LOAN AGREEMENT
THIS
LOAN
AGREEMENT (this “Agreement”)
is
made as of the 1st
day of
April, 2008, by and among (i) RADCOM LTD. (the “Company”),
Company No. 52004356, a company duly incorporated under the laws of the State
of
Israel, whose shares are traded on NASDAQ and TASE, having its principal place
of business at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Israel, and (ii) the
entities listed in Schedule
I
hereto
(collectively, the “Lenders”),
all
of which shall be represented exclusively hereunder by Plenus Management (2004)
Ltd. and Plenus Management III 2007 Ltd. (collectively, “Plenus
Management”),
private companies organized under the laws of the State of Israel, with offices
located at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇.
WITNESSETH:
WHEREAS,
the Company wishes to borrow money from the Lenders on the terms and conditions
set forth in this Agreement; and
WHEREAS,
the Lenders are willing to lend money to the Company on the terms and conditions
set forth in this Agreement.
NOW
THEREFORE, the parties hereto hereby agree as follows:
1. Loan,
Warrant and Security.
1.1 The
Loan.
Subject
to the terms and conditions and on the basis of the representations and
warranties set forth herein, the Lenders will lend to the Company, and the
Company will borrow from the Lenders, an aggregate amount of two million, five
hundred thousand dollars ($2,500,000) (the “Loan”)
against the receipt of a U.S. dollar denominated note (the "Note"),
substantially in the form attached hereto as Exhibit
A.
1.2 Closing;
Loan Disbursement.
Subject
to the terms and conditions contained herein, the Lenders shall provide the
Company with the Loan, and the Company shall deliver the Note and grant and
deliver the Warrants (as defined below) to the Lenders, at the closing of the
transactions contemplated hereby (the “Closing”)
which
shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇, Arad & Co., Advocates, on
the date on which all closing conditions set forth herein have been met or,
to
the extent possible, waived by the applicable party, but in any event not prior
to the date which is at least two (2) Business Days (as defined below) following
the date hereof and, unless agreed to otherwise in writing by the parties,
not
later than forty five (45) days following the date hereof (the “Closing
Date”).
For
the avoidance of doubt, in the event that in spite of the Company's best
commercially reasonable efforts to meet the closing conditions, forty five
(45)
days following the date hereof the Closing Date has not transpired and there
has
been no agreement by the parties to extend the Closing Date, then this Agreement
shall be terminated.
The
Loan
shall be extended to the Company by means of wire transfer in accordance with
wire instructions to be provided in writing to Plenus Management by the Company
or, if no other instructions are given, to:
1
Account
no. 610384317
Branch
no. 610
Swift
Code: ▇▇▇▇▇▇▇▇
Bank
Hapoalim,
▇▇▇▇▇
▇▇▇▇▇
▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇-▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
The
Company acknowledges that the Loan to be provided to the Company hereunder
will
be divided among the Lenders in accordance with their pro rata participation
amounts in the Loan as set forth in Schedule
I
or as
may otherwise be agreed among the Lenders.
1.3 Delivery
of Documents.
1.3.1
On
or
prior to the Closing, the Company shall deliver to Plenus Management the
following documents:
the
duly
executed Note;
(ii)
a duly
executed warrant, in the form of Exhibit
B
(the
“Warrant”),
in
the name of the Lenders, for the purchase of Warrant Shares (as defined in
the
Warrant) in accordance with the terms of the Warrant;
(iii)
(a)
a Fixed
Charge Agreement, in the form of Exhibit
C1,
and a
Floating Charge Agreement, in the form of Exhibit
C2
(the
"Pledge
Agreements"),
duly
signed by the Company, and (b)
certificates issued by the applicable governmental agencies, reasonably
satisfactory to Plenus Management, that the charges, liens, pledges and/or
security interests pursuant to the Pledge Agreements have been perfected;
(iv)
a true
and correct copy of resolutions of the Company's Board of Directors, dated
as of
the date hereof, authorizing: (a)
the
Company to enter into this Agreement, the Warrant and the Pledge Agreements
and
all other agreements and documents attached or ancillary hereto or thereto
(collectively, the "Company
Transaction Documents"),
(b)
the
consummation by the Company of the transactions contemplated in the Company
Transaction Documents, including, inter alia, the issuance and delivery of
the
Warrant to the Lenders at the Closing, the reservation of a sufficient number
of
Warrant Shares to be issued upon exercise of the Warrant and, subject to the
approval of the SEC (as defined below), the registration of the Warrant Shares
for trading on NASDAQ and TASE (as more fully set forth below), and
(c)
an
officer of the Company to execute and deliver on behalf of the Company the
Company Transaction Documents;
2
(v)
(a)
a
Subsidiary Guaranty (the "Subsidiary
Guaranty"),
in
the form of Exhibit
D1
executed
by each of Radcom Investments (1996) Ltd. and Radcom (UK) Ltd. and in the form
of Exhibit
D2
executed
by Radcom Equipment, Inc. (each - a "Subsidiary",
and
collectively – the "Subsidiaries")
(b)
a
Security Agreement, in the form of Exhibit
D3
(the
"Subsidiary
Security Agreement"),
duly
signed by Radcom Equipment, Inc., (c)
a
Deposit Account Control Agreement, substantially in the form of Exhibit
D4,
duly
signed by Radcom Equipment, Inc. and the bank(s) with which Radcom Equipment,
Inc. maintains deposit accounts (the "Control
Agreement,
and
together with
the
Subsidiary Guaranty, the Subsidiary Security Agreement and all other documents
pertaining to the transactions contemplated hereby and thereby - the "Subsidiaries
Transaction Documents"
and,
collectively with the Company Transaction Documents, the "Transaction
Documents")
and
(d)
an
evidence reasonably
satisfactory to Plenus Management that the charges pursuant to the Subsidiary
Security Agreement have been perfected;
(vi)
a true
and correct copy of resolutions of the Board of Directors of each Subsidiary
authorizing: (a)
such
Subsidiary to execute and deliver the respective Subsidiary Transaction
Documents, and (b)
an
officer of such Subsidiary to execute and deliver such respective Subsidiary
Transaction Documents;
(vii)
copies
of all waivers, notifications, consents and approvals required for the
consummation of the transactions contemplated by the Transaction
Documents;
(viii)
a
Management Rights Letter, in the form of Exhibit
E,
duly
signed by the Company;
(ix)
a legal
opinion by counsel to the Company, in the form of Exhibit
F;
(x) a
joinder
(the "Joinder"),
in the
form of Exhibit
G,
to that
certain Share Purchase Agreement, dated December 19, 2007, duly executed by
the
Company and the other parties thereto
solely
with respect to the registration rights provided to the “Purchasers”
thereunder;
(xi)
a
compliance certificate (the "Closing
Compliance Certificate"),
in the
form of Exhibit
H,
duly
executed by the Company's Chief Financial Officer (without any personal
liability).
1.3.2. Closing
Condition.
Without
derogating from the Company's obligation to timely furnish the Lenders with
all
of the documents set forth in Section 1.3.1, the obligations of the Lenders
pursuant hereto shall be subject to receipt of all of such documents on or
prior
to the Closing Date, and the Lenders shall have the right to terminate this
Agreement, without liability, by written notice to the Company should it
transpire that the Company would fail to furnish all of the said documents
by
the date which is forty five (45) days following the date
hereof.
