EXHIBIT 4.6
B.O.S. BETTER ON-LINE SOLUTIONS LTD.
SECURITIES PURCHASE AGREEMENT
JUNE 10, 2004
TABLE OF CONTENTS
PAGE
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1. AGREEMENT TO SELL AND PURCHASE 1
2. FEES AND WARRANT 1
3. CLOSING, DELIVERY AND PAYMENT 2
3.1 CLOSING 2
3.2 DELIVERY 2
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION 3
4.2 SUBSIDIARIES 3
4.3 CAPITALIZATION; VOTING RIGHTS 3
4.4 AUTHORIZATION; BINDING OBLIGATIONS 4
4.5 LIABILITIES 5
4.6 AGREEMENTS; ACTION 5
4.7 OBLIGATIONS TO RELATED PARTIES 5
4.8 CHANGES 6
4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC 7
4.10 INTELLECTUAL PROPERTY 8
4.11 COMPLIANCE WITH OTHER INSTRUMENTS 8
4.12 LITIGATION 8
4.13 TAX RETURNS AND PAYMENTS 9
4.14 EMPLOYEES 9
4.15 REGISTRATION RIGHTS AND VOTING RIGHTS 9
4.16 COMPLIANCE WITH LAWS; PERMITS 9
4.17 ENVIRONMENTAL AND SAFETY LAWS 10
4.18 VALID OFFERING 10
4.19 FULL DISCLOSURE 10
4.20 INSURANCE 11
4.21 SEC REPORTS 11
4.22 LISTING 11
4.23 NO INTEGRATED OFFERING 11
4.24 STOP TRANSFER 11
4.25 DILUTION 11
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 12
5.1 NO SHORTING 12
5.2 REQUISITE POWER AND AUTHORITY 13
5.3 INVESTMENT REPRESENTATIONS 13
5.4 PURCHASER BEARS ECONOMIC RISK 13
5.5 ACQUISITION FOR OWN ACCOUNT 13
5.6 PURCHASER CAN PROTECT ITS INTEREST 14
5.7 ACCREDITED INVESTOR 14
5.8 LEGENDS 14
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6. COVENANTS OF THE COMPANY 15
6.1 STOP-ORDERS 15
6.2 LISTING 15
6.3 MARKET REGULATIONS 16
6.4 REPORTING REQUIREMENTS 16
6.5 USE OF FUNDS 16
6.6 ACCESS TO FACILITIES 16
6.7 TAXES 16
6.8 INSURANCE 17
6.9 INTELLECTUAL PROPERTY 17
6.10 PROPERTIES 18
6.11 CONFIDENTIALITY 18
6.12 REQUIRED APPROVALS 18
6.13 REISSUANCE OF SECURITIES 19
6.14 OPINION 19
7. COVENANTS OF THE PURCHASER 20
7.1 CONFIDENTIALITY 20
7.2 NON-PUBLIC INFORMATION 20
8. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION 20
8.1 COMPANY INDEMNIFICATION 20
8.2 PURCHASER'S INDEMNIFICATION 20
9. CONVERSION OF CONVERTIBLE NOTE 21
9.1 MECHANICS OF CONVERSION 21
10.REGISTRATION RIGHTS 23
10.1 REGISTRATION RIGHTS GRANTED 23
10.2 OFFERING RESTRICTIONS 23
11.MISCELLANEOUS 23
11.1 GOVERNING LAW 23
11.2 SURVIVAL 24
11.3 SUCCESSORS 24
11.4 ENTIRE AGREEMENT 24
11.5 SEVERABILITY 24
11.6 AMENDMENT AND WAIVER 24
11.7 DELAYS OR OMISSIONS 24
11.8 NOTICES 25
11.9 ATTORNEYS' FEES 26
11.10 TITLES AND SUBTITLES 26
11.11 FACSIMILE SIGNATURES; COUNTERPARTS 26
11.12 BROKER'S FEES 26
11.13 CONSTRUCTION 26
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LIST OF EXHIBITS
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Form of Convertible Term Note Exhibit A
Form of Warrant Exhibit B
Forms of Opinions Exhibits
C1-C2
Form of Escrow Agreement Exhibit D
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of June 10, 2004, by and among B.O.S. BETTER ON-LINE SOLUTIONS LTD., a
corporation incorporated under the laws of the State of Israel (p.c. number
520042565) (the "Company"), BOScom Ltd., a corporation incorporated under the
laws of the State of Israel (organizational identification number (▇▇-▇▇▇▇▇▇▇)
(solely with respect to the representations and warranties pertaining to it)
(the "Subsidiary"), and Laurus Master Fund, Ltd., a Cayman Islands company (the
"Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of Two Million Dollars
in the currency of the United States ($2,000,000) (the "Note"), which Note is
convertible into shares of the Company's Ordinary Shares, NIS 4.00 nominal value
per share (the "Ordinary Shares") at an initial fixed conversion price of $3.08
per share of Ordinary Shares (the "Fixed Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to purchase
up to 130,000 Ordinary Shares (subject to adjustment as set forth therein) in
connection with Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and the Warrant (as defined
in Section 2) on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, a Note in the aggregate principal amount of
$2,000,000 (the "Purchase Price") convertible into the Company's Ordinary Shares
in accordance with the terms of the Note and this Agreement. The issuance of the
Note purchased on the Closing Date shall be known as the "Offering." A form of
the Note is annexed hereto as Exhibit A. The Note will mature on the Maturity
Date (as defined in the Note). Collectively, the Note and Warrant and Ordinary
Shares issuable in payment of the Note, upon conversion of the Note and upon
exercise of the Warrant are referred to as the "Securities."
2. FEES AND WARRANT. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a Warrant (the
"Warrant") to purchase up to 130,000 Ordinary Shares in connection with the
Offering (the "Warrant Shares") pursuant to Section 1 hereof. The Warrant
must be delivered on the Closing Date. A form of Warrant is annexed hereto
as Exhibit B. All the representations, covenants, warranties, undertakings,
and indemnification, and other rights made or granted to or for the benefit
of the Purchaser by the Company are hereby also made and granted in respect
of the Warrant and the Company's Ordinary Shares issuable upon exercise of
the Warrant (the "Warrant Shares").
(b) Subject to the terms of Section 2(d) below, the Company shall pay
to Laurus Capital Management, LLC, the manager of the Purchaser, a closing
payment in an amount equal to three and one-half percent (3.50%) of the
aggregate principal amount of the Note. The foregoing fee is referred to
herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its reasonable legal
fees for services rendered to the Purchaser in preparation of this
Agreement and the Related Agreements (as hereinafter defined), and expenses
incurred in connection with the Purchaser's due diligence review of the
Company and its Subsidiary and all related matters. Amounts required to be
paid under this Section 2(c) for such legal fees and expenses shall be
$45,000 (the "Expense Payment"), of which a deposit of $12,500 (the
"Deposit) was previously paid by the Company to the Purchaser, and the
remaining $32,500 will be paid on the Closing Date.
(d) The Closing Payment and the Expense Payment (net of the Deposit)
shall be on the Closing Date, as provided below out of funds held pursuant
to a Funds Escrow Agreement of even date herewith among the Company,
Purchaser, and an Escrow Agent (the "Funds Escrow Agreement") and a
disbursement letter (the "Disbursement Letter").
3. CLOSING, DELIVERY, PAYMENT AND OTHER CLOSING CONDITIONS.
3.1 CLOSING. The execution and delivery of this Agreement and the Related
Agreements shall occur upon exchange by facsimile of executed signature pages
and all other documents, instruments and writings required to be delivered
pursuant hereto and thereto. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall take
place on which date the conditions for Closing set forth in Section 9 herein
shall be satisfied in full or waived by the Company, or at such different date
as the Company and Purchaser may mutually agree (such date is hereinafter
referred to as the "Closing Date").
3.2 DELIVERY. Pursuant to the Funds Escrow Agreement in the form attached
hereto as Exhibit D at the Closing on the Closing Date, the Company will deliver
to the Purchaser, among other things, (i) a Note in the form attached as Exhibit
A representing the Purchase Price; (ii) a Warrant in the form attached as
Exhibit B in the Purchaser's name representing 130,000 Warrant Shares, (iii) the
Closing Payment, and (iv) the Expense Payment (net of the Deposit) and the
Purchaser will deliver to the Company, among other things, the Purchase Price
[amounts set forth in the Disbursement Letter] by certified funds or wire
transfer to an account designated by the Company.
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3.3 OTHER CLOSING CONDITIONS. Prior to closing of this transaction, the
Company will obtain the necessary board approvals.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to the Purchaser as follows (which representations and warranties
are supplemented by the Company's filings under the Securities Exchange Act of
1934 (collectively, the "Exchange Act Filings") and the Company's Audited
Consolidated Financial Statements as of December 31, 2003 (including the notes
thereto) (the "Financial Statements")):
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company and
the Subsidiary is a corporation duly incorporated and validly existing under the
laws of its jurisdiction of incorporation. Each of the Company and the
Subsidiary has the corporate power and authority to own and operate its
properties and assets and carry on its respective business as presently
conducted, except as would not have a Material Adverse Effect (as defined
below), and to execute and deliver, as applicable, (i) this Agreement, (ii) the
Note and the Warrant to be issued in connection with this Agreement, (iii) the
Master Security Agreement dated as of the date hereof among the Company and the
Purchaser (as amended, modified or supplemented from time to time, the "Master
Security Agreement"), (iv) the Registration Rights Agreement relating to the
Securities dated as of the date hereof between the Company and the Purchaser,
(v) the Escrow Agreement dated as of the date hereof among the Company, the
Purchaser and the escrow agent referred to therein and (vi) all other agreements
related to this Agreement and the Note and referred to herein (the preceding
clauses (ii) through (vi), collectively, the "Related Agreements"), to issue and
sell the Note and the Ordinary Shares issuable upon conversion of the Note (the
"Note Shares"), to issue and sell the Warrant and the Warrant Shares, and to
carry out the provisions of this Agreement and the Related Agreements and to
carry on its business as presently conducted. Each of the Company and the
Subsidiary is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in which the nature of
its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so has not, or could not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the business, assets, liabilities,
condition (financial or otherwise), properties, or operations of the Company and
it Subsidiary, taken as a whole (a "Material Adverse Effect").
4.2 [RESERVED]
4.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, as of the date hereof
consists of 8,750,000 Ordinary Shares nominal value NIS 4.00 per share, of
which, as of December 31, 2003, 4,167,509 Ordinary Shares are issued and
4,162,126 Ordinary Shares are outstanding.
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(b) Except as disclosed on Schedule 4.3, the Exchange Act Filings or
the Financial Statements, other than: (i) the shares reserved for issuance
under the Company's stock option plans; and (ii) shares which may be
granted pursuant to this Agreement and the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or shareholder agreements, or
arrangements or agreements of any kind for the purchase or acquisition from
the Company of any of its securities. Except as disclosed on Schedule 4.3,
the Exchange Act Filings or the Financial Statements, neither the offer,
issuance or sale of any of the Note or the Warrant, or the issuance of any
of the Note Shares or Warrant Shares, nor the consummation of any
transaction contemplated hereby will result in a change in the price or
number of any securities of the Company outstanding, under anti-dilution or
other similar provisions contained in or affecting any such securities.
(c) All issued and outstanding Ordinary Shares of the Company: (i)
have been duly authorized and validly issued and are fully paid and
nonassessable; and (ii) were issued in compliance with all applicable state
and federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the
Ordinary Shares are as stated in the Company's Articles of Association (the
"Articles"). The Note Shares and Warrant Shares shall have been, on or
before the Closing Date, duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the
Company's Articles, the Securities will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Securities may be subject to restrictions on transfer
under state, federal and/or Israeli securities laws as set forth herein or
as otherwise required by such laws at the time a transfer is proposed.
4.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part of
the Company and the Subsidiary (including their respective officers and
directors) necessary for the authorization of this Agreement and the Related
Agreements, the performance of all obligations of the Company hereunder and
under the other Related Agreements at the Closing and, the authorization, sale,
issuance and delivery of the Note and Warrant has been taken or will be taken
prior to the Closing. This Agreement and the other Related Agreements, when
executed and delivered and to the extent it is a party thereto, will be valid
and binding obligations of the Company and with respect to the representations
and warranties pertaining to it the Subsidiary, enforceable against each such
person in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
Except as disclosed on Schedule 4.4, in the Exchange Act Filings or the
Financial Statements, the sale of the Note, the subsequent conversion of the
Note into Note Shares, are not and will not be subject to any preemptive rights
or rights of first refusal that have not been properly waived or complied with.
The issuance of the Warrant and the subsequent exercise of the Warrant for
Warrant Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
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4.5 LIABILITIES. Neither the Company nor the Subsidiary has any material
contingent liabilities, except current liabilities incurred in the ordinary
course of business and liabilities disclosed in any Exchange Act Filings, in the
Financial Statements or that would not be reasonably likely to have a Material
Adverse Effect.
4.6 AGREEMENTS; ACTION. Except as set forth on Schedule 4.6 or as disclosed
in any Exchange Act Filings or the Financial Statements:
(a) there are no agreements, understandings, instruments, contracts,
judgments, orders, writs or decrees to which the Company or the Subsidiary
is a party or by which it is bound which may involve: (i) obligations
(contingent or otherwise) of, or payments to, the Company in excess of
$500,000 (other than obligations of, or payments to, the Company arising
from purchase or sale agreements entered into in the ordinary course of
business); (ii) the transfer or license of any material patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products); or (iii) provisions restricting the development, manufacture or
distribution of the Company's products or services.
(b) Since December 31, 2003, neither the Company nor the Subsidiary
has: (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its share
capital; (ii) incurred any indebtedness for money borrowed or any other
liabilities (other than ordinary course obligations) individually in excess
of $500,000 or, in the case of indebtedness and/or liabilities individually
less than $500,000, in excess of $1,000,000 in the aggregate; (iii) made
any loans or advances to any person (other than the Company's subsidiaries)
in excess, individually or in the aggregate, of $500,000, other than
ordinary course advances for travel expenses; or (iv) sold, exchanged or
otherwise disposed of any of its material assets or rights, other than the
sale of its inventory in the ordinary course of business or as a result of
discontinued operations.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments and
contracts involving the same person or entity (including persons or
entities the Company has reason to believe are affiliated therewith) shall
be aggregated for the purpose of meeting the individual minimum dollar
amounts of such subsections.
