EXHIBIT 10.17
SHARES AND WARRANT PURCHASE AGREEMENT
SHARES AND WARRANT PURCHASE AGREEMENT (this "Agreement") made as of
January __, 2004 by and between Xfone, Inc a Nevada corporation having its
executive offices located at Xxxxxxxxx Xxxxx, 000 Xxxx Xxxx Xxxxxx X00 0XX,
Xxxxxx Xxxxxxx (the "Company"), and the purchasers identified on Exhibit 1
hereto (each a "Purchaser" and together, the "Purchasers").
WHEREAS, the each of the Purchasers has agreed (severally and not in
connection with the purchase by the other Purchasers) to purchase from the
Company, and the Company has agreed to sell to each of the Purchasers, shares of
common stock of the Company (the "Shares") described herein; and
WHEREAS, the Company has agreed to issue to each of the Purchasers certain
warrants to purchase shares of common stock of the Company (the "Warrants")
described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the Purchasers and the
Company agree as follows:
Section 1. Issuance of Shares and Warrants ("Securities"). Subject to the
terms and conditions of this Agreement, each Purchaser agrees, simultaneously
with the execution and delivery of this Agreement, to purchase from the Company
the amount of Shares set forth opposite to its name in Exhibit 1 at a purchase
price of U.S. $3.00 per share. Simultaneously with the execution and delivery of
this Agreement (i) each Purchaser is paying the Purchase Price set forth on
Exhibit 1 opposite to the name of such Purchaser by wire transfer of immediately
available funds to the Company in accordance with the wire transfer instructions
set forth on Exhibit 2 hereto and is executing and delivering to the Company an
Irrevocable Proxy in the form attached hereto as Exhibit 3; (ii) the Company is
delivering to each Purchaser a stock certificate evidencing such Purchaser's
ownership of the number of shares set forth in Exhibit 1 opposite to the name of
such Purchaser. Simultaneously with the execution and delivery of this
Agreement, the Company is issuing to each Purchaser Warrants to purchase the
amount of Shares of the Company set forth on Exhibit 1 opposite to the name of
such Purchaser, such Warrants to be in the forms attached hereto as Exhibits 4
and 5. Simultaneously with the execution and delivery of this Agreement, the
Company and each Purchaser is executing and delivering a Registration Rights
Agreement (the "Registration Rights Agreement") substantially in the form of
Exhibit 6 hereto. As used herein the term "Transaction Documents" means this
Agreement, the Warrants and the Registration Rights Agreement, and completion of
all of the actions described in this Section 1 is considered the "Closing Date".
Section 2. Company Representations and Warranties. The Company represents
and warrants to each of the Purchasers severally that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective jurisdictions of their incorporation and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or financial condition of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its subsidiaries has been duly authorized and
validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement, the Warrants, the
Registration Agreement and any other agreements delivered together with this
Agreement or in connection herewith have been duly authorized, executed and
delivered by the Company and are valid and binding agreements enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity; and the Company has full corporate power and authority necessary to
enter into this Agreement, the Warrants, the Registration Agreement and such
other agreements and to perform its obligations hereunder and under all other
agreements entered into by the Company relating hereto.
(d) Outstanding Rights to Equity. In Schedule 2(d) is a list of the
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of the Company.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its affiliates, the Amex, the National Association of
Securities Dealers, Inc., Nasdaq, SmallCap Market, the OTC Bulletin Board nor
the Company's Shareholders is required for the execution and compliance by the
Company of its obligations under this Agreement, except as stated herein this
Agreement, and all other agreements entered into by the Company relating hereto,
including, without limitation, the issuance and sale of the Securities, and the
performance of the Company's obligations hereunder and under all such other
agreements.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Purchasers herein this Agreement are true and correct, neither
the issuance and sale of the Shares and Warrants nor the performance of the
Company's obligations under this Agreement and all other agreements entered into
by the Company relating thereto by the Company will:
2
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles of incorporation, charter or bylaws of the Company, (B) to the
Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or any of its
subsidiaries or over the properties or assets of the Company or any of its
affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its affiliates, or subsidiaries is a party, by which the Company or any of
its affiliates or subsidiaries is bound, or to which any of the properties of
the Company or any of its affiliates or subsidiaries is subject, or (D) the
terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its affiliates or subsidiaries is a
party except the violation, conflict, breach, or default of which would not have
a material adverse effect on the Company; or
(ii) result in the creation or imposition of any lien, charge
or encumbrance upon the Securities or any of the assets of the Company, its
subsidiaries or any of its affiliates.
(g) The Shares and Warrants. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances, subject to restrictions upon transfer under
the 1933 Act and any applicable state securities laws; and
(ii) have been, or will be, duly and validly authorized and on
the date of issuance, and upon exercise of the Warrants, the Warrant Shares will
be duly and validly issued, fully paid and nonassessable (and if registered
pursuant to the 1933 Act, and resold pursuant to an effective registration
statement will be free trading and unrestricted, provided that each Purchaser
complies with the prospectus delivery requirements of the 1933 Act and any state
securities laws); and
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company; and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under this Agreement, and all
other agreements entered into by the Company relating hereto. There is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its affiliates which
litigation if adversely determined could have a material adverse effect on the
Company.
(i) Reporting Company. The Company is a publicly-held company
subject to reporting obligations pursuant to Sections 15(d) and 13 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports ("Reports")
and other materials required to be filed there under with the Commission during
the preceding twelve months.
3
(j) No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued or resold.
(k) Information Concerning Company. The Reports contain all material
information relating to the Company and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein. Since the date of the financial statements included in the Reports, and
except as modified in the Other Written Information or in the Schedules hereto,
there has been no material adverse change in the Company's business, financial
condition or affairs not disclosed in the Reports. The Reports 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 not
misleading in light of the circumstances when made.
(l) Stop Transfer. The Shares and Warrants, when issued, will be
restricted securities. The Company will not issue any stop transfer order or
other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws.
The Company will not issue any stop transfer or other order impeding the sale,
resale or delivery of the Securities unless contemporaneous notice of such
instruction is given to the Subscriber.
(m) Defaults. The Company is not in violation of its articles of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its properties are bound or affected, which default or violation
would have a material adverse effect on the Company, (ii) not in default with
respect to any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) to
its knowledge in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.
(n) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board. Nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offer of the
Securities to be integrated with other offerings. The Company will not conduct
any offering other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities.
(o) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 0000 Xxx) in connection with the offer or sale
of the Securities.
4
(p) Listing. The Company's common stock is quoted on the Bulletin
Board. The Company has not received any oral or written notice that its common
stock will be delisted from the Bulletin Board nor that its common stock does
not meet all requirements for the continuation of such quotation and the Company
satisfies the requirements for the continued listing of its common stock on the
Bulletin Board.
(q) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, which are not
disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company's businesses since December 31,
2002 and which, individually or in the aggregate, would reasonably be expected
to have a material adverse effect on the Company's financial condition.
(r) No Undisclosed Events or Circumstances. Since December 31, 2002,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
(s) Capitalization. The authorized and outstanding capital stock of
the Company as of the date of this Agreement and the Closing Date are set forth
on Schedule 2(s). Except as set forth in the Reports and Other Written
Information and Schedule 2(d), there are no options, warrants, or rights to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to subscribe for any shares of capital stock of the
Company. All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable. (t)
Dilution. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have a potential dilutive effect on the interests of other holders of the
Company's securities. The board of directors of the Company has concluded, in
its good faith business judgment that such issuance is in the best interests of
the Company. (u) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects, will be true and correct as of the Closing Date
in all material respects, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date for a period of three years.
Section 3. Representations by the Purchasers
Each of the Purchasers (severally and not jointly) represents and
warrants to the Company as follows:
(a) Investment Purposes. The Purchaser represents to the Company
that the Purchaser is acquiring the Shares and the Warrants for its own account,
for the purpose of investment, and not with a view to the distribution or resale
of any thereof, and the Purchaser has no present plans to enter into any
contract, undertaking, agreement or arrangement for any such distribution or
resale.