3
1.4 Security.
The
Company agrees to secure the repayment of the principal amount of the Loan
(the
"Principal
Amount")
outstanding from time to time, any accrued and unpaid Interest (as defined
below) and any other amount due to the Lenders hereunder or in connection
herewith by (a) creating for the benefit of the Lenders, a first ranking fixed
charge (as such term is defined in the Companies Ordinance [New-Version]-1983)
on the Intellectual Property (as defined below) of the Company owned on the
date
hereof and/or throughout the term of this Agreement, and a first ranking
floating charge (as such term is defined in the Companies Ordinance
[New-Version]-1983) on the Company’s tangible and intangible assets and rights
of any kind, whether contingent or absolute, including, but not limited to,
the
Company's technology and other Intellectual Property, as more fully set forth
in
the Pledge Agreements, (b) causing each Subsidiary to guarantee the fulfillment
of the Company's obligations hereunder, as more fully set forth in the
Subsidiary Guaranty, and (c) causing Radcom Equipment, Inc. to secure the
Company’s obligations hereunder, as more fully set as more in the Subsidiary
Security Agreement and the Control Agreement. The Company shall inform Plenus
Management in writing of any additional registration of Intellectual Property,
or application for such registration or renewal thereof, and shall take all
such
steps as shall be reasonably required in order to extend the charges created
hereunder to such additional registration. From time to time Plenus Management
may demand the execution and delivery of, and the Company shall execute and
deliver, or cause the execution and delivery of, such additional documents
as
may be reasonably necessary to maintain or extend the charges created pursuant
to the Pledge Agreements and the Subsidiary Security Agreement, including,
without limitation, by creating additional security in favor of the Lenders
on
the assets of any Subsidiary or new subsidiary. For the avoidance of doubt,
Plenus Management and the Lenders acknowledge that the right to realize the
above charges and pledges is subject to the rights and privileges of the Office
of the Chief Scientist of the Ministry of Industry and Trade (the “OCS”).
1.5 Termination
of Security Interests.
Upon
repayment in full of the Principal Amount together with any accrued Interest
thereon and any other amount due the Lenders under the Transaction Documents
or
in connection therewith, the Security Interests (as defined in Section 1.6)
granted pursuant hereto shall terminate and be of no further force and effect.
In such event, the Lenders shall, at the Company’s expense, promptly execute and
deliver to Company such documents as the Company shall reasonably request to
evidence or effect the termination of the Lenders' Security
Interests.
1.6 Seniority.
Other
than with respect to fixed charges on assets of the Company or any subsidiary
of
the Company acquired by the Company or such subsidiary following the Closing
Date, which charges are made in favor of the actual sellers or lessors of such
assets, or in connection with purchase loans (including bank guarantees and
letters of credit) made by the actual seller of such assets or a financial
institution specifically financing such an acquisition or lease of assets
(שסל"ן)
or as
otherwise provided by law, the Loan and all amounts accrued thereon, as well
as
all other amounts due to the Lenders pursuant to the Transaction Documents,
shall rank senior to any other Security Interest on the assets and rights of
the
Company and the Company's subsidiaries, to any other indebtedness to banks,
financial and lending institutions, creditors, shareholders and other parties,
all to the extent permitted by applicable law.
4
For
purposes of this Agreement, the term “Security
Interest”
shall
mean any Lien (as defined below), assignment or other encumbrance over or in
any
person’s or entity’s property, and the term “Lien”
shall
mean any lien, pledge, encumbrance, security interests, charge, option,
preemptive right or transfer or other similar restriction.
2. Payments.
2.1
Repayment
of Principal Amount.
Subject
to the provisions of Section 2.5 below, the Principal Amount shall be due and
payable in twenty four (24) consecutive, equal monthly installments of
$104,166.66, commencing thirteen (13) months after the Closing Date and
continuing on the same day of each of the following twenty three (23) months
(and if such day is not a Business Day, then on the first Business Day
thereafter), with the last installment becoming due and payable on the third
(3rd)
anniversary of the Closing Date.
For
the
purposes of this Agreement, “Business
Day”
shall
mean each day on which at least two of the three biggest banking institutions
in
Israel are open for business.
2.2 Interest
on Principal Amount.
The
Principal Amount outstanding from time to time shall bear interest (denominated
in United States dollars and calculated on a 360 day year for the actual number
of days elapsed and compounded annually) at an annual rate of ten percent (10%),
until the date of repayment, plus value added tax (“VAT”),
if
applicable (together, the “Interest”).
The
accrued Interest shall be payable on the first Business Day of each calendar
quarter, with respect to the preceding quarter (or part thereof), except in
the
case of early prepayment, in which case accrued Interest shall be due and
payable on such date of early repayment, or for the Interest accrued during
the
quarter (or part thereof) in which the last installment of the Principal Amount
is due and payable, which Interest shall be due and payable concurrently with
such last repayment of the Principal Amount.
2.3 Interest
on Late Payments.
Without
derogating from any rights or remedies afforded by law, any portion of the
Principal Amount and/or Interest which is not paid by the Company on its due
date as set forth above, shall bear an additional interest of 5% per annum
from
the due date and until actual payment, plus VAT, if applicable (together, the
"Additional
Interest").
The
Additional Interest shall be compounded daily, except for Additional Interest
charged as a result of the first two incidents of late payment, which
shall be compounded daily only if such failures to timely pay are not remedied
within the
five (5)
Business Days after the due date.
2.4 Bank
Information.
Unless
and until otherwise notified by Plenus Management to the Company in writing,
all
payments payable by the Company to the Lenders hereunder shall be divided among
the Lenders in the manner described below (and in Schedule I) and shall be
made
to the following accounts:
(i)
17%
of each payment shall be made to the following bank account (Plenus II): Bank
Leumi, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Branch 864 Plenus
II,
L.P. 233400/61 Swift code: ▇▇▇▇▇▇▇▇▇▇▇; and
5
(ii)
the
remaining 83% of each such payment shall be made to the following bank account
(Plenus III): Bank Leumi, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Branch 864 Plenus II, L.P. 259400/19 Swift code: ▇▇▇▇▇▇▇▇▇▇▇
2.5 Prepayment.
Notwithstanding anything to the contrary herein contained, the Company may
prepay the Loan and any amounts owed to the Lenders under the Transaction
Documents, at any time, without penalty or premium, provided
that the
Company gives Plenus Management at least ten (10) days prior written notice
of
its intention to prepay and specifying therein the date and the amount of such
prepayment, and further provided
that
each such prepayment is in an amount of not less than the lesser of (a)
$200,000, or (b) the sum of the outstanding Principal Amount plus any accrued
and unpaid Interest and all other amounts due the Lenders under the Transaction
Documents. Any prepaid amount of part of the outstanding Principal Amount shall
also reduce proportionately the repayment amount of each future installment
of
the Principal Amount.
2.6 Set-off.
The
Lenders may set-off any obligation owed to them by the Company under the
Transaction Documents against any obligation (whether or not due and payable)
owed by the Lenders to the Company, regardless of the place of payment or
currency of either obligation, upon giving the Company a written notice to
this
effect. If an obligation is not liquidated or is unascertained, the Lenders
may
set-off in an amount estimated by them in good faith to be the amount of that
obligation, provided,
however,
that in
case the actual amount owed by the Company transpires to be lower than the
amount estimated by the Lenders, the Lenders shall refund the difference to
the
Company. If obligations are in different currencies, the Lenders may convert
either obligation at a market rate of exchange in their usual course of business
for the purpose of the set-off. The Lenders shall not be obliged to exercise
any
right given to them under this Section 2.6. The Company may not
set-off
any obligation owed to it by the Lenders against any obligation it owes to
the
Lenders under the Transaction Documents.
2.7 Lenders'
Books as Evidence.
The
Lenders' books and accounts shall serve as prima
facie
evidence
in all their particulars, including all references to the computation of the
Principal Amount, Interest, Additional Interest, payments made and any other
financial matter related hereto.
