Exhibit 2.1
THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE LAWS OF ANY STATE OR ANY
OTHER JURISDICTION, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
EXCEPT IN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
Issue Date:
Principal Amount:
I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
Libor + 1.5% Convertible Secured Debenture
No: 1
1. Consideration. FOR VALUE RECEIVED, IIS INTELLIGENT INFORMATION SYSTEMS
LIMITED (the "Company"), an Israeli company, with offices at ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Israel, hereby
promises to pay to the order of __________, whose address is
____________________, or its registered assigns (hereinafter, the
"Registered Holder"), the principal sum of _________ Dollars ($________),
in lawful money of the United States, on the "Maturity Date" (as defined
below), with interest thereon from December 20, 2000 in like money at the
rate of LIBOR plus one and a half percent (1.5%) per annum on the unpaid
balance of this Debenture until paid or converted. Interest on this
Debenture shall be payable quarterly, on the first business day of March,
June, September and December of each year, commencing March 2001. The first
interest payment will include interest accrued from December 20, 2000.
The interest shall be increased by one percent (1%) for every four (4)
weeks of delay by the Company in making the filings specified in Sections
4.c and 4.d of the Securities Purchase Agreement (the "Securities Purchase
Agreement") of even date by and between the Company and the Purchasers
listed therein (without derogating from any other remedy of the Registered
Holder). Subject to Section 4 herein, principal payments shall be reduced
by that portion of the principal amount of the Debenture that are converted
into the Company's Ordinary Shares (the "Ordinary Shares").
"LIBOR" shall mean the London Inter Bank Offering Rate for three-month
dollar deposits for similar amounts as published by the Wall Street
Journal.
The Company shall repay the principal amount in equal quarterly
installments on the first business day of March , June, September and
December of each
year, commencing at the beginning of the third year following the issuance
of the Debenture and ending at the end of the fifth year (each such payment
date shall be referred to as an "Installment Date"), in such manner that on
each Installment Date, the Company shall repay 8 1/3 % of the principal
amount of the Debentures.
2. Payment. Principal and interest shall be payable at such address as the
Registered Holder shall have designated to the Company in writing at least
fifteen (15) business days prior to each Installment Date and the Maturity
Date (and, in the event of failure to provide such address, at the address
specified in section 1 above), in lawful tender of the United States.
3. Issuance of Notes. This Debenture has been issued by the Company pursuant
to the authorization of the Board of Directors of the Company (the "Board")
and issued pursuant to the Securities Purchase Agreement. Pursuant to the
Securities Purchase Agreement, the Company issued units (the "Units"), each
Unit consisting of $100,000 principal amount of the Debentures and 10,000
three-year non-redeemable warrants (the "Warrants"). Pursuant to the
Securities Purchase Agreement, $3,000,000 in aggregate principal amount of
Debentures were issued on the date hereof. The Securities Purchase
Agreement contains certain additional terms that are binding upon the
Company and each Registered Holder of the Debentures. A copy of the
Securities Purchase Agreement may be obtained by any Registered Holder of
the Debentures from the Company upon written request. Capitalized terms
used but not defined herein shall have the meanings set forth in the
Securities Purchase Agreement. The Debentures, together with any debentures
from time to time issued in replacement thereof, whether pursuant to
transfer and assignment, partial conversion thereof or otherwise, are
hereinafter sometimes collectively referred to as the "Debentures."
4. Conversion Price. At the option of the Registered Holder hereof, all or
any part of the unpaid principal amount of this Debenture may, upon
execution of the Notice of Conversion attached hereto and the surrender of
this Debenture to the Company for conversion, be convertible at any time
following the date of issuance of this Debenture (the "Conversion Date")
into fully paid non-assessable Ordinary Shares of the Company, at a
conversion price (the "Conversion Price") equal to one (1) Ordinary Share
for each $3 nominal value of the principal amount of the Debenture. The
Conversion Price may be adjusted pursuant to the provisions of Section 9(c)
hereof.
5. Conversion and Delivery. Subject to the limitations set forth below,
Notice of Conversion may be given at any time after the date hereof. The
Company shall convert this Debenture pursuant to such Notice of Conversion
in accordance with Section 5 of the Securities Purchase Agreement.
No fractional Ordinary Shares shall be issued upon conversion of this
Debenture. The Registered Holder expressly waives his rights to receive a
certificate for any fractional shares. If less than all of the unpaid
principal amount evidenced by this Debenture shall be converted, the
Company will, upon such exercise of the conversion privilege, execute and
deliver to the
Registered Holder hereof a new Debenture (dated the date hereof) evidencing
the remaining amount of principal then outstanding.