5
(b) Enforceability. This Agreement constitutes the Purchaser's valid
and legally binding obligation enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
relating to, or affecting the enforcement of, creditors' rights generally.
(c) Sophistication. Each Purchaser is a sophisticated investor, and
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of investing in the Company's Shares
and receiving the Warrants. Without limiting the foregoing, the Purchaser
represents and warrants that its is an "accredited investor," as that term is
defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended
(the "Securities Act"). The Purchaser has the financial ability to bear the
economic risk of such Purchaser's investment contemplated hereby and has
adequate net worth and means of providing for its current needs and
contingencies to sustain a complete loss of its investment and has no need for
liquidity in its investment in the Company.
(d) Restrictions on Transferability. The Purchaser understands and
agrees that (i) the Shares, the Warrants and the Shares issuable upon exercise
of the Warrants (the "Securities") have not been registered under the Securities
Act by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act, (ii) the Securities must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the Securities will
bear a legend to such effect and (iv) the Company will make a notation on its
transfer books to such effect. Any such transfer, sale, assignment or
hypothecation shall be conditioned upon receipt by the Company by an opinion of
counsel satisfactory to the Company and its counsel, stating that the transferee
is a permitted transferee under this Section and that such transfer does not
violate the Securities Act or any state securities laws.
(e) Access to Information. The Purchaser had access to information
filed with the SEC. The Purchaser and its advisers have been afforded the
opportunity to ask questions of the Company concerning the investment
contemplated hereby and to obtain any additional information they have deemed
necessary as a condition to making such investment.
Section 4. Debt; Issuances of Securities. No provision of this Agreement
or of any other 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 capital stock or other
equity securities (or securities convertible into equity securities) of the
Company or to grant liens on its property and assets.
Section 5. Reissuance of Securities. The Company agrees to reissue
certificates representing the Shares and the Warrant Shares without the
restrictive legends set forth in Sections 3(d) above at such time as (a) the
holder thereof is permitted to and disposes of the Securities pursuant to Rule
144(d) and/or Rule 144(k) under the 1933 Act in the opinion of legal counsel
reasonably satisfactory to the Company, or (b) upon resale subject to an
effective registration statement after the Shares and the Warrant Shares are
registered under the 1933 Act. The Company agrees to cooperate with each
Subscriber in connection with all resales pursuant to Rule 144(d) and Rule
144(k) and provide legal opinions at the Company's expense necessary to allow
such resales provided the Company and its counsel receive reasonably requested
written representations from each Subscriber and selling broker, if any.
Provided each Purchaser provides required certifications and representation
letters, if any, if the Company fails to remove any legend as required by this
Section 5 (a "Legend Removal Failure"), then beginning on the fourteenth
business day following the date that each Purchaser has requested the removal of
the legend and delivered all items reasonably required by the Company to be
delivered by each Purchaser, that the Company continues to fail to remove such
legend, the Company shall pay to each Purchaser or assignee holding Shares or
Warrant Shares, subject to a Legend Removal Failure, as liquidated damages and
not a penalty an amount each Purchaser or assignee holding Securities subject to
a Legend Removal Failure may, at its option, require the Company to purchase all
or any portion of the Shares and Warrant Shares subject to a Legend Removal
Failure held by each Purchaser or assignee at a price per share equal to 130% of
the purchase price of such Shares and Warrant Shares within a period of up to
twelve months.
6
Section 6. Blackout. The Company undertakes and covenants that until the
first to occur of (i) the registration statement having been effective for one
hundred and eighty (180) business days, or (ii) until all the Shares and Warrant
Shares have been resold pursuant to said registration statement, the Company
will not enter into any acquisition, merger, exchange or sale or other
transaction that could have the effect of delaying the effectiveness of any
pending registration statement, causing an already effective registration
statement to no longer be effective or current, or require the filing of an
amendment to an already effective registration statement.
Section 7. Covenants of the Company. The Company covenants and agrees with
the Subscribers as follows:
(a) Stop Orders. The Company will advise the Subscribers, promptly
after it receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of
the suspension of the qualification of the Common Stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.
(b) Listing. The Company shall promptly secure the listing of the
shares of Common Stock to be purchased hereunder and the Warrant Shares upon
each securities exchange, or quotation system, if any, upon which shares of
common stock are then listed (subject to official notice of issuance) and shall
maintain such listing so long as any Securities are outstanding. The Company
will maintain the listing of its Common Stock on the American Stock Exchange,
Nasdaq SmallCap Market, Nasdaq National Market System, OTC Bulletin Board, or
New York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock (the "Principal Market")), and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market.
7
(c) Market Regulations. The Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, if any, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to Subscriber.
(d) Reporting Requirements. From the Closing Date and until at least
two (2) years after the actual effective date of the Registration Statement, the
Company will (i) cause its Common Stock to continue to be registered under
Xxxxxxx 00(x) xx xxx 0000 Xxx, (xx) comply in all respects with its reporting
and filing obligations under the 1934 Act, and (iii) comply with all
requirements related to any registration statement filed pursuant to this
Agreement. The Company will use its best efforts not to take any action or file
any document (whether or not permitted by the 1933 Act or the 1934 Act or the
rules there under) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said acts until the later of
two (2) years after the actual effective date of the Registration Statement.
Until the earlier of the resale of the Shares and the Warrant Shares by each
Purchaser or at least two (2) years after the Warrants have been exercised, the
Company will use its best efforts to continue the listing or quotation of the
Common Stock on the main market where the Company's shares trade, and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market.
(e) Use of Proceeds. The Purchase Price will be used by the Company
for working capital, investment in equipment and alike, and for acquisitions and
business development, and may not and will not be used for accrued and unpaid
officer and director salaries, payment of financing related debt, redemption of
redeemable notes or equity instruments of the Company nor non-trade obligations
outstanding on the Closing Date.
(f) Reservation of Common Stock. The Company undertakes to reserve
from its authorized but unissued common stock, at all times that Warrants remain
outstanding, a number of common shares equal to the amount of common shares
issuable upon exercise of the Warrants.
(g) Taxes. From the date of this Agreement until two (2) years after
the Closing Date, the Company will promptly pay and discharge, or cause to be
paid and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
(h) Insurance. From the date of this Agreement until two (2) years
after the Closing Date, the Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated and to the
extent available on commercially reasonable terms.
8
(i) Books and Records. From the date of this Agreement until two (2)
years after the Closing Date, the Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
(j) Governmental Authorities. From the date of this Agreement until
two (2) years after the Closing Date, the Company shall duly observe and conform
in all material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets.
(k) Intellectual Property. From the date of this Agreement until two
(2) years after the Closing Date, the Company shall maintain in full force and
effect its corporate existence, rights and franchises and all licenses and other
rights to use intellectual property owned or possessed by it and reasonably
deemed to be necessary to the conduct of its business.
(l) Properties. From the date of this Agreement until two (2) years
after the Closing Date, the Company will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to have a
material adverse effect.
(m) NON-PUBLIC INFORMATION. THE COMPANY COVENANTS AND AGREES THAT
NEITHER IT NOR ANY OTHER PERSON ACTING ON ITS BEHALF WILL PROVIDE ANY PURCHASER
OR ITS AGENTS OR COUNSEL WITH ANY INFORMATION THAT THE COMPANY BELIEVES
CONSTITUTES MATERIAL NON-PUBLIC INFORMATION, UNLESS PRIOR THERETO SUCH PURCHASER
SHALL HAVE EXECUTED A WRITTEN AGREEMENT REGARDING THE CONFIDENTIALITY AND USE OF
SUCH INFORMATION. THE COMPANY UNDERSTANDS AND CONFIRMS THAT EACH PURCHASER SHALL
BE RELYING ON THE FOREGOING REPRESENTATIONS IN EFFECTING TRANSACTIONS IN
SECURITIES OF THE COMPANY.