3. Acceleration.
For
purposes of this Agreement, each of the following events shall be deemed an
"Event
of Acceleration":
(i) the
Company fails to pay any sum due from it under any of the Transaction Documents
at the time, in the currency and in the manner specified therein, or is
otherwise in breach of any of the Transaction Documents, including, without
limitation, the financial covenants referred to in Section 7.4 hereof, and,
where such breach can be cured by the Company, such breach is not remedied
within five (5) Business Days in case of non-payment, within ten (10) Business
Days in case of another fundamental breach, or twenty one (21) Business Days
in
case of a non-fundamental breach; or
6
(ii) the
Company admits or indicates its inability to pay its debts as they become due,
consistently fails to pay its undisputed debts as they fall due, commences
negotiations with its creditors with a view to a general readjustment or
rescheduling or another arrangement regarding its indebtedness in general or
makes a general assignment for the benefit of, or a composition with, its
creditors; or
(iii) any
indebtedness of the Company to a third party for borrowed money in the amount
of
more than $200,000 is not paid when due (or the Company is otherwise in default
under any agreement with banks or financial institutions), other than as a
result of legitimate disputes, "grace periods" provided by such lender or trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices; or
(iv) the
adoption of a resolution by the Company to voluntarily liquidate; the filing
by
or against the Company of any petition in liquidation or any petition for relief
under the provisions of applicable law for the relief of debtors; or the
appointment of a special manager, liquidator or temporary liquidator, receiver
or temporary receiver or trustee to take possession of any material assets
of
the Company; provided,
however,
that if
such filing, or appointment were instigated without the Company's consent,
it
shall be deemed an Event of Acceleration only if not cancelled, removed or
stayed within sixty (60) days; or
(v) any
representation or statement made by the Company in any of the Transaction
Documents, or in any other document, certificate or written statement delivered
by it as part of the Transaction Documents, proves to have been incorrect or
misleading in any material respect when made; provided,
however,
that
with respect to (a) the representations contained in clauses (ii), (iv), (v),
(ix), (x), (xi), (xiii) and (xiv) – (xvii) of Section 4 hereof this Event
of Acceleration may only apply until the Company provides Plenus Management
with
audited, consolidated financial statements as at, and for the year ended on,
December 31, 2007, including its balance sheet, statements of income, cash-flow
and changes in shareholder equity for the period ended thereon, and (b) the
representations contained in clauses (i), (iii), (vi) - (viii) and (xii) of
Section 4 hereof this Event of Acceleration may only apply until the earlier
of
repayment in full of all amounts due the Lenders pursuant to the Transaction
Documents or the third (3rd)
anniversary of the Closing Date; or
7
(vi) any
event
or series of events occur(s) which, in the reasonable opinion of Plenus
Management, may have a material adverse effect on the business, condition
(financial or otherwise), or results of operations of the Company and the
Subsidiaries (taken as a whole) or on the ability of the Company or the
Subsidiaries to comply with any of their material obligations under any of
the
Transaction Documents ("Material
Adverse Effect").
Provided,
however,
that
none of the following shall be deemed a Material Adverse Effect: (a) changes
in
general economic or political conditions or financial credit or securities
markets in general (including changes in interest or exchange rates) in any
country or region in which any of the Company or the Subsidiaries conducts
a
material portion of its business, except to the extent such changes affect
the
Company and the Subsidiaries in a disproportionate manner as compared to other
companies that compete with the Company or the Subsidiaries operating in any
such country or region in industries in which the Company or the Subsidiaries
operate or do business; (b) any events, circumstances, changes or effects that
affect the industries in which the Company or the Subsidiaries operate, except
to the extent such events, circumstances, changes or effects affect the Company
and the Subsidiaries in a disproportionate manner as compared to other
participants in the industry; (c) any changes in GAAP occurring after the date
of this Agreement; (d) acts of war, armed hostilities or terrorism, or
escalation or worsening thereof, that cause any damage or destruction to, or
render physically unusable, any facility or property of the Company or any
of
the Subsidiaries or otherwise disrupt the business or operations of the Company
or any of the Subsidiaries; (e) any action taken by the Company at the written
request or with the written consent of Plenus Management; (f) any decline in
the
market price or decrease or increase in the trading volume of Company shares
after the date of this Agreement; and (g) any failure to meet internal or
published projections, forecasts, or revenue or earning predictions for any
period after the date of this Agreement; and further provided
that
prior to declaring an Event of Acceleration under this clause (vi), if such
Event of Acceleration can be cured, Plenus Management shall give the Company
at
least 5
Business Days prior written notice in which the Company may cure such Event
of
Acceleration; or
(vii)
a
breach by any Subsidiary of any of its respective Subsidiary Transaction
Documents which, where the breach can be cured by such Subsidiary, is not
remedied within (5) Business Days, in case of non-payment, ten (10) Business
Days, in case of another fundamental breach, or twenty one (21) Business Days,
in case of a non-fundamental breach.
Without
derogating from the provisions contained herein, the Company shall promptly
inform Plenus Management in writing of the occurrence of any Event of
Acceleration as soon as it becomes aware of it. In addition, upon receipt of
a
written request to that effect from Plenus Management, the Company shall confirm
to Plenus Management that, except as previously notified to Plenus Management,
if notified, or as notified in such confirmation, if notified, no Event of
Acceleration has occurred.
In
the
event that an Event of Acceleration described in paragraphs 3(i), 3(v), 3(vi)
or
3(vii) has happened and is continuing following any cure period set forth in
such provisions (if any), the Lenders may, by notice in writing sent to the
Company, declare all amounts due to the Lenders on account of the Loan due
and
payable. In the event that an Event of Acceleration described in paragraphs
3(ii), 3(iii) or 3(iv) has happened and is continuing following any cure period
set forth in such provisions (if any), all amounts due to the Lenders on account
of the Loan shall become due and payable without notice.
Notwithstanding
anything to the contrary contained herein, upon such amounts becoming due and
payable as a result of any Event of Acceleration as aforesaid, the Company
will
forthwith pay to the Lenders all amounts due to the Lenders on account of the
Loan, including VAT if applicable. Additional Interest shall accrue on any
delinquent payment, in accordance with the provisions of Section 2.3
above.
8
4. Representations
and Warranties of
the Company.
The
Company, being aware that the Lenders have agreed to enter into the Transaction
Documents in reliance upon the representations and warranties contained in
this
Section 4, hereby represents and warrants to the Lenders (on its behalf and
on
behalf of the Subsidiaries) that, except as set forth on a Disclosure Schedule
(the “Disclosure
Schedule”)
attached hereto as Schedule
4
or in
the Company's SEC Reports (as defined below), as of the date hereof:
(i) The
Company is a company duly formed and validly existing under the laws of the
State of Israel. The Subsidiaries are duly formed, validly existing and, where
applicable, in good standing, under the laws of the states in which they were
incorporated and the Company has no other subsidiaries. The Company’s current
Memorandum of Association and Articles and Radcom Equipment Inc.'s Certificate
of Incorporation and Bylaws are attached to the Disclosure Schedule as
Annex
4(i).
The
Company and the Subsidiaries have full corporate power and authority to enter
into and perform their obligations under the respective Transaction Documents,
and all of such documents, upon their execution and delivery, constitute legally
binding obligations of the Company or the Subsidiaries (as the case may be),
enforceable against the Company and the Subsidiaries in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
moratorium, and other laws of general application affecting enforcement of
creditors rights generally.