Notwithstanding the above, in the event that the closing price of the
Company's Ordinary Shares for a period of at least fifteen (15) consecutive
trading days is equal to or greater than $6.00, the Company may give
written notice to the Registered Holder and the entire outstanding amount
of this Debenture, shall be deemed to have been converted into Ordinary
Shares of the Company on the day following receipt of such notice.
6. Early Repayment. Commencing on the first day of the 10th month following
December 20, 2000 and ending at the end of the 15th month following the
said date, the Company may effect early repayment of the Debentures by the
payment of 166.66% of the principal amount of the Debenture (with respect
to the principal amount not converted to shares at that time). In the event
the Company wishes to perform such early repayment, it shall notify the
Registered Holder, in writing, and shall consummate such early repayment
within ten (10) days following the date of the notice. In the event of
such early repayment the exercise price all of the Warrants shall be
reduced to US$4 per share.
7. Covenants.
(a) The Company will pay all taxes, assessments and governmental charges
lawfully levied or assessed upon it, its property and any part
thereof, and upon its income for profits, and any part thereof, before
the same shall become delinquent; and will duly observe, and conform
in all material aspects to, all lawful requirements of any
governmental authority relative to any of its property, and all
covenants, terms and conditions upon or under which any of its
property is held; provided that nothing in this Section 7 shall
require the Company to observe or conform to any requirement of
governmental authority or to pay any such tax, assessment or
governmental charges so long as the validity thereof shall be
contested in good faith; and provided further the Company shall not be
required to pay any such taxes, assessments or charges, if, in the
judgment of the Board, such payment shall not be in the best interests
of the Company in the conduct of its business.
(b) Subject to the other provisions of this Debenture, the Company at all
times will maintain its corporate existence and right to carry on its
business and will duly procure all necessary renewals and extensions
thereof and use its best efforts to maintain, preserve and renew all
of its rights, powers, privileges and franchises; provided however,
that nothing herein contained shall be construed to prevent the
Company from ceasing or omitting to exercise any rights, powers,
privileges or franchises which, in the judgment of the Board, can no
longer be profitably exercised, nor to prevent the consolidation,
merger or liquidation of any subsidiary or subsidiaries of the Company
with or into the Company.
(c) The Company will at no time close its stock transfer books against the
transfer of any Ordinary Shares issued or issuable upon the conversion
of, or in lieu of payments on, the Debentures, in any manner which
interferes with the timely conversion of such Debentures, except as
may otherwise be required to comply with applicable securities laws
and the laws of the State of Israel.
(d) The Company will not, by amendment of its Memorandum of Association or
Articles of Association or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder or pursuant to the
Securities Purchase Agreement by the Company, and will at all times
assist in good faith in the carrying out of all the provisions of this
Debenture and the Securities Purchase Agreement and in the taking of
all such action as may be necessary or appropriate in order to protect
the conversion rights of the Registered Holders of the Debentures
against impairment.
(e) In the event of any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company
shall mail to each Registered Holder of the Debentures, at least ten
(10) days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
Notwithstanding anything contained herein to the contrary, no
adjustment of the Conversion Price shall be made by reason of the
issuance of shares pursuant to the acquisition by the Company of all
or substantially all of the stock or assets of any other corporation
or corporations.
8. Taxes. The issuance of certificates representing Ordinary Shares upon the
conversion of this Debenture shall be made without charge to the converting
Registered Holder of the Debenture for any tax with respect to such issue.
9. Floating Charge; Debenture Protection; Full Ratchet.
(a) Upon the issuance of the Debentures the Company shall register a
first degree floating charge over all its assets according to the
Debenture in the form attached hereto in Exhibit 1 in favor of each of
the Registered Holders.
(b) Without derogating from the provisions of Section 9(a) above, in the
event that at any time the Debentures are not converted or repaid in
full, and the Company issues additional debentures upon preferred
terms (as to the Conversion Price or Security), then the terms of the
outstanding Debentures shall be amended to include such preferred
terms, but this shall not constitute any breach or default hereunder.
(c) In addition, until the repayment or conversion of the entire principal
amount of the Debentures, in the event that the Company issues New
Securities (as defined below) at a price lower than the Conversion
Price, the Conversion Price of any part of the principal amount of
this Debenture which has not been converted by such date will be
automatically be reduced to such lower price.
