Exhibit 99.2
ORDINARY SHARES AND WARRANTS PURCHASE AGREEMENT
This ORDINARY SHARES AND WARRANTS PURCHASE AGREEMENT (this "Agreement")
is dated as of the 29th day of July, 2003 (the "Agreement Date") by and between
Commtouch Software Ltd., a corporation organized under the laws of Israel (the
"Company"), and the investors listed on Exhibit A attached hereto (each an
"Investor" and together the "Investors").
The parties hereto agree as follows:
ARTICLE I Definitions
Section 1.1 Definitions.
(a) "Closing" shall have the meaning assigned to such term in
Section 2.2 hereof.
(b) "Commission" shall mean the Securities and Exchange
Commission.
(c) "Effective Date" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for hereby and the
Ordinary Shares issuable upon exercise of the Warrants is declared effective by
the Commission.
(d) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission promulgated
thereunder.
(e) "Force Majeure" shall mean a delay in a party's
performance of its obligations or inability to cure a breach by reason of an act
of God, fire, natural disaster, accident, act of government, shortage of
equipment, materials or supplies beyond the reasonable control of such party (a
"force majeure event"); provided that the party whose performance is delayed or
prevented promptly notifies the other party of the nature and duration of the
force majeure event.
(f) "Registrable Securities" shall have the meaning assigned
to such term in Section 3.1(a).
(g) "Registration Statement" shall have the meaning assigned
to such term in Section 3.1(a).
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.
(i) "Shares" shall mean the Ordinary Shares of the Company
that may be purchased hereunder.
(j) "Trading Day" shall mean (a) any day on which the Ordinary
Shares are traded on the Nasdaq SmallCap Market, or (b) if the Ordinary Shares
are not then listed or quoted for trading on the Nasdaq SmallCap Market, then a
day on which trading occurs on the New York Stock Exchange (or any successor
thereto).
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(k) "Warrants" shall have the meaning assigned to such term in
ARTICLE II Purchase and Sale of Shares and Warrants; Representations of Company
Section 2.1 Purchase and Sale of Shares. Subject to the terms
and conditions of this Agreement, each Investor agrees, severally and not
jointly, to purchase at the Closing, and the Company agrees to issue and sell to
each Investor, that number of Ordinary Shares of Company, 0.05 NIS par value per
share (the "Ordinary Shares"), indicated with respect to the investment amounts
corresponding to each such Investor on Exhibit A attached hereto at a purchase
price equal to $0.60 per Ordinary Share ("Purchase Price"). Against the payment
of the investment proceeds by the Investors to the Company, the Company shall
issue a Stock Certificate to each Investor indicating the number of Shares
purchased by such Investor. In addition, each Investor will receive, and the
Company agrees to issue to each such Investor, a warrant substantially in the
form attached hereto as Exhibit B (the "Warrants") to purchase up to:
o 60% (sixty percent) of the number of Ordinary Shares purchased by
Investor at Closing at a price per Ordinary Share equal to $0.65.
The Ordinary Shares, the Warrants, and the Ordinary Shares issued upon exercise
of the Warrants shall be hereinafter referred to as the "Securities."
Section 2.2 Closing. The purchase and sale of the Securities
shall take place at the offices of Commtouch Inc., 0000 Xxxxxxxxxx Xxxx, Xxxxx
000, Xxxxxxxx Xxxx, XX 00000 within three (3) business days upon attainment of
all of the following:
(a) the receipt of approvals from the Chief Scientist of
Israel and the Israel Investment Center, to the extent necessary;
(b) the receipt of approval of the shareholders of the
Company, to the extent necessary; and
(c) any other necessary approvals in connection with this
Agreement and the transactions contemplated thereunder (the "Closing");
provided that the Closing will not take place if the Company receives a
delisting letter from the Nasdaq and the reasons therefor are not cured by the
Company by the time that items (a) through (c) of this Section 2.2. are
achieved, unless the Investors otherwise agree in writing.
Each party shall deliver all documents, funds, instruments and writings required
to be delivered by such party pursuant to this Agreement at or prior to the
Closing. Notwithstanding the above regarding the place of the Closing, the
Company shall be entitled to cause its transfer agent to deliver directly to
each Investor a share certificate in accordance with the terms of this
Agreement. If the Closing has not occurred by the date 75 days from the
Agreement Date, the Company's obligation to sell and the Investors' obligation
to purchase the Securities will terminate, unless otherwise extended in writing
by mutual agreement of all of the parties hereto. The Investors will not be
obligated to purchase the Securities if, after the Agreement Date and before the
Closing, there shall have occurred a material adverse effect upon the business,
financial condition, results of operations, assets, properties or business
prospects of the Company.
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Section 2.3 Representations and Warranties of the Company. The
Company hereby represents and warrants as of the Agreement Date and as of the
Closing as follows:
(a) The Company is a company duly incorporated and validly
existing under the laws of Israel. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. Without
limiting the generality of the foregoing, the Company knows of no reason why it
will not be able to register the Registrable Securities as provided in Article
III below.
(b) The Company is authorized to issue the Shares, the
Warrants and the Ordinary Shares issuable upon exercise of the Warrants pursuant
to this Agreement, and the same shall be issued free and clear of any and all
liens, encumbrances, preemptive rights, security interests and claims of any
kind and nature, and no third party holds any right or interest (beneficial,
voting or otherwise) in the Shares or Warrants. The Shares when issued and paid
for as provided herein and the Ordinary Shares issuable upon exercise of the
Warrants when issued upon exercise thereof will be fully-paid and
non-assessable.