4.7 OBLIGATIONS TO RELATED PARTIES. Except as set forth on Schedule 4.7 or
disclosed in any of the Exchange Act Filings or in the Financial Statements,
there are no obligations of the Company or of the Subsidiary to officers,
directors, shareholders or employees of the Company or the Subsidiary other
than:
(a) for payment of salary or fees for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of the
Company and its Subsidiary;
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(c) for other standard employee benefits made generally available to
all employees (including stock option agreements outstanding or to be
entered into under any stock option plan approved by the Board of Directors
of the Company); and
(d) obligations listed in the Company's financial statements.
Except as listed in the Company's financial statements, disclosed in any of the
Company's Exchange Act Filings, in the Financial Statements or set forth on
Schedule 4.7, to the Company's knowledge, none of the officers, directors, key
employees or shareholders holding 10% or more of the Company's share capital or
any members of their immediate families, are indebted to the Company,
individually, in excess of $50,000 or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may
compete with the Company. Except as listed in the Financial Statements,
disclosed in any of the Company's Exchange Act Filings or set forth on Schedule
4.7, (i) to the Company's knowledge no officer, director or shareholder holding
10% or more of the Company's share capital, or any member of their immediate
families, is, directly or indirectly, interested in any material contract
between any third party and the Company and (ii) except with respect to the
Company's subsidiaries, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
4.8 CHANGES. Since December 31, 2003, except as disclosed in any Exchange
Act Filing, in the Financial Statements or in any Schedule to this Agreement or
to any of the Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties operations of the Company or its
Subsidiary, which individually or in the aggregate has had, or could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(b) any resignation or termination of any officer, key employee or
group of employees of the Company or of its Subsidiary;
(c) any material change, except in the ordinary course of business or
as would not have a Material Adverse Effect, in the contingent obligations
of the Company or of its Subsidiay by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, which has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or its Subsidiary of a material right or
of a material debt owed to it;
(f) any direct or indirect loans made by the Company or its Subsidiary
to any stockholder, employee, officer or director of the Company or its
Subsidiary, other than advances made in the ordinary course of business or
loans which do not, in the aggregate, exceed $50,000;
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(g) any material change in any compensation arrangement or agreement
with any employee, officer, director or shareholder of the Company or its
Subsidiary
(h) any declaration or payment of any dividend or other distribution
of the assets of the Company or its Subsidiary;
(i) any labor organization activity related to the Company or its
Subsidiary;
(j) any debt, obligation or liability incurred, assumed or guaranteed
by the Company or its Subsidiary, except those for immaterial amounts and
for current liabilities incurred in the ordinary course of business;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company
or its Subsidiary;
(l) any change in any material agreement to which the Company or its
Subsidiary is a party or by which either the Company or its Subsidiariy is
bound which either individually or in the aggregate has had, or could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect; or
(n) any arrangement or commitment by the Company or its Subsidiary to
do any of the acts described in subsection (a) through (m) above.
4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set forth on
Schedule 4.9, in the Company's Exchange Act Filings or in the Financial
Statements, each of the Company and its Subsidiary has good and marketable title
to its material properties and assets, and good title to its material leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than:
(a) those resulting from taxes which have not yet become delinquent;
(b) minor liens and encumbrances which do not materially detract from
the value of the property subject thereto or materially impair the
operations of the Company or its Subsidiary; and
(c) those that have otherwise arisen in the ordinary course of
business.
All material facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company and its Subsidiary are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used, except as would not have a Material
Adverse Effect. Except as set forth on Schedule 4.9, the Company and its
Subsidiary are in compliance with all material terms of each lease to which it
is a party or is otherwise bound except those that would not be reasonably
likely to have a Material Adverse Effect.
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4.10 INTELLECTUAL PROPERTY.
(a) , Each of the Company and its Subsidiary owns or possesses
sufficient legal rights to use all material patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes described or referred to in the
Company's Exchange Act Filings or Financial Statements as necessary for its
business as now conducted (the "Intellectual Property"), without any known
infringement of the rights of others. Except as disclosed in the Company's
Exchange Act Filings, in the Financial Statements, in connection with
grants made by the OCS (as defined below) and for licenses granted in the
ordinary course of business, there are no outstanding options, licenses or
agreements of any kind relating to the foregoing proprietary rights.
(b) Neither the Company nor its Subsidiary has received any
communications alleging that the Company or its Subsidiary has violated any
of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity, nor is
the Company or its Subsidiary aware of any basis therefor.
(c) The Company does not believe it is necessary to utilize any
inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company or its Subsidiary,
except for inventions, trade secrets or proprietary information that have
been rightfully assigned to the Company or its Subsidiary.
4.11 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor its
Subsidiary is in violation or default of (x) any term of its Articles or
Memorandum of Association, or (y) any material provision of any indebtedness,
mortgage, indenture, contract, agreement or instrument to which it is party or
by which it is bound or of any judgment, decree, order or writ, which violation
or default, in the case of this clause (y), has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. The execution, delivery and performance of and compliance with this
Agreement and the Related Agreements to which it is a party, and the issuance
and sale of the Note by the Company and the other Securities by the Company each
pursuant hereto and thereto, will not, with or without the passage of time or
giving of notice, result in any such material violation, or be in conflict with
or constitute a default under any such term or provision, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or its Subsidiary or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties, except as would not be reasonably
expected to have a Material Adverse Effect.
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4.12 LITIGATION. Except as set forth on Schedule 4.12 hereto, in the
Company's Exchange Act Filings or in the Financial Statements, there is no
action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or its Subsidiary that
prevents the Company or its Subsidiary from entering into this Agreement or the
other Related Agreements, or from consummating the transactions contemplated
hereby or thereby, or which has had, or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect or any change
in the current equity ownership of the Company or its Subsidiary, nor is the
Company aware that there is any basis to assert any of the foregoing. Neither
the Company nor its Subsidiary is a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company or its Subsidiary currently pending or which the Company or its
Subsidiary intends to initiate.
4.13 TAX RETURNS AND PAYMENTS. Each of the Company and its Subsidiary has
timely filed all tax returns required to be filed by it for the periods up to
and including December 31, 2001. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the
Company or its Subsidiary on or before the Closing, have been paid or will be
paid prior to the time they become delinquent, except as would not have a
Material Adverse Effect. Except as set forth on Schedule 4.13, in the Exchange
Act Filings or in the Financial Statements, neither the Company nor its
Subsidiary has been advised:
(a) that any of its returns have been or are being audited as of the
date hereof; or
(b) of any deficiency in assessment or proposed judgment to of its
taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for or which would be reasonably likely to have a Material Adverse
Effect.
4.14 EMPLOYEES. Except as set forth on Schedule 4.14, in the Exchange Act
Filings, or in the Financial Statements the Company is in compliance with all
applicable material laws respecting employment, collective bargaining and wages
and hours and have withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to its employees.
4.15 REGISTRATION RIGHTS AND VOTING RIGHTS. Except as set forth on Schedule
4.15 and except as disclosed in the Exchange Act Filings or in the Financial
Statements, neither the Company nor its Subsidiary is presently under any
obligation, and neither the Company nor its Subsidiary has granted any rights,
to register any of the Company's or its Subsidiarys' presently outstanding
securities or any of its securities that may hereafter be issued. Except as set
forth on Schedule 4.15 and except as disclosed in Exchange Act Filings or in the
Financial Statements, to the Company's knowledge, no shareholder of the Company
or any of its Subsidiary is party to an existing agreement with respect to the
voting of equity securities of the Company or its Subsidiary.
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4.16 COMPLIANCE WITH LAWS; PERMITS. Neither the Company nor its Subsidiary
is in material violation of any applicable statute, rule, regulation, order or
restriction of any domestic Israeli or, to the Company's knowledge, foreign
government or any instrumentality or agency thereof in respect of the conduct of
its business or the ownership of its properties which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Except as set forth herein or on Schedule 4.16, no
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement or any
other Related Agreement and the issuance of any of the Securities, except such
as has been, or shall be on or before the Closing Date, duly and validly
obtained or filed or with respect to any filings that must be made after the
Closing, as will be filed in a timely manner. Each of the Company and its
Subsidiary has all material franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
4.17 ENVIRONMENTAL AND SAFETY LAWS. Neither the Company nor its Subsidiary
is in material violation of any applicable Israeli statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation. Except as set forth on
Schedule 4.17, no Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or its Subsidiary or, to the
Company's knowledge, by any other person or entity on any property owned, leased
or used by the Company or its Subsidiary. For the purposes of the preceding
sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous" or
"toxic" under any applicable Israeli laws and regulations that govern the
existence and/or remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials; or
(b) any petroleum products or nuclear materials.
4.18 VALID OFFERING. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement and in any Related
Agreement, the offer, sale and issuance of the Securities will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
4.19 FULL DISCLOSURE. There is no material information relating to the
Company or its Subsidiary, which the Company and/or its Subsidiary believe is
reasonably necessary for the Purchaser to make its investment decision, which
was not previously disclosed to Purchaser, or appears in the Schedules hereto,
in the Company's Exchange Act Filings or in the Financial Statements. Neither
this Agreement, the Related Agreements, the exhibits and schedules hereto and
thereto nor any other document delivered by the Company or its Subsidiary to
Purchaser or its attorneys or agents in connection herewith or therewith or with
the transactions contemplated hereby or thereby, contain any untrue statement of
a material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
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4.20 INSURANCE. The Subsidiary has general commercial, product liability,
fire and casualty insurance policies with coverages which the Company believes
are customary for companies similarly situated to the Subsidiary in the same or
similar business.
4.21 SEC FILINGS. Except as set forth on Schedule 4.21, the Company has
filed with the Securities and Exchange Commission (the "SEC") all proxy
statements, reports and other documents required to be filed by it under the
Exchange Act, as a foreign private issuer (collectively, the "SEC Reports").
Except as set forth on Schedule 4.21, each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.22 LISTING. The Company's Ordinary Shares are listed for trading on the
NASDAQ National Market ("NASDAQ") and the Tel-Aviv Stock Exchange ("TASE") and
satisfy all requirements for the continuation of such listing. Except as
disclosed in the Company's Exchange Act Filings or in the Financial Statements,
the Company has not received any notice that its Ordinary Shares will be
delisted from NASDAQ or that its Ordinary Shares does not meet all requirements
for listing.
4.23 NO INTEGRATED OFFERING. Neither the Company, nor its Subsidiary or
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement or any of the Related Agreements to be
integrated with prior offerings by the Company for purposes of the Securities
Act such that would subject the offering, issuance and sale of the Securities
hereunder to the registration requirements of Section 5 of the Securities Act,
or any applicable exchange-related stockholder approval provisions, nor will the
Company or any of its affiliates or its Subsidiary take any action or steps that
would cause the offering of the Securities to be integrated with other
offerings.
4.24 STOP TRANSFER. The Securities are restricted securities as of the date
of this Agreement. Neither the Company nor its Subsidiary will issue any stop
transfer order or other order impeding the sale and delivery of any of the
Securities at such time as the Securities are registered for public sale or an
exemption from registration is available, except as required by state and
federal or Israeli securities laws, by NASDAQ or by TASE.
4.25 DILUTION. The Company specifically acknowledges that its obligation to
issue the Ordinary Shares upon conversion of the Note and exercise of the
Warrant is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the OWNERSHIP interests of other shareholders of the
Company.
4.26 The Company is entitled to certain tax benefits, based on its status
as an Approved Enterprise under the Law for the Encouragement of Capital
Investments 5744-1984. The Company has not received any notice that it has not
complied, in all material respects, with the terms and provisions of its
Approved Enterprise status and applicable laws and regulations in order to
retain its status as an Approved Enterprise.
11
4.27 The Company has received grants in support of its research and
development through the Office of the Chief Scientist of the Ministry of
Industry and Trade of the State of Israel (the "OCS") as listed in SCHEDULE 4.27
hereto, in the Exchange Act Filings or in the Financial Statements (the
"GRANTS"). The Company has not received any notice that it is not in compliance,
in all material respects, with the terms and conditions of the Grants, or that
is has not duly fulfilled, in all material respects, all the undertakings
relating thereto. The Company is not aware of any event or other set of
circumstances which might lead to the revocation or material modification of any
of the Grants.
4.28 PATRIOT ACT. The Company certifies that, to the best of Company's
knowledge, neither the Company nor its Subsidiary has been designated, and is
not owned or controlled, by a "suspected terrorist" as defined in Executive
Order 13224. The Company hereby acknowledges that the Purchaser seeks to comply
with all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Company hereby represents, warrants and agrees
that: (i) none of the cash or property that the Company or its Subsidiary will
pay or will contribute to the Purchaser has been or shall be derived from, or
related to, any activity that is deemed criminal under United States law; and
(ii) no contribution or payment by the Company or its Subsidiary to the
Purchaser, to the extent that they are within the Company's and/or its
Subsidiary's control shall cause the Purchaser to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly
notify the Purchaser if any of these representations ceases to be true and
accurate regarding the Company or its Subsidiary. The Company agrees to provide
the Purchaser any additional information regarding the Company or its Subsidiary
that the Purchaser reasonably deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities. The
Company understands and agrees that if at any time it is discovered that any of
the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, the
Purchaser may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
the Purchaser's investment in the Company. The Company further understands that
the Purchaser, if required by applicable law, may release confidential
information about the Company and its Subsidiary and, if applicable, any
underlying beneficial owners, to proper authorities if the Purchaser, in its
sole discretion, determines that it is in the best interests of the Purchaser in
light of relevant rules and regulations under the laws set forth in subsection
(ii) above.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
5.1 NO SHORTING. The Purchaser or any of its affiliates and investment
partners has not, will not and will not cause any person or entity, directly or
indirectly, to engage in "short sales" of the Company's Ordinary Shares or any
other hedging strategies as long as the Note shall be outstanding. This Section
5.1 shall survive the Closing of the transactions contemplated hereby.
