Company that the inclusion of all
Registrable Shares, Primary Shares and/or Other Shares proposed to be included
in such registration would interfere with the successful marketing (including
pricing) of the Registrable Shares proposed to be included in such registration,
then the number of Registrable Shares, Primary Shares and/or Other Shares
proposed to be included in such registration shall be included in the following
order:
(i) first, the Registrable Shares;
(ii) second, the Primary Shares; and
(iii) third, the Other Shares which are entitled to
registration rights.
(c) At any time before the registration statement covering Registrable
Shares becomes effective, the holder/s of a majority of such shares may request
the Company to withdraw or not to file the registration statement. In that
event, if such request of withdrawal shall not have been caused by, or made in
response to an event having material adverse effect on the business, properties,
conditions, financial or otherwise, or operations of the Company, the
2
holders
shall have used their demand registration right under this Section 2 and the
Company shall no longer be obligated to register Registrable Shares pursuant to
the exercise of such registration right pursuant to this Section 2, unless the
remaining holders shall pay to the Company the expenses incurred by the Company
through the date of such request.
SECTION 3. HOLDBACK AGREEMENT.
If the Company at any time shall register Ordinary Shares under the
Securities Act pursuant to Section 2 for sale to the public pursuant to a firm
commitment public offering for proceeds in excess of $5,000,000, the Lenders
shall not sell publicly, make any short sale of, grant any option for the
purchase of, or otherwise dispose publicly of, any Registrable Shares (other
than those Ordinary Shares included in such registration pursuant to Section 2)
as required by any underwriter in connection with such registration, without the
prior written consent of the Company, for up to 90 days. The Company shall
obtain the agreement of any person permitted to sell Ordinary Shares in a
registration to be bound by and to comply with this Section 3 as if such person
was a Lender hereunder.
SECTION 4. PREPARATION AND FILING.
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the registration
of any Registrable Shares, the Company shall, as expeditiously as practicable:
(a) use its best efforts to cause a registration statement that
registers such Registrable Shares to become and remain effective for a period of
365 days or until all of such Registrable Shares have been disposed of (if
earlier); it being understood that such registration statement may, in the
Company's discretion, be on any form that the Company is eligible to use to
register the resale of the Registrable Shares; it being further understood that
before or following the effectiveness of a registration statement covering the
Registrable Shares, the Company may change to another form of registration
statement for which the Company is then eligible to register its securities,
provided that at least one registration statement covering the Registrable
Shares not yet sold remains effective during such 365 day period or until all of
such Registrable Shares have been disposed of (if earlier). In addition, by or
before the conclusion of such 365 day period the Company may take such actions
for any such registration statement covering Registrable Shares (or, in the
Company's discretion, a registration statement on another form that the Company
is eligible to use to register its securities) to remain effective for such
additional time period as the Company shall decide in its sole discretion;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement (or, in the
Company's discretion, a registration statement on another form that the Company
is eligible to use to register its securities) effective for a period of 365
days or until all of such Registrable Shares have been disposed of (if earlier)
and to comply with the provisions of the Securities Act with respect to the sale
or other disposition of such Registrable Shares, or such longer period as is
determined by the Company pursuant to Section 4(a) hereof;
(c) use its best efforts to register or qualify such Registrable Shares
under such other securities or blue sky laws of such jurisdictions as the
Lenders reasonably request and do any and all other acts and things that may be
reasonably necessary or advisable to enable the Lenders to
3
consummate the disposition in such jurisdictions of the Registrable Shares owned
by the Lenders; provided, however, that the Company will not be required to
qualify generally to do business, subject itself to general taxation or consent
to general service of process in any jurisdiction where it would not otherwise
be required to do so but for this paragraph (c) or to provide any material
undertaking or make any changes in its By-laws or Articles of Association which
the Board of Directors determines to be contrary to the best interests of the
Company or to modify any of its contractual relationships then existing;
(d) furnish to the Lenders holding such Registrable Shares such number
of copies of a summary prospectus, if any, or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as such Lenders may reasonably request in order to
facilitate the public sale or other disposition of such Registrable Shares;
(e) without limiting subsection (c) above, use its best efforts to
cause such Registrable Shares to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Lenders holding such
Registrable Shares to consummate the disposition of such Registrable Shares;
(f) notify the Lenders holding such Registrable Shares on a timely
basis at any time when a prospectus relating to such Registrable Shares is
required to be delivered under the Securities Act within the appropriate period
mentioned in subparagraph (a) of this Section 4, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing
and, at the request of an Lender, prepare and furnish to such Lender a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the offerees
of such shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) use its best efforts to obtain from its independent certified
public accountants "cold comfort" letters addressed to the Company and any
selling Lender in customary form and at customary times and covering matters of
the type customarily covered by cold comfort benefits;
(h) use its best efforts to obtain from its counsel an opinion or
opinions in customary form addressed to the Company and any selling Lender;
(i) provide a transfer agent and registrar (which may be the same
entity and which may be the Company) for such Registrable Shares;
(j) issue to any underwriter to which the Lenders may sell shares in
such offering certificates evidencing such Registrable Shares;
(k) list such Registrable Shares on the automated quotation system of
the National Association of Securities Dealers, Inc. (the "NASD"), and any other
national securities exchange on which any shares of the Ordinary Shares are
listed;
4
(l) subject to all the other provisions of this Agreement, use its best
efforts to take all other steps accessory to effect the registration of such
Registrable Shares contemplated hereby.