(c) The Company has full power and authority to enter into and
consummate the transactions contemplated by this Agreement, and the consent of
not other party or entity is necessary for the consummation of the transactions
contemplated herein other than as set forth herein. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated in this Agreement and the fulfillment of the terms of this
Agreement have been duly authorized by all necessary corporate action and will
not conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to, any contract, indenture, mortgage, loan
agreement, deed, trust, note, lease, sublease, voting agreement, voting trust or
other instrument or agreement to which the Company is a party or by which it may
be bound, or to which any of the property or assets of the Company is subject,
and will not trigger anti-dilution rights (apart from those described in the
warrant issued to Go2Net, Inc. (now known as Infospace) in July 1999 in the sum
of 1,136,000 Shares (the anti-dilution protection which will result in an
adjustment to the exercise price of such warrant, but will not result in an
adjustment in the amount of shares into which such warrant is exercisable)) or
other rights to acquire additional equity securities of the Company, nor will
such action result in any violation of the provisions of the articles of
association of the Company or any applicable statute, law, rule, regulation,
ordinance, decision, directive or order.
(d) The Company meets the eligibility requirements for the use
of Form F-3 for the registration of securities in a transaction involving
secondary offerings.
(e) The Company does not meet its listing requirements
according to NASDAQ rules and is engaged in discussions with the NASDAQ in an
effort to achieve compliance.
ARTICLE III Registration and Accredited Investor Rights and Obligations
Section 3.1 Registration Statement.
(a) Filing and Effectiveness. The Company will file as soon as
commercially practicable a Form F-3 (or if not eligible at such time to file
Form F-3, a Form F-1) registration statement with the Commission (the
"Registration Statement"), for non-underwritten resale into
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the open market of the Shares and the Ordinary Shares issuable upon exercise of
the Warrants (the "Registrable Securities"). Once filed, the Company shall take
all reasonable measures to cause such Registration Statement registering the
Registrable Securities to be declared effective. The Company will notify the
Investors and its transfer agent of the effectiveness of the Registration
Statement within ten (10) Trading Days of such event.
(b) Liquidated Damages for Failure to Register. In the event
that (a) the Registration Statement is not filed by the Company within 60 days
from the Closing Date, (b) the Registration Statement is not declared effective
by the Commission within 120 days from the Closing date, or (c) such
Registration Statement is not maintained as effective by the Company for the
period set forth in Section 3.1(c) below (each a "Registration Default"), and
the reason for any one of the above occurrences is not an event of Force
Majeure, then the Company will pay each Investor (pro-rata on a monthly basis)
for each Registration Default then in effect, as liquidated damages and not as a
penalty, during any period in which a Registration Default is occurring, 5%
(five percent) per calendar month or portion thereof of (i) the aggregate
Purchase Price paid by the Investor for the Securities, and (ii) the value of
any outstanding Warrants (valued at the difference between the average volume
weighted average price [based on a trading day from 9:30 a.m. to 4:00 p.m.] on
the NASDAQ SmallCap Market as reported by Bloomberg Financial LP using the AQR
function [i.e. volume weighted average quote recap] for the Ordinary Shares for
each Trading Day (the "VWAP") during the applicable month and the exercise price
multiplied by the number of Warrant Shares the Warrants are exercisable into,
but in no case less than zero), held by such Investor until such corresponding
Registration Default no longer exists ("Liquidated Damages"). Such payment of
the Liquidated Damages shall be made to the Investor upon 5 Trading Days'
irrevocable notice to the Investor, in cash or registered Ordinary Shares (based
on the average of the closing sale prices of an Ordinary Share during the 5
Trading Days immediately following such irrevocable notice by the Company of
such issuance), on the last day of each month during which a Registration
Default occurred or was continuing, without demand therefor by the Investor;
provided, however, that the payment of the Liquidated Damages shall not relieve
the Company from its obligations to register the Securities pursuant to this
Section. Provided however that in no event shall the amount of Liquidated
Damages payable hereunder to any Investor exceed 45% (forty-five percent) of the
Purchase Price paid by that Investor. And provided however that the Company
retains the discretion whether to pay such Liquidated Damages in cash or
registered Ordinary Shares. To the extent that the issuance of Ordinary Shares
that are registered as Liquidated Damages is subject to the same delay,
notwithstanding the above monthly requirement for payment, the Company may
deliver to the Investor such shares as soon as they become registered.
(c) Effectiveness Period. The Company will maintain the
Registration Statement effective under the Securities Act until the earlier of
(i) the date that all of the Shares and Ordinary Shares issued upon exercise of
the Warrants have been sold pursuant to such Registration Statement, (ii) the
date the Investors receive an opinion from counsel to the Company, which counsel
shall be reasonably acceptable to the Investors, that the Shares may be sold
under the provisions of Rule 144 without limitation as to volume, (iii) the date
that all Shares have been otherwise transferred to persons who may trade such
shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such Shares not
bearing a restrictive legend, or (iv) thirty-six (36) months from the Effective
Date.
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Section 3.2 Investors Representations.
(a) Investor Status Declaration. Each Investor declares that
it has such knowledge and experience as to be capable of evaluating the merits
and risks of its investment. Each Investor is able to fend for itself and can
bear the economic risk of this investment, including a complete loss.