"New Securities" shall mean any shares of the Company, whether or not
now authorized, and rights, options or warrants to purchase capital
stock, and securities of any type whatsoever that are, or may become,
convertible into capital stock; provided that the term "New
Securities" shall not include (i) shares of the Company issuable upon
exercise or options or warrants outstanding on the date hereof, 2000
or issued or granted pursuant to the Warrants; (ii) securities issued
to employees and consultants of the Company pursuant to any stock
option plan or stock purchases or stock bonus arrangement approved by
the Board of Directors of the Company; (iii) securities issued
pursuant to payment of any dividend or distribution with respect to
all of the Company's issued and outstanding capital stock or (iv)
securities issued to a strategic investor according to a strategic
investor agreement, which, in addition to its equity investment in the
Company, provides significant added value to the Company's business;
For the purposes of any adjustment of the Conversion Price
pursuant to this Section 9(c), the following provisions shall be
applicable:
(i) In the case of the issuance of Shares for consideration in
whole or in part in property other than cash, the value of such
property or consideration other than cash shall be deemed to be the
fair market value of such property , irrespective of any accounting
treatment.
(ii) In the case of the issuance of Shares for consideration in
whole or in part other than cash or property, the value of such
consideration shall be deemed to be the aggregate value of such
Shares, less the value of any other consideration received by the
Company.
(iii) In the case of the issuance of options or other rights to
purchase or subscribe for securities by their terms convertible into
or exchangeable for shares or options to purchase or other rights to
subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of Ordinary Shares deliverable
upon exercise of such options to purchase or rights to subscribe for
Shares shall be deemed to have been issued at the time such options or
rights were issued and for a consideration
equal to the consideration, if any, received by the Company upon the
issuance of such options or rights plus the minimum purchase price
provided in such options or rights for the Shares covered thereby;
(B) the aggregate maximum number of Ordinary Shares deliverable
upon conversion of, or in exchange for, any such convertible or
exchangeable securities or upon the exercise of options to purchase or
rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration
received by the Company for any such securities and related options or
rights, provided that in making the foregoing calculations, such
convertible or exchangeable securities shall be deemed to have been
converted or redeemed; and
(C) if there is any change in the exercise price of, or number of
shares deliverable upon exercise of, any such options or rights or
upon the conversion or exchange of any such convertible or
exchangeable securities (other than a change resulting from the
antidilution provisions thereof), then the Conversion Price shall
automatically be readjusted in proportion to such change.
(c) Share Dividend; Subdivision; Split of Shares. If the number of
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Ordinary Shares outstanding at any time prior to repayment or conversion
of this Debenture is increased by a shares dividend payable in Ordinary
Shares or by a subdivision or split-up of Ordinary Shares, then, following
the record date fixed for the determination of holders of shares entitled
to receive such shares dividend, subdivision or split-up, the Conversion
Price shall be appropriately decreased and the number of Ordinary Shares
issuable on conversion of the principal amount shall be increased in
proportion to such increase in outstanding shares.
(d) Combination of Shares. If, at any time prior to repayment or
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conversion of this Debenture, the number of Ordinary Shares outstanding is
decreased by a combination of the outstanding Ordinary Shares, then,
following the record date for such combination, the Conversion Price shall
be appropriately increased and the number of Ordinary Shares issuable on
on conversion of the principal amount shall be increased in proportion to
such increase in outstanding shares.
(e) Calculations. All calculations under this Section 9 shall be made to
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the nearest one-tenth of a cent ($0.001) or to the nearest one-tenth of a
share, as the case may be.
10. No Rights as Stockholder. The Registered Holder of this Debenture shall
not, by reason of the ownership of this Debenture, have any rights
whatsoever as a stockholder of the Company, or any other rights,
whatsoever, except as stated in this Debenture and in the Securities
Purchase Agreement.
11. Events of Default. In case one or more of the following events of default
shall have occurred:
(a) default in the due and punctual payment of interest upon or principal
of any of the Debentures as and when the same becomes due and payable
either at maturity or otherwise, which such default continues for five
(5) days; or
(b) failure to deliver the Ordinary Shares required to be delivered upon
conversion of Debentures in the manner and at the time required by
Section 5 of the Securities Purchase Agreement, which such failure
continues for five (5) days; or
(c) failure on the part of the Company to duly observe or perform any of
its other covenants or agreements contained in the Debentures or to
cure any material breach in a material representation contained in the
Securities Purchase Agreement for a period of forty-five (45) days
after the date on which written notice of such failure requiring the
same to be remedied has been given by a Registered Holder to the
Company; or
(d) a decree or order by a court having jurisdiction has been entered
adjudging the Company a bankrupt or insolvent, or approving a petition
seeking reorganization of the Company under any applicable bankruptcy
law and such decree or order has continued undischarged or unstayed
for a period of ninety (90) days; or a decree or order of a court
having jurisdiction for the appointment of a receiver or liquidator or
trustee or assignee in bankruptcy or insolvency of the Company or of
all or substantially all of its property, or for the winding-up or
liquidation of its affairs, has been entered, and has remained in
force undischarged or unstayed for a period of ninety (90) days; or
(e) the Company institutes proceedings to be adjudicated a voluntary
bankrupt, or consents to the filing of a bankruptcy proceeding against
it, or files a petition or answer or consent seeking reorganization
under applicable law, or consents to the filing of any such petition
or to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of all or substantially
all of its property, or makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts
generally as they become due;
then, and in each and every such case, so long as such event of default has
not been remedied and unless the principal of all the Debentures has
already become due and payable, the holders of not less than seventy five
percent (75%) in principal amount of the Debentures then outstanding, by
notice in writing to the Company, may declare the principal of his
Debenture then outstanding and the interest accrued thereof, if not already
due and payable, to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything herein contained to the contrary notwithstanding.