(ii) The
(i)
Company's audited, consolidated financial statements as at, and for the year
ended on, December 31, 2006, including its balance sheet, statements of income,
cash-flow and changes in shareholder equity for the period ended thereon, and
(ii) Company's unaudited, consolidated financial statements for the year ended
on December 31, 2007, and its statements of income and cash-flow for such 12
month period, are attached to the Disclosure Schedule as Annex
4(ii)
(the
“Financial
Statements”).
The
Financial Statements are true and correct in all material respects, were audited
in the case of item (i) above by a recognized firm of independent certified
public accountants, are in accordance with the books and records of the Company,
have been prepared in accordance with U.S. generally accepted accounting
principles consistently applied ("GAAP"),
and
accurately present in all material respects the consolidated financial position
of the Company as of such dates and the results of its operations for the
periods then ended. Since December 31, 2007, there has not been any material
adverse change in the assets, liabilities, condition (financial or otherwise)
or
business of the Company, including, without limitation:
(a) any
damage, destruction or loss, whether or not covered by insurance, materially
and
adversely affecting the assets, properties, conditions (financial or otherwise),
operating results or business of the Company;
(b) any
waiver by the Company of a valuable right or of a material debt owed to
it;
9
(c) any
satisfaction or discharge of any material Lien, material claim or material
encumbrance or payment of any material obligation by the Company, except in
the
ordinary course of business;
(d) any
material change or amendment to a material contract or material arrangement
by
which the Company is bound or to which any of its assets or properties
subject;
(e) any
loans
made by the Company to its employees, officers or directors, other than travel
advances and the like made in the ordinary course of business;
(f) any
sale,
transfer or lease of, except in the ordinary course of business, or mortgage
or
pledge or imposition of Lien on, any of the Company’s material assets;
or
(g) any
change in the accounting methods or accounting principles or practices employed
by the Company.
(iii) The
execution and delivery of the respective Transaction Documents by the Company
and the Subsidiaries and performance of the Company’s and the Subsidiaries'
obligations thereunder have been duly and validly authorized by all necessary
corporate action.
(iv)
The
Company has filed all forms, reports, statements and other documents required
to
be filed with the Securities and Exchange Commission (“SEC”)
for
the three years preceding the date hereof and, to the extent not available
on
the SEC’s ▇▇▇▇▇ system, has heretofore delivered to Plenus Management, in the
form filed with the SEC during such period, together with any amendments
thereto, all Annual Reports on Form 20-F (collectively, the “Company
SEC Reports”).
As of
their respective filing or publication dates, the Company SEC Reports complied
in all material respects with the requirements of the United States Securities
Exchange Act of 1934 and the United States Securities Act of 1933, as amended,
applicable to the Company. The Company SEC Reports did not, at the time they
were filed, contain any untrue statement of a material fact or omit to state
a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(v)
(a)
The
Financial Statements reflect, in accordance with GAAP, all material taxation
for
which the Company was then liable or accountable in respect of or by reference
to any income, sales, value added, profit, receipt, gain, transaction,
agreement, distribution or event which was earned, accrued, received, or
realized, entered into, paid or made on or before December 31, 2004, and the
Company has promptly paid or provided in its books of account for all taxation
for which it has become liable or accountable in the period from the date of
its
incorporation to the Closing Date, except for such omissions which would not
reasonably be likely to have a Material Adverse Effect.
10
(b)
The
Company has at all times and within the requisite time limits promptly, fully
and accurately observed, performed and complied with all material obligations
or
conditions imposed on it under any legislation relating to taxation, except
for
such non compliance that, both individually and in the aggregate, would not
have
a Material Adverse Effect.
(c)
The
Company is not aware of any circumstances which will or may, whether by lapse
of
time or the issue of any notice of assessment or otherwise, give rise to any
dispute with any relevant taxation authority in relation to its liability or
accountability for taxation, any claim made by it, any relief, deduction, or
allowance afforded to it, or in relation to the status or character of the
Company or any of its enterprises under or for the purpose of any provision
of
any legislation relating to taxation, except for such dispute or claim that,
both individually and in the aggregate, are not likely to have a Material
Adverse Effect.
(vi) The
Company has taken all corporate actions, and has procured all consents and
approvals, necessary for the issuance of the Warrant; and the Warrant and the
Warrant Shares when issued (provided that, with respect to the Warrant Shares,
the Warrant was properly exercised in accordance with its terms), shall be
duly
authorized, validly issued, fully paid, nonassessable and shall not trigger
any
preemptive rights which have not been waived.
(vii) Neither
the execution nor the delivery of any of the Transaction Documents, nor the
consummation of the transactions contemplated thereby, will contravene any
agreement or negative pledge, or any law, rule, restriction or decree to which
the Company or any Subsidiary is subject, and will not result in any such
violation or be in conflict with or constitute, with or without the passage
of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event that results
in the creation of any Lien upon any assets of the Company or any Subsidiary
or
the suspension, revocation, impairment, forfeiture, or non-renewal of any
material permit, license, authorization, or approval applicable to the Company
or any Subsidiary, its respective business or operations or any of its
respective assets or properties except for, in each case, such contraventions,
conflicts, defaults and the like that both individually and in the aggregate,
are not likely to have a Material Adverse Effect.
(viii) There
is
no order, writ, injunction or decree of any court, government or governmental
agency that, if occurred after the Closing, would constitute an Event of
Acceleration pursuant to clause (vi)
of
Section 3; nor is there any
action, suit, proceeding or investigation pending or threatened against the
Company or any Subsidiary that questions the validity of any of the Transaction
Documents, or the right of the Company or any Subsidiary to execute and deliver
any such document or to consummate the transactions contemplated thereby, or
that may have, either individually or in the aggregate, a Material Adverse
Effect; nor is the Company aware that there is any basis for the
foregoing.
(ix) There
are
no material claims, guarantees, royalty payments, payments to government
entities or regulatory bodies, Security Interests, options or other rights
outstanding with respect to any assets or securities of the Company or any
Subsidiary, and neither the Company nor any Subsidiary has any outstanding
loans
or financial obligations to any third parties, including, but not limited to,
any banking obligations, and any Liens, whether registered or not, on the
Company’s or any Subsidiary's bank accounts or other assets of the Company or
any Subsidiary.
11
(x) (a)
To the
Company's best knowledge, the Company and the Subsidiaries own, free and clear
of claims or rights of any other person, with full right to use, sell, license,
sublicense, dispose of, and bring actions for infringement of, or have acquired
or have licenses or other rights to use, all Intellectual Property (as defined
below) used by them in the conduct of their business as presently conducted.
A
complete list of all patents, trademarks and key domain names registered by
the
Company or any Subsidiary in any jurisdiction as of the date hereof, and
all
applications for registration or renewal of such patents, trademarks and key
domain names in any jurisdiction as of the date hereof, is set forth in the
Disclosure Schedule.
(b)
To the
Company's knowledge, the business of the Company and the Subsidiaries as
presently conducted and the production, marketing, licensing, use and servicing
of any products or services of the Company and the Subsidiaries do not infringe
or conflict with any Intellectual Property. The Company and the Subsidiaries
have not received written notice from any third party asserting that any
Intellectual Property owned or licensed by the Company or the Subsidiaries,
or
which the Company or the Subsidiaries otherwise have the right to use, is
invalid or unenforceable by the Company and the Subsidiaries and there is no
reasonable basis for any such claim (whether or not pending or threatened).