(N) SECURITIES LAWS DISCLOSURE; PUBLICITY. THE COMPANY SHALL, BY
8:30 A.M. EASTERN TIME ON THE TRADING DAY FOLLOWING THE CLOSING DATE, ISSUE A
PRESS RELEASE OR FILE A CURRENT REPORT ON FORM 6-K, OR COMPARABLE DISCLOSURE, IN
EACH CASE REASONABLY ACCEPTABLE TO EACH PURCHASER DISCLOSING THE MATERIAL TERMS
OF THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY AND EACH PURCHASER SHALL
CONSULT WITH EACH OTHER IN ISSUING ANY PRESS RELEASES WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY, AND NEITHER THE COMPANY NOR ANY PURCHASER
SHALL ISSUE ANY SUCH PRESS RELEASE OR OTHERWISE MAKE ANY SUCH PUBLIC STATEMENT
WITHOUT THE PRIOR CONSENT OF THE COMPANY, WITH RESPECT TO ANY PRESS RELEASE OF
ANY PURCHASER, OR WITHOUT THE PRIOR CONSENT OF EACH PURCHASER, WITH RESPECT TO
ANY PRESS RELEASE OF THE COMPANY, WHICH CONSENT SHALL NOT UNREASONABLY BE
WITHHELD, EXCEPT IF SUCH DISCLOSURE IS REQUIRED BY LAW, IN WHICH CASE THE
DISCLOSING PARTY SHALL PROMPTLY PROVIDE THE OTHER PARTY WITH PRIOR NOTICE OF
SUCH PUBLIC STATEMENT OR COMMUNICATION. NOTWITHSTANDING THE FOREGOING, THE
COMPANY SHALL NOT PUBLICLY DISCLOSE THE NAME OF ANY PURCHASER, OR INCLUDE THE
NAME OF ANY PURCHASER IN ANY FILING WITH THE COMMISSION OR ANY REGULATORY AGENCY
OR TRADING MARKET, WITHOUT THE PRIOR WRITTEN CONSENT OF SUCH PURCHASER, EXCEPT
(I) AS REQUIRED BY FEDERAL SECURITIES LAW IN CONNECTION WITH THE REGISTRATION
STATEMENT CONTEMPLATED BY THE REGISTRATION RIGHTS AGREEMENT AND (II) TO THE
EXTENT SUCH DISCLOSURE IS REQUIRED BY LAW OR TRADING MARKET REGULATIONS, IN
WHICH CASE THE COMPANY SHALL PROVIDE THE PURCHASERS WITH PRIOR NOTICE OF SUCH
DISCLOSURE PERMITTED UNDER SUBCLAUSE (I) OR (II).
9
Section 8. Survival of covenants, agreement, representations and
warranties. All covenants, agreements, representations and warranties made
herein and in certificates delivered pursuant hereto shall survive the execution
and delivery of this Agreement and the Warrants and shall continue in full force
and effect in accordance with applicable statutes of limitations.
Section 9. Entire agreement; Preamble, Exhibits and Schedules; no oral
change. This Agreement and the Warrants embody the entire agreement and
understanding between the Company and each of the Purchasers (severally)
relating to the subject matter hereof, and supersede all prior agreements and
understandings relating to such subject matter. The preamble to this Agreement,
Exhibits and Schedules attached hereto shall constitute an integral part of this
Agreement. This Agreement may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.
Section 10 Term and Termination. The Company agrees to give the Purchasers
2 business days to pay the Purchase Price as described herein to the Company,
from the date of signing this Agreement. At the end of such time, only the
Company can choose to terminate this Agreement by doing so in writing to the
Purchasers.
Section 11. Notices. Any notice required by the provisions of this
Agreement will be writing and will be deemed effectively given: (a) upon
personal delivery to the party to be notified; (b) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day; (c) seven (7) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or (d) three (3)
days after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. Notices shall be sent
to the addresses first set forth above or to such other address as a party
furnishes to other parties in writing.
Section 12. Law Governing. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York with respect to contracts
executed and performed in the State of New York.
10
Section 13. JURISDICTION. THE COMPANY AND EACH OF THE PURCHASERS
(SEVERALLY) CONSENT THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT OR THEM
UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT, OR ANY OTHER
INSTRUMENT OR DOCUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, SHALL BE
BROUGHT EXCLUSIVELY IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX LOCATED IN NEW YORK
COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. THE COMPANY AND EACH OF THE PURCHASERS (SEVERALLY), BY THEIR EXECUTION AND
DELIVERY OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY CONSENT AND SUBMIT TO THE
PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDINGS.
THE COMPANY AND EACH OF THE PURCHASERS (SEVERALLY) AGREE THAT PERSONAL
JURISDICTION OVER THEM MAY BE OBTAINED BY THE DELIVERY OF A SUMMONS (POSTAGE
PREPAID) IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11 OF THIS AGREEMENT.
ASSUMING DELIVERY OF THE SUMMONS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11
OF THIS AGREEMENT, THE COMPANY AND EACH OF THE PURCHASERS (SEVERALLY) HEREBY
EXPRESSLY AND IRREVOCABLY WAIVE ANY ALLEGED LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OF FORUM NON CONVENIENS OR ANY SIMILAR BASIS. EACH PARTY HERETO
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER
THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
Section 14. Successors and Assigns. All the covenants and provisions of
this Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns hereunder. No party may assign any
rights or obligations hereunder without the prior written consent of the other
parties and any purported assignment without such consent shall be null and
void.
Section 15. Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waiver or consents to departure
from the provisions hereof may not be given without the consent of the party
against whom such waiver or consent is sought.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, and by the parties hereto in separate counterparts, each of which
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
Section 17. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
Section 18. Lockup. The Purchasers and the insiders of the Company will
not sell shares for a price that is lower than the minimum price required for
listing on NASDAQ Small Cap + US$1.00, until the Company is listed on NASDAQ
Small Cap or AMEX exchange, but for no longer than 120 days.
Section 19. Expenses; Attorney's Fees. Each party shall bear its own
expenses, including, without limitation, attorneys' fees, in connection with the
execution, delivery and performance of this Agreement.
11
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
Xfone, Inc. Date
By: Xxx Xxxxxxxxx
Title: Chief Executive Officer
----------------------------
By: Date
----------------------------
Title:
----------------------------
----------------------------
12
Exhibit 1
NAME AND ADDRESS OF PURCHASER NAME OF SHARES SHARE NUMBER OF PURCHASE NUMBER OF NUMBER OF
PURCHASED PRICE SHARES PRICE WARRANTS A WARRANTS B
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Xxxx Xxxxx
19 Xxxxxxx Xxxxx st. XFONE, INC. $ 3 5,000 $ 15,000 5,000 5,000
Tel-Aviv 69642
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Xxx Xxxxx
2 Xxxxxx Xxxxx St. XFONE, INC. $ 3 8,500 $ 25,500 8,500 8,500
Tel-Aviv
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Xxxxxxx Xxxxxx
52 Xxxx Gur st. XFONE, INC. $ 3 3,000 $ 9,000 3,000 3,000
Tel-Aviv
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Yuval Xxxx Xxxxx
00 Xxxxxx Xxxxxxx xx. XFONE, INC. $ 3 8,000 $ 24,000 8,000 8,000
Ramat Hasharon 47218
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Xxx Xxxxx
00 Xxxxxx Xxxxxxx xx. XFONE, INC. $ 3 8,000 $ 24,000 8,000 8,000
Ramat Hasharon 47218
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Xxxxx Xxxxxxxx
19 Xxxxxxx Xxxxx st. XFONE, INC. $ 3 13,000 $ 39,000 13,000 13,000
Tel-Aviv 69642
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Xxxxxx Xxxxxxxx
51 Harimon st. XFONE, INC. $ 3 5,000 $ 15,000 5,000 5,000
Ramat-Hasharon
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Teneram Investment
11 Tuval st. XFONE, INC. $ 3 8,400 $ 25,200 8,400 8,400
Ramat-Gan
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Xxxxxxx Xxxx
4 Hashita st. XFONE, INC $ 3 10,000 $ 30,000 10,000 10,000
Beit Yanay
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
Xxxx Xxxxxx
00 Xxxx Xxx xx. XXXXX, INC $ 3 7,000 $ 21,000 7,000 7,000
Tel-Aviv
-------------------------------------- ---------------------- ------ ----------- -------------- ----------- -----------
13
Exhibit 2
Wire Transfer Instructions
Barclays Bank U.K
Hampstead and Xxxxxxxxx Business Centre
XX Xxx 00000
Xxxxxx X00 0XX
Xxxxxx Xxxxxxx
Sort Code: 20-30-19
Account Number: 00000000
Account Name: Xfone, Inc.