The Lenders, upon receipt of any notice from the Company of any event
of the kind described in Section 4(f) hereof, shall forthwith discontinue
disposition of the Registrable Shares pursuant to the registration statement
covering such Registrable Shares until the Lenders' receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4(g) hereof, and, if
so directed by the Company, the Lenders shall deliver to the Company all copies,
other than permanent file copies then in the Lenders' possession, of the
prospectus covering such Registrable Shares at the time of receipt of such
notice.
SECTION 5. EXPENSES
All expenses (other than underwriting discounts and commissions
relating to the Registrable Shares, as provided in the last sentence of this
Section 5) incurred by the Company in complying with Section 4, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the NASD), fees and expenses of complying with
securities and blue sky laws, printing expenses, and fees and expenses of the
Company's counsel and accountants; provided, however, that all underwriting
discounts and selling commissions applicable to the Registrable Shares and Other
Shares shall be borne by the holders selling such Registrable Shares and Other
Shares, in proportion to the number of Registrable Shares and Other Shares sold
by each such holder.
SECTION 6. INDEMNIFICATION.
(a) In connection with any registration of any Registrable Shares under
the Securities Act pursuant to this Agreement, the Company shall indemnify and
hold harmless each Lender, each underwriter, broker or any other person acting
on behalf of the holders of Registrable Shares and each other person, if any,
who controls any of the foregoing persons within the meaning of the Securities
Act against any losses, claims, damages or liabilities, joint or several (or
actions in respect thereof), to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or allegedly untrue statement of a material fact
contained in the registration statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the Company in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse each Lender, such
underwriter, such broker or such other person acting on behalf of the holders of
Registrable Shares and each such controlling person for any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action (including any legal or other
expenses incurred) arises out of or is based upon
5
an untrue statement or allegedly untrue statement or omission or alleged
omission made in said registration statement, preliminary prospectus, final
prospectus, amendment supplement or document incident to registration or
qualification of any Registrable Shares in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by an Lender or his counsel or underwriter specifically for use in the
preparation thereof; provided further, however, that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any untrue
statement, omission or alleged omission made in any preliminary prospectus but
eliminated or remedied in the final prospectus (filed pursuant to Rule 424 of
the Securities Act), such indemnity agreement shall not inure to the benefit of
any Lender, underwriter, broker or other person acting on behalf of holders of
the Restricted Shares from whom the person asserting any loss, claim, damage,
liability or expense purchased the Restricted Shares which are the subject
thereof, if a copy of such final prospectus had been made available to such
person and such Lender, underwriter, broker or other person acting on behalf of
holders of the Registrable Shares and such final prospectus was not delivered to
such person with or prior to the written confirmation of the sale of such
Registrable Shares to such person.
(b) In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, the Lenders, jointly and severally,
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in the preceding paragraph of this Section 6) the Company, each
director of the Company, each officer of the Company who shall sign such
registration statement, each representative of the Company, including the
Company's counsel, each underwriter, broker or other person acting on behalf of
the holders of Registrable Shares and each person who controls any of the
foregoing persons within the meaning of the Securities Act with respect to any
statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company or such underwriter specifically for use in connection
with the preparation of such registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 6, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. The failure of any indemnified party to
notify an indemnifying party of any such action shall not (unless such failure
shall have a material adverse effect on the indemnifying party) relieve the
indemnified party on account of this Section 6. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be responsible for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that if any indemnified
party shall have reasonably concluded that there may be one or more legal or
equitable defenses available to such indemnified party which are additional to
or conflict with those available to the indemnifying party, or that such claim
or litigation involves or could have an effect upon matters beyond the scope of
the indemnity agreement provided in this Section 6, the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
indemnified party (but shall have the right to participate therein with counsel
of its choice) and such indemnifying
6
party shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section 6. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel with respect to such claim.
(d) If the indemnification provided for in this Section 6 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant hereto were determined by pro rata allocation or by any other method or
allocation which does not take account of the equitable considerations referred
to herein. No person guilty of fraudulent misrepresentation shall be entitled to
contribution from any person.