(c)
The
Company and the Subsidiaries have taken all steps determined by them to be
reasonably required in order to establish and preserve their ownership in their
owned Intellectual Property and to keep confidential all material technical
information developed by, or belonging to, the Company and the Subsidiaries
which has not been patented or copyrighted. To the Company's best knowledge,
the
Company and the Subsidiaries are not making any material unlawful use of any
Intellectual Property of any other person, including, without limitation, any
former employer of any past or present employees of the Company and the
Subsidiaries. To the Company's best knowledge, neither the Company or the
Subsidiaries nor any of their employees have any agreements or arrangements
with
former employers of such employees relating to any Intellectual Property of
such
employers, which materially interfere or conflict with the performance of such
employee’s duties for the Company or the Subsidiaries or result in any former
employers of such employees having any rights in, or claims on, the Intellectual
Property of the Company or the Subsidiaries. Each current and former employee
of
the Company or the Subsidiaries has executed agreements regarding
confidentiality, proprietary information and assignment of inventions and
copyrights to the Company or the Subsidiaries, respectively, each independent
contractor or consultant of the Company or the Subsidiaries having access to
confidential information of the Company or the Subsidiaries has executed
agreements regarding confidentiality and proprietary information, and the
Company and the Subsidiaries have not received written notice that any employee,
consultant or independent contractor is in violation of any agreement or in
breach of any agreement or arrangement relating to proprietary information
or
assignment of inventions.
12
For
purposes of this Agreement, “Intellectual
Property”
means
patents, patent rights, patent applications, trademarks, trade names, service
marks, brand names, logos and other trade designations (including unregistered
names and marks), trademark and service ▇▇▇▇ registrations and applications,
copyrights and copyright registrations and applications, inventions, protected
formulae, formulations, processes, methods, trade secrets, computer software,
computer programs and source codes, and similar technical information,
engineering know-how, assembly number and test data drawings.
(xi) The
Company's capitalization on
a
fully diluted basis as of the date hereof is as set forth in the Disclosure
Schedule. The outstanding shares of any class of the Company are duly and
validly authorized and issued, fully paid and nonassessable, and were issued
in
accordance with applicable securities laws or pursuant to valid exemptions
therefrom. There are no outstanding options, warrants, rights or agreements
for
the purchase or acquisition from the Company of any shares of its share capital.
The Company is not a party or subject to any agreement or understanding and,
to
the Company's knowledge, there is no agreement or understanding between any
persons and/or entities, which affects or relates to the voting rights or to
the
giving of written consents with respect to (1) any of the Company's securities,
or (2) appointment or removal of a director of the Company.
(xii)
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental authority on the
part
of the Company or any Subsidiary is required in connection with the consummation
of the transactions contemplated by the Transaction Documents, except as set
forth in the Transaction Documents and compliance with applicable securities
laws.
(xiii)
Each
Material Agreement (as defined below) is in full force and effect, is not
subject to rescission and, to the Company's knowledge, there are no existing
circumstances which would reasonably be expected to materially modify the terms
thereof. To the Company’s knowledge, no third party is in default under any
Material Agreement. A list of the Material Agreements is set forth in the
Disclosure Schedule. Neither the Company not any of the Subsidiaries is in
breach of any obligation under any Material Agreement.
For
the
purposes of this Agreement, the term “Material
Agreement”
shall
mean any agreement to which the Company or any Subsidiary is a party and which
(i) was filed as an exhibit to the Company’s SEC Reports or (ii) is material to
the Company's business taken as a whole, including instruments, leases,
licenses, arrangements or undertakings of any nature, written or oral.
(xiv)
(a)
The
Company has delivered to Plenus Management full and complete copies of all
employment agreements or management and consulting agreements currently in
force
for each of the three most highly paid individuals employed or hired by the
Company.
(b)
The
form(s) of contracts under which substantially all the officers, employees
and
consultants of the Company and the Subsidiaries at the date hereof, who have
access to confidential information of the Company or the Subsidiaries, are
engaged, include customary provisions relating to non-disclosure and
non-competition.
13
(c)
There
is not now or has been threatened any material labor dispute, strike, slow-down,
picketing, work stoppage or other similar labor activity with respect to the
employees of the Company and the Subsidiaries, taken as a group.
(xv)(a)
No
Interested Party (as such term in Hebrew ("בעל
ענין") is
defined in the Companies Law, 5759-1999) has any direct or indirect interest
in
any material asset used in or otherwise relating to the business of the Company
or the Subsidiaries; (b) no Interested Party is indebted to the Company or
any
Subsidiary; (c) no Interested Party has entered into, or has had any direct
or
indirect financial interest in, any Material Agreement, material transaction
or
material business dealing with or involving the Company or any Subsidiary;
(d)
no Interested Party is competing, directly or indirectly, with the Company
or
any Subsidiary; and (e) no Interested Party has any material claim or right
against the Company or any Subsidiary (other than rights to receive amounts
not
yet due with respect to compensation for services performed as an employee
or
director of the Company or any Subsidiary).
(xvi)
No
person
has, or will have, as a result of any act or omission by the Company, or anyone
acting on behalf of the Company, any right, interest or valid claim against
the
Company or the Lenders for any commission, fee or other compensation as a finder
or broker or in any similar capacity in connection with the transactions
contemplated by this Agreement. The
Company will indemnify and hold the Lenders harmless from and against any claim
or liability resulting from any party claiming any such commission or fee,
if
such claims shall be contrary to the foregoing statement.
(xvii)
The
representations and warranties made by the Company in this Section 4 do not
contain any untrue statement of a material fact or omit to state a material
fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
14
4A.
Representations
and Warranties of
the Lenders.
Each
of
the Lenders, being aware that the Company has entered into the Transaction
Documents in reliance upon the representations and warranties contained in
this
Section 4A, hereby represents and warrants to the Company as
follows:
4A.1
The
Transaction Documents to be executed by such Lender, when executed and delivered
by such Lender on the date hereof or on the Closing Date, shall constitute
the
valid, binding and enforceable obligations of such Lender. The execution,
delivery and performance of the Transaction Documents and the consummation
of
the transactions contemplated thereby by such Lender will not conflict with,
or
result in a violation of, any of the terms, conditions and provisions of such
Lender's governing instruments.
4A.2
The
execution, delivery and performance of the obligations of such Lender hereunder
have been duly authorized by all necessary corporate action, if such Lender
is a
corporate entity, and will not violate, together with the consummation of the
transactions contemplated thereby, any provision of any instrument, judgment,
order, writ, decree or contract to which it is party or by which it is bound,
or
any provision of law, rule or regulation applicable to such Lender which would
prevent the execution by such Lender of the Transaction Documents or the
performance of its obligations hereunder and the consummation of the
transactions contemplated thereby.
4A.3
No
agent, broker, investment banker, person or firm acting in a similar capacity
on
behalf of or under the authority of such Lender is or will be entitled to any
broker's or finder's fee or any other commission or similar fee, directly or
indirectly, on account of any action taken by such Lender in connection with
any
of the transactions contemplated under the Transaction Documents. Such Lender
will indemnify and hold the Company harmless from and against any claim or
liability resulting from any party claiming any such commission or fee, if
such
claims shall be contrary to the foregoing statement.
4A.4
All
Lenders are exclusively and irrevocably represented by Plenus Management for
all
intents and purposes under this Agreement and the other Transaction Documents,
and the actions of Plenus Management shall be binding upon the
Lenders,
as
confirmed in the Side Letter attached hereto as Exhibit
I.
The
Company shall be entitled to fully rely on any instructions and actions by
Plenus Management as if they were instructions of the Lenders.
4A.5
It
is an experienced and knowledgeable lender and investor and is capable of
evaluating the risks of its loan to the Company and of its investment in the
Warrants. Such Lender is an “accredited investor” within the meaning of Rule 501
propagated under the Securities Act of 1933, as amended.
Nothing
set forth in this Section 4A shall be deemed to detract from or otherwise
prejudice the Lenders' reliance on the Company's representations and warranties
set forth in Section 4 above.
15
5.
Reporting
and Notice Rights;
Confidentiality.