(b) Purchase Entirely for Own Account. Investor undertakes to
acquire the Shares and Ordinary Shares issuable upon exercise of the Warrants
for investment and for Investor's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same, provided that nothing in this section shall constitute an
agreement by Investor to hold or refrain from disposing of the Shares and
Ordinary Shares issuable upon exercise of the Warrants for any amount of time,
provided that any transfer, sale or other disposition of the Shares by Investor
shall comply in all respects with the requirements of the Securities Act and
similar provisions of state law. Investor will have sole voting control over the
Shares and Ordinary Shares issuable upon exercise of the Warrants for purposes
of Section 13(d) of the Exchange Act. Investor does not presently have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities.
(c) Restricted Securities. Investor understands that the
Shares and the Ordinary Shares issuable upon exercise of the Warrants have not
been, and will not at the time of sale and issuance by the Company be,
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of
Investor's representations as expressed herein. Investor understands that the
Shares and the Ordinary Shares issuable upon exercise of the Warrants are
"restricted securities" under applicable U.S. federal and state securities laws
and regulations, and that pursuant to these laws, Investor must hold the Shares
and the Ordinary Shares issuable upon exercise of the Warrants indefinitely
unless the Securities are registered with the Commission and qualified by
necessary state authorities or an exemption from such registration and
qualification requirements is available. Investor further acknowledges that if
an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Shares and the Ordinary Shares
issuable upon exercise of the Warrants, and requirements relating to the Company
which are outside of Investor control and which the Company is under no
obligation, except as set forth herein, to satisfy.
(d) Information. Each Investor acknowledges that (i) it has
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Investor; (ii) it has been afforded
the opportunity to ask questions of the Company; (iii) it has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities;
(iv) it understands that it (and not the Company) shall be responsible for
Investor's own tax liabilities that may arise as a result of this investment or
the transactions contemplated by this Agreement; (v) it has had access to the
Company's Annual Report on Form 20-F for the year ended December 31, 2002, and
with Reports on Form 6-K for the months of April (2 reports) and June 2003, all
as filed with the SEC; and (vi) it understands that an investment in the Company
may be considered as a high-risk investment, and the Investor nevertheless has
voluntarily agreed to consummate the investment.
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Section 3.3 Piggy-Back Registration.
(a) The Company shall notify the Investors in writing at least
fifteen (15) days prior to filing any registration statement under the 1933 Act
for purposes of effecting a public offering of securities of the Company
(including, but not limited to, registration statements relating to secondary
offerings of securities of the Company, but excluding registration statements
relating to any employee benefit plan or a corporate reorganization) and will
afford the Investors an opportunity to include in such registration statement
all or any part of the Shares or the Ordinary Shares reserved for issuance upon
exercise of the Warrant. If an Investor desires to include in any such
registration statement all or any part of such securities, the Investor shall,
within ten (10) days after receipt of the above-described notice from the
Company, so notify the Company in writing, and in such notice shall inform the
Company of the number of Shares and Ordinary Shares reserved for issuance upon
exercise of the Warrant that Investor wishes to include in such registration
statement. If Investor decides not to include all of the Shares or Ordinary
Shares issued or reserved for issuance upon the exercise of the Warrant in any
registration statement thereafter filed by the Company, the Investor shall
nevertheless continue to have the right to include any such securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein. The Company will cooperate with the Investor to
facilitate its distribution of securities pursuant to any such registration
statement.
(b) All expenses incurred by the Company in complying with
Section 3.3(a) (other than the underwriter's discounts and commissions),
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), fees and expenses of complying with securities and blue sky laws (except
for blue sky expenses required by law to be borne by Investors), expense
allowances of the underwriters, printing expenses, fees and disbursements of
counsel or other advisor to the Company, and of the accountants to Company, are
herein called "Registration Expenses." All fees and expenses of counsel for any
selling Investor and all underwriting discounts and commissions applicable to
the eligible securities covered by any such registration, are herein called
"Selling Expenses." The Company shall pay all Registration Expenses in
connection with each registration pursuant to Section 3.3(a). All Selling
Expenses and blue sky expenses required by law to be borne by Investors in
connection with each registration pursuant to Section 3.3(a) shall be borne by
the Investor or Investors therein in proportion to the number of eligible
securities included by each in such registration or in such other proportions as
they may agree upon. In the event of any dispute as to how Selling Expenses are
allocated, the Company shall be entitled to apportion the expenses in a
reasonable manner between the various Investors.
(c) The piggy-back registration rights granted in this Section
3.3 shall take effect solely if the Registration Statement described in Section
3.1(a) above is not declared effective within 90 days of the Closing date.
Section 3.4 Indemnification.
(a) Indemnification by Company. In the event of a registration
of any Shares pursuant to this Article III, the Company will hold harmless
Investors and each officer, director, employee and advisor of each of the
foregoing, against any expenses, losses, claims, damages or
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liabilities, joint or several, to which Investors may become subject under the
Securities Act, any state securities law or otherwise, including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
insofar as such expenses, losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained, on the Effective Date thereof,
in any registration statement under which such Shares are registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, 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 in light of the
circumstances under which they were made not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
expense, loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, said preliminary prospectus or said
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished in writing to the Company by or on behalf of
Investors or specifically for use in the preparation thereof.
(b) Indemnification by Investors. In the event of any
registration of any Shares under the Securities Act pursuant to this Article
III, each Investor, severally and not jointly, will indemnify and hold harmless
the Company, each officer of the Company who signs the registration statement,
and each director of the Company against any and all such expenses, losses,
claims, damages or liabilities referred to in the first paragraph of this
Section 3.4, if the statement, alleged statement, omission or alleged omission
in respect of which such expense, loss, claim, damage or liability is asserted
was made in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of such Investor specifically for use in
connection with the preparation of such registration statement, preliminary
prospectus, prospectus, amendment or supplement.