Exhibit 3
IRREVOCABLE PROXY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned does hereby make,
constitute and appoint Xxx Xxxxxxxxx, 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
Shares of Xfone, Inc. a Nevada based 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 by-laws, 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.
This Proxy is given to Xxx Xxxxxxxxx in consideration of the performance
of the Shares and Warrant Purchase Agreement dated _______, by and between the
undersigned and other Purchasers 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 Shares (and no other securities) so
sold by the undersigned in an arm's length sale (in good faith) of the Shares to
a third party that is not an Affiliate (as defined below) or related party of
the Lender.
An "Affiliate" means (A) an entity in which the undersigned owns or has
the right to own directly or indirectly equity and voting share or any other
kind of interest or acts as an officer thereof, or has the right and power to
direct the policy and management of such company; or (B) a trust or living will
or trust in which the undersigned is a beneficiary thereof; or (C) the spouse,
children, parents, and any other family members up to a fourth degree of the
undersigned; or (D) any trustee of the undersigned; or (E) any other person or
entity which will be subject to the undersigned instructions in connection with
the ordinary shares so purchased by such person or entity.
THE UNDERSIGNED SHALL EXECUTE AND DELIVER SUCH ADDITIONAL DOCUMENTS AND
INSTRUMENTS AS THE CORPORATION OR XXX XXXXXXXXX MAY REQUIRE TO CONFIRM THE GRANT
HEREBY, INCLUDING, WITHOUT LIMITATION, SUCH INSTRUMENTS AS MAY BE NECESSARY OR
APPROPRIATE UNDER ISRAELI LAW.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy
this day of January ___, 2004.
Name:
----------------------------
By:
------------------------------
Name:
Title:
Exhibit 4
WARRANT A
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.
WARRANT TO PURCHASE COMMON STOCK
OF XFONE, INC.
NO. __
THIS CERTIFIES THAT, for value received, _______, (the "HOLDER"), is
entitled, subject to the terms and conditions of this Warrant, to purchase from
Xfone, Inc. a Nevada corporation (the "COMPANY"), at a price per share as
specified below up to ______ Shares, subject to the terms and provisions of this
Warrant (and subject to adjustment for stock splits, recapitalization events and
the like) (the "WARRANT SHARES").
Terms used herein and not otherwise defined shall have the meaning
assigned thereto in the Shares and Warrants Purchase Agreement dated January
____, 2004 between the Holder and the Company attached hereto as Exhibit 1 (the
"AGREEMENT").
All herein is subject to the fulfillment of the terms and conditions by
the Holder are subject to the full payment of the Shares by the Purchaser in the
Agreement as described herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall
have the following respective meanings:
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"REGISTERED HOLDER" means any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"WARRANT" as used herein, includes this Warrant and any warrant delivered
in substitution or exchange therefore as provided herein.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Due Authorization; Consents. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for issuance and delivery of all of the Warrant Shares, has been taken. This
Warrant is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization and similar laws affecting
creditors' rights generally and to general equitable principles. All consents,
approvals and authorizations of, and registrations, qualifications and filings
with, any federal or state governmental agency, authority or body, or any third
party, required in connection with the execution, delivery and performance of
this Warrant and the consummation of the transactions contemplated hereby have
been obtained.
2.2 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, designations, declarations or filings with any
governmental authority on the part of Company required in connection with the
consummation of the transactions contemplated herein have been obtained.
2.3 Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Warrant and the consummation of the
transactions contemplated hereby will not be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Memorandum of Association, Articles of Association, other
constitutive document, or any agreement or contract of the Company, or a
violation of any statutes, laws, regulations or orders, or an event which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.
3. EXERCISE OF WARRANT
3.1. Subject to compliance with the terms and conditions of this Warrant
and applicable securities laws, this Warrant may be exercised, in whole or in
part with respect to the applicable number of Warrant Shares, at an exercise
price (the "Exercise Price") of U.S. $5.5 per Warrant Share.
3.2 Net Issue Exercise. In lieu of exercising this Warrant, the Holder may
elect to receive Shares equal to the value of this Warrant if the registration
statement is not effective after 12 months from the Closing Date (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with notice of such election, in which event the Company
shall issue to the Holder a number of Shares computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of the Shares to be issued to the
Holder.
Y = the number of the Shares purchasable under this
Warrant.
2
A = the fair market value of one Share on the date
of determination.
B = the per share Exercise Price (as adjusted to
the date of such calculation).
(c) Fair Market Value. For purposes of this Section 1,
the per share fair market value of the Shares shall
mean:
(i) If the Company's Common Stock is publicly
traded, the per share fair market value of the Shares
shall be the average of the closing prices of the
Common Stock as quoted on the Nasdaq National Market
or the principal exchange on which the Common Stock is
listed, or if not so listed then the fair market value
shall be the average of the closing bid prices of the
Common Stock as published in The Wall Street Journal,
in each case for the fifteen trading days ending five
trading days prior to the date of determination of
fair market value;
(ii) If the Company's Common Stock is not so
publicly traded, the per share fair market value of
the Shares shall be such fair market value as is
determined in good faith by the Board of Directors of
the Company after taking into consideration factors it
deems appropriate, including, without limitation,
recent sale and offer prices of the capital stock of
the Company in private transactions negotiated at
arm's length.
3.3. (i) The Holder may exercise this Warrant in respect of the applicable
number of Warrant Shares, at any time or from time to time by the delivery
(including, without limitation, delivery by facsimile) of the form of Notice of
Exercise attached hereto as Exhibit 2 (the "NOTICE OF EXERCISE"), duly executed
by the Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering:
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, of an
amount equal to the product obtained by multiplying the number of shares of
Warrant Shares being purchased upon such exercise by the then applicable
Exercise Price, (and the Warrant Shares shall be issued as soon as practicable
after five (5) days commencing the payment day), except that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below), the Exercise
Amount shall be paid to the Company within five (5) business days of the
termination of all HSR Act Restrictions (and the Warrant Shares shall be issued
as soon as practicable after five (5) days commencing the payment day).
(ii) Provided, however, that under no circumstances may the Holder
exercise, and in no event shall the Company be obligated to honor any exercise
of this Warrant to the extent the result of such exercise and issuance of
Warrant Shares pursuant thereto would result (after giving effect to such
issuance) in the Holder owning 4.9% or more of the then outstanding Ordinary
Shares of the Company. To the extent any such exercise is not honored pursuant
to the foregoing proviso, the shares withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.
3
3.4. Fractional Shares. The Company shall pay the Holder cash in lieu of
any fraction of a share equal to such fraction of the Exercise Price of one
whole share of Warrant Shares. No fractional shares or scrip representing
fractional shares shall be issued upon an exercise of this Warrant.
3.5. HSR Act. The Company hereby acknowledges that exercise of this
Warrant by Holder may subject the Company and/or the Holder to the filing
requirements of the HSR Act and that Holder may be prevented from exercising
this Warrant until the expiration or early termination of all waiting periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS").
3.6. Partial Exercise; Effective Date of Exercise. In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Warrant Shares purchasable hereunder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have been exercised on the date immediately following the date of the
expiration of all HSR Act Restrictions. The person entitled to receive the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all purposes as the holder of record of such shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.