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5.2 REQUISITE POWER AND AUTHORITY. The Purchaser is duly organized, validly
existing and in good standing under the laws of the country of its formation and
has all necessary power and authority under all applicable provisions of law to
execute and deliver this Agreement and the Related Agreements and to carry out
their provisions. All corporate action on Purchaser's part required for the
lawful execution and delivery of this Agreement and the Related Agreements have
been or will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 INVESTMENT REPRESENTATIONS. Purchaser understands that the Securities
are being offered and sold pursuant to an exemption or exemptions from
registration requirements of Israeli and US Federal and state securities laws
and that the Company is relying upon the truth and accuracy of Purchaser's
representations contained in the Agreement, including, without limitation, that
the Purchaser is an "accredited investor" within the meaning of Regulation D
under the Securities Act . The Purchaser confirms that it has received or has
had full access to all the information it considers necessary or appropriate to
make an informed investment decision with respect to the Note and the Warrant to
be purchased by it under this Agreement and the Note Shares and the Warrant
Shares acquired by it upon the conversion of the Note and the exercise of the
Warrant, respectively. The Purchaser further confirms that it has had an
opportunity to ask questions and receive answers from the Company regarding the
Company's and its Subsidiary's business, management and financial affairs and
the terms and conditions of the Offering, the Note, the Warrant and the
Securities and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to the Purchaser or to
which the Purchaser had access.
5.4 PURCHASER BEARS ECONOMIC RISK. The Purchaser has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. The Purchaser must bear the economic risk of this investment
until the Securities are sold pursuant to: (i) an effective registration
statement under the Securities Act; or (ii) an exemption from registration is
available with respect to such sale.
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5.5 ACQUISITION FOR OWN ACCOUNT. The Purchaser is acquiring the Note and
Warrant and the Note Shares and the Warrant Shares for the Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution. Purchaser has not
offered the Securities for sale by any means of general solicitation or general
advertising including, but no limited to, any advertisements, articles, notices
or other communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.
5.6 PURCHASER CAN PROTECT ITS INTEREST. The Purchaser represents that by
reason of its, or of its management's, business and financial experience, the
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Note, the Warrant and the Securities and to protect its own interests in
connection with the transactions contemplated in this Agreement and the other
Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Related Agreements.
5.7 ACCREDITED INVESTOR. Purchaser represents that it is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
5.8 LEGENDS.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE
ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO B.O.S. BETTER ON-LINE SOLUTIONS LTD. THAT
SUCH REGISTRATION IS NOT REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by DWAC
system (as hereinafter defined), shall bear a legend which shall be in
substantially the following form until such shares are covered by an
effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO THE SHARES EVIDENCED BY THIS
CERTIFICATE, FILED AND MADE EFFECTIVE UNDER THE SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO B.O.S. BETTER ON-LINE SOLUTIONS LTD. THAT SUCH REGISTRATION IS NOT
REQUIRED."
14
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE
ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT OR THE UNDERLYING ORDINARY SHARES UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO B.O.S. BETTER ON-LINE SOLUTIONS LTD. THAT
SUCH REGISTRATION IS NOT REQUIRED."
5.9 CONTROL OVER THE PURCHASER. The Purchaser has made available to the
Company a complete and detailed list of individuals who have or share voting
and/or investment control over the Purchaser. Purchaser acknowledges that such
information shall be provided by the Company to the OCS and the Investment
Center of the Ministry of Industry, Trade and Labor of the State of Israel (the
"Investment Center"), whose approval of the transactions contemplated hereby is
a condition to the Company's obligations hereunder. Purchaser shall update such
list as reasonably requested by the Company, to comply with any request for such
information from any regulatory body, including, without limitation the OCS and
the Investment Center. This Section 5.9 shall survive the Closing of the
transactions contemplated hereby.
6. COVENANTS OF THE COMPANY. Until irrevocable payment in full by the Company
(Subject to Section 6.12) of all amounts due to Purchaser under the Note and the
Related Agreements, the Company covenants and agrees with the Purchaser as
follows:
6.1 STOP-ORDERS. The Company will advise the Purchaser, promptly after it
receives notice of issuance by the SEC, any state securities commission or any
other regulatory authority of any stop order or of any order preventing or
suspending any offering of any securities of the Company, or of the suspension
of the qualification of the Ordinary Shares of the Company for offering or sale
in any jurisdiction, or the initiation of any proceeding for any such purpose.
15
6.2 LISTING. The Company shall promptly secure the listing of the Ordinary
Shares issuable upon conversion of the Note and upon the exercise of the Warrant
on the NASDAQ National Market or on any other market upon which the Company's
Ordinary Shares are then listed (the "Principal Market") (subject to official
notice of issuance) and shall maintain such listing so long as any other
Ordinary Shares shall be so listed. Except with respect to the listing on the
Tel-Aviv Stock Exchange, the Company will maintain the listing of its Ordinary
Shares on the Principal Market, and will comply in all material respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the National Association of Securities Dealers ("NASD") and such exchanges,
as applicable.
6.3 MARKET REGULATIONS. The Company shall notify the SEC, NASD, the Israeli
Securities Authority and the Tel-Aviv Stock Exchange and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Purchaser.
6.4 REPORTING REQUIREMENTS. The Company will timely file with the SEC all
reports required to be filed pursuant to the Exchange Act by foreign private
issuers and refrain from terminating its status as an issuer required by the
Exchange Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination.
6.5 USE OF FUNDS. The Company agrees that it will use the proceeds of the
sale of the Note and the Warrant for general working capital purposes, and/or
mergers and acquisitions only.
6.6 ACCESS TO FACILITIES Each of the Company and its Subsidiary will permit
any representatives designated by the Purchaser (or any successor of the
Purchaser), upon reasonable notice and during normal business hours, at such
person's expense and accompanied by a representative of the Company, to:
(a) visit and inspect any of the properties of the Company or its
Subsidiary;
(b) examine the corporate and financial records of the Company or any
of its Subsidiary (unless such examination is not permitted by federal,
state or local law or by contract) and make copies thereof or extracts
therefrom; and
(c) discuss the affairs, finances and accounts of the Company or its
Subsidiary with the directors, officers and independent accountants of the
Company or its Subsidiary. Notwithstanding the foregoing, neither the
Company nor its Subsidiary will provide any material, non-public
information to the Purchaser unless the Purchaser signs a confidentiality
agreement and otherwise complies with Regulation FD, under the federal
securities laws
6.7 TAXES. Each of the Company and its Subsidiary will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company and its Subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company and/or such Subsidiary shall have set aside on
its books adequate reserves with respect thereto, and provided, further, that
the Company and its Subsidiary will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor
16
6.8 INSURANCE. Each of the Company and its Subsidiary will keep its assets
which are of an insurable character insured by financially sound and reputable
insurers against loss or damage by fire, explosion and other risks customarily
insured against by companies in similar business similarly situated as the
Company and its Subsidiary; and the Subsidiary will maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner which the
Company reasonably believes is customary for companies in similar business
similarly situated as the Company and its Subsidiary and to the extent available
on commercially reasonable terms. The Company will bear the full risk of loss
from any loss of any nature whatsoever with respect to the assets pledged to the
Purchaser as security for its obligations hereunder and under the Related
Agreements. At the Company's and its Subsidiary's cost and expense in amounts
and with carriers reasonably acceptable to Purchaser, the Company and its
Subsidiary shall (i) keep its material properties insured against the hazards of
fire, flood and such other hazards that are included in "Extended Fire"
insurance, for such properties' full value; (ii) maintain Third Party Liability
insurance against claims for personal injury, death or property damage suffered
by others with the limit of liability of_NIS 5 Million per occurrence and in the
aggregate; (iii) maintain Employers' Liability Insurance with the limit of
liability of $5 Million per occurrence and in the aggregate; and (iv) furnish
Purchaser with (x) a certificate evidencing the maintenance of such insurance
coverage at least thirty (30) days before any expiration date, (y) excepting the
Employer's Liability Insurance, endorsements to such policies naming Purchaser
as "co-insured" or "additional insured" , and (z) evidence that as to Purchaser
the insurance coverage shall not be impaired or invalidated by the insurer and
the insurer will provide Purchaser with at least thirty (30) days notice prior
to cancellation. The Company and the Subsidiary shall instruct the insurance
carriers that in the event of any loss thereunder in excess of $50,000 in the
aggregate, upon the occurrence and during the continuance of an Event of Default
beyond any applicable cure period and until such Event of Default is cured, or
waived by the Purchaser in its sole discretion, the carriers shall make payment
for such loss to the Company and/or the Subsidiary and Purchaser jointly. In the
event that as of the date of receipt of each loss recovery upon any such
insurance, the Purchaser has not declared an Event of Default with respect to
this Agreement or any of the Related Agreements, then the Company and/or such
Subsidiary shall be permitted to direct the application of such loss recovery
proceeds toward investment in property, plant and equipment that would comprise
"Pledgor Collateral" secured by Purchaser's security interest pursuant to its
security agreement, with any surplus funds to be applied toward payment of the
obligations of the Company to Purchaser. In the event that Purchaser has
properly declared an event of default with respect to this Agreement or any of
the Related Agreements, then all loss recoveries received by Purchaser upon any
such insurance thereafter may be applied to the obligations of the Company
hereunder and under the Related Agreements, in such order as the Purchaser may
determine. Any surplus (following satisfaction of all Company obligations to
Purchaser) shall be paid by Purchaser to the Company or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by the Company
or the Subsidiary, as applicable, to Purchaser, on demand.
17
6.9 INTELLECTUAL PROPERTY. Each of the Company and its Subsidiary shall
maintain in full force and effect its existence, rights and franchises and all
licenses and other rights to use Intellectual Property owned or possessed by it
and reasonably deemed to be necessary to the conduct of its business.
6.10 PROPERTIES. Each of the Company and its Subsidiary will keep its
material properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto, except as would not
have a Material Adverse Effect; and each of the Company and its Subsidiary will
at all times comply with each provision of all leases to which it is a party or
under which it occupies property if the breach of such provision could, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.11 CONFIDENTIALITY The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Purchaser, unless
expressly agreed to by the Purchaser or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement. Notwithstanding the foregoing, the Company may disclose Purchaser's
identity and the terms of this Agreement to its current and prospective debt and
equity financing sources.
6.12 REQUIRED APPROVALS. For so long as twenty-five percent (25%) of the
principal amount of the Note is outstanding, the Company, without the prior
written consent of the Purchaser, shall not:
(a) directly or indirectly declare or pay any dividends, other than
dividends paid to the Company or any of its wholly-owned subsidiaries;
(b) liquidate, dissolve or effect a material reorganization provided,
however, that the Company may merge or effect a material reorganization if
the Company is the surviving entity;
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its
terms would (under any circumstances) restrict the Company's or its
Subsidiary's right to perform the provisions of this Agreement, any other
Related Agreement or any of the agreements contemplated hereby or thereby;
(d) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of ten percent (10%) per annum of the fair market
value of the Company's assets) whether secured or unsecured other than (x)
the Company's indebtedness to the Purchaser, (y) indebtedness set forth on
SCHEDULE 6.12(D) attached hereto and made a part hereof and any
refinancings or replacements thereof on terms no less favorable to the
Company than the indebtedness being refinanced or replaced, and (z) any
debt incurred in connection with the purchase of assets, or any
refinancings or replacements thereof on terms no less favorable to the
Company than the indebtedness being refinanced or replaced; (ii) cancel any
debt owing to it in excess of $500,000 in the aggregate during any 12 month
period; (iii) assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other person,
except the endorsement of negotiable instruments by the Company for deposit
or collection or similar transactions in the ordinary course of business or
guarantees of indebtedness of the Company's subsidiaries or otherwise
permitted to be outstanding pursuant to this clause (d); and
18
(e) create or acquire any subsidiary after the date hereof unless (i)
such subsidiary is a wholly-owned subsidiary of the Company or (ii) such
Subsidiary becomes party to the Master Security Agreement (either by
executing a counterpart thereof or an assumption or joinder agreement in
respect thereof) and, to the extent required by the Purchaser, satisfies
each condition of this Agreement and the other Related Agreements as if
such subsidiary was a subsidiary on the Closing Date.
6.13 REISSUANCE OF SECURITIES. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Section 5.7 above
at such time as:
(a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement after
such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
6.14 OPINIONS. On the Closing Date, the Company will deliver to the
Purchaser opinions acceptable to the Purchaser substantially in the forms of
Exhibits C1 and C2 hereto, from the Company's external legal counsels. The
Company will provide, at the Company's expense, such other legal opinions to be
issued in connection with sales effected under Rule 144 of the Securities Act,
or in connection with a request by or on behalf of the Company's Transfer Agent
in the future as are deemed reasonably necessary by the Purchaser (and
acceptable to the Purchaser) in connection with the conversion of the Note and
exercise of the Warrant.
6.15 On or prior to the Closing Date the Company will execute and deliver
to the Purchaser the Related Agreements signed by the Company and its Subsidiary
(if required) and any debentures attached thereto.
6.16 On or prior to the Closing Date, the Company will execute and deliver
to the Purchaser a confirmation by the board of directors of the Company
according to section 282 of the Companies Law - 1999, together with a copy of
resolutions by the Company's Board of Directors, authorizing the execution and
performance of this Agreement, the Related Agreements and the transactions
contemplated hereby and thereby.
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6.17 The Company will at all times have authorized and reserved a
sufficient number of Ordinary Shares for the full conversion of the Note and
exercise of the Warrants.
7. COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with the
Company as follows:
7.1 CONFIDENTIALITY. The Purchaser agrees that it will not disclose, and
will not include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
7.2 NON-PUBLIC INFORMATION. The Purchaser agrees not to effect any sales in
the Company's Ordinary Shares while in possession of material, non-public
information regarding the Company if such sales would violate applicable
securities law.
This Section 7 shall survive the Closing of the transactions contemplated
hereby.
8. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.
8.1 COMPANY INDEMNIFICATION. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which results, arises out of or is based upon: (i) any
misrepresentation by the Company or its Subsidiary or breach of any warranty by
the Company or its Subsidiary in this Agreement, any other Related Agreement or
in any exhibits or schedules attached hereto or thereto; or (ii) any breach or
default in performance by Company or its Subsidiary of any covenant or
undertaking to be performed by Company or its Subsidiary hereunder, under any
other Related Agreement or any other agreement entered into by the Company and
Purchaser relating hereto or thereto. Nothing herein shall be deemed to expand
the Subsidiary's liability hereunder or under any Related Agreement, beyond its
liability in connection with the representations and warranties made by the
Subsidiary hereunder.
8.2 PURCHASER'S INDEMNIFICATION. Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons and principal shareholders, at
all times against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company which results, arises out of or is based upon: (i) any
misrepresentation by Purchaser or breach of any warranty by Purchaser in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or under any
other Related Agreement.
20
9. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING. The obligations of
the Company to issue the Note and the Warrant to the Investors at the Closing is
subject to the fulfillment (or waiver by the Company) prior to or on the Closing
Date of the conditions set forth below. In the event that any such condition is
not met to the satisfaction of the Company, then the Company shall not be
obligated to proceed with the transactions contemplated hereunder and in the
Related Agreements, and shall not be subject to any liability hereunder or
thereunder.