5.1
Reporting
and Notice Rights.
Without
derogating from the management rights contained in the Management Rights Letter,
but subject to limitations, if any, under applicable law, the Company shall
provide the Lenders (including by filing of such information on ▇▇▇▇▇) with
all
of the following information commencing from the Closing Date until the full
repayment of the Loan and all amounts related thereto, and with the information
set forth in clauses (i), (ii) and (v) below following such repayment and so
long as the Lenders and/or their Permitted Transferees (as defined below) hold
the Warrant or shares of the Company constituting at least 20% of the the
Warrant Shares: (i) audited financial statements, within one-hundred and eighty
(180) days after the end of each fiscal year (including an audited annual
balance sheet of the Company as of
the end
of the fiscal year and the statement of income and cash flow of the Company
for
the fiscal year then ended), (ii) unaudited quarterly financial statements,
within forty-five (45) days after the end of each of the first, second and
third
quarter, (iii) all board materials, at the same time that members of the Board
of Directors of the Company receive them, (iv) such other data and information
as the Lenders may reasonably request, provided such data and information are
reasonably available, (v) in the event of a merger or consolidation of the
Company, a sale of all or substantially all of the assets or shares of the
Company or any other reorganization or restructuring of the Company having
similar effects or a distribution of dividends, advanced written notice of
at
least seven (7) Business Days prior to the anticipated closing of such
transaction or distribution, and (vi) advanced written notice of at least seven
(7) Business Days prior
to
the anticipated date of
any
public offering of the Company’s securities pursuant to a registration statement
filed with the Securities and Exchange Commission under the U.S. securities
laws
or pursuant to a registration statement filed with a similar authority under
the
securities laws of any other jurisdiction.
Furthermore,
as long as the Company owes the Lenders any amount hereunder, the Lenders shall
have, at reasonable times and upon reasonable notice, full access to all books
and records of the Company and shall be entitled to inspect the properties
of
the Company and consult with management of the Company regarding the same,
to
the extent reasonably required or advisable for the purpose of monitoring
compliance by the Company with its obligations under the Transaction
Documents.
5.2 Confidentiality.
The
Lenders acknowledge that the data and the information obtained pursuant to
the
Transaction Documents or by the operation of any applicable law are
confidential, and also acknowledge the prohibition on the use of material
non-public information pursuant to applicable securities law, and agree that
such data and information will not be disclosed, used or otherwise exploited
for
any other purpose, without the prior written consent of the Company;
provided,
however,
that
the Lenders may disclose any data and information: (i) in connection with
reports to their shareholders, partners, and investors, but only to the extent
so required and (ii) to their directors, officers and employees on a need to
know basis; on the condition, in each such case, that the recipient of data
or
information shall be subject to the same obligations to which the Lenders are
subject to with respect to such data and information pursuant
hereto.
16
6. Deleted.
7. Covenants.
7.1 Authorizations,
Approvals, Licenses and Consents.
The
Company shall comply with the terms of, and do all that is commercially
reasonably necessary to maintain in full force and effect, all authorizations,
approvals, licenses and consents required in, or by the laws and regulations
of,
the State of Israel or any other applicable jurisdiction to enable it and the
Subsidiaries to lawfully enter into, and perform their obligations under, the
Transaction Documents, and to ensure the legality, validity, enforceability
or
admissibility in evidence of all such documents.
7.2 Registration
Rights.
(i)
The
Company shall prepare and file with the SEC as soon as commercially reasonable,
but in any event not later than May 30, 2008 (the “Filing
Deadline”),
a
registration statement (the 'Registration
Statement")
on
Form F-3 (or, if Form F-3 is not then available to the Company, on such form
of
registration statement as is then available to effect a registration for resale
of the Warrant Shares and any other securities issued or issuable with respect
to any of the Warrant Shares) (collectively, the "Registrable
Securities")
covering the resale of the Registrable Securities. Subject to any SEC comments,
such Registration Statement shall include the plan of distribution attached
hereto as Exhibit
J.
Such
Registration Statement also shall cover, to the extent allowable under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (including Rule 416), such indeterminate number of additional
Ordinary Shares resulting from share splits, bonus shares (stock dividends)
or
similar transactions with respect to the Registrable Securities. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided to Plenus
Management and its counsel prior to its filing or other submission.
(ii)
The
Company shall use commercially reasonable efforts to have the Registration
Statement declared effective as soon as practicable. The Company shall notify
Plenus Management by facsimile or e-mail as promptly as practicable, and in
any
event, within twenty-four (24) hours, after any Registration Statement is
declared effective and shall simultaneously provide Plenus Management with
copies of any related Prospectus to be used in connection with the sale or
other
disposition of the securities covered thereby. The Company shall maintain the
effectiveness of the Registration Statement until the earlier of (i) the sale
of
all of the Registrable Securities by the Lenders; (ii) such time as all of
the
Registrable Securities may be sold by the Lenders pursuant to Rule 144(k);
or
(iii) the fifth (5th)
anniversary of the Closing Date.
17
(iii)
If
(A) a Registration Statement covering the Registrable Securities is not filed
by
the Filing Deadline, (B) such Registration Statement is not declared effective
by the SEC prior to the later of (i) five (5) Business Days after the SEC shall
have informed the Company that no review of the Registration Statement will
be
made or that the SEC has no further comments on the Registration Statement
or
(ii) the 180th day after the Closing Date or (C) after a Registration Statement
has been declared effective by the SEC, sales cannot be made pursuant to such
Registration Statement for any reason within the Company's control (including,
without limitation, by reason of a stop order, or the Company’s failure to
update the Registration Statement) (each, an “Event”
and
the
date on which such Event occurs, the “Event
Date”),
then
without diminishing the Company's obligation to cause the registration of the
Registrable Securities as soon as practicable or the Lenders' right to seek
injunctive relief, the Lenders shall be entitled to a payment in ordinary shares
of the Company, based on the then
Warrant
Exercise Price (as therein defined), in the amount of $20,000
payable on the
applicable
Event
Date and an additional payment of $7,000 for any additional month of delay.
7.3 Negative
Covenants.
The
Company will not, without prior written consent of Plenus Management:
(a)
materially change the general nature of its
business;
(b)
make
or maintain any loan, except for loans and other advances in the aggregate
amount of up to $250,000 at any given time that are granted in the ordinary
course of business.