3.7 Expiration of Warrant. This Warrant shall expire, with respect to the
applicable number of Warrant Shares only, on the earlier to occur of : (a) the
date that is five (5) years following the date of this Warrant; (b) the merger
or consolidation of the Company with or into, or the sale of all or
substantially all of the assets or shares of the Company to, another person or
entity, following which the Company is not the surviving entity; provided,
however, that the Holder receives at least 30 days' prior written notice of such
follow on offering and shall be entitled to make its exercise of this Warrant
conditional upon the closing of such transaction; (c) The Company can call the
Warrants before the end of the 5 years, if the underlying shares are registered
and the closing price of the Share in the market is $12 or higher for 20
consecutive trading days, subject to there being an effective registration
statement and 10 days written notice to the Holder.
4. VALID ISSUANCE; TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer involved
in the issuance of any certificate for shares of Warrant Shares in any name
other than that of the Registered Holder of this Warrant, and in such case the
Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company's reasonable satisfaction that no tax or other charge
is due.
4
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. In addition to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's Articles of Association, the number of shares of Warrant Shares
issuable upon exercise of this Warrant (or any shares of stock or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase Price are subject to adjustment upon occurrence of the following
events:
5.1. Adjustment for Share Splits, Share Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant Shares issuable upon exercise of this Warrant
(or any shares of stock or other securities at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Warrant Shares or Ordinary Shares. The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.
5.2. Adjustment for Dividends or Distributions of Shares or Other
Securities or Property. In case 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
of stock 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 shares of Warrant Shares (or such other stock 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 stock available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section
5.3. Reclassification. If the Company, by reclassification of securities
or otherwise, shall change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 5. No adjustment
shall be made pursuant to this Section 5.3 upon any conversion or redemption of
the Warrant Shares which is the subject of Section 5.5.
5.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital reorganization of the capital stock 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 Purchase Price then in effect, the number of shares of stock
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 5. The foregoing provisions of this Section 5.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock 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
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.
5
6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Purchase Price, or number or type of shares issuable upon exercise of this
Warrant, the Chief Financial Officer or Controller of the Company shall compute
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
7. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to
the Company of the ownership of and the loss, theft, destruction or mutilation
of this Warrant, and of indemnity reasonably satisfactory to it, and (in the
case of mutilation) upon surrender and cancellation of this Warrant, the Company
will execute and deliver in lieu thereof a new Warrant of like tenor as the
lost, stolen, destroyed or mutilated Warrant.
8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant such number of shares of Warrant Shares or other shares of capital stock
of the Company as are from time to time issuable upon exercise of this Warrant
and, from time to time, will take all steps necessary to amend its Articles of
Association to provide sufficient reserves of shares of Warrant Shares issuable
upon exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing share certificates
to execute and issue the necessary certificates for shares of Warrant Shares
upon the exercise of this Warrant.
6
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees
that, absent an effective registration statement filed with the SEC under the
Securities Act of 1933 (the "ACT"), covering the disposition or sale of this
Warrant or the Warrant Shares issued or issuable upon exercise hereof as the
case may be, and registration or qualification under applicable state securities
laws, such Holder will not sell, transfer, pledge, or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's Articles of Association and either (i) the
Company has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the
Holder hereby represents, warrants and covenants that any shares of stock
purchased upon exercise of this Warrant shall be acquired for investment only
and not with a view to, or for sale in connection with, any distribution
thereof; that the Holder has had such opportunity as such Holder has deemed
adequate to obtain from representatives of the Company such information as is
necessary to permit the Holder to evaluate the merits and risks of its
investment in the Company; that the Holder is able to bear the economic risk of
holding such shares as may be acquired pursuant to the exercise of this Warrant
for an indefinite period; that the Holder understands that the shares of stock
acquired pursuant to the exercise of this Warrant will not be registered under
the Act (unless otherwise required pursuant to exercise by the Holder of the
registration rights, if any, previously granted to the registered Holder) and
will be "restricted securities" within the meaning of Rule 144 under the Act and
that the exemption from registration under Rule 144 will not be available for at
least one year from the date of exercise of this Warrant, subject to any special
treatment by the SEC for exercise of this Warrant, and even then will not be
available unless a public market then exists for the stock, adequate information
concerning the Company is then available to the public, and other terms and
conditions of Rule 144 are complied with; and that all stock certificates
representing shares of stock issued to the Holder upon exercise of this Warrant
may have affixed thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company. In the absence of affirmative action by the Holder to purchase Warrant
Shares by exercise of this Warrant no provisions of this Warrant, and no
enumeration herein of the rights or privileges of the Holder hereof shall cause
such Holder hereof to be a shareholder of the Company for any purpose.
7
12. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. The Holder represents
and warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise thereof are
being acquired for its own account, for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended (the "Act"). Upon
exercise ________ of ____________ this _____________ Warrant, _____________ the
____________ Holder shall, if so requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the securities issuable upon
exercise of this Warrant are being acquired for investment and not with a view
toward distribution or resale.
(b) The Holder understands that the Warrant and the Shares have not
been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
13. NOTICES. All notices and other communications hereunder shall be in
writing and shall be given in person, by registered mail (registered
international air mail if mailed internationally), by an overnight courier
service which obtains a receipt to evidence delivery, or by facsimile
transmission (provided that written confirmation of receipt is provided),
addressed as set forth below:
If to the Company: XFONE, Inc.
Xxxxxxxxx House
000 Xxxx Xxxx
Xxxxxx X00 0XX
Xxxxxx Xxxxxxx
If to Holder:
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
8
Or such other address as any party may designate to the other in accordance with
the aforesaid procedure. All notices and other communications delivered in
person or by courier service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given twenty-four hours following transmission, and all notices and
other communications sent by registered mail (or air mail if the posting in
international) shall be deemed given seven (7) days after posting.
14. HEADINGS. The headings in this Warrant are for purposes of convenience
in reference only, and shall not be deemed to constitute a part hereof.
15. GOVERNING LAW; JURISDICTION. Any claim arising under or relating to
this Warrant, shall be governed by the laws of the State of New York, without
regard to principles of conflict of laws. Each party hereto consents that any
legal action or proceeding against it under, arising out of or in any manner
relating to this Warrant shall be brought exclusively in the courts of the State
of New York located in New York County or in the United States District Court
for the Southern District of New York. Each party hereto expressly waives any
right to a trial by jury in any action or proceeding under this Warrant, and
agrees that any such action or proceeding shall be tried before a court and not
before a jury.
16. NO IMPAIRMENT. The Company will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Registered
Holder of this Warrant against impairment. Without limiting the generality of
the foregoing, the Company (a) will not increase the par value of any shares of
stock issuable upon the exercise of this Warrant above the amount payable
therefor upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Warrant Shares upon exercise of this
Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of its Warrant Shares
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the share capital of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding Ordinary Shares
or Warrant Shares;
9
then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Warrant Shares, Ordinary
Shares or (such stock or securities as at the time are receivable upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares, Ordinary Shares (or such other stock or securities), for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be delivered at least ten (10) days prior to the date therein
specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of this Warrant may be executed by the parties hereto and delivered by
facsimile, and each such executed counterpart shall be, and shall be deemed to
be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which
prohibits the rights granted to the Holders of this Warrant. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to holders of the Company's securities
under any other agreements, except rights that have been waived or lapsed.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
January __, 2004.
HOLDER: XFONE,INC
---------------------
By: By:
------------------------ ----------------------------
---------------------------- ----------------------------
Printed Name Printed Name
---------------------------- ----------------------------
Title Title
11
EXHIBIT 1
AGREEMENT
12
EXHIBIT 2
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
XFONE, INC. WARRANT NO. __
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of Xfone, Inc., as provided for therein, and (check the
applicable box):
|_| Tenders herewith payment of the exercise price in full in the form of cash
or (by check) or by wire transfer in same-day funds in the amount of
$____________ for _________ such securities, pursuant to the Warrant.
|_| Please issue a certificate or certificates for such securities in the name
of, and pay any cash for any fractional share to (please print name,
address and social security number):
Name:
----------------------------------------------
Address:
----------------------------------------------
Signature:
----------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of the Warrant Certificate to which this notice is attached as Exhibit 2.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
there under rounded up to the next higher whole number of shares.