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchaser under this Agreement and the related Agreements shall be
true in all material respects as of the Closing Date, with the same
effect as though made on and as of such date.
9.2 COMPLIANCE WITH AGREEMENTS. Purchaser shall have performed and
complied in all respects with all agreements or conditions required by
this Agreement and the Related Agreements to be performed and complied
with by it prior to or as of the Closing Date.
9.3 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 and the Related
Agreements.
9.4 DELIVERY OF PURCHASE AMOUNT. The Purchaser shall have delivered to the
Company the Purchase Amount on or before the Closing Date.
9.5 GOVERNMENT APPROVALS. The Company shall have received all necessary
approvals by the OCS and the Investment Center with respect to the
transactions contemplated hereby and by the Related Agreements. The
Purchaser shall have executed any confirmations required by the OCS
and/or the Investment Center for the grant of such approvals.
9.6 NOTICES TO NASDAQ THE TASE AND THE ISA. The Company shall have made
all required filings of notices with NASDAQ, the Tel Aviv Stock
Exchange and the Israel Securities Authority and has received no
notice adversely effecting the performance of the transactions
contemplated hereunder and in the Related Agreements. The Company
shall use its commercially reasonable efforts to complete such
filings.
21
10. CONVERSION OF CONVERTIBLE NOTE.
10.1 MECHANICS OF CONVERSION.
(a) Provided the Purchaser has notified the Company of the Purchaser's
intention to sell the Note Shares and the Note Shares are included in an
effective registration statement or are otherwise exempt from registration
when sold: (i) upon the conversion of the Note or part thereof, the Company
shall, at its own cost and expense, take all necessary action (including
the issuance of an opinion of counsel reasonably acceptable to the
Purchaser following a request by the Purchaser) to assure that the
Company's transfer agent shall issue the Company's Ordinary Shares in the
name of the Purchaser (or its nominee) or such other persons as designated
by the Purchaser in accordance with Section 10.1(b) hereof and in such
denominations to be specified representing the number of Note Shares
issuable upon such conversion; and (ii) the Company warrants that no
instructions other than these instructions have been or will be given to
the transfer agent of the Company's Ordinary Shares and that after the
Effectiveness Date (as defined in the Registration Rights Agreement) the
Note Shares issued will be freely transferable subject to the prospectus
delivery requirements of the Securities Act and the provisions of this
Agreement, and will not contain a legend restricting the resale or
transferability of the Note Shares.
(b) Purchaser will give notice of its decision to exercise its right
to convert the Note or part thereof by telecopying or otherwise delivering
an executed and completed notice including a breakdown in reasonable detail
of the Principal Amount and accrued interest being converted (the "Notice
of Conversion") all as more fully provided in the Note. The Purchaser will
not be required to surrender the Note until the Purchaser receives a credit
to the account of the Purchaser's prime broker through the DWAC system (as
defined below), representing the Note Shares or until the Note has been
fully satisfied. Each date on which a Notice of Conversion is telecopied or
delivered to the Company in accordance with the provisions hereof shall be
deemed a "Conversion Date." Pursuant to the terms of the Notice of
Conversion, the Borrower will issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day of the
date of the delivery to Borrower of the Notice of Conversion and shall
cause the transfer agent to transmit the certificates representing the
Conversion Shares to the Holder by crediting the account of the Purchaser's
prime broker with the Depository Trust Company ("DTC") through its Deposit
Withdrawal Agent Commission ("DWAC") system within three (3) business days
after receipt by the Company of the Notice of Conversion (the "Delivery
Date")
(c) The Company understands that a delay in the delivery of the Note
Shares in the form required pursuant to Section 10 hereof beyond the
Delivery Date could result in economic loss to the Purchaser. In the event
that the Company fails to direct its transfer agent to deliver the Note
Shares to the Purchaser via the DWAC system within the time frame set forth
in Section 10.1(b) above and the Note Shares are not delivered to the
Purchaser by the Delivery Date, as compensation to the Purchaser for such
loss, the Company agrees to pay late payments to the Purchaser for late
issuance of the Note Shares in the form required pursuant to Section hereof
upon conversion of the Note in the amount equal to the greater of: (i) $500
per business day after the Delivery Date; or (ii) the Purchaser's actual
damages from such delayed delivery. Notwithstanding the foregoing, the
Company will not owe the Purchaser any late payments if the delay in the
delivery of the Note Shares beyond the Delivery Date is solely out of the
control of the Company and the Company is actively trying to cure the cause
of the delay. The Company shall pay any payments incurred under this
Section in immediately available funds upon demand and, in the case of
actual damages, accompanied by reasonable documentation of the amount of
such damages. Such documentation shall show the number of Ordinary Shares
the Purchaser is forced to purchase (in an open market transaction) which
the Purchaser anticipated receiving upon such conversion, and shall be
calculated as the amount by which (A) the Purchaser's total purchase price
(including customary brokerage commissions, if any) for the Ordinary Shares
so purchased exceeds (B) the aggregate principal and/or interest amount of
the Note, for which such Conversion Notice was not timely honored.
22
10.2 Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum amount
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Purchaser and thus refunded to the
Company.
11. REGISTRATION RIGHTS, OFFERING RESTRICTIONS.
11.1 REGISTRATION RIGHTS GRANTED. The Company hereby grants registration
rights to the Purchaser pursuant to a Registration Rights Agreement dated as of
even date herewith between the Company and the Purchaser.
11.2 OFFERING RESTRICTIONS. Except as previously disclosed in the SEC
Reports, in the Exchange Act Filings, in the Financial Statements, or stock or
stock options granted to employees or directors of the Company (these exceptions
hereinafter referred to as the "Excepted Issuances"), neither the Company nor
its Subsidiary will issue any securities with a continuously variable/floating
conversion feature which are or could be (by conversion or registration)
free-trading securities (i.e. Ordinary Shares subject to a registration
statement) prior to the full repayment or conversion of the Note (together with
all accrued and unpaid interest and fees related thereto) (the "Exclusion
Period").
12. MISCELLANEOUS.
12.1 GOVERNING LAW. THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. ANY ACTION BROUGHT BY EITHER
PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE
FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH PARTIES AND THE
INDIVIDUALS EXECUTING THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS ON BEHALF
OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS AND WAIVE
TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY OTHER
RELATED AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE
UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL BE DEEMED
INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND SHALL BE DEEMED
MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH
MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY
OR ENFORCEABILITY OF ANY OTHER PROVISION OF ANY AGREEMENT.
23
12.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchaser and the
closing of the transactions contemplated hereby to the extent provided therein.
All statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of either party pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by such party hereunder solely as of the date of
such certificate or instrument.
12.3 SUCCESSORS. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of the Securities from time to time, other than the holders of Ordinary Shares
which have been sold by the Purchaser pursuant to Rule 144 or an effective
registration statement. Purchaser may not assign its rights hereunder to a
competitor of the Company or its Subsidiary.
12.4 ENTIRE AGREEMENT. This Agreement, the Related Agreements, the exhibits
and schedules hereto and thereto and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
12.5 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
12.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the written
consent of the Company and the Purchaser or their respective successors.
(b) The obligations of the Company and the rights of the Purchaser
under this Agreement may be waived only with the written consent of the
Purchaser or its successors.
(c) The obligations of the Purchaser and the rights of the Company
under this Agreement may be waived only with the written consent of the
Company or its successors.
12.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
24
12.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal business
hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.
All communications shall be sent as follows:
IF TO THE PURCHASER, TO: B.O.S. Better On-Line Solutions Ltd.
Beit ▇▇▇▇▇, 100 BOS Road, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇ ▇▇▇-▇▇▇▇
WITH A COPY TO:
Amit, Pollak, Matalon & ▇▇▇-▇▇▇▇▇▇▇, Erez & Co.NYP
Tower, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇ ▇▇▇-▇▇▇▇
IF TO THE COMPANY, TO: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services ltd.
▇.▇. ▇▇▇ ▇▇▇▇ G.T.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
25
WITH A COPY TO:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
12.9 ATTORNEYS' FEES. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all reasonable and actually
incurred fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, including, without limitation,
such reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
12.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
12.11 FACSIMILE SIGNATURES; COUNTERPARTS. This Agreement may be executed by
facsimile signatures and in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.
12.12 BROKER'S FEES, STAMP TAXES. Except as set forth on Schedule 12.12
hereof, each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
such party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 12.12 being untrue. The Company
shall bear all stamp taxes required to be paid in connection with this
Agreement, the Note and/or the Warrant.
12.13 CONSTRUCTION. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
26
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
B.O.S. BETTER ON-LINE SOLUTIONS LTD. LAURUS MASTER FUND, LTD.
By: By:
----------------------- -----------------------
Name: Name:
----------------------- -----------------------
Title: Title:
----------------------- -----------------------
BOSCOM, LTD.
By:
-----------------------
Name:
-----------------------
Title:
-----------------------
27
EXHIBIT A
FORM OF CONVERTIBLE NOTE
[omitted]
A-1
EXHIBIT B
FORM OF WARRANT
[omitted]
B-1
EXHIBITS C1-C2
OPINIONS
[omitted]
C-1
EXHIBIT D
FORM OF ESCROW AGREEMENT
[omitted]
D-2
THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE ORDINARY SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO B.O.S. BETTER ON-LINE SOLUTIONS LTD. THAT SUCH REGISTRATION IS
NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, B.O.S. BETTER ON-LINE SOLUTIONS LTD., a corporation
incorporated under the laws of the State of Israel (the "BORROWER"), hereby
promises to pay to LAURUS MASTER FUND, LTD. a Cayman Islands company ▇/▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇.▇. ▇▇▇ ▇▇▇▇ G.T., Queensgate House, South
Church Street, Grand Cayman, Cayman Islands, Fax: ▇▇▇-▇▇▇-▇▇▇▇ (the "HOLDER") or
its registered assigns or successors in interest, on order, the sum of Two
Million United States Dollars ($2,000,000), together with any accrued and unpaid
interest hereon, on June 10, 2007 (the "MATURITY DATE") if not sooner paid.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the "PURCHASE AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1(a) INTEREST RATE. Subject to Section 4.11 and 5.6 hereof, interest
payable on this Note shall accrue at a rate per annum (the "Interest Rate")
equal to the "prime rate" published in THE WALL STREET JOURNAL from time to
time, plus three percent (3.0%). The Interest Rate shall be increased or
decreased as the case may be for each increase or decrease in the prime rate in
an amount equal to such increase or decrease in the prime rate; each change to
be effective as of the day of the change in such rate and also subject to
Section 1.1(b) hereof. In no event, however, shall the Interest Rate be less
than zero percent (0.00%). Interest shall be (i) calculated on the basis of a
360 day year, (ii) payable monthly, in arrears, commencing on September 1, 2004
and on the first business day of each consecutive calendar month thereafter
until the Maturity Date (and on the Maturity Date), whether by acceleration or
otherwise (each, a "REPAYMENT DATE").
1.1 (b) INTEREST RATE ADJUSTMENT. The Interest Rate shall be calculated on
the last business day of each month hereafter until the Maturity Date (each a
"DETERMINATION DATE") and be subject to adjustment. If (i) the Borrower shall
have registered the Borrower's Ordinary Shares underlying the conversion of the
Note and that certain warrant issued to the Holder (the "Warrant") on a
registration statement declared effective by the SEC, and (ii) the average
closing price of the Ordinary Shares as reported by Bloomberg, L.P. on the
Principal Market (as defined below) for any five ((5) consecutive trading days
during the fifteen (15) days immediately preceding a Determination Date, exceeds
the then applicable Fixed Conversion Price, then the Interest Rate for the
succeeding calendar month shall automatically be reduced by 200 basis points
(2.0%) for each incremental twenty five percent (25%) increase in the market
price of the Ordinary Shares above the then applicable Fixed Conversion Price.
If (i) the Borrower shall not have registered the Borrower's Ordinary Shares
underlying the conversion of the Note and the Warrant on a registration
statement declared effective by the SEC, and (ii) the average closing price of
the Ordinary Shares as reported by Bloomberg, L.P. on the Principal Market
(below) for any five (5) consecutive trading days during the fifteen (15) days
immediately preceding a Determination Date exceeds the Fixed Conversion Price,
then the Interest Rate for the succeeding calendar month shall automatically be
reduced by 100 basis points (1.0%) for each incremental twenty five percent
(25%) increase in the market price of the Ordinary Shares above the then
applicable Fixed Conversion Price.
1.2 MINIMUM MONTHLY PRINCIPAL PAYMENTS. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"PRINCIPAL AMOUNT") shall begin on October 1, 2004 and shall recur on the first
calendar day of each succeeding month thereafter until the Maturity Date (each,
an "AMORTIZATION DATE") as set forth in the table below:
DATE PRINCIPAL AMOUNT DATE PRINCIPAL AMOUNT
------- ------- ------- -------
10/1/04 $20,000 12/1/05 $73,600
11/1/04 $20,000 1/1/06 $73,600
12/1/04 $20,000 2/1/06 $73,600
1/1/05 $20,000 3/1/06 $73,600
2/1/05 $20,000 4/1/06 $73,600
3/1/05 $20,000 5/1/06 $73,600
4/1/05 $20,000 6/1/06 $73,600
5/1/05 $20,000 7/1/06 $73,600
6/1/05 $73,600 8/1/06 $73,600
7/1/05 $73,600 9/1/06 $73,600
8/1/05 $73,600 10/1/06 $73,600
9/1/05 $73,600 11/1/06 $73,600
10/1/05 $73,600 12/1/06 $73,600
11/1/05 $73,600 1/1/07 $73,600
2/1/07 $73,600
3/1/07 $73,600
4/1/07 $73,600
5/1/07 $73,600
6/1/07 $73,600
Subject to Section 3 below, beginning on the first Amortization Date, the
Borrower shall make monthly payments to the Holder on each Repayment Date, each
in the amount set forth above, together with any accrued and unpaid interest to
date on such portion of the Principal Amount plus any and all other amounts
which are then owing under this Note but have not been paid (collectively, the
"MONTHLY AMOUNT"). All payments hereunder shall be paid by wire transfer of
immediately available funds to the account designated by the Holder in a written
notice delivered to the Borrower at least three business days in advance of the
Repayment Date.
ARTICLE II
CONVERSION REPAYMENT
2.1 (a) PAYMENT OF MONTHLY AMOUNT IN CASH OR ORDINARY Shares. Each month by
the fifth (5th) business day prior to each Amortization Date (the "NOTICE
DATE"), the Holder shall deliver to Borrower a written Monthly Conversion Notice
in the form of EXHIBIT B attached hereto converting the Monthly Amount payable
on the next Repayment Date in either cash or Ordinary Shares, or a combination
of both (each, a "REPAYMENT NOTICE"). If a Repayment Notice is not delivered by
the Holder on or before the applicable Notice Date for such Repayment Date,
then, the Borrower shall pay the Monthly Amount due on such Repayment Date in
cash. Any portion of the Monthly Amount paid in cash on a Repayment Date, shall
be paid to the Holder an amount equal to 100% of such unconverted portion of the
Monthly Amount due and owing to Holder on the Repayment Date. If the Holder
converts all or a portion of the Monthly Amount into Ordinary Shares as provided
herein, the number of such shares to be issued by the Borrower to the Holder on
such Repayment Date shall be the number determined by dividing (x) the portion
of the Monthly Amount to be paid in shares of Ordinary Shares, by (y) the then
applicable Fixed Conversion Price. For purposes hereof, the initial "FIXED
CONVERSION PRICE" means $3.08 (which has been determined on the date of this
Note as an amount equal to 110% of the average closing price for the twenty (20)
trading days immediately prior to the date of this Note, but in no event shall
the fixed conversion price be less than USD$3.08.) The Fixed Conversion Price
may be adjusted in accordance with the provisions of Section 3.4(b) below.
(b) MONTHLY AMOUNT CONVERSION GUIDELINES. Subject to Sections 2.1(a), 2.2,
and 3.2 hereof, the Holder shall convert all or a portion of the Monthly Amount
due on each Repayment Date into Ordinary Shares if the average closing price of
the Ordinary Shares as reported by Bloomberg, L.P. on the Principal Market for
any five (5) consecutive trading days during the fifteen (15) days immediately
preceding such Repayment Date was greater than or equal to one hundred and ten
percent (110%) of the Fixed Conversion Price, provided, however, that such
conversions shall be up to but not exceed twenty five percent (25%) of the
aggregate dollar trading volume of the Ordinary Shares for the thirty (30) day
trading period immediately preceding the Repayment Date. Any part of the Monthly
Amount due on a Repayment Date that the Holder has not converted into Ordinary
Shares, shall be paid by the Borrower in cash on such Repayment Date. Any part
of the Monthly Amount due on such Repayment Date which must be paid in cash (as
a result of the closing price of the Ordinary Shares on one or more of the five
(5) consecutive trading days during the fifteen (15) days immediately preceding
the applicable Repayment Date being less than 110% of the Fixed Conversion
Price) shall be paid in cash at the rate of 100% of the Monthly Amount otherwise
due on such Repayment Date, within three (3) business days of the applicable
Repayment Date.
2.2 NO EFFECTIVE REGISTRATION. Notwithstanding anything to the contrary
herein, none of the Borrower's obligations to the Holder may be converted into
Ordinary Shares unless (i) an effective current Registration Statement (as
defined in the Registration Rights Agreement) covering the Ordinary Shares to be
issued in connection with the satisfaction of such obligations exists or an
exemption from registration of the Ordinary Shares is available pursuant to Rule
144 of the Securities Act and (ii) no Event of Default hereunder exists and is
continuing, unless such Event of Default is cured within any applicable cure
period or is otherwise waived in writing by the Holder in whole or in part at
the Holder's option.
Any amounts converted by the Holder pursuant to this Section 2.2 shall be
deemed to constitute payments of outstanding fees, interest and principal
arising in connection with Monthly Amounts for the remaining Repayment Dates, in
chronological order.
2.4 OPTIONAL REDEMPTION IN CASH. The Borrower will have the option of
prepaying this Note ("OPTIONAL REDEMPTION") by paying to the Holder a sum of
money equal to one hundred and twenty percent (120%) of the then outstanding
principal amount of this Note together with accrued but unpaid interest thereon
and any and all other sums due, accrued or payable to the Holder arising under
this Note, the Purchase Agreement, or any Related Agreement (the "REDEMPTION
AMOUNT") outstanding on the day written notice of redemption (the "NOTICE OF
REDEMPTION") is given to the Holder. The Notice of Redemption shall specify the
date for such Optional Redemption (the "REDEMPTION PAYMENT DATE") which date
shall be seven (7) business days after the date of the Notice of Redemption (the
"REDEMPTION PERIOD"). A Notice of Redemption shall not be effective with respect
to any portion of this Note for which the Holder has a pending election to
convert pursuant to Section 3.1, or for conversions initiated or made by the
Holder pursuant to Section 3.1 during the Redemption Period. The Redemption
Amount shall be determined as if such Holder's conversion elections had been
completed immediately prior to the date of the Notice of Redemption. On the
Redemption Payment Date, the Redemption Amount must be paid in good funds to the
Holder. In the event the Borrower fails to pay the Redemption Amount on the
Redemption Payment Date as set forth herein, then such Redemption Notice will be
null and void.
ARTICLE III
CONVERSION RIGHTS
3.1. HOLDER'S CONVERSION RIGHTS. The Holder shall have the right, but not
the obligation, to convert all or any portion of the then aggregate outstanding
principal amount of this Note, together with interest and fees due hereon, into
Ordinary Shares subject to the terms and conditions set forth in this Article
III. The Holder may exercise such right by delivery to the Borrower of a written
notice of conversion in the form of EXHIBIT A attached hereto (the "Notice of
Conversion") not less than one (1) business day prior to the date upon which
such conversion shall occur. The date upon which such conversion shall occur is
the "CONVERSION DATE".
3.2 CONVERSION LIMITATION. Notwithstanding anything contained herein to the
contrary, the Holder shall not be entitled to convert pursuant to the terms of
the Note an amount that would (a) be convertible into that number of Ordinary
Shares which, when added to the number of Ordinary Shares otherwise beneficially
owned by such Holder including those issuable upon exercise of warrants held by
such Holder would exceed 4.99% of the outstanding Ordinary Shares of the
Borrower at the time of conversion or (b) (ii) exceed twenty five percent (25%)
of the aggregate dollar trading volume of the Ordinary Shares for the thirty
(30) day trading period immediately preceding delivery of a Notice of Conversion
to the Borrower. For the purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13d-3 thereunder. The conversion limitation
described in this Section 3.2 shall automatically become null and void without
any notice to Borrower upon the occurrence and during the continuance beyond any
applicable grace period of an Event of Default, or upon 75 days prior notice to
the Borrower, except that at no time shall the beneficial ownership exceed
19.99% of the Borrower's outstanding Ordinary Shares as of the date hereof.
Notwithstanding anything contained herein to the contrary, the number of
Ordinary Shares issuable by the Borrower and acquirable by the Holder pursuant
to the terms of this Note and/or the Warrant issued by the Borrower to the
Holder pursuant to the Securities Purchase Agreement, shall not exceed an
aggregate of 833,085 of the Borrower's Ordinary Shares, (subject to appropriate
adjustment for stock splits, stock dividends, or other similar recapitalizations
affecting the Ordinary Shares).
3.3 MECHANICS OF HOLDER'S CONVERSION. (a) In the event that the Holder
elects to convert this Note into Ordinary Shares, the Holder shall give notice
of such election by delivering an executed and completed Notice of Conversion to
the Borrower and such Notice of Conversion shall provide a breakdown in
reasonable detail of the Principal Amount, accrued interest and fees being
converted. On each Conversion Date (as hereindefined) and in accordance with its
Notice of Conversion, the Holder shall make the appropriate reduction to the
Principal Amount, accrued interest and fees as entered in its records and shall
provide written notice thereof to the Borrower within two (2) business days
after the Conversion Date.
(b) Pursuant to the terms of the Notice of Conversion, the Borrower will
issue instructions to the transfer agent accompanied by an opinion of counsel
within 2 business days of the date of the delivery to Borrower of the Notice of
Conversion and shall cause the transfer agent to transmit the certificates
representing the Note Shares to the Holder by crediting the account of the
Holder's designated broker with the Depository Trust Corporation ("DTC") through
its Deposit Withdrawal Agent Commission ("DWAC") system within three (3)
business days after receipt by the Borrower of the Notice of Conversion (the
"DELIVERY Date"). In the case of the exercise of the conversion rights set forth
herein the conversion privilege shall be deemed to have been exercised and the
Note Shares issuable upon such conversion shall be deemed to have been issued
upon the date of receipt by the Borrower of the Notice of Conversion. The Holder
shall be treated for all purposes as the record holder of such Ordinary Shares.
3.4 CONVERSION MECHANICS.
(a) The number of Ordinary Shares to be issued upon each conversion of this
Note shall be determined by dividing that portion of the principal and interest
and fees to be converted, if any, by the then applicable Fixed Conversion Price.
In the event of any conversions of outstanding principal amount under this Note
in part pursuant to this Article III, such conversions shall be deemed to
constitute conversions of outstanding principal amount applying to Monthly
Amounts for the remaining Repayment Dates in chronological order. No fractional
shares shall be issued upon any conversion of this Note. The value of any
fractional shares shall be paid in cash.
(b) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion is subject to adjustment from time to
time upon the occurrence of certain events, as follows:
A. STOCK SPLITS, COMBINATIONS AND DIVIDENDS. If the Ordinary Shares are
subdivided or combined into a greater or smaller number of Ordinary Shares, or
if a dividend is paid on the Ordinary Shares in Ordinary Shares, the Fixed
Conversion Price , as the case may be, shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of Ordinary Share outstanding immediately after such event bears to the
total number of Ordinary Shares outstanding immediately prior to such event.
B. During the period the conversion right exists, the Borrower will reserve
from its authorized and unissued Ordinary Shares a sufficient number of shares
to provide for the issuance of Ordinary Shares upon the full conversion of this
Note. The Borrower represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable. The Borrower agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing share
certificates to execute and issue the necessary certificates for Ordinary Shares
upon the conversion of this Note.
C. SHARE ISSUANCES. Subject to the provisions of this Section 3.4, if the
Borrower shall at any time prior to the conversion or repayment in full of the
Principal Amount issue any Ordinary Shares or securities convertible into
Ordinary Shares to a person other than the Holder (except (i) pursuant to
Subsections A or B above; (ii) pursuant to options, warrants, or other
obligations to issue shares outstanding on the date hereof as disclosed to
Holder in writing; (iii) pursuant to any financing transaction in which the
Holder (or any of its affiliates) participates or is entitled to any fees; (iv)
pursuant to options that may be issued under any employee stock option plan
adopted by the Borrower); or (v) grant of options to service provides against
their services, issuances in connection with strategic alliances, and issuances
in connection with merger and acquisition transactions approved by the board of
directors of the Company, for a consideration per share (the "Offer Price") less
than the Fixed Conversion Price in effect at the time of such issuance, then the
Fixed Conversion Price shall be adjusted at the time of issuance of such
securities by multiplying the then applicable Fixed Conversion Price by the
following fraction:
A + B
-----------------------------
(A + B) + [((C - D) x B) / C]
A = Actual shares outstanding prior to such offering
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offering Price
D. RECLASSIFICATION, ETC. If the Borrower at any time shall, by
reclassification or otherwise, change the Ordinary Shares into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Note Shares immediately prior to such reclassification or other
change.
3.5 ISSUANCE OF NEW NOTE. Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Borrower to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid. The
Borrower will pay no costs, fees or any other consideration to the Holder for
the production and issuance of a new Note.
3.6 RIGHTS OF SHAREHOLDERS. No Holder shall be entitled, as a Note holder,
to vote or receive dividends or be deemed the holder of the Note Shares or any
other securities of the Company which may at any time be issuable upon the
conversion of this Note for any purpose, nor shall anything contained herein be
construed to confer upon the Holder, as such, any of the rights of a shareholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
shares, reclassification of shares, change of nominal value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until the Note Shares
purchasable upon the conversion hereof shall have become deliverable, as
provided herein.
ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond any applicable
grace period, the Holder may make all sums of principal, interest and other fees
then remaining unpaid hereon and all other amounts payable hereunder immediately
due and payable. In the event of such an acceleration, within five (5) days
after written notice from Holder to Borrower (each occurrence being a "DEFAULT
NOTICE PERIOD") the amount due and owing to the Holder shall be 120% of the
outstanding principal amount of the Note (plus accrued and unpaid interest and
fees, if any) (the "DEFAULT PAYMENT"). If, with respect to any Event of Default,
the Borrower cures the Event of Default by the end of the Default Notice Period,
the Event of Default will be deemed to no longer exist and any rights and
remedies of Holder pertaining to such Event of Default will be of no further
force or effect. The Default Payment shall be applied first to any fees due and
payable to Holder pursuant to the Note or the Related Agreements, then to
accrued and unpaid interest due on the Note and then to the outstanding
principal balance of the Note.
The occurrence of any of the following events set forth in Sections 4.1
through 4.8, inclusive, is an "EVENT OF DEFAULT":
4.1 FAILURE TO PAY PRINCIPAL, INTEREST OR OTHER FEES. The Borrower (i)
fails to pay when due any installment of principal, interest or other fees
hereon in accordance herewith, or (ii) the Borrower fails to pay when due any
amount exceeding $200,000 due under any other promissory note issued by Borrower
(unless the Borrower shall in good faith contest the validity of such amounts),
and in any such case, such failure shall continue for a period of three (3) days
following the date upon which any such payment was due.
4.2 BREACH OF COVENANT. The Borrower breaches any covenant or any other
term or condition of this Note, the Purchase Agreement or the Registration
Rights Agreement in any material respect, or the Borrower or its Subsidiary,
BOScom Ltd. (the "Subsidiary"), breaches any covenant or any other term or
condition of any Related Agreement in any material respect and, any such case,
such breach, if subject to cure, continues for a period of fifteen (15) days
after the occurrence thereof.
4.3 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
warranty made by the Borrower in this Note or the Purchase Agreement, or by the
Borrower or the Subsidiary in any Related Agreement, shall, in any such case, be
false or misleading in any material respect on the date that such representation
or warranty was made or deemed made that has a material adverse effect on the
Company's performance of its obligations to the Holder, or the practical
realization by the Holder of any benefit or remedy it may have under the Note or
the Related Agreements.
4.4 RECEIVER OR TRUSTEE. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
4.5 JUDGMENTS. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than $200,000 , and shall remain
unvacated, unbonded or unstayed for a period of thirty (30) days.