SECTION 7. UNDERWRITING AGREEMENT.
Notwithstanding the provisions of Sections 3, 4 and 5, to the extent
that the Lenders shall enter into an underwriting or similar agreement, which
agreement contains provisions covering one or more issues addressed in such
Sections, the provisions contained in such agreement addressing such issue or
issues shall control; provided, however, that any such agreement to which the
Company is not a party shall not be binding upon the Company. No holder may
participate in any underwritten registration hereunder unless such holder (a)
agrees to such holder's securities on the basis provided in any underwriting
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
and customarily required under the terms of such underwriting arrangements.
SECTION 8. INFORMATION BY HOLDER.
Each Lender shall furnish to the Company such written information
regarding such Lender and the distribution proposed by the Lender as the Company
may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.
SECTION 9. EXCHANGE ACT COMPLIANCE.
The Company shall comply with all of the reporting requirements of the
Exchange Act applicable to it (whether or not it shall be required to do so, but
specifically excluding Section 14 of the Exchange Act if not then applicable to
the Company) and shall comply with all other
7
public information reporting requirements of the Commission which are conditions
to the availability of Rule 144 for the sale of the Ordinary Shares. The Company
shall cooperate with the Lenders in supplying such information as may be
necessary for the Lenders to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of Rule 144.
SECTION 10. NO CONFLICT OF RIGHTS
The Company shall not, after the date hereof, grant any registration
rights that prohibit the registration rights granted hereby.
SECTION 11. TERMINATION.
This Agreement shall terminate and be of no further force or effect
when there shall no longer be any Registrable Shares outstanding; provided that
Sections 5 and 6 shall survive any termination of this Agreement.
SECTION 12. SUCCESSORS AND ASSIGNS.
This Agreement shall bind and inure to the benefit of the Company and
the Lenders and, subject to Section 13, the respective successors and assigns of
the Company and the Lenders.
SECTION 13. ASSIGNMENT.
A Lender may assign his rights hereunder to any purchaser or transferee
of Registrable Shares; provided, however, that such purchaser or transferee
shall, as a condition to the effectiveness of such assignment, be required to
execute a counterpart to this Agreement agreeing to be treated as an Lender
whereupon such purchaser or transferee shall have the benefits of, and shall be
subject to the restrictions contained in, this Agreement as if such purchaser or
transferee was originally included in the definition of an Lender herein and had
originally been a party hereto.
SECTION 14. ENTIRE AGREEMENT
This Agreement and the other writings referred to herein or therein or
delivered pursuant hereto or thereto, contain the entire agreement between the
each of the Lenders and the Company with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 15. NOTICES.
Any notice that is required or provided to be given under this
Agreement shall be deemed to have been sufficiently given and received for all
purposes when delivered in writing by hand, facsimile, or five (5) business days
after being sent by certified or registered mail, postage and charges prepaid,
return receipt requested, or three (3) business days after being sent by
internationally overnight delivery providing receipt of delivery, to the
following addresses: if to the Company, On Track Innovations Ltd., X.X.X 00,
Xxxx Xxxx, Xxxxxx, 00000, attn. Xxxx Xxxxxx, facsimile: (000) 0 0000-000, with a
copy to ZAG/S&W LLP, 0 Xxxx Xxxxxx Xxxxxx, Xxxxxx, XX 00000, attn. Xxxxxx X.
Xxxx, Esq., facsimile: (000) 000-0000; or at any other a
8
ddress designated by the Company, to the Lenders; if to a Lender, to its address
listed on Schedule 1 or at any other address designated by the Lender to the
Company in writing.
SECTION 16. MODIFICATIONS; AMENDMENTS; WAIVERS.
The terms and provisions of this Agreement may not be modified or
amended, nor may any provision be waived, except pursuant to writing signed by
the Company and the Lenders.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
SECTION 18. HEADINGS.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
SECTION 19. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York applicable to contracts made and to
be performed wholly therein.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
9
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the date first set forth above.
ON TRACK INNOVATIONS LTD.