(c) Indemnification Procedure. Each party entitled to
indemnification under this Section 3.4 (the "Indemnified Party") shall give
notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting thereon,
provided that the Indemnified Party may participate in such defense at its own
expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 3.4 except to the extent such failure resulted in
actual detriment to the Indemnifying Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
ARTICLE IV Additional Covenants
Section 4.1 Transfer Restrictions.
(a) The Investors agree to the imprinting, so long as is
required by this Section 4.1, of the following legend (the "Legend") on any
certificate evidencing Securities:
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THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
(b) Certificates evidencing the Shares shall not contain any
legend (including the legend set forth in Section 4.1(a)) while a registration
statement covering the resale of such security is effective under the Securities
Act, provided that an Investor wishing to have the legend removed from a
certificate first provide the Company with a broker's letter in appropriate form
evidencing the Investor's present intent to resell the security or (ii)
following any sale of such Shares pursuant to Rule 144, or (iii) if such Shares
are eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
Section 4.2 Rule 144 and 144A Reporting.
(a) With a view to making available to holders of Registrable
Securities the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees at all times to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144 and
Rule 144A; and (ii) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
(b) For purposes of facilitating sales pursuant to Rule 144A,
so long as the Company is not subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, each holder of Registrable Securities and any
prospective purchaser of such holder's securities shall have the right to obtain
from the Company, upon request of the holder prior to the time of sale, a brief
statement of the nature of the business of the Company and the products and
services it offers; and the Company's most recent balance sheet and profit and
loss and retained earnings statements, and similar financial statements for the
two preceding fiscal years (the year end financial statements should be audited
to the extent reasonably available).
Section 4.3 For as long as the Company's shares are listed on
the Nasdaq SmallCap Market or any relevant market or system, the Company will
use best efforts to list the Shares and Ordinary Shares obtained upon exercise
of the Warrants for trading on the Nasdaq system or any relevant market or
system, if applicable. The Company will use commercially reasonable efforts to
continue the listing or trading of its Ordinary Shares on the Nasdaq SmallCap
Market or any relevant market or system, if applicable, and will use
commercially reasonable efforts to comply in all respects with the Company's
reporting, listing or other obligations under the rules of the Nasdaq SmallCap
Market or any relevant market or system.
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ARTICLE V Miscellaneous
Section 5.1 Fees and Expenses.
(a) Each party will pay its own fees and expenses related to
the transactions contemplated by this Agreement.
Section 5.2 Consent to Jurisdiction and Governing Law.
Each of the Company and Investors (i) hereby irrevocably submit to the exclusive
jurisdiction of the United States District Court and other courts of the United
States sitting in the State of California for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Company,
Investors consent to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section shall
affect or limit any right to serve process in any other manner permitted by law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of California, without giving effect to the choice of
law provisions thereof. Section 5.3 Entire Agreement; Amendment. This Agreement
contains the entire understanding of the parties with respect to the matters
covered hereby and, except as specifically set forth herein, neither the Company
nor Investors makes any representations, warranty, covenant or undertaking with
respect to such matters. The parties hereto may not amend this Agreement or any
rights or obligations hereunder without the prior written consent of the Company
and Investors.
Section 5.4 Notices. Any notice, demand, request, waiver or
other communication required or permitted to be given hereunder shall be in
writing and shall be effective (a) upon hand delivery, by telecopy or facsimile
at the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of dispatch by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
dispatch, whichever shall first occur. The addresses for such communications
shall be:
If to the Company: Commtouch Software Ltd.
c/o Commtouch Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000-0000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxx Xxxxxx, Chief Executive Officer
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If to the Investors: To the address and fax number indicated on the
signature page hereof.
With a copy (which shall Xxxxx Xxxxx & Co.
not constitute notice) to: 00 Xxxxxx Xxxxxx
Xxxxxxxxx 00000, Xxxxxx
Attention: Xxxxx Xxxxxxxxx
Fax No.: (000-0) 000-0000
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 5.5 Waivers. No provision of this Agreement may be
waived other than by a written instrument signed by the party against whom
enforcement of any such waiver is sought. No waiver by either party of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provisions, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Section 5.6 Headings. The article, section and subsection
headings in this Agreement are for convenience only and shall not constitute a
part of this Agreement for any other purpose and shall not be deemed to limit or
affect any of the provisions hereof.
Section 5.7 Successors and Assigns. Investors may not assign
this Agreement to any person without the prior consent of the Company, which
consent will not be unreasonably withheld. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns.
Section 5.8 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument.
Section 5.9 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 5.10 Further Assurances. From and after the date of
this Agreement, upon the request of the Investors or the Company, each of the
Company and the Investors shall execute and deliver such instruments, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement.
Section 5.11 Corporate Securities Laws. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
10
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS
SO EXEMPT.
[remainder of page intentionally left blank]
11
[ORDINARY SHARES AND WARRANTS PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
COMMTOUCH SOFTWARE LTD.
By:
--------------------------------
Name:
Title:
INVESTORS:
Israel Seed IV, L.P. Argos Capital Management, Inc.
By: By:
------------------------------- --------------------------------
Signature Signature
----------------------------- -------------------------------
Name and Title of Signatory Name and Title of Signatory
12
Exhibit A
Schedule of Investors and Investment Amount
----------------------------------------- ----------------- ------------- --------------
Name and Address of Investor Amount of No. of No. of
Investment Ordinary Warrants
Shares
----------------------------------------- ----------------- ------------- --------------
Israel Seed IV, L.P. $1,000,000 1,666,667 1,000,000
Queensgate Bank & Trust Company Ltd.
Xxxxxxx Xxxxx, 0xx Xxxxx
000 Xxxxx Xxxxxx Xxxxxx
P.O. Box 30464 SMB
Grand Cayman, Cayman Island
Tel: (000 0) 000 0000
Fax: (000 0) 000 0000
email: xxxxxx@xxxxxxxxxx.xxx
Attn: Xxxxxx Xxxxx
----------------------------------------- ----------------- ------------- --------------
Argos Capital Management, Inc. $500,000 833,333 500,000
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Email: xxx@xxxxxx.xxx
Attn. Xxxxxxx X. Xxxxxx
----------------------------------------- ----------------- ------------- --------------
1
Exhibit B
Form of Warrant
Issued _______, 200_
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN. "THIS WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE COMPANY MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE THAT SUCH
REGISTRATION IS NOT REQUIRED.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
Void after ________, 200_
COMMTOUCH SOFTWARE LTD.
WARRANT TO PURCHASE UP TO ________ [ORDINARY] SHARES
----------
THIS CERTIFIES THAT, for value received, _____________, a ________ company
("_______" or "Holder"), is entitled at any time prior to expiration of this
Warrant to subscribe for and purchase up to __________ shares of the fully paid
and nonassessable ordinary shares, nominal value NIS 0.05, of Commtouch Software
Ltd., an Israeli company (the "Company"), at the price per share equal to $0.65
(such price and such other price as may result, from time to time, from the
adjustments/restrictions specified in paragraph 4 hereof are collectively
referred to herein as the "Warrant Price"), subject to the provisions and upon
the terms and conditions hereinafter set forth. As used herein, "Shares" shall
mean the ordinary shares of the Company; "Warrant Shares" shall mean the Shares
issued or issuable upon exercise of the Warrants; and "Date of Grant" shall mean
___________, 200_.
2
1. TERM.
This Warrant is exercisable, in whole or in part, at any time and from time to
time on and after the Date of Grant through ______, 200__[fifth anniversary of
Date of Grant].
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) The purchase right represented by this Warrant may be exercised by
the holder hereof, in whole or in part, by the surrender of this Warrant (with
the notice of exercise form attached hereto as Exhibit A duly executed) at the
principal office of the Company and (i) by the payment to the Company, by check,
of an amount equal to the Warrant Price per Share multiplied by the number of
Shares then being purchased.
(b) In the event of any exercise of the purchase right represented by
this Warrant, certificates for the Shares so purchased shall be delivered to the
holder hereof within ten business days of the effective date of such purchase
and, unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the securities, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof within such ten-day period. Upon the effective date of such purchase, the
holder shall be deemed to be the holder of record of the securities,
notwithstanding that certificates representing the securities shall not then be
actually delivered to such holder or that such securities are not then set forth
on the stock transfer books of the Company.
(c) In lieu of exercising this Warrant by payment of cash or check, and
provided that applicable law so allows, the Holder may elect to receive shares
equal to the value of this Warrant (or the portion thereof being exercised) at
any time after the date hereof during the term hereof, by surrender of this
Warrant at the principal executive office of the Company, together with the
Notice of Conversion in the form of Exhibit B annexed hereto, in which event the
Company shall issue to Holder a number of Shares in accordance with the
following formula:
Y(A-B)
------
X = A
Where, X = the number of Shares to be issued to Holder;
Y = the number of Shares for which the Warrant is
being exercised;
A = the fair market value of one Share; and
B = the Exercise Price.
For purposes of this Section 2(c), the fair market value of the Shares shall
mean the price determined by the Company's Board of Directors, acting in good
faith, upon a review of all relevant factors; provided, however, that (i) where
there exists a public market for the Company's Shares at the time of such
exercise, the fair market value per Share shall be the average of the closing
bid and asked prices of the Shares quoted
3
in the Over-The-Counter- Market Summary or the last reported sale price of the
Shares or the closing price quoted on the Nasdaq SmallCap or National Market on
which the Shares are listed for the five (5) days prior to the date of
determination of fair market value, or (ii) upon the exercise of this Warrant
concurrently with the closing of the sale, lease, distribution or other
disposition of all or substantially all of the assets of the Company or all or
substantially of the Company's share capital including a merger or consolidation
of the Company with or into any other entity or entities, or any other corporate
reorganization, where the shareholders of record as constituted immediately
prior to such event do not retain, immediately after such event, as a result of
or in exchange for their equity in the Company at least a fifty percent (50%)
interest in the successor entity (a "Sale"), the per share price to be received
by the holders of Shares. Exercise of this Warrant concurrently with the closing
of a Sale, made be made conditional on the closing of such Sale.
3. SHARES FULLY PAID; RESERVATION OF SHARES.
(a) All securities which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be fully paid and
nonassessable, and free from all taxes, liens, preemptive rights and charges
with respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of Shares to
provide for the exercise of the rights represented by this Warrant.
(b) The Company will not, by amendment of its memorandum or association
or articles of association, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, willfully avoid or seek to avoid the observance or performance of any of
the terms hereof, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of Warrant Holder under the Warrants
against such willful actions. Without limiting the generality of the foregoing,
the Company: (i) will not set nor increase the par or nominal value of any
Warrant Shares above the amount payable therefor upon such exercise, and (ii)
will take all actions that are necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of the Warrants.
4. ADJUSTMENTS.
The maximum number of Warrant Shares issuable upon exercise of this Warrant and
the Warrant Price shall be adjusted if any of the following events occur before
the holder's exercise of this Warrant:
(a) Distributions, Share Dividends and Splits.
(i) In case the Company declares a dividend (whether ordinary
or extraordinary) or other distribution payable in Shares or subdivides its
Shares into a greater number of Shares, the Warrant Price in effect immediately
prior to such declaration or subdivision shall be proportionately decreased and
the number and kind
4
of Shares purchasable upon exercise of this Warrant shall be adjusted so that
the holder thereof shall be entitled to receive the kind and number of shares or
the other securities of the Company that the holder would have owned or have
been entitled to receive after the happening of any of the events described in
this paragraph (a)(i) had the Warrant Shares been issued immediately prior to
the happening of such event or any record date with respect thereto.
(ii) In the case of any reclassification or change of the
outstanding securities of the Company or of any reorganization of the Company
after the date hereof, or in case, after such date, the Company shall
consolidate with or merge with or into another corporation or convey all or
substantially all of its assets to another corporation or other entity, then, in
each such case, Warrant Holder, upon any exercise of this Warrant, at any time
after the consummation of such reclassification, change, reorganization,
consolidation, merger, or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon the exercise of this
Warrant prior to such consummation, the stock or other securities or property to
which such Warrant Holder would have been entitled upon the consummation of such
reclassification, change, reorganization, consolidation, merger or conveyance if
Warrant Holder had exercised the Warrants immediately prior thereto, all subject
to further adjustment as provided in this Section, and the successor or
purchasing corporation or other entity in such reclassification, change,
reorganization, consolidation, merger or conveyance (if not the Company) shall
duly execute and deliver to Warrant Holder a supplement hereto acknowledging
such corporation's or entity's obligations under the Warrants; and in each such
case, the terms of the Warrants (including the exercisability, transfer and
adjustment provisions of the Warrants) shall be applicable to the shares of
stock or other securities or property receivable upon the exercise of the
Warrants after the consummation of such reclassification, change,
reorganization, consolidation, merger or conveyance.
(iii) An adjustment made pursuant to this paragraph (a) shall
become effective immediately after the record date in the case of a dividend or
distribution and shall become immediately effective after the effective date in
the case of a subdivision. If, as a result of an adjustment made pursuant to
this paragraph (a), the holder after exercise shall become entitled to receive
shares of two or more classes of capital stock or Shares and any other class of
capital stock of the Company, the Board of Directors of the Company (whose
determination shall be conclusive and shall be described in a written notice to
the holder promptly after such adjustment) shall determine the allocation of the
adjusted Warrant Price between or among shares of such classes of capital stock
or Shares and such other classes of capital stock.
(iv) In the case of any adjustment in the number of Warrant
Shares receivable upon the exercise of the Warrants pursuant to the terms
hereof, the chief financial officer of the Company shall promptly thereafter
compute such adjustment in accordance with the terms hereof and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based. The Company will provide copies of such
certificate to Warrant Holder in the manner provided for notices hereunder.
(v) In case, at any time during the term of this Warrant, the
Company shall declare a cash dividend upon its Ordinary Shares payable otherwise
than out of earnings or earned surplus or shall distribute to holders of its
Ordinary
5
Shares, shares of its share capital (other than Ordinary Shares), or other
securities of other persons, evidences of indebtedness issued by the Company or
other persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Ordinary
Shares or other securities of the Company convertible into or exchangeable for
Ordinary Shares), then, in each such case, immediately following the record date
fixed for the determination of the holders of Ordinary Shares entitled to
receive such dividend or distribution, the Warrant Price in effect thereafter
shall be determined by multiplying the Warrant Price in effect immediately prior
to such record date by a fraction of which the numerator shall be an amount
equal to the difference of (x) the Current Market Price of one share of Ordinary
Shares minus (y) the fair market value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the amount of cash,
stock, securities, evidences of indebtedness, assets, options or rights, as the
case may be, so distributed in respect of one Ordinary Share, and of which the
denominator shall be such Current Market Price. For the purpose of any
computation pursuant to this Section, the Current Market Price at any date of
one Ordinary Share shall be deemed to be the average of the daily closing prices
for the 15 consecutive business days ending on the last business day before the
day in question (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such 15 business day period). The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sales took place on such day, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Ordinary Shares is listed or admitted
to trading or as reported by Nasdaq (or if the Ordinary Shares is not at the
time listed or admitted for trading on any such exchange or if prices of the
Ordinary Shares are not reported by Nasdaq then such price shall be equal to the
average of the last reported bid and asked prices on such day as reported by The
National Quotation Bureau Incorporated or any similar reputable quotation and
reporting service, if such quotation is not reported by The National Quotation
Bureau Incorporated); provided, however, that if the Ordinary Shares are not
traded in such manner that the quotations referred to in this clause (v) are
available for the period required hereunder, the Current Market Price shall be
determined in good faith by the Board of Directors of the Company or, if such
determination cannot be made or if Holder disputes in writing any determination
so made by the Company's Board of Directors within 30 days of being informed of
such determination, by a nationally recognized independent investment banking or
accounting firm selected by the Board of Directors of the Company (or if such
selection cannot be made, by a nationally recognized independent investment
banking or accounting firm selected by the American Arbitration Association in
accordance with its rules).
(b) Record Date. In case the Company shall take a record of the holders
of its Shares for the purpose of determining holders entitled to receive a
dividend or other distribution payable in Shares, then such record date shall be
considered to be the date of the issue or sale of the Shares related to such
dividend or distribution.
(c) Stock Combinations. In case the Company shall combine all of the
outstanding Shares into a smaller number of Shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased and the
number of Warrant Shares shall be proportionately decreased.
6
(d) Fractional Shares. No fractional Warrant Shares shall be issued
upon the exercise hereof. Upon exercise by any holder, such holder shall be
entitled to receive the aggregate full number of Shares which the holder may
receive upon exercise.
(e) The adjustment to the number of Shares issuable upon the exercise
hereof and the adjustments to the Warrant Price described in this Section 4
shall be made each time any event listed in this Section 4 occurs.
(f) If any event occurs of the type contemplated by the provisions of
this Section 4, but not expressly provided for by such provisions or definition,
then the Company's Board of Directors in its reasonable judgment shall make an
appropriate adjustment in the number of Warrant Shares obtainable upon exercise
of this Warrant so as to protect the rights of the Warrant Holder.
5. COMPLIANCE WITH SECURITIES ACT; RESTRICTIONS ON TRANSFER; REPRESENTATIONS.
Holder hereby represents and warrants that:
(a) Purchase Entirely for Own Account. This Warrant and the Warrant
Shares issuable upon exercise hereof (collectively, the "Securities") will be
acquired for investment for Holder's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and Holder
has no present intention of selling, granting any participation in or otherwise
distributing the same, provided that nothing in this section shall constitute an
agreement by the Holder to hold or refrain from disposing of the Warrant Shares
for any amount of time, provided that any transfer, sale or other disposition of
the Warrant Shares shall comply in all respects with the requirements of the
Securities Act and similar provisions of state law. Holder does not presently
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to any person with respect to any of the
Securities.
(b) Investment Experience. Holder acknowledges that it is able to fend
for itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in this Warrant. Holder also represents
it has not been organized for the purpose of acquiring this Warrant.
(c) Accredited Investor. Holder is (a) an "accredited investor" within
the meaning of Rule 501 of Regulation D of the Securities and Exchange
Commission (the "SEC"), as presently in effect.
(d) Restricted Securities. Holder understands that the Securities are
characterized as "restricted securities" under the federal securities laws in as
much as they are being acquired from the Company in a transaction not involving
a public offering, and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act of 1933,
as amended ("the Securities Act") only in certain limited circumstances. In this
connection, Holder represents that it is familiar with SEC Rule 144 promulgated
under the Securities Act,
7
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
(e) Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Holder further agrees not to make any
disposition of all or any portion of the Warrant Shares: (i) unless and until
there is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement, or (ii) pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
securities act. The Company may require an opinion of counsel in form and
substance reasonably acceptable that such registration is not required.
(f) Authorization. If the holder is not a natural person, the holder
hereby represents that its acceptance of this Warrant has been authorized on its
behalf by all appropriate limited liability company, corporate or partnership
action.
(h) Legend. This Warrant and all Shares issued upon exercise of this
Warrant(unless registered under the Securities Act) shall be stamped or
imprinted with a legend in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE COMPANY MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE THAT SUCH
REGISTRATION IS NOT REQUIRED.
The Company need not register a transfer of this Warrant or the Warrant Shares
unless the conditions specified in such legend are satisfied. Subject to the
foregoing transfer restrictions set forth in this Section, this Warrant is
transferable, in whole or in part, on the books of the Company, upon surrender
of this Warrant to the Company, together with a written assignment duly executed
by the Holder.
(i) Notwithstanding the foregoing, the restrictions imposed upon the
transferability of this Warrant and the Warrant Shares shall cease and terminate
as to this Warrant or any particular shares of capital stock when, (i) such
Warrant or Warrant Shares shall have been effectively registered under the 1933
Act and sold by the holder thereof in accordance with such registration or (ii)
counsel for Holder provides an opinion, in form and substance reasonably
satisfactory to the Company (or in lieu of an opinion of counsel, Holder
provides the Company with other evidence satisfactory to the Company), that such
restrictions are no longer required in order to ensure compliance with the 1933
Act. If and whenever the restrictions imposed hereunder shall terminate as to
this Warrant (or to any Warrant Shares) as
8
hereinabove provided, Holder may and the Company shall, as promptly as
practicable upon the request of Holder and at the Company's expense, cause to be
stamped or otherwise imprinted upon this Warrant or such shares of capital stock
a legend in substantially the following form:
"The restrictions on the transferability of [this] [these]
[Warrant] [securities] terminated on _______________, _____,
and are of no further force or effect"
or take such other action as to effectively remove the restrictions on the
transferability of the Warrant and the Warrant Shares.
Any Warrant issued upon the split-up, combination, exchange, substitution,
transfer or loan of the Warrants entitled to bear such legend shall have a
similar legend endorsed thereon. Whenever the restrictions imposed hereunder
shall terminate as to any Warrant or as to any shares of capital stock, as
hereinabove provided, the Holder thereof shall be entitled to receive from the
Company without expense, a new Warrant or new shares of capital stock not
bearing the restrictive legend set forth hereon or above, respectively.
(j) The Company shall cause all Warrant Shares covered by a valid
registration statement to be listed on any securities exchange upon which the
Shares are then listed.
6. RIGHTS OF SHAREHOLDERS.
No holder of the Warrant or Warrants shall be entitled to vote or receive
dividends or be deemed the holder of Shares, nor shall anything contained herein
be construed to confer upon the holder of this Warrant, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings, or to receive dividends until the
Warrant or Warrants shall have been exercised and the Shares shall have become
deliverable, as provided herein.