13
Exhibit 5
WARRANT B
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL ORDINARY SHARES ISSUABLE
HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES HAS BEEN REGISTERED UNDER THE ACT.
WARRANT TO PURCHASE COMMON STOCK
OF XFONE, INC.
NO. _
THIS CERTIFIES THAT, for value received, __________, (the "HOLDER"), is
entitled, subject to the terms and conditions of this Warrant, to purchase from
Xfone, Inc. a Nevada corporation (the "COMPANY"), at a price per share as
specified below up to ________ Shares, subject to the terms and provisions of
this Warrant (and subject to adjustment for stock splits, recapitalization
events and the like) (the "WARRANT SHARES").
Terms used herein and not otherwise defined shall have the meaning
assigned thereto in the Shares and Warrants Purchase Agreement dated January
____, 2004 between the Holder and the Company attached hereto as Exhibit 1 (the
"AGREEMENT").
All herein is subject to the fulfillment of the terms and conditions by
the Holder are subject to the full payment of the Shares by the Purchaser in the
Agreement as described herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have
the following respective meanings:
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"REGISTERED HOLDER" means any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"WARRANT" as used herein, includes this Warrant and any warrant delivered
in substitution or exchange therefore as provided herein.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Due Authorization; Consents. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and the authorization, issuance, reservation
for issuance and delivery of all of the Warrant Shares, has been taken. This
Warrant is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization and similar laws affecting
creditors' rights generally and to general equitable principles. All consents,
approvals and authorizations of, and registrations, qualifications and filings
with, any federal or state governmental agency, authority or body, or any third
party, required in connection with the execution, delivery and performance of
this Warrant and the consummation of the transactions contemplated hereby have
been obtained.
2.2 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, designations, declarations or filings with any
governmental authority on the part of Company required in connection with the
consummation of the transactions contemplated herein have been obtained.
2.3 Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Warrant and the consummation of the
transactions contemplated hereby will not be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Memorandum of Association, Articles of Association, other
constitutive document, or any agreement or contract of the Company, or a
violation of any statutes, laws, regulations or orders, or an event which
results in the creation of any lien, charge or encumbrance upon any asset of the
Company.
3. EXERCISE OF WARRANT
3.1. Subject to compliance with the terms and conditions of this Warrant
and applicable securities laws, this Warrant may be exercised, in whole or in
part with respect to the applicable number of Warrant Shares, at an exercise
price (the "Exercise Price") of U.S. $3.5 per Warrant Share.
3.2 Net Issue Exercise. In lieu of exercising this Warrant, the Holder may
elect to receive Shares equal to the value of this Warrant if the registration
statement is not effective after 12 months from the Closing Date (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with notice of such election, in which event the Company
shall issue to the Holder a number of Shares computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of the Shares to be issued to the
Holder.
Y = the number of the Shares purchasable under this
Warrant.
2
A = the fair market value of one Share on the date
of determination.
B = the per share Exercise Price (as adjusted to
the date of such calculation).
(c) Fair Market Value. For purposes of this Section 1,
the per share fair market value of the Shares shall
mean:
(i) If the Company's Common Stock is publicly
traded, the per share fair market value of the Shares
shall be the average of the closing prices of the
Common Stock as quoted on the Nasdaq National Market
or the principal exchange on which the Common Stock is
listed, or if not so listed then the fair market value
shall be the average of the closing bid prices of the
Common Stock as published in The Wall Street Journal,
in each case for the fifteen trading days ending five
trading days prior to the date of determination of
fair market value;
(ii) If the Company's Common Stock is not so
publicly traded, the per share fair market value of
the Shares shall be such fair market value as is
determined in good faith by the Board of Directors of
the Company after taking into consideration factors it
deems appropriate, including, without limitation,
recent sale and offer prices of the capital stock of
the Company in private transactions negotiated at
arm's length.
3.3. (i) The Holder may exercise this Warrant in respect of the applicable
number of Warrant Shares, at any time or from time to time by the delivery
(including, without limitation, delivery by facsimile) of the form of Notice of
Exercise attached hereto as Exhibit 2 (the "NOTICE OF EXERCISE"), duly executed
by the Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering:
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, of an
amount equal to the product obtained by multiplying the number of shares of
Warrant Shares being purchased upon such exercise by the then applicable
Exercise Price, (and the Warrant Shares shall be issued as soon as practicable
after five (5) days commencing the payment day), except that if Holder is
subject to HSR Act Restrictions (as defined in Section 3.4 below), the Exercise
Amount shall be paid to the Company within five (5) business days of the
termination of all HSR Act Restrictions (and the Warrant Shares shall be issued
as soon as practicable after five (5) days commencing the payment day).
(ii) Provided, however, that under no circumstances may the Holder
exercise, and in no event shall the Company be obligated to honor any exercise
of, this Warrant to the extent the result of such exercise and issuance of
Warrant Shares pursuant thereto would result (after giving effect to such
issuance) in the Holder owning 4.9% or more of the then outstanding Ordinary
Shares of the Company. To the extent any such exercise is not honored pursuant
to the foregoing proviso, the shares withheld from such exercise shall remain
available for issuance upon subsequent exercise of this Warrant, subject to such
proviso.
3
3.4 Fractional Shares. The Company shall pay the Holder cash in lieu of
any fraction of a share equal to such fraction of the Exercise Price of one
whole share of Warrant Shares. No fractional shares or scrip representing
fractional shares shall be issued upon an exercise of this Warrant.
3.5. HSR Act. The Company hereby acknowledges that exercise of this
Warrant by Holder may subject the Company and/or the Holder to the filing
requirements of the HSR Act and that Holder may be prevented from exercising
this Warrant until the expiration or early termination of all waiting periods
imposed by the HSR Act ("HSR ACT RESTRICTIONS").
3.6. Partial Exercise; Effective Date of Exercise. In case of any partial
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Warrant Shares purchasable hereunder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have been exercised on the date immediately following the date of the
expiration of all HSR Act Restrictions. The person entitled to receive the
shares of Warrant Shares issuable upon exercise of this Warrant shall be treated
for all purposes as the holder of record of such shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.
3.7 Expiration of Warrant. This Warrant shall expire, with respect to the
applicable number of Warrant Shares only, on the earlier to occur of: (a) 10
days after the Company is approved for listing on NASDAQ Small Cap or the
American Stock Exchange or 10 days following effectiveness of the registration
statement to be filed by the company pursuant to the Registration Rights
Agreement between the Holder and the Company of even date hereof; (b) the date
that is 375 days following the date of this Warrant; (c) the merger or
consolidation of the Company with or into, or the sale of all or substantially
all of the assets or shares of the Company to, another person or entity,
following which the Company is not the surviving entity; provided, however, that
the Holder receives at least 30 days' prior written notice of such follow on
offering and shall be entitled to make its exercise of this Warrant conditional
upon the closing of such transaction; (d) The Company can call the Warrants
before the end of the180 days, if the closing price of the Share in the market
is $12 or higher for 20 consecutive trading days, subject to there being an
effective registration statement and 10 days written notice to the Holder.
4. VALID ISSUANCE; TAXES. All shares of Warrant Shares issued upon the exercise
of this Warrant shall be validly issued, fully paid and non-assessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required
to pay any tax or other charge imposed in connection with any transfer involved
in the issuance of any certificate for shares of Warrant Shares in any name
other than that of the Registered Holder of this Warrant, and in such case the
Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company's reasonable satisfaction that no tax or other charge
is due.