By:____________________________
Name: ____________________
Title: ___________________
PLATINUM PARTNERS VALUE ARBITRAGE FUND PLATINUM GLOBAL MACRO FUND
By:____________________________ By:____________________________
Name: ____________________ Name: _____________________
Title: ___________________ Title: ____________________
WEST END CONVERTIBLE FUND L.P. WEC PARTNERS LLC
By:____________________________ By:____________________________
Name: ____________________ Name: ______________________
Title: ___________________ Title: _____________________
XXXXXXX X. XXXXX
By:____________________________
Name: ____________________
Title: ___________________
10
SCHEDULE 1
LENDERS AND ADDRESS LOAN WARRANTS PAYBACK
WARRANTS
PLATINUM PARTNERS VALUE ARBITRAGE FUND $500,000 90,000 235,294
c/o Platinum Partners LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel. 000-000-0000 Fax. 000-000-0000
PLATINUM GLOBAL MACRO FUND $250,000 45,090 117,647
c/o Platinum Partners LLC
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel. 000-000-0000 Fax. 000-000-0000
WEST END CONVERTIBLE FUND L.P. $75,000 13,500 35,294
c/o WEC Partners LLC
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxx, XX 00000
Tel. 000-000-0000
Fax. 000-000-0000
WEC PARTNERS LLC $75,000 13,500 35,294
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxx, XX 00000
Tel. 000-000-0000
Fax. 000-000-0000
XXXXXXX X. XXXXX $99,000 17,820 46,588
00 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Tel. 000-000-0000
Fax. 000-000-0000
11
EXHIBIT D
VOTING UNDERTAKING
VOTING UNDERTAKING
Reference is made to Section 6.5 of a certain Note and Warrant Purchase
Agreement dated the date hereof, by and between On Track Innovations Ltd., an
Israeli company (hereinafter referred to as the "Company") and certain lenders
(the "Purchase Agreement").
The undersigned, [Xxxx Xxxxxx/Xxxxxx Xxxxxx], in consideration of the
sum of $1.00, hereby undertakes in respect of all his Ordinary Shares of the
Company, that he now or hereafter may own or hold, including, without
limitation, to use his right, as a shareholder, to demand the call by any proper
officer of the Company pursuant to the provisions of its articles of
association, memorandum of association or other organizational documents and as
permitted by law of a meeting of its shareholders and at any meeting of
shareholders, annual, general or special, and to vote for the approval and all
other actions, in his capacity as a shareholder, in connection with the
conversion of the Notes and the exercisability of the Warrants (as such terms
are defined in the Purchase Agreement) (the "Transaction").
This undertaking shall expire upon the earlier to occur of (i)
obtaining the shareholders' approval required for the Transaction and (ii) May
8, 2004.
For the avoidance of doubt, this undertaking shall not bind in any way
the undersigned's actions in his capacity as an officer and a member of the
board of directors of the Company, and in exercising his duties and obligations
as an officer and member of the board of directors of the Company, this
undertaking shall not bind the undersigned in any manner.
IN WITNESS WHEREOF, the undersigned has executed this Undertaking this
8 day of September, 2003.
Name:_______________________
By:____________________________
Name:
Title:
EXHIBIT E
FORM OF PROXY
IRREVOCABLE PROXY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned does hereby
make, constitute and appoint Xxxx Xxxxxx, its true and lawful attorney, for it
and in its name, place and stead, to act as its proxy in respect of all of the
Ordinary Shares of On Track Innovations Ltd., an Israeli company (hereinafter
referred to as the "Company"), which it now or hereafter may own or hold,
including, without limitation, the right, on its behalf, to demand the call by
any proper officer of the Company pursuant to the provisions of its articles of
association, memorandum of association or other organizational documents and as
permitted by law of a meeting of its shareholders and at any meeting of
shareholders, annual, general or special, to vote for the transaction of any and
all business that may come before such meeting, or at any adjournment thereof,
including, without limitation, the right to vote for the sale of all or any part
of the assets of the Company and/or the liquidation and dissolution of the
Company; giving and granting to his said attorney full power and authority to do
and perform each and every act and thing whether necessary or desirable to be
done in and about the premises, as fully as it might or could do if personally
present with full power of substitution, appointment and revocation, hereby
ratifying and confirming all that its said attorneys shall do or cause to be
done by virtue hereof. Notwithstanding the foregoing, this Proxy shall not
extend to any votes or acts in which the shares subject hereto could not be
legally voted under any applicable law or regulation.
This Proxy is given to Xxxx Xxxxxx in consideration of the performance
of the Note and Warrant Purchase Agreement dated the date hereof, by and between
the undersigned and other lenders and the Company, and this Proxy shall not be
revocable or revoked by the undersigned and shall be binding upon his successors
and assigns, provided, however, that this Proxy shall be null and void and shall
have no force and effect, in respect of such Ordinary Shares (and no other
securities) so sold by the undersigned in an arm's length sale (in good faith)
to a party other than an Affiliate (as defined in Rule 144 under the Securities
Act of 1933, as amended) below) of the Lender providing this Proxy. This Proxy
may not be assigned by Xxxx Xxxxxx.
The undersigned shall execute and deliver such additional documents and
instruments as the Company or Xxxx Xxxxxx may require to confirm the grant
hereby, including, without limitation, such instruments as may be necessary or
appropriate under Israeli law; provided that under no circumstances shall the
undersigned be required to deliver any of its Ordinary Shares or provide stock
powers in connection with this proxy.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy
this 8th day of September, 2003.
Name:_______________________
By:_________________________
Name:
Title:
