ORDINARY SHARES PURCHASE AGREEMENT
Dated as of January 23, 2001
by and between
COMMTOUCH SOFTWARE LTD.
and
TORNEAUX FUND LTD.
TABLE OF CONTENTS
Page
ARTICLE I Definitions.............................................................................1
Section 1.1 Definitions...........................................................................1
ARTICLE II Purchase and Sale of Shares.............................................................4
Section 2.1 Purchase and Sale of Shares...........................................................4
Section 2.2 The Shares............................................................................4
Section 2.3 Purchase Price and Closing............................................................4
ARTICLE III Representations and Warranties..........................................................4
Section 3.1 Representations and Warranties of the Company.........................................4
Section 3.2 Representations and Warranties of the Purchaser......................................11
ARTICLE IV Covenants..............................................................................12
Section 4.1 Securities Compliance................................................................12
Section 4.2 Registration and Listing.............................................................12
Section 4.3 Registration Statement...............................................................13
Section 4.4 Compliance with Laws.................................................................13
Section 4.5 Keeping of Records and Books of Account..............................................13
Section 4.6 Reporting Requirements...............................................................13
Section 4.7 Non-public Information...............................................................13
Section 4.8 Effective Registration Statement.....................................................14
Section 4.9 No Stop Orders.......................................................................14
Section 4.10 Amendments to the Registration Statement.............................................14
Section 4.11 Prospectus Delivery..................................................................14
Section 4.12 Other Financing......................................................................15
Section 4.13 Notices..............................................................................15
ARTICLE V Conditions to Closing, Draw Downs and Call Options.....................................15
Section 5.1 Conditions Precedent to the Issuance of a Draw Down Notice...........................15
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to Close.....................16
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to Accept a
Draw Down Notice and Purchase the Shares.............................................17
ARTICLE VI Draw Down Terms; Call Option...........................................................18
Section 6.1 Draw Down Terms......................................................................18
Section 6.2 Purchaser's Call Option..............................................................21
-i-
ARTICLE VII Termination............................................................................22
Section 7.1 Termination by Mutual Consent........................................................22
Section 7.2 Other Terminationf...................................................................22
Section 7.3 Effect of Termination................................................................22
ARTICLE VIII Indemnification........................................................................23
Section 8.1 General Indemnity....................................................................23
Section 8.2 Indemnification Procedures...........................................................24
ARTICLE IX Miscellaneous..........................................................................25
Section 9.1 Fees and Expenses....................................................................25
Section 9.2 Specific Enforcement, Consent to Jurisdiction........................................26
Section 9.3 Entire Agreement; Amendment..........................................................27
Section 9.4 Notices..............................................................................27
Section 9.5 Waivers..............................................................................28
Section 9.6 Headings.............................................................................29
Section 9.7 Successors and Assigns...............................................................29
Section 9.8 Governing Law........................................................................29
Section 9.9 Survival.............................................................................29
Section 9.10 Counterparts.........................................................................29
Section 9.11 Publicity............................................................................29
Section 9.12 Severability.........................................................................29
Section 9.13 Further Assurances...................................................................30
-ii-
ORDINARY SHARES PURCHASE AGREEMENT
This ORDINARY SHARES PURCHASE AGREEMENT (this "Agreement") is dated as
of January 23, 2001 by and between Commtouch Software Ltd., a corporation
organized under the laws of Israel (the "Company"), and Torneaux Fund Ltd., a
limited liability company organized under the laws of the Commonwealth of the
Bahamas (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions.
(a) "Alternate Market" shall mean the Nasdaq Small Cap Market, the
American Stock Exchange, the New York Stock Exchange, or the Over the Counter
Bulletin Board, whichever is at the time the principal trading exchange or
market for the Ordinary Shares.
(b) "Articles" shall have the meaning assigned to such term in Section
3.1(c) hereof.
(c) "Call Option" shall have the meaning assigned to such term in
Section 6.2(a) hereof.
(d) "Call Option Amount" means the actual amount of proceeds received
by the Company upon the exercise of a Call Option by the Purchaser.
(e) "Charter" shall have the meaning assigned to such term in Section
3.1(c) hereof.
(f) "Closing" shall have the meaning assigned to such term in Section
2.3 hereof.
(g) "Closing Date" shall have the meaning assigned to such term in
Section 2.3 hereof.
(h) "Commission" shall mean the Securities and Exchange Commission.
(i) "Commission Documents" shall have the meaning assigned to such term
in Section 3.1(f) hereof.
(j) "Commission Filings" means the Company's Form 20-F, as amended, for
the fiscal year ended December 31, 1999, Form 6-K, as amended, containing
results of operations for the quarterly periods ended September 30, 2000, June
30, 2000 and March 31,
2000 and all other reports on Form 6-K filed by the Company subsequent to
September 30, 2000, Registration Statement on Form F-3, No. 333-46192, as
amended, and all other filings made by the Company after the date hereof
pursuant to the Exchange Act.
(k) "Draw Down" means the exercise by the Company of its right to
request the purchase of Ordinary Shares by the Purchaser.
(l) "Draw Down Amount" means the actual amount of a Draw Down in any
Draw Down Pricing Period or such other amount mutually agreed upon by the
Purchaser and the Company.
(m) "Draw Down Discount Percentage" means 93.5% if the Threshold Price
is equal to or greater than $17.00 but less than $20.00; provided, however, that
for every $3.00 increase in the Threshold Price above $17.00, the draw down
discount percentage shall be increased 0.25%, incrementally; provided, further,
that if the Threshold Price is equal to or greater than $38.00 the draw down
discount percentage shall be equal to 95.25%; provided, further, that if the
Threshold Price is less than $17.00 but equal to or greater than $14.00, the
draw down discount percentage means 93%; provided, further, that for every $3.00
decrease in the Threshold Price below $14.00 but equal to or greater than $8.00,
the draw down discount percentage shall be decreased 0.5%; provided, further,
that if the Threshold Price is less than $8.00 but equal to or greater than
$5.00, the draw down discount percentage shall mean 92%; provided, further, that
if the Threshold Price is less than $5.00 but equal to or greater than $2.00,
the draw down discount percentage shall mean 91%.
(n) "Draw Down Exercise Date" shall mean the date of issuance of a Draw
Down Notice by the Company.
(o) "Draw Down Notice" shall have the meaning assigned to such term in
Section 6.1(i) hereof.
(p) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive Trading Days commencing on the first Trading Day designated as the
start date of such draw down pricing period in the Draw Down Notice, or such
other period mutually agreed upon by the Purchaser and the Company.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
(r) "Investment Period " shall have the meaning assigned to such term
in Section 7.1 hereof.
(s) "Market Capitalization" shall be equal to the product of (i) the
closing bid price of the Ordinary Shares and (ii) the Company's outstanding
Ordinary Shares on such date, each as determined on the Draw Down Exercise Date
by Bloomberg Financial LP using the DES and HP Functions.
(t) "Material Adverse Effect" shall mean any effect on the business,
results of operations, prospects, assets or financial condition of the Company
that is material and adverse
-2-
to the Company and its Subsidiaries, taken as a
whole, which effect shall have been publicly disclosed in a Press Release or is
a report filed with the Commission, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under this Agreement in
any material respect.
(u) "Material Change in Ownership" shall mean that, as of any
particular measurement date, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇ shall
beneficially own in the aggregate less than 5% of the outstanding Ordinary
Shares of the Company, except that for purposes of making any such calculation,
Ordinary Shares issued to the Purchaser pursuant to this Agreement shall not be
included in such calculation.
(v) "Ordinary Shares" shall have the meaning assigned to such term in
Section 2.1 hereof.
(w) "Press Release" shall mean any and all information relating to the
Company which is in the public domain or is generally available to the public or
any information issued in a press release.