4
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. In addition to any
adjustment to the Warrant Shares required by the terms of such Warrant Shares in
the Company's Articles of Association, the number of shares of Warrant Shares
issuable upon exercise of this Warrant (or any shares of stock or other
securities or property receivable or issuable upon exercise of this Warrant) and
the Purchase Price are subject to adjustment upon occurrence of the following
events:
5.1. Adjustment for Share Splits, Share Subdivisions or Combinations of
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
the number of shares of Warrant Shares issuable upon exercise of this Warrant
(or any shares of stock or other securities at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Warrant Shares or Ordinary Shares. The Purchase
Price of this Warrant shall be proportionally increased and the number of shares
of Warrant Shares issuable upon exercise of this Warrant (or any shares of stock
or other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Shares.
5.2. Adjustment for Dividends or Distributions of Shares or Other
Securities or Property. In case 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
of stock 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 shares of Warrant Shares (or such other stock 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 stock available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section 5.
5.3. Reclassification. If the Company, by reclassification of securities
or otherwise, shall change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefore shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 5. No adjustment
shall be made pursuant to this Section 5.3 upon any conversion or redemption of
the Warrant Shares which is the subject of Section 5.5.
5.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
case of any capital reorganization of the capital stock 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 Purchase Price then in effect, the number of shares of stock
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 5. The foregoing provisions of this Section 5.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock 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
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.
5
6. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase
Price, or number or type of shares issuable upon exercise of this Warrant, the
Chief Financial Officer or Controller of the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
7. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to it, and (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.
8. RESERVATION OF WARRANT SHARES. The Company hereby covenants that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Warrant Shares or other shares of capital stock of the
Company as are from time to time issuable upon exercise of this Warrant and,
from time to time, will take all steps necessary to amend its Articles of
Association to provide sufficient reserves of shares of Warrant Shares issuable
upon exercise of this Warrant. All such shares shall be duly authorized, and
when issued upon such exercise, shall be validly issued, fully paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing share certificates
to execute and issue the necessary certificates for shares of Warrant Shares
upon the exercise of this Warrant.
6
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees that,
absent an effective registration statement filed with the SEC under the
Securities Act of 1933 (the "ACT"), covering the disposition or sale of this
Warrant or the Warrant Shares issued or issuable upon exercise hereof as the
case may be, and registration or qualification under applicable state securities
laws, such Holder will not sell, transfer, pledge, or hypothecate any or all
such Warrants or Warrant Shares, unless such transfer is performed in compliance
with the provisions of the Company's Articles of Association and either (i) the
Company has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required in connection with such disposition or (ii) the sale of such securities
has been registered under the Act.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder
hereby represents, warrants and covenants that any shares of stock purchased
upon exercise of this Warrant shall be acquired for investment only and not with
a view to, or for sale in connection with, any distribution thereof; that the
Holder has had such opportunity as such Holder has deemed adequate to obtain
from representatives of the Company such information as is necessary to permit
the Holder to evaluate the merits and risks of its investment in the Company;
that the Holder is able to bear the economic risk of holding such shares as may
be acquired pursuant to the exercise of this Warrant for an indefinite period;
that the Holder understands that the shares of stock acquired pursuant to the
exercise of this Warrant will not be registered under the Act (unless otherwise
required pursuant to exercise by the Holder of the registration rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within the meaning of Rule 144 under the Act and that the exemption from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this Warrant, subject to any special treatment by the SEC
for exercise of this Warrant, and even then will not be available unless a
public market then exists for the stock, adequate information concerning the
Company is then available to the public, and other terms and conditions of Rule
144 are complied with; and that all stock certificates representing shares of
stock issued to the Holder upon exercise of this Warrant may have affixed
thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company. In
the absence of affirmative action by the Holder to purchase Warrant Shares by
exercise of this Warrant no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder hereof shall cause such Holder
hereof to be a shareholder of the Company for any purpose.
7
12. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. The Holder represents and
warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise thereof are
being acquired for its own account, for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended (the "Act"). Upon
exercise __________ of ____________ this _____________ Warrant, _____________
the ____________ Holder shall, if so requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the securities issuable
upon exercise of this Warrant are being acquired for investment and not with a
view toward distribution or resale.
(b) The Holder understands that the Warrant and the Shares have not
been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
13. NOTICES. All notices and other communications hereunder shall be in writing
and shall be given in person, by registered mail (registered international air
mail if mailed internationally), by an overnight courier service which obtains a
receipt to evidence delivery, or by facsimile transmission (provided that
written confirmation of receipt is provided), addressed as set forth below:
If to the Company: XFONE, Inc.
Britannia House
000 Xxxx Xxxx
Xxxxxx X00 0XX
Xxxxxx Xxxxxxx
If to Holder:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
8
Or such other address as any party may designate to the other in accordance with
the aforesaid procedure. All notices and other communications delivered in
person or by courier service shall be deemed to have been given as of three (3)
business days after sending thereof, those given by facsimile transmission shall
be deemed given twenty-four hours following transmission, and all notices and
other communications sent by registered mail (or air mail if the posting in
international) shall be deemed given seven (7) days after posting.
14. HEADINGS. The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
15. GOVERNING LAW; JURISDICTION. Any claim arising under or relating to this
Warrant, shall be governed by the laws of the State of New York, without regard
to principles of conflict of laws. Each party hereto consents that any legal
action or proceeding against it under, arising out of or in any manner relating
to this Warrant shall be brought exclusively in the courts of the State of New
York located in New York County or in the United States District Court for the
Southern District of New York. Each party hereto expressly waives any right to a
trial by jury in any action or proceeding under this Warrant, and agrees that
any such action or proceeding shall be tried before a court and not before a
jury.
16. NO IMPAIRMENT. The Company will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Registered Holder
of this Warrant against impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any shares of
stock issuable upon the exercise of this Warrant above the amount payable
therefore upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Warrant Shares upon exercise of this
Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of its Warrant Shares
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the share capital of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding Ordinary Shares
or Warrant Shares;
9
then, and in each such case, if applicable, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Warrant Shares, Ordinary
Shares or (such stock or securities as at the time are receivable upon the
exercise of this Warrant), shall be entitled to exchange their shares of Warrant
Shares, Ordinary Shares (or such other stock or securities), for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be delivered at least ten (10) days prior to the date therein
specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of counterparts
of this Warrant may be executed by the parties hereto and delivered by
facsimile, and each such executed counterpart shall be, and shall be deemed to
be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities which
prohibits the rights granted to the Holders of this Warrant. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to holders of the Company's securities
under any other agreements, except rights that have been waived or lapsed.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
January___, 2004.
HOLDER: XFONE, INC
----------------------
By: By:
------------------------- ----------------------------
---------------------------- ----------------------------
Printed Name Printed Name
---------------------------- ----------------------------
Title Title
11
EXHIBIT 1
AGREEMENT
12
EXHIBIT 2
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
XFONE, INC. WARRANT B NO. __
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of Xfone, Inc., as provided for therein, and (check the
applicable box):
|_| Tenders herewith payment of the exercise price in full in the form of cash
or (by check) or by wire transfer in same-day funds in the amount of $
___________ for _________ such securities, pursuant to the Warrant.
|_| Please issue a certificate or certificates for such securities in the name
of, and pay any cash for any fractional share to (please print name,
address and social security number):
Name:
----------------------------------------------
Address:
----------------------------------------------
Signature:
----------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of the Warrant Certificate to which this notice is attached as Exhibit 2.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
there under rounded up to the next higher whole number of shares.
13
EXHIBIT 6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of January ____, 2004 by and between Xfone, Inc a Nevada corporation
having its executive offices located at Xxxxxxxxx Xxxxx, 000 Xxxx Xxxx Xxxxxx
X00 0XX, Xxxxxx Xxxxxxx (the "Company"), and the purchasers identified on
Exhibit 1 hereto (each a "Purchaser" and together, the "Purchasers").
This Agreement is made pursuant to the Shares and Warrants Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Effectiveness Date" means, with respect to the Registration
Statement required to be filed hereunder, the earlier of (a) the 120th
calendar day following the Closing Date as defined in the Purchase
Agreement. and (b) the tenth Trading Day following the date on which the
Company is notified by the Commission that the Registration Statement will
not be reviewed or is no longer subject to further review and comments.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Filing Date" means, with respect to the Registration Statement
required to be filed hereunder, the 45th calendar day following the
Closing Date.