4.6 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
of its Subsidiaries and such proceedings, solely if instituted against the
Borrower or any of its Subsidiaries, shall continue undismissed or unstayed for
ninety (90) business days. No cure period shall apply for proceedings or relief
under any bankruptcy law or any law for the relief of debtors shall be
instituted by the Borrower.
4.7 STOP TRADE. An SEC stop trade order or Principal Market trading
suspension of the Ordinary Shares shall be in effect for ten (10) consecutive
trading days or five (5) days during a period of ten (10) consecutive days,
excluding in all cases a suspension of all trading on a Principal Market,
PROVIDED that the Borrower shall not have been able to cure such trading
suspension within thirty (30) days of the notice thereof or list the Ordinary
Shares on another Principal Market within sixty (60) days of such notice. The
"Principal Market" for the Ordinary Shares shall include the NASD OTC Bulletin
Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock
Exchange, New York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Ordinary Shares), or any securities
exchange or other securities market on which the Ordinary Shares is then being
listed or traded. Notwithstanding the above, any suspension of trading on, or
the delisting of the Ordinary Shares of the Tel Aviv Stock Exchange shall not be
deemed an Event of Default hereunder or under the Related Agreements.
4.8 FAILURE TO DELIVER ORDINARY SHARES OR REPLACEMENT NOTE. The Borrower
shall fail (i) to timely deliver Ordinary Shares to the Holder pursuant to and
in the form required by this Note, and Section 9 of the Purchase Agreement, if
such failure to timely deliver Ordinary Shares shall not be cured within two (2)
business days or (ii) to deliver a replacement Note to Holder within seven (7)
business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements). Notwithstanding the foregoing, the Borrower will not be
deemed in default hereunder for any delay in the delivery of the Ordinary Shares
or a replacement Note, which is out of the control of the Borrower (including
any delays in processing by a transfer agent) and the Borrower is actively
trying to cure the cause of such delay.
4.9 DEFAULT UNDER RELATED AGREEMENTS OR OTHER AGREEMENTS. The occurrence
and continuance of any Event of Default (as defined in any Related Agreement) or
any event of default (or similar term) under any other material indebtedness in
excess of $200,000.
4.10 [Reserved]
DEFAULT RELATED PROVISIONS
4.11 PAYMENT GRACE PERIOD. Following the occurrence and continuance of an
Event of Default beyond any applicable cure period hereunder, and for as long as
such Event of Default has not been cured, the Borrower shall pay the Holder a
default interest rate of two percent (2%) per month on all amounts due and owing
under the Note, which default interest shall be payable upon demand.
4.12 CONVERSION PRIVILEGES. The conversion privileges set forth in Article
III shall remain in full force and effect immediately from the date hereof and
until this Note is paid in full.
4.13 CUMULATIVE REMEDIES. The remedies under this Note shall be cumulative.
ARTICLE V
MISCELLANEOUS
5.1 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
any party hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.2 NOTICES. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) ten business days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) two business days after
deposit with a internationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the Borrower at the address provided in the Purchase Agreement executed in
connection herewith, with a copy to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. NYP Tower, ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇ ▇▇▇-▇▇▇▇ and
to the Holder at the address provided in the Purchase Agreement for such Holder,
with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, or at such other address as the
Borrower or the Holder may designate by ten days advance written notice to the
other parties hereto. A Notice of Conversion shall be deemed given when made to
the Borrower pursuant to the Purchase Agreement.
5.3 AMENDMENT PROVISION. The term "Note" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented, and any
successor instrument issued pursuant to Section 3.5 hereof, as it may be amended
or supplemented.
5.4 ASSIGNABILITY. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the
Borrower without the consent of the Holder.
5.5 GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.
5.6 MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to establish
or require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
5.7 SECURITY INTEREST AND GUARANTEE. The Holder has been granted a security
interest in certain assets of the Borrower as more fully described in the Master
Security Agreement dated as of the date hereof. The obligations of the Borrower
under this Note are guaranteed by certain Subsidiaries of the Borrower pursuant
to the Subsidiary Guaranty dated as of the date hereof.
5.8 CONSTRUCTION. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
5.9 COST OF COLLECTION. If default is made in the payment of this Note, the
Borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
IN WITNESS WHEREOF, the Borrower has caused this Convertible Term Note to
be signed in its name effective as of this 10th day of June, 2004.
B.O.S. BETTER ON-LINE SOLUTIONS LTD.
By:________________________________
Name:______________________________
Title:_____________________________
THIS WARRANT AND THE ORDINARY SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THIS WARRANT AND THE ORDINARY SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO B.O.S. BETTER ON-LINE
SOLUTIONS LTD. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase up to 130,000 Ordinary Shares of
B.O.S. BETTER ON-LINE SOLUTIONS LTD.
(subject to adjustment as provided herein)
ORDINARY SHARES PURCHASE WARRANT
No. _________________ Issue Date: June 10, 2004
B.O.S. BETTER ON-LINE SOLUTIONS LTD. a corporation incorporated under the
laws of the State of Israel hereby certifies that, for value received, LAURUS
MASTER FUND, LTD., or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company (as defined herein) from and after
the Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., New York time, through the close of business June 10, 2011 (the
"Expiration Date"), up to 130,000 fully paid and nonassessable Ordinary Shares
(as hereinafter defined), NIS 4.00 nominal value per share, at the applicable
Exercise Price per share (as defined below). The number and character of such
Ordinary Shares and the applicable Exercise Price per share are subject to
adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include B.O.S. Better On-Line Solutions
Ltd. and any corporation which shall succeed, or assume the obligations of,
B.O.S. Better On-Line Solutions Ltd. hereunder.
(b) The term "Ordinary Shares" includes (i) the Company's Ordinary
Shares, nominal value NIS 4.00 per share; and (ii) any other securities
into which or for which any of the securities described in (i) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any shares (other than
Ordinary Shares) and other securities of the Company or any other person
(corporate or otherwise) which the Holder of the Warrant at any time shall
be entitled to receive, or shall have received, on the exercise of the
Warrant, in lieu of or in addition to Ordinary Shares, or which at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Ordinary Shares or Other Securities pursuant to Section 4 or
otherwise.
B-1
(d) The "Exercise Price" applicable under this Warrant shall be a
price of $4.04 per Ordinary Share acquired hereunder.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder.
1. EXERCISE OF WARRANT.
1.1 NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and after the date
hereof through and including the Expiration Date, the Holder shall be
entitled to receive, upon exercise of this Warrant in whole or in
part, by delivery of an original or fax copy of an exercise notice in
the form attached hereto as Exhibit A (the "Exercise Notice") and
payment in accordance with Section 2.2 below, Ordinary Shares of the
Company (the "Warrant Shares"), subject to adjustment pursuant to
Section 4. This Warrant may be exercised in whole or in part.
1.2 FAIR MARKET VALUE. For purposes hereof, the "Fair Market Value" of an
Ordinary Share as of a particular date (the "Determination Date")
shall mean:
(a) If the Company's Ordinary Shares are traded on the American Stock
Exchange or another national exchange or are quoted on the
National or SmallCap Market of The Nasdaq Stock Market,
Inc.("Nasdaq"), then the closing or last sale price,
respectively, reported for the last business day immediately
preceding the Determination Date.
(b) If the Company's Ordinary Shares are not traded on the American
Stock Exchange or another national exchange or on the Nasdaq but
is traded on the NASD OTC Bulletin Board, then the mean of the
average of the closing bid and asked prices reported for the last
business day immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Ordinary
Shares are not publicly traded, then as the Holder and the
Company agree or in the absence of agreement, by arbitration in
accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen
from a panel of persons qualified by education and training to
pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the Company's
Articles of Association (the "Articles"), then all amounts to be
payable per share to holders of the Ordinary Shares pursuant to
the Articles in the event of such liquidation, dissolution or
winding up, plus all other amounts to be payable per share in
respect of the Ordinary Shares in liquidation under the Articles,
assuming for the purposes of this clause (d) that all of the
Ordinary Shares then issuable upon exercise of the Warrant are
outstanding at the Determination Date.
1.3 COMPANY ACKNOWLEDGMENT. The Company will, at the time of the exercise
of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights
to which such Holder shall continue to be entitled after such exercise
in accordance with the provisions of this Warrant. If the Holder shall
fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any such
rights.
1.4 TRUSTEE FOR WARRANT HOLDERS. In the event that a bank or trust company
shall have been appointed as trustee for the Holders of the Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described)
and shall accept, in its own name for the account of the Company or
such successor person as may be entitled thereto, all amounts
otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section 1.
2. PROCEDURE FOR EXERCISE.
2.1 DELIVERY OF SHARE CERTIFICATES, ETC., ON EXERCISE. The Company agrees
that the Ordinary Shares purchased upon exercise of this Warrant shall
be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares in
accordance herewith. As soon as practicable after the exercise of this
Warrant in full or in part, and in any event within three (3) business
days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder, or as such Holder (upon payment by
such Holder of any applicable transfer taxes) may direct in compliance
with applicable securities laws, a certificate or certificates for the
number of duly and validly issued, fully paid and nonassessable
Ordinary Shares (or Other Securities) to which the Holder shall be
entitled on such exercise, plus, in lieu of any fractional share to
which such Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then Fair Market Value of one full share,
together with any other shares or other securities and property
(including cash, where applicable) to which such Holder is entitled
upon such exercise pursuant to Section 1 or otherwise.
2.2 EXERCISE. (a) Payment may be made either (i) in cash, by wire transfer
or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Exercise Price, (ii) by
delivery of the Warrant, or Ordinary Shares receivable upon exercise
of the Warrant in accordance with Section (b) below, or (iii) by a
combination of any of the foregoing methods, for the number of
Ordinary Shares specified in such Exercise Notice (as such exercise
number shall be adjusted to reflect any adjustment in the total number
of Ordinary Shares issuable to the Holder per the terms of this
Warrant) and the Holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully-paid and
non-assessable Ordinary Shares (or Other Securities) determined as
provided herein.
(b) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one Ordinary Share is greater than the Exercise Price (at the
date of calculation as set forth below), in lieu of exercising this Warrant for
cash, the Holder may elect to receive shares equal to the value (as determined
below) of this Warrant (or the portion thereof being exercised) by surrender of
this Warrant at the principal office of the Company together with the properly
endorsed Exercise Notice in which event the Company shall issue to the Holder a
number Ordinary Shares computed using the following formula:
X=Y (A-B)
-------
A
Where X = the number of Ordinary Shares to be issued to the Holder
Y = the number of Ordinary Shares purchasable under the Warrant or,
if only a portion of the Warrant is being exercised, the portion
of the Warrant being exercised (at the date of such calculation)
A = the Fair Market Value of one of the Company's Ordinary Shares
(at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
3. EFFECT OF REORGANIZATION, ETC.; ADJUSTMENT OF EXERCISE PRICE.
3.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, including the sale of
substantially all of the Company's outstanding share capital to a
corporate third party, in consideration for such third party's
securities, or (c) transfer all or substantially all of its properties
or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case,
as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of
this Warrant, on the exercise hereof as provided in Section 1 at any
time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be,
shall receive, in lieu of the Ordinary Shares (or Other Securities)
issuable on such exercise prior to such consummation or such effective
date, the shares and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or
in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.
3.2 DISSOLUTION. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of
its Ordinary Shares, shall at its expense deliver or cause to be
delivered to the Holder the shares and other securities and property
(including cash, where applicable) receivable by the Holder of the
Warrant pursuant to Section 3.1, or, if the Holder shall so instruct
the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder
of the Warrant (the "Trustee").
3.3 CONTINUATION OF TERMS. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to
in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares and
other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation
or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of
any such shares or other securities, including, in the case of any
such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of this Warrant as provided in
Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transactions described in
this Section 3, then the Company's securities and property (including
cash, where applicable) receivable by the Holders of the Warrant will
be delivered to Holder or the Trustee as contemplated by Section 3.2.
4. EXTRAORDINARY EVENTS REGARDING ORDINARY Shares. In the event that the
Company shall (a) issue additional Ordinary Shares as a dividend or other
distribution on outstanding Ordinary Shares, (b) subdivide its outstanding
Ordinary Shares, or (c) combine its outstanding Ordinary Shares into a smaller
number of Ordinary Shares, then, in each such event, the Exercise Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
then Exercise Price by a fraction, the numerator of which shall be the number of
Ordinary Shares outstanding immediately prior to such event and the denominator
of which shall be the number of Ordinary Shares outstanding immediately after
such event, and the product so obtained shall thereafter be the Exercise Price
then in effect. The Exercise Price, as so adjusted, shall be readjusted in the
same manner upon the happening of any successive event or events described
herein in this Section 4. The number of Ordinary Shares that the Holder of this
Warrant shall thereafter, on the exercise hereof as provided in Section 1, be
entitled to receive shall be increased or decreased, as the case may be, to a
number determined by multiplying the number of Ordinary Shares that would
otherwise (but for the provisions of this Section 4) be issuable on such
exercise by a fraction of which (a) the numerator is the Exercise Price that
would otherwise (but for the provisions of this Section 4) be in effect, and (b)
the denominator is the Exercise Price in effect on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the Ordinary Shares (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional Ordinary Shares (or Other Securities) issued or sold or deemed to
have been issued or sold, (b) the number of Ordinary Shares (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of Ordinary Shares to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to the Holder of the Warrant and any Warrant agent
of the Company (appointed pursuant to Section 13 hereof).
6. RESERVATION OF SHARES, ETC., ISSUABLE ON EXERCISE OF WARRANT. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrant, Ordinary Shares (or Other Securities)
from time to time issuable on the exercise of the Warrant.
7. REPRESENTATIONS AND WARRANTIES BY THE HOLDER. The Holder represents and
warrants to the Company as follows:
7.1 Holder understands that the Warrant is being offered and sold pursuant
to an exemption or exemptions from registration requirements of
Israeli and US Federal and state securities laws and that the Company
is relying upon the truth and accuracy of Holder's representations
contained in that Securities Purchase Agreement of even date herewith,
including, without limitation, that the Holder is an "accredited
investor" within the meaning of Regulation D under the Securities Act
of 1933.
7.2 Holder has substantial experience in evaluating and investing in
private placement transactions of securities in companies similar to
the Company so that it is capable of evaluating the merits and risks
of its investment in the Company and has the capacity to protect its
own interests. Holder is able to bear the economic risk of this
investment.
7.3 Holder is acquiring the Warrant and the Ordinary Shares issuable upon
exercise of the Warrant for its own account for investment only, and
not as a nominee or agent and not with a view towards or for resale in
connection with their distribution.
8. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered Holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel that
such transfer is exempt from the registration requirements of applicable
securities laws, the Company at its expense but with payment by the Transferor
of any applicable transfer taxes) will issue and deliver to or on the order of
the Transferor thereof a new Warrant of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the aggregate on the face or faces
thereof for the number of Ordinary Shares of Ordinary Stock called for on the
face or faces of the Warrant so surrendered by the Transferor.
9. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. REGISTRATION RIGHTS. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Registration Rights Agreement entered into by the Company and the
Purchaser dated as of even date of this Warrant.
11. MAXIMUM EXERCISE. Notwithstanding anything contained herein to the
contrary, the Holder shall not be entitled to convert pursuant to the terms of
the Note or the Warrant an amount that would (a) be convertible into that number
of Ordinary Shares which, when added to the number of Ordinary Shares otherwise
beneficially owned by such Holder including those issuable upon exercise of
warrants of the Company held by such Holder would exceed 4.99% of the
outstanding Ordinary Shares of the Company at the time of conversion or (b) (ii)
exceed twenty five percent (25%) of the aggregate dollar trading volume of the
Ordinary Share for the thirty (30) day trading period immediately preceding
delivery of a Notice of Conversion to the Company. For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and Regulation 13d-3
thereunder. The conversion limitation described in this Section 11 shall
automatically become null and void without any notice to Company upon the
occurrence and during the continuance beyond any applicable grace period of an
Event of Default, or upon 75 days prior notice to the Company, except that at no
time shall the beneficial ownership exceed 19.99% of the borrower's Ordinary
Shares. Notwithstanding anything contained herein to the contrary, the number of
Ordinary Shares issuable by the Company and acquirable by the Holder a pursuant
to the terms of this Warrant and/or the Note issued by the Company to the Holder
pursuant to this Securities Purchase Agreement, shall not exceed an aggregate of
833,085 of the Company's Ordinary Shares, (subject to appropriate adjustment for
stock splits, stock dividends, or other similar recapitalizations affecting the
Ordinary Shares).
12. RIGHTS OF SHAREHOLDERS. No Holder shall be entitled, as a Warrant
holder, to vote or receive dividends or be deemed the holder of the Ordinary
Shares or any other securities of the Company, which may at any time be issuable
upon the exercise of this Warrant for any purpose, nor shall anything contained
herein be construed to confer upon the Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of shares, reclassification of shares, change of nominal value,
consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised and the Ordinary Shares issuable upon the
exercise hereof shall have become deliverable, as provided herein.
13. WARRANT AGENT. The Company may, by written notice to each Holder of the
Warrant, appoint an agent for the purpose of issuing Ordinary Shares (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 8, and replacing this Warrant pursuant to
Section 9, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
14. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
15. NOTICES, ETC. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
16. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any time during
the term of this Warrant reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
17. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and construed in accordance with the
laws of State of New York without regard to principles of conflicts of laws. Any
action brought concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York; provided, however, that the Holder may choose to waive
this provision and bring an action outside the state of New York. The Company
hereby agrees to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Warrant. The headings in this Warrant are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision. Each of the Company and
the Holder acknowledges that its legal counsel participated in the preparation
of this Warrant and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Warrant to favor any party against the other
party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
B.O.S. BETTER ON-LINE SOLUTIONS LTD.
By:
-----------------------
Name:
-----------------------
Title:
----------------------- -----------------------
MASTER SECURITY AGREEMENT
THIS MASTER SECURITY AGREEMENT (this "SECURITY AGREEMENT") made as of the 10th
day of June 2004, by and between B.O.S. Better On-Line Solutions Ltd., a company
incorporated under the laws of the State of Israel, company number ▇▇-▇▇▇▇▇▇-▇
(the "PLEDGOR") and Laurus Master Fund a Cayman Islands company (the
"PURCHASER").
WHEREAS Pledgor and the Purchaser, have entered into a Securities Purchase
Agreement dated June 10, 2004 (the "PURCHASE AGREEMENT")
WHEREAS the Pledgor has agreed to enter into this Security Agreement in
order to secure the Obligations (as defined below) of the Pledgor to
the Purchaser pursuant to the Purchase Agreement, the Note, the
Warrant and the Related Agreements.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. The Preamble to this Security Agreement constitutes an integral part
thereof. All capitalized terms used herein and not defined herein shall
have the meaning assigned to such terms in the Purchase Agreement.
2. To secure the full and punctual payment and performance of all Obligations
(as hereafter defined), the Pledgor hereby assigns and grants to the
Purchaser the following security interests:
(a) A first priority floating charge on all assets of the Pledgor, now
owned or at any time hereafter acquired by the Pledgor, or in which
the Pledgor now has or at any time in the future may acquire any
right, title or interest (the "PLEDGOR COLLATERAL"), including without
limitation, all accounts, inventory, equipment, goods, promissory
notes, contractual rights (subject to any assignment or pledge
limitations included therein) chattel paper, investment property
(excluding the Pledged Shares (as defined below) and any interests in
Surf Communications Solutions Ltd. but including all other equity
interests owned by the Pledgor), letter-of-credit rights, intellectual
property, trademarks and tradestyles in which the Pledgor now has or
hereafter may acquire any right, title or interest, all proceeds and
products thereof (including, without limitation, proceeds of
insurance) and all additions, accessions and substitutions thereto or
therefore. A debenture with respect the said pledge is attached as
EXHIBIT A hereto.
(b) A first priority fixed charge on all of its right, title and interest
in all outstanding and issued shares (144,330 Ordinary Shares) of
BOScom Ltd. held by the Pledgor and any additional shares of BOScom
Ltd. that Pledgor may acquire, receive and/or otherwise be entitled to
(the "PLEDGED SHARES").
A debenture with respect the Pledged Shares is attached as EXHIBIT B
hereto.
3. Notwithstanding anything other provision herein, any security interest
granted by the Pledgor hereunder shall be subject to any restriction, if
such exist, on the transfer of intellectual property imposed by or pursuant
to the regulations and directives of the Ministry of Industry and Trade and
the Office of the Chief Scientist applicable to the Company.
4. The term "OBLIGATIONS" as used herein shall mean and include all debts,
indebtedness, obligations and liabilities of the Pledgor to the Purchaser
whether now existing or hereafter arising, direct or indirect, liquidated
or unliquidated, absolute or contingent, due or not due and whether under,
pursuant to or evidenced by a note, agreement, guaranty, instrument or
otherwise and arising under, out of, or in connection with: (i) the
Purchase Agreement, (ii) the Note, (iii) the Warrant, (iv) the Related
Agreements (the Purchase Agreement, the Note, the Warrant and the Related
Agreements and this Security Agreement, as each may be amended, modified,
restated or supplemented from time to time, are collectively referred to as
the "DOCUMENTS"), and in connection with any documents, instruments or
agreements relating to or executed in connection with the Documents or any
documents, instruments or agreements referred to therein, provided however
that the realization of any pledge under this Security Agreement shall at
all times be limited to the then outstanding amount payable to Purchaser
under the Note and to any expenses and costs related to the realization of
such pledge.
5. The Pledgor hereby represents, warrants and covenants to the Purchaser
that:
(a) it is a corporation validly existing and duly incorporated under the
laws of the State of Israel;
(b) its legal name is as set forth in its Certificate of Incorporation as
amended through the date hereof and it will provide the Purchaser
thirty (30) days' prior written notice of any change in its legal
name;
(c) its organizational identification number (if applicable) is as set
forth above and it will provide the Purchaser thirty (30) days' prior
written notice of any change in its organizational identification
number;
(d) it is the lawful owner of the Pledgor Collateral and the Pledged
Shares, it has the sole right to grant a security interest therein and
will defend such collateral against all claims and demands of all
persons and entities;
(e) it will keep the Pledgor Collateral and the Pledged Shares free and
clear of all attachments, levies, taxes, liens, security interests and
encumbrances of every kind and nature ("ENCUMBRANCES"), except for
such Encumbrances which by their terms are junior to the security
interests granted to the Purchaser and were created after receipt of
the prior written consent of the Purchaser (which consent shall not be
unreasonably withheld) or with respect to the Pledgor Collateral only,
are made in the ordinary course of business;
2
(f) it will not, without the Purchaser' prior written consent, which
consent shall not be unreasonably withheld, sell, exchange, lease,
pledge or otherwise dispose of or give any other rights in the Pledgor
Collateral and the Pledged Shares except, with respect to the Pledgor
Collateral only and not including the Pledged Shares, for sales and/or
exchanges of tangible assets that are part of the Pledgor Collateral
and for leases, pledges on assets imposed in connection with the
purchase or lease thereof or other dispositions in the ordinary course
of business.
(g) it will insure or cause Pledgor Collateral to be insured in accordance
with the provisions of the Purchase Agreement;
(h) it will upon reasonable notice and during normal business hours allow
the Purchaser or the Purchaser' representatives free access to and the
right of inspection of the tangible Pledgor Collateral;
(i) Pledgor hereby agrees to indemnify and save the Purchaser harmless
from all loss, costs, damage, liability and/or expense, including
reasonable attorneys' fees, that the Purchaser may sustain or incur to
enforce payment, performance or fulfillment of any of the Obligations
and/or in the enforcement of this Security Agreement or in the
prosecution or defense of any action or proceeding either against the
Purchaser or the Pledgor concerning any matter growing out of or in
connection with this Security Agreement, and/or any of the Obligations
and/or any of the Pledgor Collateral and the Pledged Shares, except to
the extent caused by the Purchaser's own gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a
final and non-appealable decision). Notwithstanding the above, in no
event shall Pledgor's aggregate liability pursuant to all sections of
this Security Agreement exceed the then outstanding amount payable to
Purchaser under the Note and to any expenses and costs related to the
realization of such pledge.
6. The occurrence of any of the following events or conditions shall
constitute an "Event of Default":
(a) Breach of any covenant, warranty or representation made or furnished
to the Purchaser by the Pledgor in any of the Documents, which, after
given prior notice if subject to cure, shall not be cured for a period
of thirty (30) business days;
(b) the loss, theft, substantial damage, destruction to or of any material
portion of the Pledgor Collateral; the sale or encumbrance of the
Pledgor Collateral except as set forth under sections 5(e) or 5(f)
above; the sale or encumbrance of the Pledged Shares or the making of
any seizure or attachment thereof or thereon except to the extent:
(i) such loss, damage or destruction is covered by insurance
proceeds;
(ii) said encumbrance is junior to the security interest provided
hereunder and was registered per written prior consent provided
by Purchaser, which consent shall not be unreasonably withheld;
or
3
(iii) said seizure or attachment does not secure indebtedness in
excess of $50,000 or such seizure or attachment has not been
removed or otherwise released within thirty (30) business days of
the creation or the assertion thereof;
(c) Pledgor is not able to pay its matured current debts, shall cease
operations, dissolve, terminate its business existence, make an
assignment for the benefit of creditors, suffer the appointment of a
receiver, trustee, liquidator or custodian of all or any material part
of the Pledgor's property, which appointment shall not have been
revoked within thirty (30) business days;
(d) Pledgor shall become subject to any proceedings under any applicable
bankruptcy or insolvency law, which if commenced against the Pledgor,
shall not be dismissed within thirty (30) business days;
(e) The Pledgor shall repudiate, purport to revoke or fail to perform any
or all of its obligations under the Note (after given no less than
15-days prior notice and after passage of applicable cure period, if
any);
(f) an Event of Default shall have occurred under and as defined in the
Purchase Agreement or in any Related Agreement (after passage of
applicable cure period, if any);
(g) any event which materially adversely affects the value of any of the
Pledged Shares and/or the Pledgor Collateral. The Pledgor shall
promptly notify the Purchaser in writing of such event.
(h) any event or series of events occur(s), which, in the reasonable
opinion of the Purchaser, may have a material adverse effect on the
business, condition (financial or otherwise), or results of operations
of the Pledgor or on the ability of the Pledgor to comply with any of
its material obligations hereunder or under the Purchase Agreement,
provided that Purchaser gives the Pledgor a written notice for
declaring a Default Event under this subclause (h), and further
provided that the Pledgor shall be entitled to provide a written
response to the Purchaser within fourteen (14) days, it being agreed
however, that nothing herein nor the Pledgor's written response shall
limit or delay the Purchaser's right, in its discretion, to declare a
Default Event hereunder and exercise the remedies available to the
Purchaser hereunder, immediately after Pledgor's written response.
7. Upon the occurrence of any Event of Default and at any time thereafter, the
Purchaser may declare all Obligations immediately due and payable and the
Purchaser shall have the remedies of a secured party provided in this
Agreement and under any applicable law. Any proceeds of any foreclosures on
any of the Pledgor Collateral or the Pledged Shares shall be first applied
by the Purchaser to the payment of all expenses in connection with the sale
of the Pledgor Collateral or the Pledged Shares, including reasonable
attorneys' fees and other legal expenses and disbursements and the
reasonable expense of retaking, holding, preparing for sale, selling, and
the like, and any balance of such proceeds shall be applied by the
Purchaser toward the payment of any outstanding Obligations in such order
of application as the Purchaser may elect, and the Pledgor shall be liable
for any deficiency.
4
8. If the Pledgor defaults in the performance or fulfillment of any of the
terms, conditions, promises, covenants, provisions or warranties to be
performed or fulfilled under or pursuant to this Security Agreement, the
Purchaser may, at its option without waiving its right to enforce this
Security Agreement according to its terms, immediately or at any time
thereafter but subject to notice to the Pledgor, perform or fulfill the
same or cause the performance or fulfillment of the same for Pledgor's
account and at Pledgor's cost and expense, and the cost and expense thereof
(including reasonable attorneys' fees) shall be added to the Obligations
and shall be payable on demand with interest thereon at the highest rate
permitted by law.
9. No delay or failure on the Purchaser's part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any
other right, privilege, remedy or option, and no waiver whatever shall be
valid unless in writing, signed by the Purchaser and then only to the
extent therein set forth, and no waiver by the Purchaser of any default
shall operate as a waiver of any other default or of the same default on a
future occasion. The Purchaser's books and records containing entries with
respect to the Obligations shall be admissible in evidence in any action or
proceeding, and unless Pledgor presents records or other evidence to the
contrary, shall be binding upon the Pledgor for the purpose of establishing
the items therein set forth and shall constitute prima facie proof thereof.