(x) "Prospectus" shall mean the prospectus in the form included in the
Registration Statement, as supplemented by any Prospectus or Prospectus
Supplement filed pursuant to Rule 424(b) under the Securities Act.
(y) "Prospectus Supplement" shall mean any prospectus supplement to the
Registration Statement filed with the Commission pursuant to Rule 424(b).
(z) "Registration Statement" shall mean the registration statement on
Form F-3, Commission File Number 333-46192 under the Securities Act, filed with
the Commission for the registration of the Ordinary Shares, as such Registration
Statement may be amended from time to time.
(aa) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.
(bb) "Settlement Date" shall have the meaning assigned to such term in
Section 6.1(d) hereof.
(cc) "Shares" shall mean the Ordinary Shares of the Company that may be
purchased hereunder.
(dd) "Subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries.
(ee) "Threshold Price" is the lowest the Company may set in the Draw
Down Notice to sell Shares during a Draw Down Pricing Period (not taking into
account the Draw Down Discount Percentage during such Draw Down Pricing Period).
-3-
(ff) "Trading Day" shall mean a day on which the Ordinary Shares are
traded on the Nasdaq National Market or an Alternate Market.
(gg) "VWAP" shall mean the daily volume weighted average price (based
on a Trading Day from 9:30 a.m. to 4:00 p.m., eastern time) of the Ordinary
Shares on the NASDAQ National Market or an Alternate Market as reported by
Bloomberg Financial LP using the AQR function.
ARTICLE II
Purchase and Sale of Shares
Section 2.1 Purchase and Sale of Shares. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to $40,000,000 of the
Ordinary Shares of the Company, 0.05 NIS par value per share (the "Ordinary
Shares"), based on Draw Downs, subject to Section 6.1 hereof.
Section 2.2 The Shares. The Company has reserved one million five
hundred thousand (1,500,000) Ordinary Shares, subject to Section 4.4(b) hereof,
free of preemptive rights and other similar contractual rights of shareholders
Section 2.3 Purchase and Closing. The Company agrees to issue and sell
to the Purchaser and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchaser agrees to purchase that number of the Shares to be issued in
connection with each Draw Down and each Call Option exercised by the Purchaser.
The closing of the execution and delivery of this Agreement shall occur upon
delivery by facsimile of executed signature pages of this Agreement and all
other document, instruments and writings required to be delivered pursuant to
this Agreement to the offices of Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, The
Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Closing") at
10:00 a.m., eastern time, on (i) ___________ __, 2001, or (ii) such other time
and place or on such date as the Purchaser and the Company may agree upon (the
"Closing Date"). Each party shall deliver all documents, instruments and
writings required to be delivered by such party pursuant to this Agreement at or
prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization and Power. The Company is a corporation duly
incorporated and validly existing under the laws of Israel and has the requisite
corporate power to own, lease
-4-
and operate its properties and assets and to conduct its business as it is now
being conducted. The Company and each of its Subsidiaries are duly qualified to
do business as a foreign corporation in every jurisdiction in which the nature
of the business conducted, or property owned by it therein, makes such
qualification necessary except for any jurisdiction in which the failure to be
so qualified will not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and, except as contemplated by Section 4.4(b), no
further consent or authorization of the Company or its Board of Directors or
shareholders is required. This Agreement has been duly executed and delivered by
the Company. This Agreement constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of the date hereof are set forth on
Schedule 3.1(c) attached hereto. All of the outstanding Ordinary Shares have
been duly and validly authorized, and are fully paid and non-assessable. Except
as set forth in this Agreement including Schedule 3.1(c), as of the date hereof
no Ordinary Shares are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants, scrip, rights to subscribe to, call
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement including Schedule 3.1(c), as of the date
hereof there are no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company in order to
sell restricted securities or as set forth in Schedule 3.1(c), as of the date
hereof, the Company is not a party to any agreement granting registration rights
to any person with respect to any of its equity or debt securities. The Company
is not a party to, and it has no knowledge of, any agreement restricting the
voting or transfer of any shares of the capital stock of the Company. The offer
and sale of all capital stock, convertible securities, rights, warrants, or
options of the Company issued prior to the Closing complied with all applicable
federal and state securities laws, and no stockholder has a right of rescission
or damages with respect thereto which would have a Material Adverse Effect. The
Company has furnished or made available to the Purchaser true and correct copies
of the Company's Memorandum of Association as in effect on the date hereof (the
"Charter"), and the Company's Articles of Association as in effect on the date
hereof (the "Articles").
(d) Issuance of Shares. The Shares to be issued under this Agreement
have been duly authorized by all necessary corporate action and, when paid for
and issued in accordance with the terms hereof, the Shares shall be validly
issued and outstanding, fully paid
-5-
and non-assessable, and the Purchaser shall be entitled to all rights accorded
to a holder of Ordinary Shares.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Charter or
Articles, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected, except, in all cases (other than violations
pursuant to clauses (i) and (iv) (to the extent of federal securities law)), for
such conflicts, defaults, terminations, amendments, accelerations, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Commission, or
the Nasdaq National Market subsequent to the Closing, and, any registration
statement which may be filed pursuant hereto); provided that, for purpose of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchaser
herein.
(f) Commission Documents, Financial Statements. The Ordinary Shares are
registered pursuant to Section 12(g) of the Exchange Act, and since December 15,
2000 the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has delivered or made available to the
Purchaser true and complete copies of the Commission Documents filed with the
Commission since December 15, 2000 and prior to the Closing Date. The Company
has not provided to the Purchaser any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. The Form 20-F for the year ended December 31,
1999, as amended, complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and the said Form 20-F did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the Commission Documents comply as to form in all material
respects
-6-
with applicable accounting requirements and the published rules and regulations
of the Commission applicable thereto or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 3.1(g) attached
hereto set forth each Subsidiary of the Company as of the date hereof, showing
the jurisdiction of its incorporation or organization and showing the percentage
of each person's ownership of the outstanding stock or other interests of such
Subsidiary. Except as set forth in the Commission Documents or the Commission
Filings, none of such Subsidiaries is a "significant subsidiary" as defined in
Regulation S-X.
(h) No Material Adverse Effect. Since December 15, 2000, the Company
has not experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. The Company has no liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any Subsidiary (including the
notes thereto) in conformity with GAAP not disclosed in the Commission
Documents, other than those incurred in the ordinary course of the Company's or
its Subsidiaries respective businesses since December 15, 2000 and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company and which has not been so publicly announced or
disclosed.
(k) Indebtedness. Schedule 3.1(k) sets forth as of December 15, 2000
all outstanding secured and unsecured Indebtedness of the Company, or for which
the Company or any Subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money or
amounts owed in excess of $500,000 (other than trade accounts payable incurred
in the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $500,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
or any Subsidiary is in default with respect to any Indebtedness.
-7-
(l) Title to Assets. Each of the Company and its Subsidiaries has good
and marketable title to all of its real and personal property reflected in the
Commission Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the Commission
Documents or the Commission Filings or such that could not reasonably be
expected to cause a Material Adverse Effect. All said leases of the Company and
each of its Subsidiaries are valid and subsisting and in full force and effect
in all material respects.
(m) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company which questions the validity of this Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto. There is
no action, suit, claim, investigation or proceeding pending or, to the knowledge
of the Company, threatened, against or involving the Company or any Subsidiary,
or any of their respective properties or assets which, if adversely determined,
is reasonably likely to result in a Material Adverse Effect.
(n) Compliance with Law. The business of the Company has been and is
presently being conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances, except such that do
not cause a Material Adverse Effect. Each of the Company and its Subsidiaries
has all franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of its
business as now being conducted unless the failure to possess such franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. (o) Certain Fees. No brokers,
finders or financial advisory fees or commissions will be payable by the Company
with respect to the transactions contemplated by this Agreement.
(p) Disclosure. To the Company's knowledge, neither this Agreement or
the Schedules hereto nor any other documents, certificates or instruments
furnished to the Purchaser by or on behalf of the Company in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(q) Operation of Business. The Company or its Subsidiaries owns or has
a valid right to use all patents, trademarks, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Commission Documents
or the Commission Filings and all rights with respect to the foregoing, which
are necessary for the conduct of its business as now conducted without any
conflict with the rights of others, except to the extent set forth in the
Commission Documents or the Commission Filings that a Material Adverse Effect
could not reasonably be expected to result from such conflict.
(r) Environmental Compliance. Except as disclosed in the Commission
Filings, the Company has obtained all approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any
-8-
other person, that are required under any Environmental Laws except where the
failure to do so would not have a Material Adverse Effect. "Environmental Laws"
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, to the best of the Company's knowledge, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company that violate or could reasonably be expected
to violate any Environmental Law after the Closing or that could reasonably be
expected to give rise to any environmental liability, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to
the manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of any hazardous
substance.
(s) Material Agreements. Except as set forth in the Commission
Documents, the Commission Filings and this Agreement, the Company is not a party
to any written or oral contract, instrument, agreement, commitment, obligation,
plan or arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to Form 20-F or to a registration statement on Form F-3
(collectively, "Material Agreements") if the Company were registering securities
under the Securities Act. The Company has in all material respects performed all
the obligations required to be performed by it to date under the foregoing
agreements, has received no notice of default and, to the best of the Company's
knowledge is not in default under any Material Agreement now in effect, the
result of which could reasonably be expected to cause a Material Adverse Effect.
(t) Transactions with Affiliates. There are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company, or
any of its customers (excluding agreements related to the purchase or lease of
the Company's products) or suppliers on the one hand, and (b) on the other hand,
any person who would be covered by Item 404(a) of Regulation S-K other than as
disclosed in the Commission Documents or the Commission Filings.
(u) Securities Act of 1933. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto
filed pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the provisions of the Securities Act. The Commission
has not issued any order preventing or suspending the use of any Prospectus.
-9-
(ii) The Registration Statement in the form in which it became
effective and the Prospectus and any supplement or amendment thereto when filed
with the Commission under Rule 424(b) under the Securities Act complied in all
material respects with the provisions of the Securities Act and did not at any
such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in the light of the circumstances under
which they made) not misleading, except that this representation and warranty
does not apply to statements in or omissions from the Registration Statement or
the Prospectus made in reliance upon and in conformity with information relating
to the Purchaser furnished to the Company in writing by or on behalf of the
Purchaser expressly for use therein.
(iii) The Company has not distributed and, prior to the
completion of the sale of the Shares to the Purchaser, will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement, the Prospectus or other materials, if any,
permitted by the Securities Act.
(v) Employees. As of the date hereof, the Company has no collective
bargaining arrangements or agreements covering any of its employees. Except as
set forth on Schedule 3.1(v) attached hereto, as of the date hereof the Company
has no employment contract or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company. Each of the Company and its Subsidiaries
requires its officers, technical employees and certain consultants to enter into
agreements regarding proprietary information and assignment of inventions, or
other similar agreements containing restrictive covenants. As of the date
hereof, since December 15, 2000, no officer, consultant or key employee of the
Company whose termination, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, has terminated or has
expressed any present intention of terminating his or her employment or
engagement with the Company.
(w) Use of Proceeds. The proceeds from the sale of the Shares will be
used by the Company and its Subsidiaries for general corporate purposes.
(x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan (as defined below) by the Company which
is or would have a Material Adverse Effect. The execution and delivery of this
Agreement and the issue and sale of the Shares will not involve any transaction
which is subject to the prohibitions of Section 406 of ERISA or in connection
with which a tax could be imposed pursuant to Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), provided that, if any of the
Purchaser, or any person or entity that owns a beneficial interest in any of the
Purchaser, is an "employee pension benefit plan" (within the meaning of Section
3(2) of ERISA) with respect to
-10-
which the Company is a "party in interest" (within the meaning of Section 3(14)
of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 3.1(y), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or by any trade or business, whether or not
incorporated, which, together with the Company, is under common control, as
described in Section 414(b) or (c) of the Code.
(z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.
Section 3.2 Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of the Bahamas.
(b) Authorization and Power. The Purchaser has the requisite corporate
power and authority to enter into and perform this Agreement and to purchase the
Shares in accordance with the terms hereof. The execution, delivery and
performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Purchaser. This Agreement constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is or
by which any of its properties or assets are bound or (iv) result in a violation
of
-11-
any law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Purchaser or its properties, except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Purchaser to
enter into and perform its obligations under this Agreement in any material
respect. The Purchaser is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or to purchase the Shares in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
the Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.
(e) Selling Restriction. The Purchaser has the right to sell Shares
during the Investment Period. The Purchaser covenants, however, that prior to
and during the Investment Period, neither the Purchaser nor any of its
affiliates nor any entity managed by the Purchaser will ever sell Ordinary
Shares other than what the Purchaser has accumulated under the terms of this
Agreement or in any accounts directly or indirectly managed by the Purchaser or
any affiliate of the Purchaser or any entity managed by the Purchaser; provided,
however, that neither the Purchaser nor any parties referred to in this Section
3.2(e) shall sell during the Investment Period any options, warrants, or other
securities or instruments which are convertible into or exercisable for Ordinary
Shares or which derive their value from the market price of Ordinary Shares, or
any Ordinary Shares acquired upon conversion or exercise of any such options,
warrants, or other securities or instruments.
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows, which covenants
are for the benefit of the Purchaser and its permitted assignees, that during
the term of this Agreement:
Section 4.1 Securities Compliance. The Company shall notify the
Commission and the Nasdaq National Market or an Alternate Market, if applicable,
in accordance with their rules and regulations, of the transactions contemplated
by this Agreement, and shall take all other necessary action and proceedings as
may be required by applicable law, rule and regulation, for the legal and valid
issuance of the Shares to the Purchaser.
-12-
Section 4.2 Registration and Listing. The Company will take all action
necessary to cause its Ordinary Shares to continue to be registered under
Section 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under the Exchange
Act or Securities Act, except as permitted herein. The Company will take all
action necessary to continue the listing or trading of its Ordinary Shares and
the listing of the Shares on the Nasdaq National Market or an Alternate Market
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Nasdaq National Market or an
Alternate Market.
Section 4.3 Registration Statement. Before the Company shall issue a
Draw Down Notice, the Company shall have caused a sufficient number of Ordinary
Shares to be authorized and registered to cover the Shares to be issued in
connection with this Agreement.
Section 4.4 Compliance with Laws.
(a) The Company shall comply with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.
(b) The Company will not be obligated to issue and the Purchaser will
not be obligated to purchase any shares of the Ordinary Shares which would
result in the issuance under this Agreement of more than nineteen and
nine-tenths percent (19.9%) of the issued and outstanding shares of the Ordinary
Shares, unless such issuance has been duly approved by the shareholders of the
Company.
Section 4.5 Keeping of Records and Books of Account. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its Subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made in accordance with GAAP.
Section 4.6 Reporting Requirements. Upon request, the Company shall
furnish or make available through the Commission's electronic filing system or
in hard copy, at the Company's option, the following to the Purchaser so long as
the Purchaser shall be obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 6-K within
forty-five (45) days after such documents are filed with the Commission;
(b) Annual Reports filed with the Commission on Form 20-F within ninety
(90) days after such documents are filed with the Commission; and
(c) Copies of all notices and information, including without limitation
notices and proxy statements in connection with any meetings, that are provided
to holders of Ordinary
-13-
Shares, contemporaneously with the delivery of such notices or information to
such holders of Ordinary Shares.
Section 4.7 Non-public Information. Neither the Company nor any of its
officers or agents shall disclose any material non-public information about the
Company to the Purchaser and neither the Purchaser nor any of its affiliates,
officers or agents will solicit any material non-public information from the
Company.
Section 4.8 Effective Registration Statement. The Company will keep the
Registration Statement continuously effective during the Investment Period.
Section 4.9 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act. If at any time the Commission
shall issue any stop order suspending the effectiveness of the Registration
Statement, the Company will make all reasonable efforts to obtain the withdrawal
of such order at the earliest possible time.
Section 4.10 Amendments to the Registration Statement. The Company will
not (i) file any amendment to the Registration Statement or make any amendment
or supplement to the Prospectus which relates to the Purchaser, this Agreement
and the transactions contemplated hereby of which the Purchaser shall not
previously have been advised or to which the Purchaser shall reasonably object
after being so advised or (ii) so long as, in the reasonable opinion of counsel
for the Purchaser, a Prospectus is required to be delivered in connection with
any purchase of Shares by the Purchaser, file any information, documents or
reports pursuant to the Exchange Act without delivering a copy of such
information, documents or reports to the Purchaser, promptly following such
filing.
Section 4.11 Prospectus Delivery. The Company shall file with the
Commission a Prospectus Supplement on the first Trading Day immediately
following the end of each Settlement Period, and will deliver to the Purchaser,
without charge, in such quantities as reasonably requested by the Purchaser,
copies of each form of Prospectus and Prospectus Supplement on each Settlement
Date. The Company consents to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Securities Act and
with the securities or Blue Sky laws of the jurisdictions in which the Shares
may be sold by
-14-
the Purchaser, in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Securities
Act to be delivered in connection with sales of the Shares. If during such
period of time any event shall occur that in the judgment of the Company or in
the reasonable opinion of counsel for the Purchaser is required to be set forth
in the Prospectus (as then amended or supplemented) or should be set forth
therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus to comply with the Securities Act or any
other law, the Company will forthwith prepare and, subject to the provisions of
Section 4.10 above, file with the Commission an appropriate supplement or
amendment thereto, and will expeditiously furnish to the Purchaser a reasonable
number of copies thereof.
Section 4.12 Other Financing. If the Company enters into any other
financing agreement, the primary purpose of which would be to obtain equity
financing for the Company (an "Other Financing"), during a Draw Down Pricing
Period, the Company shall promptly notify the Purchaser of such Other Financing
as provided in Section 4.13, and the Purchaser shall have the options set forth
in Section 6.1(k) hereof. As used herein, "Other Financing" shall not include
the Company (i) entering into a loan, credit or lease facility with a bank or
financing institution (including any equity component thereof), (ii)
establishing an employee stock option plan or agreement (iii) issuing Ordinary
Shares in connection with the Company's current option plans (as the same may be
amended from time to time), stock purchase plans, rights plans, currently
outstanding warrants or options, or increase the number of shares available
under any such plans (the primary purpose of which is not to raise equity), (iv)
issuing Ordinary Shares, warrants, and/or preferred stock in connection with the
formation and maintenance of strategic partnerships, alliances or joint ventures
and the acquisition of products, licenses or other assets, and which would
result in the issuance to a third party or third parties of Ordinary Shares of
less than twenty-five percent (25%) of the number of Ordinary Shares issued and
outstanding immediately prior to the closing of such Other Financing, and which
is being entered into for a strategic reason, and (v) entering into any
transaction which would otherwise meet the requirements of an Other Financing,
if the Threshold Price in effect during such Draw Down Pricing Period is greater
than $12.00 (each a "Permitted Transaction"). Section 4.13 Notices. The Company
shall promptly notify the Purchaser that (i) a Material Adverse Effect or
Material Change in Ownership has occurred or (ii) the Company has entered into
an Other Financing (as defined in Section 4.12 hereof).
ARTICLE V
Conditions to Closing, Draw Downs and Call Options
Section 5.1 Conditions Precedent to the Issuance of a Draw Down Notice.
The issuance by the Company of a Draw Down Notice, and its obligation thereby to
sell the Shares to the Purchaser, is subject to the satisfaction or waiver, at
or before each Draw Down Exercise Date and Settlement Date, as applicable, of
each of the conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
-15-
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made and as of each
Draw Down Exercise Date and Settlement Date, as applicable, as though made at
that time, except for representations and warranties that are expressly made as
of a particular date.
(b) Registration Statement. The Company shall have Shares registered
under the Registration Statement on the Draw Down Exercise Date and Settlement
Date, as applicable, in an amount equal to or in excess of the number of the
Shares issuable pursuant to such Draw Down Notice or Call Option. The
Registration Statement registering the offer and sale of the Shares shall have
been declared effective by the Commission on or prior to each Draw Down Exercise
Date and Settlement Date, as applicable, and there shall be no stop order
suspending the effectiveness of the Registration Statement.
(c) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to each Draw Down Exercise Date and Settlement
Date, as applicable.
(d) No Injunction. No statute, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) No Suspension, Etc. Trading in the Ordinary Shares shall not have
been suspended by the Commission or the Nasdaq National Market or an Alternate
Market (except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to such Draw Down
Exercise Date and Settlement Date, as applicable).
(f) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date, as
though made at that time, except for representations and warranties that speak
as of a particular date.
-16-
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) Effective Registration Statement. The Registration Statement
registering the offer and sale of the Shares shall have been declared effective
by the Commission on or prior to the Closing Date and there shall be no stop
order suspending the effectiveness of the Registration Statement.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(f) Opinions of Counsel, Etc. At the Closing, the Purchaser shall have
received opinions of counsel to the Company, dated the Closing Date, in the
forms of Exhibit A-1 and A-2 hereto, a secretary's certificate, dated the
Closing Date, in the form of Exhibit B hereto, and such other certificates and
documents as the Purchaser or its counsel shall reasonably require incident to
the Closing.
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down Notice and Purchase the Shares. The obligation hereunder of
the Purchaser to accept a Draw Down Notice and to acquire and pay for the Shares
on any Settlement Date is subject to the satisfaction or waiver, at or before
each Draw Down Exercise Date and each Settlement Date, as applicable, of each of
the conditions set forth below. The conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Draw Down Exercise
Date and Settlement Date, as applicable, as though made at that time, except for
representations and warranties that speak as of a particular date.
(b) Registration Statement. The Company shall have Shares registered
under the Registration Statement which are valued on the Draw Down Exercise Date
in an amount equal to or in excess of the dollar amount value of the Shares
issuable pursuant to such Draw Down Notice or Call Option. The Registration
Statement registering the offer and sale of the Shares shall have been declared
effective by the Commission prior to the Draw Down Exercise
-17-
Date and shall have been supplemented, as required, to disclose the sale of the
Shares prior to each Settlement Date, as applicable, and there shall be no stop
order suspending the effectiveness of the Registration Statement.
(c) No Suspension, Etc. Trading in the Ordinary Shares shall not have
been suspended by the Commission or the Nasdaq National Market or an Alternate
Market (except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to each Draw Down
Exercise Date), and, on or as of the Draw Down Exercise Date or applicable
Settlement Date or during the applicable Draw Down Pricing Period, trading in
securities generally as reported by the Nasdaq National Market or an Alternate
Market shall not have been suspended or limited, or minimum prices shall not
have been established on securities whose trades are reported by the Nasdaq
National Market or an Alternate Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities, nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity or crisis of such magnitude in its effect on,
or any material adverse change in any financial market which, in each case, in
the judgment of the Purchaser, makes it impracticable or inadvisable to purchase
the Shares. The Ordinary Shares shall be listed on Nasdaq or an Alternate
Market.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Draw Down Exercise Date and the
Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit C.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(g) No Material Adverse Effect; No Material Change in Ownership. No
Material Adverse Effect or Material Change in Ownership shall have occurred.
ARTICLE VI
Draw Down Terms; Call Option
Section 6.1 Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
-18-
(a) The Company, may, in its sole discretion, issue a Draw Down Notice
with respect to a Draw Down during each Draw Down Pricing Period of up to (i)
$650,000 if the Threshold Price is equal to or greater than $2.00 and less than
$3.00, (ii) an additional $200,000 for every $1.00 increase in the Threshold
Price greater than $2.00 but less than $6.00, (iii) an additional $250,000 for
every $1.00 increase in the Threshold Price equal to or greater than $6.00 but
less than $9.00, and (iv) an additional $1,000,000 for every $3.00 increase in
the Threshold Price above $8.00; provided, however, that if the Threshold Price
is equal to or greater than $38.00, the Draw Down Amount may be equal to up to
$12,000,000; provided, further, that the Company may, in its sole discretion,
issue a Draw Down Notice with respect to any Draw Down Amount at any Threshold
Price or any Draw Down Discount Percentage pursuant to terms mutually agreed
upon by the Purchaser and the Company, which Draw Down the Purchaser will be
obligated to accept. Prior to issuing any Draw Down Notice, the Company shall
have Shares registered under the Registration Statement which are valued in a
dollar amount equal to or in excess of the Draw Down Amount. The Company may
amend a Draw Down Notice to provide that a Threshold Price higher or lower than
the Threshold Price then in effect (and a corresponding higher or lower Draw
Down Amount and Draw Down Discount Percentage) shall apply to each day of the
final ten (10) Trading Days of the Draw Down Pricing Period; provided, however,
that the Company provides such amended Draw Down Notice on or before 5:00 p.m.,
eastern time, of the tenth (10th) Trading Day of the Draw Down Pricing Period.
No such amendment shall reduce the aggregate number of Draw Downs which the
Company may issue hereunder or otherwise adversely affect the Company's rights
hereunder.
(b) The number of Shares to be issued in connection with each Draw Down
shall be equal to the sum of the quotients (for each Trading Day of the Draw
Down Pricing Period for which the VWAP equals or exceeds the Threshold Price) of
(x) 1/20th (or such other fraction the denominator of which equals the number of
Trading Days during the Draw Down Pricing Period) of the Draw Down Amount
divided by (y) the applicable Draw Down Discount Percentage multiplied by the
VWAP of the Ordinary Shares for such Trading Day.
(c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. Each Draw Down Pricing Period shall consist of two (2) periods of ten
(10) consecutive Trading Days (each, a "Settlement Period").
(d) The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second Trading Day following the end of each
Settlement Period (the "Settlement Date").
(e) There shall be a minimum of five (5) Trading Days between Draw
Downs, unless otherwise mutually agreed upon between the Purchaser and the
Company.
(f) There shall be a maximum of eighteen (18) Draw Downs during the
term of this Agreement.
(g) Each Draw Down will expire on the end of the last Trading Day of
each Draw Down Pricing Period.
-19-
(h) If the VWAP on a given Trading Day is less than the Threshold
Price, then the total amount of the Draw Down for the relevant Draw Down Pricing
Period will be reduced by 1/20th or such applicable fraction as determined under
Section 6.1(a) hereof (or such other fraction the denominator of which equals
the number of Trading Days during the Draw Down Pricing Period). At no time
shall the Threshold Price be set below $2.00, unless mutually agreed upon by the
Company and the Purchaser. If trading in the Ordinary Shares is suspended for
any reason for more than three (3) hours in any Trading Day, at the Purchaser's
option, the price of the Ordinary Shares shall be deemed to be below the
Threshold Price for that Trading Day and the Draw Down for the relevant Draw
Down Pricing Period shall be reduced by 1/20th or such applicable fraction as
determined under Section 6.1(a) hereof (or such other fraction the denominator
of which equals the number of Trading Days during the Draw Down Pricing Period).
Notwithstanding anything in the foregoing to the contrary, for each Trading Day
during the Draw Down Pricing Period that the VWAP is less than the Threshold
Price or is deemed to be below the Threshold Price pursuant to the immediately
preceding sentence, the Purchaser may elect in its sole discretion to purchase
Shares at a price equal to the Threshold Price multiplied by the Draw Down
Discount Percentage at the end of such Draw Down Pricing Period. The Purchaser
will inform the Company via facsimile transmission no later than 8:00 p.m.
(eastern time) on the last Trading Day of such Draw Down Pricing Period as to
the number of Shares, if any, the Purchaser chooses to purchase under such
circumstances set forth in this Section 6.1(h).
(i) The Company must inform the Purchaser via facsimile transmission
before 9:30 a.m. (eastern time) on the first Trading Day of the Draw Down
Pricing Period substantially in the form attached hereto as Exhibit D (the "Draw
Down Notice") of the Draw Down Amount the Company wishes to exercise. In
addition to the Draw Down Amount, the Company shall set the Threshold Price with
each Draw Down Notice and shall designate the first Trading Day of the Draw Down
Pricing Period. Notwithstanding anything in the foregoing to the contrary, if
the Company wishes the Draw Down Exercise Date to be the first day of the Draw
Down Pricing Period, the Draw Down Notice must be delivered to the Purchaser and
receipt of such Draw Down Notice confirmed by the Purchaser prior to 9:30 a.m.
(eastern time) on the date of such Draw Down Exercise Date.
(j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent Commission
system ("DWAC"), and upon receipt of the Shares, the Purchaser shall cause
payment therefor to be made to the account designated by the Company by wire
transfer of immediately available funds provided that the Shares are received no
later than 1:00 p.m., eastern time, or next day available funds if the Shares
are received thereafter.
(k) If during any Draw Down Pricing Period the Company shall enter into
an Other Financing (other than Ordinary Shares issued under this Agreement or
pursuant to a Permitted Transaction), the Purchaser may in its sole discretion
(i) purchase the Draw Down Amount of Ordinary Shares and/or exercise Call
Options granted during such Draw Down Pricing Period on the terms at which the
Company issued Ordinary Shares in the Other Financing during such Draw Down
Pricing Period, net of any third party's discount and fees; provided, however,
that (y) the third party purchases Ordinary Shares at a discounted purchase
price less than the purchase price to be paid by the Purchaser during such Draw
Down Pricing
-20-
Period, and (z) the Threshold Price in effect during such Draw Down Pricing
Period is less than $12.00, (ii) purchase the Draw Down Amount of Shares and/or
exercise Call Options granted during such Draw Down Pricing Period at the
applicable Draw Down Discount Percentage times the VWAP for such Draw Down
Pricing Period, or (iii) elect not to purchase any Shares during such Draw Down
Pricing Period. The Purchaser shall notify the Company of its election on the
Trading Day preceding the Settlement Date.
(l) If on the Settlement Date, the Company fails to deliver the Shares
to be purchased by the Purchaser, and such failure continues for ten (10)
Trading Days, the Company shall pay, in cash or restricted Ordinary Shares, at
the option of the Purchaser, as liquidated damages and not as a penalty to the
Purchaser an amount equal to two percent (2%) of the Draw Down Amount for the
initial thirty (30) days and each additional thirty (30) day period thereafter
until such failure has been cured, which shall be pro rated for such periods
less than thirty (30) days (the "Periodic Amount"). Cash payments to be made
pursuant to this clause (1) shall be due and payable immediately upon demand in
immediately available cash funds. Certificates evidencing the restricted
Ordinary Shares shall be delivered immediately upon demand. The parties agree
that the Periodic Amount represents a reasonable estimate on the part of the
parties, as of the date of this Agreement, of the amount of damages that may be
incurred by the Purchaser if the Company fails to deliver the Shares on the
Settlement Date. If the Purchaser elects to receive Ordinary Shares instead of
cash, unless such Shares have been previously registered under the Securities
Act, the Purchaser shall have the right to demand registration once within
twelve (12) months of the date of issuance of such Ordinary Shares and piggyback
registration rights if the Company files a separate registration statement.
Section 6.2 Purchaser's Call Option.
(a) During each Draw Down Pricing Period, the Company at its sole
discretion may grant to the Purchaser the right to exercise multiple call
options of up to the applicable Draw Down Amount (a "Call Option"). The amount
of the Call Option shall be set forth in the Draw Down Notice. For each Trading
Day during a Draw Down Pricing Period, the Purchaser may exercise a Call Option
by providing notice to the Company of the exercise of a Call Option (the "Call
Option Notice"), substantially in the form attached hereto as Exhibit E.
(b) The number of Ordinary Shares to be issued in connection with each
Call Option shall equal the quotient of (i) the Call Option Amount and (ii) the
product of the applicable Draw Down Discount Percentage and the greater of (A)
the VWAP for the Ordinary Shares on the day the Purchaser issues its Call Option
Notice and (B) the Threshold Price.
(c) Each Call Option exercised shall be settled on the applicable
Settlement Date.
(d) The Threshold Price designated by the Company in its Draw Down
Notice shall apply to each Call Option.
(e) For each Call Option that the Purchaser exercises pursuant to this
Section 6.2, the Purchaser must issue via facsimile a Call Option Notice to the
Company no later than 8:00 p.m. (eastern time) on the day such Call Option is
exercised. If the Purchaser does not
-21-
exercise a Call Option by 8:00 p.m. (eastern time) on the last Trading Day of
the applicable Draw Down Pricing Period, the Purchaser's Call Options with
respect to that Draw Down Pricing Period shall terminate.
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. The term of this Agreement
shall be the earliest of (i) twenty-four (24) months from the date of execution
of this Agreement (the "Investment Period"), (ii) the date that all of the
Ordinary Shares registered under the Registration Statement have been issued and
sold, and (iii) the date the Purchaser has purchased in the aggregate
$40,000,000 pursuant to all Draw Downs issued and Call Options granted and
exercised. This Agreement also may be terminated at any time by mutual consent
of the parties.
Section 7.2 Other Termination. The Company shall inform the Purchaser,
and the Purchaser shall have the right to terminate this Agreement within the
thirty (30) days subsequent to the giving of such notice (the "Event Period"),
if (x) the Company enters into an Other Financing without the prior consent of
the Purchaser, which consent will not be unreasonably delayed, conditioned or
withheld, which provides for (i) the issuance of Ordinary Shares or securities
convertible, exercisable or exchangeable into Ordinary Shares at a discount to
the then current market price of the Ordinary Shares, including, without
limitation, an equity line of credit transaction, but not including issuances at
a price which is subject to a discount to the then current market price, which
discounted price is greater than the purchase price then in effect during the
then applicable Draw Down Pricing Period; provided, however, that (y) the total
amount of the Other Financing does not exceed five percent (5%) of the Company's
then current Market Capitalization, and (z) the Ordinary Shares or securities
convertible, exercisable or exchangeable into Ordinary Shares which are
purchased pursuant to such Other Financing shall constitute "restricted shares"
as defined in Rule 144 under the Securities Act and cannot be registered for
resale for one (1) year from the date of issuance, (ii) a mechanism for the
reset of the purchase price of the Ordinary Shares to below the then current
market price of the Ordinary Shares, or (iii) the issuance of Ordinary Shares
with warrants, which have an exercise price such that together with the price of
the Ordinary Shares would result in the issuance of Ordinary Shares at a per
share price below the then current market price of the Ordinary Shares, or (y)
an event resulting in a Material Adverse Effect or Material Change in Ownership
has occurred. The Purchaser may terminate this Agreement upon one (1) day's
notice during the Event Period.
Section 7.3 Effect of Termination. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and all further transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall be of
no further force and effect, except as provided in Section 9.9 hereof. Nothing
in this Section 7.3 shall be deemed to release the Company or the Purchaser from
any liability for any breach under this Agreement, or to impair the rights of
the Company and the Purchaser to compel specific performance by the other party
of its obligations under this Agreement, with respect to any obligations which
arose prior to termination.
-22-
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will indemnify and hold
harmless the Purchaser, each of its directors, fund managers and officers, and
each person, if any, who controls the Purchaser within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act from and against any
losses, claims, damages, liabilities and expenses (including reasonable costs of
defense and investigation and all reasonable attorneys' fees) to which the
Purchaser, each of its directors, fund managers and officers, and each person,
if any, who controls the Purchaser may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages, liabilities and expenses
(or actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement, or the Prospectus or
Prospectus Supplement, or any amendment or supplement to it, or (ii) the
omission or alleged omission to state in the Registration Statement or any
Prospectus or Prospectus Supplement or any amendment or supplement to it, or any
document incorporated by reference in the Registration Statement, a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided that the Company shall not be liable under this Section
8.1(a) to the extent that a court of competent jurisdiction shall have
determined by a final judgment (with no appeals available) that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or such
person through its bad faith or willful misconduct; provided, however, that the
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Purchaser expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to the Prospectus, the
foregoing indemnity shall not inure to the benefit of the Purchaser or any such
person from whom the person asserting any loss, claim, damage, liability or
expense purchased Ordinary Shares if copies of the Prospectus were timely
delivered to the Purchaser pursuant hereto and a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of the Purchaser or
any such person to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Ordinary Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage, liability or expense.
The Company will reimburse the Purchaser and each such controlling
person promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or any controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding, except where the Company is not required to provide indemnification
as stated in this Section 8.1.
-23-
(b) Indemnification by the Purchaser. The Purchaser will indemnify and
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any losses,
claims, damages, liabilities and expenses (including reasonable costs of defense
and investigation and all attorneys' fees) to which the Company and each
director, officer and person, if any, who controls the Company may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out of
or are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained, or incorporated by reference, in the Registration
Statement or any Prospectus or Prospectus Supplement or any amendment or
supplement to it, (ii) the omission or alleged omission to state in the
Registration Statement or any Prospectus or Prospectus Supplement or any
amendment or supplement to it, or any document incorporated by reference in the
Registration Statement, a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, the untrue statement, alleged untrue statement, omission or
alleged omission was made in reliance upon, and in conformity with, written
information furnished by the Purchaser to the Company for inclusion in the
Registration Statement, the Prospectus or Prospectus Supplement or an amendment
or supplement thereto, or any document incorporated by reference in the
Registration Statement, (iii) any acts or failures to act, undertaken or omitted
to be taken by the Purchaser or such person through its bad faith or willful
misconduct, to the extent that a court of competent jurisdiction shall have so
determined by a final judgment (with no appeals available), and (iv) with
respect to the Prospectus, if copies of the Prospectus were timely delivered to
the Purchaser pursuant hereto and a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of the Purchaser or any such
person to such person, if required by law so to have been delivered, at or prior
to the written confirmation of the sale of the Common Stock to such person, and
if the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage, liability or expense
(c) The Purchaser will reimburse the Company and each such director,
officer or controlling person promptly upon demand for any legal or other costs
or expenses reasonably incurred by the Company or the other person in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding, except where the Purchaser is not required to
provide indemnification as stated in this Section 8.1.
Section 8.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the notice of commencement of an action for which
the person intends to seek indemnification under paragraph (a) or (b) of Section
8.1, the person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent such indemnifying
party has been materially prejudiced by the failure to give notice. The
indemnifying party will be entitled to participate in the defense of any claim,
action, suit or proceeding as to which indemnification is being sought, and if
the indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action is brought, the indemnifying party may
(but will not be required to) assume the defense against the claim, action, suit
or proceeding with counsel satisfactory to it. After an indemnifying party
notifies an indemnified party that the
-24-
indemnifying party wishes to assume the defense of a claim, action, suit or
proceeding the indemnifying party will not be liable for any legal or other
expenses incurred by the indemnified party in connection with the defense
against the claim, action, suit or proceeding except that if, in the opinion of
counsel to the indemnifying party, one or more of the indemnified parties should
be separately represented in connection with a claim, action, suit or proceeding
the indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties. Each indemnified party, as a condition to
receiving indemnification as provided in Paragraph (a) or (b) or Section 8.1,
will cooperate in all reasonable respects with the indemnifying party in the
defense of any action or claim as to which indemnification is sought. No
indemnifying party will be liable for any settlement of any action effected
without its prior written consent. No indemnifying party will, without the prior
written consent of the indemnified party, effect any settlement of a pending or
threatened action with respect to which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the other from the sale of Ordinary Shares which
is the subject of the claim, action, suit or proceeding which resulted in the
loss or liability or (ii) if that allocation is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
of the sale of Ordinary Shares, but also the relative fault of the indemnifying
party and the indemnified party with respect to the statements, omissions,
actions or inactions, which are the subject of the claim, action, suit or
proceeding that resulted in the loss or liability, as well as any other relevant
equitable considerations.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses.
(a) The Company shall pay all reasonable fees and expenses related to
the transactions contemplated by this Agreement; provided, that the Company
shall pay, at the Closing, all reasonable attorneys fees and expenses (exclusive
of disbursements and out-of-pocket expenses) incurred by the Purchaser of up to
$50,000 in connection with the preparation, negotiation, execution and delivery
of this Agreement. In addition, the Company shall pay all reasonable fees and
expenses incurred by the Purchaser in connection with any amendments,
modifications or waivers of this Agreement or incurred in connection with the
enforcement of this Agreement, including, without limitation, all reasonable
attorneys' fees and expenses.
-25-
(b) If on the fourteenth (14th) month anniversary of this Agreement,
the Company has not requested Draw Downs in an aggregate amount of $3,000,000
the Company shall pay the Purchaser, at the option of the Purchaser, a fee equal
to either (x) an amount equal to $100,000 in cash, or (ii) warrants to purchase
100,000 Ordinary Shares at an exercise price of 110% of the VWAP of the Ordinary
Shares on the date of execution of this Agreement. The Purchaser shall have the
right to demand registration once within twelve (12) months of the date of
issuance of such warrants and shall have piggyback registration rights if the
Company files a separate registration statement (other than a registration (A)
on Form S-8 or S-4 or any successor or similar forms, (B) relating to Ordinary
Shares or any other shares of capital stock of the Company issuable upon
exercise of employee share options or in connection with any employee benefit or
similar plan of the Company, or (C) in connection with a direct or indirect
acquisition by the Company of another person or any transaction with respect to
which Rule 145 (or any successor provision) under the Securities Act applies),
whether or not for sale for its own account; and provided, however, that (A) if
such registration involves a public offering, the Purchaser must sell its
Ordinary Shares to the underwriters selected by the Company on the same terms
and conditions as apply to the Company and any other selling shareholder, unless
the Purchase withdraws its request for registration, and (B) if the Company
shall determine for any reason not to continue with such registration, the
Company shall give written notice the Purchaser and, thereupon, shall be relived
of its obligation to register any of the Purchaser's Ordinary Shares in
connection with such discontinued registration; and provided, that if a
registration pursuant to this Section 9.1(b) involves a public offering by the
Company and the managing underwriter thereof advises the Company that, in its
view, the number of Ordinary Shares or other capital shares that the Company,
the Purchaser and the other selling shareholders intend to include in such
registration exceeds the largest number that can be sold without having an
adverse effect on such public offering (the "Maximum Offering Size"), the
Company will include in such registration only that number of Ordinary Shares
such that the number of Ordinary Shares to be registered does not exceed the
Maximum Offering Size, with the difference between the number of Ordinary Shares
in the Maximum Offering Size and the number of shares to be issued by the
Company to be allocated (after including all shares to be issued and sold by the
Company) among the Purchaser and all other selling shareholders pro rata on the
basis of the relative number of Ordinary Shares which the Purchaser and each
other selling shareholder wish to sell under such registration.
If as a result of the proration provisions of this Section 9.1(b), the
Purchaser is not entitled to include all Ordinary Shares issued to the Purchaser
pursuant to the rights given in this Section 9.1(b), the Purchaser may elect to
withdraw its request for registration. The number of Ordinary Shares required to
satisfy any underwriter's over-allotment option shall be allocated pro rata
among the Company, the Purchaser and any other selling shareholders on the basis
of the relative number of Ordinary Shares otherwise to be included by each of
them in the registration.
The Company's obligations under this Section 9.1(b) shall terminate on
the date that the registration statement to be filed in accordance herewith is
declared effective by the Commission, provided that all the Shares issued
pursuant to this Section 9.1 are included in such registration statement.
Section 9.2 Specific Enforcement, Consent to Jurisdiction.
-26-
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which either of them may
be entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section 9.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representations, warranty, covenant or undertaking with
respect to such matters. The parties hereto may not amend this Agreement or any
rights or obligations hereunder without the prior written consent of the Company
and the Purchaser.
Section 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of dispatch by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such dispatch,
whichever shall first occur. The addresses for such communications shall be:
-27-
If to the Company: Commtouch Software Ltd.
c/o Commtouch Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, CFO
With copies to: McCutchen, Doyle, ▇▇▇▇▇ & Enersen, LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Purchaser: Torneaux Fund Ltd.
c/o Fortis Fund Services (Bahamas) Ltd.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇
With copies to: Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel. No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇)▇▇▇-▇▇▇▇
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 9.5 Waivers. No provision of this Agreement may be waived other
than by a written instrument signed by the party against whom enforcement of any
such waiver is sought. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
-28-
Section 9.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7 Successors and Assigns. The Purchaser may not assign this
Agreement to any person without the prior consent of the Company, which consent
will not be unreasonably withheld. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions thereof.
Section 9.9 Survival. The representations and warranties of the Company
and the Purchaser contained in Article III and the covenants contained in
Article IV shall survive the execution and delivery hereof until the termination
of this Agreement, and the agreements and covenants set forth in Article VIII of
this Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
Section 9.10 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other party within five days of the execution and delivery hereof.
Section 9.11 Publicity. The Company shall not issue any press release
or otherwise make any public statement or announcement with respect to this
Agreement or the transactions contemplated hereby or the existence of this
Agreement without the prior written consent of the Purchaser. In the event the
Company is required by law or regulation to issue a press release or otherwise
make a public statement or announcement with respect to this Agreement or the
transaction contemplated hereby prior to or after the Closing, the Company shall
consult with the Purchaser on the form and substance of such press release or
other disclosure.
Section 9.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
-29-
Section 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
[END OF PAGE]
-30-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
COMMTOUCH SOFTWARE LTD.
By: _______________________
Name:
Title:
TORNEAUX FUND LTD.
By: ________________________
Name:
Title:
-▇▇-
▇▇▇▇▇▇▇ ▇-▇ TO THE
ORDINARY SHARES PURCHASE AGREEMENT
FORM OF OPINION OF COMPANY'S U.S. COUNSEL
[LETTERHEAD OF McCUTCHEN, DOYLE, ▇▇▇▇▇ & ENERSEN, LLP]
EXHIBIT A-2 TO THE
ORDINARY SHARES PURCHASE AGREEMENT
FORM OF OPINION OF COMPANY'S ISRAEL COUNSEL
[LETTERHEAD OF NASCHITZ, ▇▇▇▇▇▇▇ & CO.]
EXHIBIT B
TO THE ORINDARY SHARES PURCHASE AGREEMENT
SECRETARY'S CERTIFICATE
January ___, 2001
The undersigned, ______________________, Secretary of Commtouch
Software Ltd., an Israeli corporation (the "Company"), delivers this certificate
in connection with the issuance and sale of shares of Ordinary Shares of the
Company in an aggregate amount of up to $40,000,000 to Torneaux Fund Ltd. (the
"Purchaser") pursuant to the Ordinary Shares Purchase Agreement, dated January
___, 2001 (the "Agreement"), by and between the Company and the Purchaser, and
hereby certifies on the date hereof, that (capitalized terms used herein without
definition have the meanings assigned to them in the Agreement):
1. Attached hereto as Exhibit A is a true, complete and correct copy of
the Memorandum of Association of the Company, which is in full force and effect
on the date hereof, as filed with the Corporations Authority of the State of
Israel. The Memorandum of Association of the Company has not been further
amended or restated, and no document with respect to any amendment to the
Memorandum of Association of the Company has been filed with the Corporations
Authority of the State of Israel, and no action has been taken by the Company in
contemplation of any such amendment or the dissolution, merger or consolidation
of the Company.
2. Attached hereto as Exhibit B is a true and complete copy of the
Articles of Association of the Company, as amended and restated through, and as
in full force and effect on, the date hereof, and no proposal for any amendment,
repeal or other modification to the Articles of Association of the Company has
been taken or is currently pending before the Board of Directors or shareholders
of the Company.
3. Attached hereto as Exhibit C is a true and correct copy of all
written actions and resolutions of the Board of Directors (including any
committees thereof) of the Company relating to the Agreement and the
transactions contemplated thereby; said actions and resolutions have not been
amended, rescinded or modified since their adoption and remain in full force and
effect as of the date hereof; said actions and resolutions are the only
resolutions adopted by the Board of Directors of the Company, or any committee
thereof, pertaining to (A) the offering of the Ordinary Shares to be sold by the
Company pursuant to the Agreement, (B) the execution and delivery of the
Agreement and (C) all other transactions in connection with the foregoing.
4. Each person who, as an officer of the Company, or as
attorney-in-fact of an officer of the Company, signed (A) the Agreement, (B) the
Registration Statement and (C) any other document delivered prior hereto or on
the date hereof in connection with the transactions contemplated by the
Agreement, was duly elected, qualified and acting as such officer or duly
appointed and acting as such attorney-in-fact, and the signature of each such
person appearing on any such document is his or her genuine signature.
5. The Agreement as executed and delivered on behalf of the Company has
been approved by the Company.
6. The actions, resolutions and other corporate records of the Company
relating to all of the proceedings of the shareholders of the Company, the Board
of Directors of the Company and any committees thereof made available to the
Purchaser and its counsel are the true, correct and complete copies thereof,
with respect to all proceedings of said shareholders, Board of Directors and
committees thereof. Such documents of the Company made available to the
Purchaser and its counsel were true and complete in all respects. There have
been no material changes, additions or alterations in said records and other
documents that have not been disclosed to the Purchaser.
IN WITNESS WHEREOF, I have signed my name as of the date first above
written.
By:
----------------------------------------
Name:
Title: Secretary
I, __________________, Chief Executive Officer of Commtouch Software
Ltd., do hereby certify that ______________________ is the duly elected,
qualified and acting Secretary of the above mentioned company, and that the
signature set forth above is his true and genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name as of the date first
above written.
By:
-----------------------------------------
Name:
Title: Chief Executive Officer
EXHIBIT C
TO THE ORDINARY SHARES PURCHASE AGREEMENT
COMPLIANCE CERTIFICATE
In connection with the issuance of Ordinary Shares of
Commtouch Software Ltd. (the "Company") pursuant to the Draw Down Notice, dated
___________ delivered by the Company to Torneaux Fund Ltd. (the "Purchaser")
pursuant to Article VI of the Ordinary Shares Purchase Agreement dated January
__, 2001 by and between the Company and Torneaux Fund Ltd. (the "Agreement"),
the undersigned hereby certifies as follows:
1. The undersigned is the duly elected Chief [Executive/Financial]
Officer of the Company.
2. The representations and warranties of the Company set forth in
Section 3.1 of the Agreement are true and correct in all material respects as
though made on and as of the date hereof, except for representations and
warranties that speak as of a particular date.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material respects with all obligations and conditions contained in Section
5.3 of the Agreement.
Capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in the Agreement.
The undersigned has executed this Certificate this _____ day
of _________, 200__.
By:_______________________________
Name:_____________________________
Title:____________________________
EXHIBIT D
TO THE ORDINARY SHARES PURCHASE AGREEMENT
FORM OF DRAW DOWN NOTICE
Reference is made to the Ordinary Shares Purchase Agreement dated as of
January __, 2001 (the "Purchase Agreement") between Commtouch Software Ltd., an
Israeli corporation (the "Company"), and Torneaux Fund Ltd. Capitalized terms
used and not otherwise defined herein shall have the meanings given such terms
in the Purchase Agreement.
In accordance with and pursuant to Section 6.1 of the Purchase
Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw
Down request for the Draw Down Amount indicated below.
Draw Down Amount: ____________________________________________
Call Option Amount: __________________________________________
Draw Down Pricing Period start date: _________________________
Draw Down Pricing Period end date: ___________________________
Settlement Date: _____________________________________________
Threshold Price: _____________________________________________
Minimum Threshold Price:___$2.00______________________________
Dollar Amount and/or Number of
Ordinary Shares of Currently Unissued
under the Registration Statement: ____________________________
Dated:
-----------------------------
--------------------------------
By:
--------------------------------------
Name:
Title:
Address:
--------------------------------
Facsimile No.:
---------------------------
Wire Instructions:
-----------------------
Contact Name:
-----------------------
Receipt Acknowledged:
Torneaux Fund Ltd.
By:
---------------------------------------------------------
Name:
Title:
EXHIBIT E
TO THE ORDINARY SHARES PURCHASE AGREEMENT
FORM OF CALL OPTION NOTICE
To: ______________
Fax #:
Reference is made to the Ordinary Shares Purchase Agreement dated as of
January__, 2001 (the "Purchase Agreement") between Commtouch Software Ltd., an
Israeli corporation (the "Company"), and Torneaux Fund Ltd. Capitalized terms
used and not otherwise defined herein shall have the meanings given such terms
in the Purchase Agreement.
In accordance with and pursuant to Section 6.2 of the Purchase
Agreement, the Purchaser hereby issues this Call Option Notice to exercise a
Call Option for the Call Option Amount indicated below.
Call Option Amount Exercised: _______________________________
Number of Shares to be purchased: ___________________________
VWAP on the date hereof: ____________________________________
Draw Down Discount Percentage: ______________________________
Settlement Date: ____________________________________________
Threshold Price: ____________________________________________
Minimum Threshold Price:_________________$2.00_______________
Dated:
--------------------
Torneaux Fund Ltd.
By:
---------------------------------
Name:
Title:
DISCLOSURE SCHEDULES
RELATING TO THE ORDINARY SHARES PURCHASE AGREEMENT, DATED AS
OF JANUARY __, 2001
BETWEEN COMMTOUCH SOFTWARE LTD. AND
TORNEAUX FUND LTD.
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO
SUCH NUMBERS AND LETTERS AS SET FORTH IN THE ORDINARY SHARES PURCHASE AGREEMENT
(THE "AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE
AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE
MODIFIED IN THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES
CONTAINED IN THESE DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL
THE DISCLOSURES SHALL BE READ TOGETHER.
SCHEDULE 3.1(g)