"Holder" or "Holders" means the holder or holders or Purchasers, as
the case may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means the Shares and the Warrant Shares,
together with any shares of Common Stock issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.
"Registration Statement" means the registration statements required
to be filed hereunder, including (in each case) the Prospectus, amendments
and supplements to the registration statement or Prospectus, including
pre- and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in the
registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration.
(a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission the Registration Statement covering the resale of all of the
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement required hereunder shall be on Form S-3
or its equivalent for a public offering of shares and the Company shall use its
reasonable efforts to cause such shares to be registered for the offering. The
Registration Statement required hereunder shall reflecting the principles of
what is contained (except if otherwise directed by the Holders) in the "Plan of
Distribution" attached hereto as Annex A, subject to the laws and regulations
governing any plan of distribution, and what is customary by the Company
according to the Purchase Agreement. The Company shall cause the Registration
Statement to become effective and remain effective as provided herein. The
Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event not later than the
Effectiveness Date, and shall use its commercially reasonable efforts to keep
the Registration Statement continuously effective under the Securities Act until
the date when all Registrable Securities covered by the Registration Statement
(a) have been sold pursuant to the Registration Statement or an exemption from
the registration requirements of the Securities Act or (b) may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period").
2
(b) If: a Registration Statement is not filed on or prior to its Filing
Date the Company shall pay to each Holder an amount in shares, as liquidated
damages and not as a penalty, equal to 1% of the aggregate Shares owned by such
Holder pursuant to the Purchase Agreement for any Registrable Securities then
held by such Holder; and. if the Registration Statement is not declared
effective by the Commission on or before the Effectiveness Date, or after a
Registration Statement is first declared effective by the Commission, it ceases
for any reason to remain continuously effective as to all Registrable Securities
for which it is required to be effective, or the Holders are not permitted to
utilize the Prospectus therein to resell such Registrable Securities, for in any
such cases twenty Trading Days (which need not be consecutive days) in the
aggregate during any 12-month period (any such failure or breach being referred
to as an "Event," and for purposes of clause (i) or (iv) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five Trading
Day period is exceeded, or for purposes of clause (iii) the date which such
fifteen Trading Day period is exceeded, or for purposes of clause (v) the date
on which such twenty Trading Day period is exceeded, being referred to as "Event
Date"), then in addition to any other rights the Holders may have hereunder or
under applicable law: on each monthly anniversary of each such Event Date (if
the applicable Event shall not have been cured by such date) until the
applicable Event is cured or no more than a total of twelve months from the
Closing Date, the Company shall pay to each Holder an amount in shares, as
liquidated damages and not as a penalty, equal to 2% of the aggregate Shares
owned by such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder no more than a total of twelve months from
the Closing date. In no way will the Company pay more than 2% per month if the
Company misses both the Filing Date and Effective Date. The liquidated damages
pursuant to the terms hereof shall apply on a pro-rata basis for any portion of
a month prior to the cure of an Event.
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Not less than five Trading Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, and subject to the Purchase Agreement (i) furnish to the Holders copies
of all such documents proposed to be filed (including documents incorporated or
deemed incorporated by reference to the extent requested by such Person and not
available on the XXXXX system), which documents will be subject to the review of
such Holders, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith.
3
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep the Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible, and in any event within ten Trading Days, to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and, as promptly as reasonably possible, upon request, provide
counsel to the placement agent true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and (iv)
comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than two Trading
Days prior to such filing) and (if requested by any such Person) confirm such
notice in writing promptly following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration Statement
is proposed to be filed; (B) when the Commission notifies the Company whether
there will be a "review" of the Registration Statement and whenever the
Commission comments in writing on the Registration Statement (the Company shall
upon request provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence of any
event or passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any 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.
4
(d) Use its commercially reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the effectiveness
of the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Holder, without charge, at least one conformed copy of
the Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Holder, and
all exhibits to the extent requested by such Holder (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
(f) Promptly deliver to each Holder, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Holder may reasonably request in
connection with resales by the Holder of Registrable Securities. The Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering and sale
of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving of any notice pursuant to Section
3(c).
(g) Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from the registration or qualification) of such Registrable Securities
for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, that the Company shall not be required to qualify generally
to do business in any jurisdiction (i) where it is not then so qualified, (ii)
that would subject the Company to any material tax in any such jurisdiction
where it is not then so subject or (iii) that would require the Company to file
a general consent to service of process in any such jurisdiction.
(h) If requested by the Holders, cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to the Registration
Statement, which certificates shall be free, to the extent permitted by the
Purchase Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
Holders may request.
5
(i) Upon the occurrence of any event contemplated by Section 3(c)(v), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain 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,
in light of the circumstances under which they were made, not misleading. If the
Company notifies the Holders in accordance with clauses (ii) through (v) of
Section 3(c) above to suspend the use of any Prospectus until the requisite
changes to such Prospectus have been made, then the Holders shall suspend use of
such Prospectus. The Company will use commercially reasonable efforts to ensure
that the use of the Prospectus may be resumed as promptly as is practicable. The
Company shall be entitled to exercise its right under this Section 3(i) to
suspend the availability of a Registration Statement and Prospectus, subject to
the payment of liquidated damages pursuant to Section 2(b), for a period not to
exceed 60 days (which need not be consecutive days).
(j) Comply with all applicable rules and regulations of the Commission.
(k) The Company may require each selling Holder to furnish to the Company
a certified statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if required by the Commission, the Person thereof that
has voting and dispositive control over the Shares.
6
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. All selling expenses relating to
securities registered by the Holders shall be borne by the Holders of such
securities pro rata on the basis of the number of shares so registered.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys' fees)
and expenses (collectively, "Losses"), as incurred, to the extent arising out of
or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in light
of the circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that the Holder has approved Annex A hereto for this
purpose) or (2) in the case of an occurrence of an event of the type specified
in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(d). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.
7
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, to the extent arising out of or based upon: (x) such Holder's failure
to comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading
to the extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus or to the extent that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or such form of prospectus or in any amendment or supplement
thereto or (2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(d). In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have prejudiced
the Indemnifying Party.
8
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party; provided, that the Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses applicable to such
actions for which such Indemnified Party is not entitled to indemnification
hereunder, determined based upon the relative faults of the parties.
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
of a material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
9
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount of proceeds
actually received by such Holder from the sale of the Registrable Securities by
reason of such untrue or alleged untrue statement or omission or alleged
omission, except in the case of gross negligence or fraud by such Holder. The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) Compliance. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to the Registration
Statement.
(c) Discontinued Disposition. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Section 3(c), such Holder
will forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
(d) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of
such determination and, if within fifteen days after the date of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.
10
(e) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and each
Holder of the then outstanding Registrable Securities.
(f) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile prior to 6:30 p.m. (New
York City time) on a Trading Day, (ii) the Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile later
than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New
York City time) on such date, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The address or facsimile number for such notices and communications shall be
delivered and addressed as set forth in the Purchase Agreement
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(h) Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(i) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York, New York. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, New York 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 this Agreement), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by delivering a copy thereof via overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
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 an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
11
(j) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
12
(m) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
(n) Conflicting Instructions. A person or entity is deemed to be a holder
of Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons or entities with respect to the
same Registrable Securities, the Company will act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[PURCHASERS' SIGNATURE PAGES TO FOLLOW]
13
[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
Xfone, Inc.
By: Xxx Xxxxxxxxx
Title: Chief Executive Officer
-----------------------------------
By:
Title:
------------------------------------
14
ANNEX A
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees, donees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares subject to the terms of the Purchase
Agreement and the Registration Rights Agreement:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933 amending the list of
Selling Stockholders to include the pledgee, transferee or other successors in
interest as Selling Stockholders under this prospectus.
15
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not have
any agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock.
16
SCHEDULE 2 (d)
Outstanding Rights to Equity
SCHEDULE 2(s)
Capitalization