For
the
avoidance of doubt, the foregoing limitation shall not apply to loans and other
advances between the Company and any of its subsidiaries which entered into
a
security agreement with the Lenders and to payment terms negotiated with
customers in arm’s length transactions;
(c)
receive financial loans or similar extensions of credit from a bank, another
financial institution or other similar third party exceeding (together with
the
amounts set forth in clause (d) below), other than short term loans, or similar
extensions of credit, of up to thirty (30) days received in the ordinary course
of business which do not exceed an aggregate amount of $200,000;
(d)
provide any guarantee or otherwise incur any contingent liability in connection
with any financial loan or similar extension of credit from a bank or another
financial institution or other similar third party, other than in the ordinary
course of business and in an aggregate amount which may not exceed in the
aggregate (together with the amounts set forth in clause (c) above) an amount
of
$200,000. For the avoidance of doubt, nothing herein shall prevent the Company
from granting in the ordinary course of business a performance bond, performance
guarantee or any other similar guarantees in connection with performance of
the
Company's obligations and/or
the obligations of a subsidiary which entered into a security agreement with
the
Lenders, pursuant
to a contract to which it
and/or
such subsidiary
is a
party;
For
the
purpose of clarity, the restrictions contained in clauses (c) and (d) of this
Section 7.3 shall not apply to any commercial debts (e.g., payments due to
suppliers or guarantees in respect thereof) incurred by the Company in the
ordinary course of its business;
18
(e)
repay
any loans (including, without limitation, shareholders’ loans), debts or other
financial obligations, excluding, however (i) normal operating expenses of
the
Company which are incurred in the ordinary course of business, and (ii)
repayment of loans or debts the assumption of which is not forbidden pursuant
to
this Agreement;
(f)
sell,
transfer, assign, pledge, or grant a Security Interest over any of the material
assets of the Company (except for sales or transfers of assets of the Company
in
the Company's ordinary course of business), all except as expressly permitted
herein;
(g)
make
any Distribution (as such term in Hebrew ("חלוקה")
is
defined in the Companies Law, 5759-1999); and
(h)
enter
into, or be a party to, any transaction, arrangement or agreement with any
Affiliate (as defined below) other than (i) investments in the Company or grant
of options pursuant to the Company’s employee stock option plan then in effect,
(ii) transactions involving insignificant amounts (provided that such
transactions are limited in number), (iii) the transactions currently in place
or extensions thereof, which are listed in Exhibit
K,
or (iv)
arm's length transactions in the ordinary course of business. For the avoidance
of doubt, material amendments of the terms of the transactions listed in said
Exhibit
K
shall
also require Plenus Management’s prior written consent. For purposes of this
Agreement, the term “Affiliate”
shall
mean, any individual or any type of entity, whether incorporated or not, which,
directly or indirectly through one or more intermediaries, controls or is under
common control with the Company.
The
above
covenants shall also apply to each and every subsidiary of the Company,
including subsidiaries formed following the Closing Date. This Section shall
not
apply to any transaction conducted solely between the Company and Radcom
Equipment, Inc. or such other subsidiaries (subject to such other subsidiaries
executing security agreements similar to the Subsidiary Security Agreement)
in
the ordinary course of business.
7.4.
Financial
Covenants.
The
Company shall comply with the financial covenants set forth in Exhibit
L.
7.5.
Merger;
Consolidation; Acquisition; Investments.
For so
long as any amounts payable to the Lenders pursuant to the provisions of the
Transaction Documents have not been repaid in full, the Company will have such
amounts repaid, if the Lenders so desire, (i) immediately upon the consolidation
of the Company with, or a merger with or into, or a sale of Company securities
(by the Company or by the Company’s shareholders) to any third party, pursuant
to which the Company’s shareholders immediately prior to such transaction will
own less than 51% of the surviving entity immediately following such
transaction, (ii) an acquisition or other transfer of all or substantially
all
of the Company’s assets, other than to an entity in which at least 51% of the
outstanding share capital is beneficially owned by the Company and/or its
shareholders (clauses (i) and (ii) above shall each be referred to herein as
an
“M&A
Transaction”),
or
(iii) the consummation of any secondary public offering of the Company's
securities with net proceeds to the Company in excess of $5,000,000 (which,
for
the avoidance of doubt, will not include the PIPE transaction approved by the
Company’s
shareholders on January 30, 2008.
19
8. Miscellaneous.
8.1 Further
Action.
At any
time and from time to time, each of the parties agrees, without further
consideration, to take such actions and to execute and deliver such documents
as, in the other party's opinion, may be reasonably necessary to carry out
and
give full effect to the provisions of the Transaction Documents and the
intentions of the parties as reflected hereby and thereby. Without derogating
from the generality of the foregoing, the Company shall use its best commercial
efforts to maintain in full force and effect all authorizations, approvals,
licenses and consents required by or under applicable laws and regulations
in
order to enter into the Transaction Documents and perform all of its obligations
under the Transaction Documents.
8.2 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Israel, without regard to the conflict of laws provisions thereof.
The parties hereby irrevocably submit to the exclusive jurisdiction of the
competent courts sitting in Tel Aviv, Israel.
8.3 Joint
and Several.
The
rights and obligations of the entities comprising the Lenders hereunder are
joint and several.
8.4 Successors
and Assigns.
Except
as otherwise expressly limited herein, the provisions hereof shall inure to
the
benefit of, and be binding upon, the successors, assigns, heirs, executors,
and
administrators of the parties hereto.
8.5 Non-assignability.
None of
the rights or obligations set forth in, arising under, or created by, this
Agreement may be assigned or transferred by the Company or a Lender without
the
prior consent in writing of the other party, which consent shall not be
unreasonably withheld. Anything in this Section 8.5 to the contrary
notwithstanding, each Lender shall have the right to assign or transfer its
rights and obligations under this Agreement, as long as such assignment or
transfer is not to a competitor of the Company, to any of the following (each
a
“Permitted
Transferee”):
(i)
any other entity which controls, is controlled by, or is under common control
with, such Lender, (ii) to any the other Lender, (iii) if the Lender is a
trustee or is appointed to act on behalf of others - to its beneficiaries,
or
(iv) if the Lender is a general or limited partnership - to its partners and
to
affiliated partnerships managed by the same management company or managing
general partner or to an entity which controls, is controlled by, or is under
common control with, such management company or managing general partner. The
limited right of a Lender to assign and transfer pursuant to this Section 8.5
shall also apply,
mutatis mutandis,
to each
Permitted Transferee.
20
8.6 Entire
Agreement.
The
Transaction Documents and their exhibits and schedules constitute the full
and
entire understanding and agreement among the parties with regard to the subject
matters thereof and supersede and terminate all prior discussions, commitments,
understandings or agreements heretofore. The preamble, exhibits and schedules
to
the Transaction Documents constitute integral parts thereof.
8.7 Transaction
Expenses.
The
Company will participate in the payment of the legal fees and other expenses
incurred by the Lenders in connection with the transactions contemplated by
the
Transaction Documents by paying, on or before the Closing Date, a one-time
transaction fee of $25,000,
plus applicable VAT. The Company shall also be responsible for all taxes and
other compulsory payments to which the Lenders are, or shall be, subject under
the Transaction Documents (other than taxes on the income of the Lenders imposed
in any applicable jurisdiction). For the avoidance of doubt, Plenus Management
and the Lenders declare that they are not aware of the existence of such taxes
on the date hereof.
8.8 Amendments
and Waivers.
Any
term of this Agreement may be amended and the observance of any term hereof
may
be waived (either prospectively or retroactively and either generally or in
a
particular instance) only with the written consent of the Company and Plenus
Management. No delay or omission to exercise any right, power or remedy accruing
to any party upon any breach or default under this Agreement, shall be deemed
a
waiver of any other breach or default theretofore or thereafter occurring.
All
remedies, either under this Agreement or by law or otherwise afforded to any
of
the parties, shall be cumulative and not alternative, except as specifically
set
forth in this Agreement.
8.9 Notices.
All
notices and other communications required or permitted hereunder to be given
to
a party to this Agreement shall be in writing and shall be faxed (with
electronic and telephone confirmation of receipt) emailed or mailed by
registered or certified mail (return receipt required), postage prepaid, or
by
electronic mail (with electronic and telephone confirmation of receipt), or
delivered by hand or by messenger, if to the Company - to the Company's address
set forth above, to the attention of the Company’s Chief Financial Officer, and
if to a Lender - to the Lenders' addresses set forth in Schedule I, to the
attention of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, or to such other address or to attention of
such
other person with respect to a party as such party shall notify the other party
in writing as above provided. Any notice sent in accordance with this Section
8.9 shall be effective (i) if mailed, three (3) Business Days after mailing,
(ii) if sent by messenger, upon delivery, and (iii) if sent via fax or
electronic mail, upon transmission and electronic confirmation of receipt or
(if
transmitted and received on a non-Business Day) on the first Business Day
following transmission and electronic confirmation of receipt.