12. Transferability. This Debenture is transferable, in whole or in part in
accordance with the terms of Section 5 of the Securities Purchase
Agreement. Upon obtaining such written consent, the Registered Holder may
submit a written notification, in person or by his duly authorized
attorney, demanding for a transfer of the Debenture on the register of the
Company maintained at its principal offices. The Company may deem and treat
the person in whose name this Debenture is registered as the absolute owner
hereof, for the purpose of receiving payment of the principal thereof and
interest hereon, whether or not the same shall be overdue, and for all
other purposes whatsoever, including but without limitation, the giving of
any written notices required hereunder, and the Company shall not be
affected by any notice to the contrary.
13. Non-Recourse. No recourse shall be had for the payment of the principal of
or the interest on this Debenture or any part hereof, or for any claim
based hereon or otherwise in respect hereof, or of the indebtedness
represented hereby, against any incorporator, stockholder, officer or
director, as such, past, present or future of the Company either directly
or through the Company, whether by virtue of any constitutional provision,
statute or rule of law, or by the enforcement of any assessment or penalty
or otherwise, all liability, if any, of that character against any such
incorporator, stockholder, officer or director being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly
waived and released.
14. Acceptance of Holder. This Debenture is subject to all of the covenants,
obligations, conditions, rights, limitations and other provisions stated
herein, to all of which the Holder and each successive holder hereof by
acceptance of any Debenture assents.
15. Amendments and Modification. Changes in or additions to this Debenture may
be made, and compliance with any covenant or condition herein set forth may
be omitted only if the Company shall obtain the written consent from the
Registered Holder of this Debenture.
16. Non-Waiver. Neither any failure nor any delay on the part of the Registered
Holder of this Debenture in exercising any right, power, or privilege
hereunder shall operate as a waiver of any rights of any holder hereof, nor
shall a single or partial exercise of any right preclude any other or
further exercise of any other right, power of privilege accorded to any
Registered Holder hereof.
17. Governing Law. This Debenture shall be construed and enforced in accordance
with and governed by the laws of Israel, without giving effect to
principles of conflicts of law. The Company agrees that any final judgment
after exhaustion of all appeals or the expiration of time to appeal in any
such action or proceeding shall be conclusive and binding, and may be
enforced in Israel by suit on the judgment or in any other manner provided
by law. The Parties hereby consent to the jurisdiction of the courts of
Tel-Aviv, and hereby waive, to the maximum extent permitted by law, any
objection, including any objections based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
18. Headings. The headings contained in this Debenture are for reference
purposes only and shall not affect the meaning of interpretation of this
Debenture.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed as of
the date first written above.
I.I.S. INTELLIGENT INFORMATION SYSTEMS LIMITED
By: __________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman and CEO
Attest:
By: ___________________________
Name:
Title:
NOTICE OF CONVERSION
The conversion form appearing below should only be executed by the Registered
Holder desiring to convert all or part of the principal amount of the Debenture
attached hereto.
CONVERSION FORM
Date: _______________________
TO: I.I.S. INTELLIGENT INFORMATION SYSTEMS
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Israel
The undersigned hereby exercises the conversion privilege upon the terms and
conditions set forth in the attached Debenture, to the extent of the maximum
number of Ordinary Shares issuable pursuant to the terms of Sections 4 and 5 of
the Debenture, and accordingly, authorizes the Company to apply $__________
principal amount of the attached Debenture to payment in full for such Ordinary
Shares. Please register such shares and make delivery thereof as follows:
Registered in the Name of (Giving First or Middle Name in Full)
Name__________________________________________
(Please Print)
Address_______________________________________
DELIVERY INSTRUCTIONS
To be completed ONLY if Certificates are to be mailed to persons other than
Registered Holders.
Name__________________________________________
(Please Print)
Address_______________________________________
Signature_____________________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto
________________________________________________________the within Debenture and
all rights thereunder, hereby irrevocably authorizing the Company to transfer
said note on the books of the Company, with full power of substitution in the
premises.
Dated:
Signature: ____________________________
Print Name:____________________________
In the presence of:
Signature: ____________________________
Print Name:____________________________