7. PIGGY-BACK REGISTRATION RIGHTS
(a) The Company shall notify Warrant Holder in writing at least fifteen
(15) days prior to filing any registration statement under the 1933 Act for
purposes of effecting a public offering of securities of the Company (including,
but not limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any
employee benefit plan or a corporate reorganization) and will afford Warrant
Holder an opportunity to include in such registration statement all or any part
of the Warrant Shares issued or reserved for issuance to Warrant Holder upon
exercise of this Warrant. If Warrant Holder desires
9
to include in any such registration statement all or any part of such Warrant
Shares, Warrant Holder shall, within ten (10) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Warrant Shares Warrant
Holder wishes to include in such registration statement. If Warrant Holder
decides not to include all of the shares of Ordinary Shares issued or reserved
for issuance to Warrant Holder upon the exercise of this Warrant in any
registration statement thereafter filed by the Company, Warrant Holder shall
nevertheless continue to have the right to include any such Warrant Shares any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein. The Company will cooperate with Warrant Holder to
facilitate its distribution of Warrant Shares pursuant to any such registration
statement.
(b) The Company agrees to indemnify and hold harmless Warrant Holder
and its directors, officers, employees, agents, partners, members, controlling
persons and affiliates from and against any expenses, losses, claims, damages or
liabilities they may incur arising out of any untrue or alleged untrue statement
of material fact contained in such registration statement, or any amendment or
supplement thereto, or arising out of or 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 arising out of any
violation of the 1933 Act or the Securities Exchange Act of 1934, as amended, in
connection therewith, provided, however, that the Company will not be liable in
any such case to the extent that any such expense, loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
or amendment thereto in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of the Holder specifically
for use in the preparation thereof. Provided that Warrant Holder is entitled to
indemnification hereunder, the Company will reimburse Warrant Holder and its
directors, officers, employees, agents, controlling persons and affiliates for
any legal or other expenses reasonably incurred in connection with investigating
or defending any such action or claim as such expenses are incurred.
(c) All expenses incurred by the Company in complying with Section 7(a)
(other than the underwriter's discounts and commissions), including, without
limitation, all registration and filing fees (including all expenses incident to
filing with the National Association of Securities Dealers, Inc.), fees and
expenses of complying with securities and blue sky laws (except for blue sky
expenses required by law to be borne by sellers), expense allowances of the
underwriters, printing expenses, fees and disbursements of counsel or other
advisor to the Company, and of the accountants to Company, are herein called
"Registration Expenses." All fees and expenses of counsel for any selling
Warrant Holder and all underwriting discounts and commissions applicable to the
eligible securities covered by any such registration, are herein called "Selling
Expenses."
(d) The Company shall pay all Registration Expenses in connection with
each registration pursuant to Section 7(a). All Selling Expenses and blue sky
expenses required by law to be borne by sellers in connection with each
registration pursuant to Section 7(a) shall be borne by the seller or sellers
therein in proportion to
10
the number of eligible securities included by each in such registration or in
such other proportions as they may agree upon. In the event of any dispute as to
how Selling Expenses are allocated, the Company shall be entitled to apportion
the expenses in a reasonable manner between the various sellers.
(e) The piggy-back registration rights granted in this Section 6 are in
addition to, and not in lieu of, any other registration rights the Holder may
have by virtue of other contractual arrangements with the Company.
8. GOVERNING LAW.
The terms and conditions of this Warrant shall be governed by and construed in
accordance with the laws of the State of California.
9. MISCELLANEOUS.
The headings in this Warrant are for purposes of convenience and reference only,
and shall not be deemed to constitute a part hereof. Neither this Warrant nor
any term hereof may be changed, waived, discharged or terminated orally but only
by an instrument in writing signed by the Company and the registered holder
hereof. All notices and other communications from the Company to the holder of
this Warrant shall be mailed by first-class registered or certified mail or
recognized commercial courier service, postage prepaid, to the address furnished
to the Company in writing by the last holder of this Warrant who shall have
furnished an address to the Company in writing.
_______, 200_ COMMTOUCH SOFTWARE LTD.
------------------------------------
Xxxxxx Xxxxxx, Chief Executive Officer
11
EXHIBIT A
NOTICE OF EXERCISE
TO: COMMTOUCH SOFTWARE LTD.
1. The undersigned hereby elects to purchase ___________ Shares of
Commtouch Software Ltd. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such Shares in full, together
with all applicable transfer taxes, if any.
2. The undersigned represents that the Shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
3. Please issue a certificate or certificates representing said Shares
in the name of the undersigned or in such other name as is specified below:
---------------------------------
(Name)
---------------------------------
---------------------------------
(Address)
-----------------------------------
Name of Warrant holder
-----------------------------------
Signature of Authorized Signatory
-----------------------------------
Print Name and Title
-----------------------------------
Date
EXHIBIT B
NOTICE OF CONVERSION
TO: COMMTOUCH SOFTWARE LTD.
1. The undersigned hereby elects to convert the attached Warrant into
such number of Ordinary Shares (the "Shares") of Commtouch Software Ltd. as is
determined pursuant to Section 2(c) of such Warrant, which conversion shall be
effected pursuant to the terms of the attached Warrant.
2. Please issue a certificate or certificates representing the Shares
in the name of the undersigned or in such other name as is specified below:
---------------------------------
(Print Name)
---------------------------------
(Address)
---------------------------------
(Address)
3. The undersigned represents that the Shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
(Date) (Signature)
(Print Name)