8.10 Currency;
Manner of Payment.
The
term "dollars" or the symbol "$" appearing in this Agreement shall mean the
legal currency of the United States of America, and all payments hereunder
shall
be made in such currency, unless otherwise agreed in writing by Plenus
Management and the Company.
Payments
due to the Lenders shall be made to their respective bank accounts set forth
above or as shall otherwise be designated by the Lenders from time to time
by
written notice. The Company shall make such payments to such bank account by
initiating such payments on a banking day, before 12.00 a.m., Israel time,
by
bank wire transfer of immediately available funds.
21
8.11 Survival.
All
covenants made in this Agreement shall remain in full force and effect for
as
long as this Agreement is still in effect pursuant to its terms. Section 5.2
above (Confidentiality)
shall
survive the termination of this Agreement. The Warrant, or the Warrant Shares
if
issued, shall not be returned to the Company even if this Agreement is
terminated early for whatever reason.
8.12 Partial
Invalidity.
If any
provision of this Agreement is held by a court of competent jurisdiction to
be
invalid or unenforceable under applicable law, then such provision shall be
excluded from this Agreement and the remainder of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in
accordance with its terms; provided,
however,
that in
such event this Agreement shall be interpreted so as to give effect, to the
greatest extent consistent with and permitted by applicable law, to the meaning
and intention of the excluded provision as determined by such court of competent
jurisdiction.
8.13.
Limitations
on Rights of Third Parties.
Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give any person, other than the Company, the Lenders and Plenus
Management, any rights or remedies under this Agreement.
[Remainder
of page intentionally left blank.]
22
IN
WITNESS WHEREOF the parties have signed this Loan Agreement in one or more
counterparts as of the date first appearing above set forth.
|
By:
|
||
|
Its:
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||
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PLENUS
II, LIMITED
PARTNERSHIP
|
||
|
By:
|
PLENUS
MANAGEMENT
(2004)
LTD.
|
|
|
Its.
|
Management
Company
|
|
|
By:
|
||
|
Its:
|
||
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PLENUS
II (D.C.M.), LIMITED
PARTNERSHIP
|
||
|
By:
|
PLENUS
MANAGEMENT
(2004)
LTD.
|
|
|
Its.
|
Management
Company
|
|
|
By:
|
||
|
Its:
|
||
|
PLENUS
III, LIMITED
PARTNERSHIP
|
||
|
By:
|
PLENUS
MANAGEMENT III
2007
LTD.
|
|
|
Its.
|
Management
Company
|
|
|
By:
|
||
|
Its:
|
||
|
PLENUS
III (D.C.M.), LIMITED
PARTNERSHIP
|
||
|
By:
|
PLENUS
MANAGEMENT III
2007
LTD.
|
|
|
Its.
|
Management
Company
|
|
|
By:
|
||
|
Its:
|
||
23
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PLENUS
III (2), LIMITED
PARTNERSHIP.
|
||
|
By:
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PLENUS
MANAGEMENT III
2007
LTD.
|
|
|
Its.
|
General
Partner
|
|
|
By:
|
Management
Company
|
|
|
Its:
|
||
|
PLENUS
III (C.I.), L.P.
|
||
|
By:
|
PLENUS
MANAGEMENT III
2007
LTD.
|
|
|
Its:
|
Management
Company
|
|
|
By:
|
||
|
Its:
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||
24
Exhibit
L
Financial
Covenants
Subject
to the provisions of the last (bolded) paragraph of this financial covenants
exhibit, below are the following two financial covenants applicable to the
Company, which are cumulative
(i.e.,
the Company shall be required to comply with both (i) the Revenues/Bookings
financial covenant and the Operating Loss financial covenant).
1.
Revenues/Bookings
Financial Covenant
For
purposes of this financial covenant, the term "Revenues"
means
the Company's consolidated revenues for the applicable quarter, as reflected
in
the Company’s financial statements published in accordance with applicable laws
and regulations, and (ii) the term "Bookings"
means
all binding and legally enforceable agreements and purchase orders that were
received by the Company and/or any of its Subsidiaries in the applicable quarter
(as confirmed in writing by the Company's Chief Financial Officer and Chief
Executive Officer by no later than 45 days following the end of such quarter).
Revenuers/Bookings
Test
The
Company's consolidated Revenues or Bookings for each of the following quarters
should not be less than the corresponding amount:
Q2-08
-
$2.5 million
Q3-08
-
$2.5 million
Q4-08
-
$2.5 million
Q1-09
-
$3.0 million
Q2-09
-
$3.0 million
Q3-09
-
$3.0 million
Q4-09
-
$3.0 million
It
being
clarified that:
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(i)
|
the
Company shall be deemed to have complied with this financial covenant
if
it meets either
the Revenues test or
the Bookings test;
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| (ii) |
with
respect to the Revenues and the Booking tests – should the Revenues
or Booking in any given quarter be lower than the corresponding amount
set
forth above, the determination as to whether the Company has met
the
Revenues or Booking test for such quarter shall be postponed to the
immediately following quarter and if the combined Revenues or Booking
in
such quarter and the immediately preceding quarter shall be at least
equal
to the aggregated minimum Revenues or Booking for such quarters as
set
forth above, the Company shall be deemed to have met the Revenues
or
Booking test for the applicable quarter. For example, should the
Company
fail to meet the Q2-08 Revenues test, it will need to have not less
than
$5 million worth of Revenues by the end of Q3-08 (the combined Revenues
for Q2-08 and Q3-08) or else it shall be deemed to have failed to
meet the
Revenues test; and
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25
|
(iii)
|
notwithstanding
the foregoing, even if the Company fails to comply with the Revenues
test
and the Bookings test during any of the first 3 quarters of 2009
but the
accumulated Revenues of the Company for such quarter and the 3 quarters
immediately preceding such quarter are equal to or higher than US$18
million, the Company shall be deemed to have met this Revenues test
for
such quarter. The foregoing shall apply also to Q4-09, provided that
the
accumulated Revenues must be US$20 million or higher. For example,
should
the Company fail to meet the Q1-09 Revenues test, but the accumulated
Revenues of the Company for Q2-08, Q3-08, Q4-8 and Q1-09 shall be
equal to
or exceed US$18 million, then the Company shall be deemed to have
complied
with the Revenues test for such quarter.
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2.
Operating
Loss Financial
Covenant
The
Company's Operating Loss (as reflected in the Company’s financial statements
published in accordance with applicable laws and regulations) for each of the
quarters commencing on Q2-08 and ending on Q4-09 (inclusive) shall not exceed
US$1 million.
Notwithstanding
the foregoing, the Company shall not be deemed to be in breach of this Operating
Loss financial covenant even if during any of the aforesaid quarters the
Company's Operating Loss exceeds US$1 million, if the cumulative Operating
Loss
of such quarter and the immediately preceding and immediately ensuing financial
quarter are less than US$3 million. For example, even if the Operating Loss
of
the Company for Q4-08 exceeded US$1 million, the determination as to whether
the
Company has met the Operating Loss financial covenant shall be postponed until
the end of Q1-09 and if the combined Operating Loss of the Company for Q1-09
together with the Operating Loss for Q3-08 and Q4-08 shall be equal to or lower
than US$3 million, the Company shall be deemed to have met the Operating Loss
financial covenant during such quarter.
Notwithstanding
anything to the contrary contained in this exhibit, if and for so long as the
Company's available cash deposited in its bank account(s), as confirmed in
writing by a bank statement issued by the applicable bank(s), shall be equal
to
or exceed an amount which is twice the outstanding amounts due the Lenders
pursuant to the Agreement at such time, the Company shall not be required to
meet any of the foregoing financial covenants.
26