The Purchaser shall have the right to enforce any one or more of the
remedies available to the Purchaser, successively, alternately or
concurrently.
10. The Pledgor shall cooperate with the Purchaser and execute all documents as
may be reasonably necessary to register the Pledged Shares and the Pledgor
Collateral with the Israeli Registrar of Companies and/or any other
Registrar, including, inter alia, the document(s) in the form annexed
hereto as EXHIBIT C hereto, and shall bear all stamp taxes with respect to
such registrations. The Pledgor undertakes to register such registrations
with the Israeli Registrar of Companies within 3 business days in Israel.
The Pledgor shall pay upon demand, all reasonable expenses, including
reasonable attorney's fees, of enforcing the Purchaser's rights and
remedies hereunder in the event of a breach by the Pledgor as well as with
respect to expenses resulting from exercising the pledge of any of the
Pledged Shares, and/or the Pledgor Collateral.
11. This Security Agreement shall terminate upon full payment of all the
Obligations, including the Note, and the Purchaser undertakes to promptly
sign any and all forms required in order to remove any and all security
interests granted by Pledgor hereunder.
12. This Security Agreement shall be governed by and construed in accordance
with the laws of the State of Israel and cannot be terminated orally.
Notwithstanding the above, if legally possible, the Purchaser will be
entitled to initiate any legal action according to the terms of this
Agreement and elect to realize any or all of the Pledged Shares and/or the
Pledgor Collateral, pursuant to the laws of the State of New York. In such
event the competent courts of New York will have the exclusive jurisdiction
and this Security Agreement shall be governed by and construed with the
laws of the State of New York.
5
13. All of the rights, remedies, options, privileges and elections given to the
Purchaser hereunder shall inure to the benefit of the Purchaser's
successors and assigns. The term "Purchaser" as herein used shall include
the Purchaser's company, any parent of the Purchaser's company, any of the
Purchaser's subsidiaries and any co-subsidiaries of The Purchaser' parent,
whether now existing or hereafter created or acquired, and all of the
terms, conditions, promises, covenants, provisions and warranties of this
Security Agreement shall inure to the benefit of and shall bind the
representatives, successors and assigns of each of us and them.
14. All notices hereunder shall be sufficiently given if mailed or delivered to
the addresses set forth below.
IN WITNESS WHEREOF this Master Security Agreement has been executed by the
parties hereto as of the date first above written.
B.O.S. BETTER ON-LINE SOLUTIONS LTD.
Beit ▇▇▇▇▇, 100 BOS Road, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇ ▇▇▇-▇▇▇▇
By:
-------------------------
Name:
-------------------------
Date:
-------------------------
LAURUS MASTER FUND LTD.
--------------------------------------
By:
-------------------------
Name:
-------------------------
Date:
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6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of June 10, 2004, by and between B.O.S. Better On-Line Solutions Ltd.,
an Israeli corporation (the "Company"), and Laurus Master Fund, Ltd., a Cayman
Islands Company (the "Purchaser").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof, by and between the Purchaser and the Company (the
"Securities Purchase Agreement"), and pursuant to the Note and the Warrant
referred to therein.
The Company and the Purchaser hereby agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
that are defined in the Securities Purchase Agreement shall have the meanings
given to such terms in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"AFFILIATE" of any specified person means any other person, directly or
indirectly, controlling or controlled by or under common control with such
specified person. For the purpose of this definition "control" as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, whether through the ownership of voting securities or by agreement or
otherwise.
"COMMISSION" means the Securities and Exchange Commission.
"ORDINARY Shares" means the Company's Ordinary Shares, NIS 4.00 nominal
value per share.
"EFFECTIVENESS DATE" means the 90th day following the date hereof, or the
120th day following the date hereof if the Registration Statement is reviewed by
the Commission.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
any successor statute.
"FILING DATE" means, with respect to the Registration Statement required to
be filed hereunder, a date no later than forty five (45) days following the date
hereof, and with respect to shares of Ordinary Stock issuable to the Holder as a
result of adjustments to the Fixed Conversion Price made pursuant to Section 3.4
of the Secured Convertible Term Note or Section 4 of the Warrant or otherwise,
sixty (60) days (ninety (90) days if the request is made between February 1 and
March 31,) days after the occurrence such event or the date of the adjustment of
the Fixed Conversion Price.
"HOLDER" or "HOLDERS" means the Purchaser or any of its successors to the
extent any of them hold Registrable Securities, provided that only registered
holders of Registrable Securities shall be counted for purposes of calculating
any proportion of holders entitled to take any action, receive any damages or
give any notice pursuant to this Agreement.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
"MAJORITY HOLDERS" shall means the Holders of a majority of the then
outstanding aggregate principal amount of Registrable Securities registered
under a Registration Statement, provided that Registrable Securities which have
been sold or otherwise transferred pursuant to the Registration Statement or
Rule 144 shall not be included in the calculation of Majority Holders.
"NOTE" has the meaning set forth in the Securities Purchase Agreement.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means the shares of Ordinary Shares issued upon
the conversion of the Note and issuable upon exercise of the Warrant.
"REGISTRATION STATEMENT" means each registration statement required to be
filed hereunder, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and any
successor statute.
"TRADING MARKET" means any of the NASD OTC Bulletin Board, NASDAQ SmallCap
Market, the Nasdaq National Market, the American Stock Exchange, the New York
Stock Exchange and the Tel Aviv Stock Exchange.
"WARRANT" means the Ordinary Shares purchase warrant issued pursuant to the
Securities Purchase Agreement.
2. All references in this Agreement to amendments or supplements to the
Registration Statement, any preliminary Prospectus or Prospectus shall be deemed
to mean and include the filing of any document under the Exchange Act, after the
date of such Registration Statement, preliminary Prospectus or Prospectus, as
the case may be, which is incorporated by reference therein. REGISTRATION.
(a) On or prior to the Filing Date the Company shall prepare and file with
the Commission a Registration Statement covering the Registrable
Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form F-3 (except
if the Company is not then eligible to register for resale the
Registrable Securities on Form F-3, in which case such registration
shall be on another appropriate form in accordance herewith). The
Company shall cause the Registration Statement to become effective and
remain effective as provided herein. The Company shall use its
reasonable commercial efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event no later than the
Effectiveness Date. The Company shall use its reasonable commercial
efforts to keep the Registration Statement continuously effective
under the Securities Act until the date which is the earlier date of
when (i) all Registrable Securities have been sold; (ii) all
Registrable Securities may be sold by non-Affiliates of the Company
immediately without registration under the Securities Act and without
volume restrictions pursuant to Rule 144(k), as determined by the
counsel to the Company on the basis of the Holders' representations,
pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent; or (iii) the second
anniversary of the Closing Date (the "Effectiveness Period").
(b) If: (i) the Registration Statement is not filed on or prior to the
Filing Date; (ii) the Registration Statement is not declared effective
by the Commission by the Effectiveness Date; (iii) after the
Registration Statement is filed with and declared effective by the
Commission, the Registration Statement ceases to be effective (by
suspension, excluding a suspension of all trading on the Trading
Market, or otherwise) as to all Registrable Securities to which it is
required to relate at any time prior to the expiration of the
Effectiveness Period (without being succeeded immediately by an
additional registration statement filed and declared effective) for a
period of time which shall exceed 30 days in the aggregate per year or
more than 20 consecutive calendar days (defined as a period of 365
days commencing on the date the Registration Statement is declared
effective); or (iv) the Ordinary Shares are not listed or quoted on
any Trading Market, or is suspended from trading on any Trading Market
(except for the Tel Aviv Stock Exchange) for a period of three (3)
consecutive trading days (provided the Company shall not have been
able to cure such trading suspension within 30 days of the notice
thereof or list the Ordinary Stock on another Trading Market); (any
such failure or breach being referred to as an "Event," and for
purposes of clause (i) or (ii) the date on which such Event occurs, or
for purposes of clause (iii) the date which such 30 day or 20
consecutive day period (as the case may be) is exceeded, or for
purposes of clause (iv) the date on which such three (3) trading day
period is exceeded, being referred to as "Event Date"), then until the
applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to
2.0% for each thirty (30) day period (prorated for partial periods) on
a daily basis of the outstanding principal amount of the Note. While
such Event continues, such liquidated damages shall be paid not less
often than each thirty (30) days. Any unpaid liquidated damages as of
the date when an Event has been cured by the Company shall be paid
within seven (7) business days following the date on which such Event
has been cured by the Company.
(c) Within three business days of the Effectiveness Date, the Company
shall cause its counsel to issue a blanket opinion in the form
attached hereto as Exhibit A, to the transfer agent stating that the
shares are subject to an effective registration statement and can be
reissued free of restrictive legend upon notice of a sale by Purchaser
and confirmation by Purchaser that it has complied with the prospectus
delivery requirements, provided that the Company has not advised the
transfer agent orally or in writing that the opinion has been
withdrawn. Copies of the blanket opinion required by this Section 2(c)
shall be delivered to Purchaser within the time frame set forth above.
3. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions hereof to effect the registration of any Registrable Securities under
the Securities Act, the Company will, by the Filing Date:
(a) prepare and file with the Commission the Registration Statement with
respect to such Registrable Securities, respond as promptly as
possible to any comments received from the Commission, and use its
reasonable commercial efforts to cause the Registration Statement to
become and remain effective for the Effectiveness Period with respect
thereto, and promptly provide to the Purchaser copies of all filings
and Commission letters of comment relating thereto;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement and to keep such
Registration Statement effective until the expiration of the
Effectiveness Period;
(c) furnish to the Purchaser such number of copies of the Registration
Statement and the Prospectus included therein (including each
preliminary Prospectus) as the Purchaser reasonably may request to
facilitate the public sale or disposition of the Registrable
Securities covered by the Registration Statement;
(d) use its commercially reasonable efforts to register or qualify the
Purchaser's Registrable Securities covered by the Registration
Statement under the securities or "blue sky" laws of such
jurisdictions within the United States as the Purchaser may reasonably
request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified
or to consent to general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by the Registration Statement
with any securities exchange on which the Ordinary Shares of the
Company are then listed;
(f) immediately notify the Purchaser at any time when a Prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event, of which the Company has knowledge, as
a result of which the Prospectus contained in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and
(g) make available for inspection by the Purchaser and any attorney,
accountant or other agent retained by the Purchaser, all relevant
publicly available, non-confidential financial and other records,
pertinent corporate documents and properties of the Company as is
customary for due diligence examinations in connection with public
offerings, and cause the Company's officers, directors and employees
to supply all such relevant publicly available non-confidential
information reasonably requested by the attorney, accountant or agent
of the Purchaser.
4. REGISTRATION EXPENSES. All expenses relating to the Company's compliance
with Sections 2 and 3 hereof, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, fees of, and disbursements incurred by, one
counsel for the Holders (to the extent such counsel is required due to Company's
failure to meet any of its obligations hereunder), are called "Registration
Expenses". All selling commissions applicable to the sale of Registrable
Securities, including any fees and disbursements of any special counsel to the
Holders beyond those included in Registration Expenses, are called "Selling
Expenses." The Company shall only be responsible for all Registration Expenses
and not for any Selling Expenses.
5. INDEMNIFICATION.
(a) In the event of a registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the Purchaser, and its officers, directors and each
other person, if any, who controls the Purchaser within the meaning of
the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser, or such persons
may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Securities were
registered under the Securities Act pursuant to this Agreement, any
preliminary Prospectus or final Prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Purchaser, and each such person for
any reasonable legal or other expenses incurred by them in connection
with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be
liable in any such case if and to the extent that any such loss,
claim, damage or liability arises out of or is based upon (A) any
untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by or on
behalf of the Purchaser or any such person in writing specifically for
use in any such document; (B) use of the Registration Statement or the
related Prospectus following a Discontinuation Event, provided
Purchaser received prior notice of such Discontinuation Event; or (C)
if the Purchaser fails to deliver a Prospectus, as then amended or
supplemented, provided that the Company shall have delivered to the
Purchaser such Prospectus.
Notwithstanding the foregoing, the Company shall not be liable for any
losses, claims, damages or liabilities by reason of any compromise,
consent to entry of judgment, or settlement effected without the
Company's prior written consent, which consent shall not be
unreasonably withheld or conditioned.
(b) In the event of a registration of the Registrable Securities under the
Securities Act pursuant to this Agreement, the Purchaser will
indemnify and hold harmless the Company, and its officers, directors
and each other person, if any, who controls the Company within the
meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such persons
may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact which was furnished in
writing by the Purchaser to the Company expressly for use in (and such
information is contained in) the Registration Statement under which
such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary Prospectus or final
Prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse the Company and each such person for any reasonable legal or
other expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided,
however, that the Purchaser will be liable in any such case if and
only to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished in writing to the Company by or on behalf of the
Purchaser specifically for use in any such document. Notwithstanding
the provisions of this paragraph, the Purchaser shall not be required
to indemnify any person or entity in excess of the amount of the
aggregate net proceeds received by the Purchaser in respect of
Registrable Securities in connection with any such registration under
the Securities Act.
(c) Promptly after receipt by a party entitled to claim indemnification
hereunder (an "Indemnified Party") of notice of the commencement of
any action, such Indemnified Party shall, if a claim for
indemnification in respect thereof is to be made against a party
hereto obligated to indemnify such Indemnified Party (an "Indemnifying
Party"), notify the Indemnifying Party in writing thereof, but the
omission so to notify the Indemnifying Party shall not relieve it from
any liability which it may have to such Indemnified Party other than
under this Section 5(c) and shall only relieve it from any liability
which it may have to such Indemnified Party under this Section 5(c) if
and to the extent the Indemnifying Party is substantially prejudiced
by such omission. In case any such action shall be brought against any
Indemnified Party and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to
participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such
Indemnified Party, and, after notice from the Indemnifying Party to
such Indemnified Party of its election so to assume and undertake the
defense thereof, the Indemnifying Party shall not be liable to such
Indemnified Party under this Section 5(c) for any legal expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof; if the Indemnified Party retains its own counsel,
then the Indemnified Party shall pay all fees, costs and expenses of
such counsel, provided, however, that, if the defendants in any such
action include both the indemnified party and the Indemnifying Party
and the Indemnified Party shall have reasonably concluded that there
may be reasonable defenses available to it which are different from or
additional to those available to the Indemnifying Party or if the
interests of the Indemnified Party reasonably may be deemed to
conflict with the interests of the Indemnifying Party, the Indemnified
Party shall have the right to select one separate counsel and to
assume such legal defenses and otherwise to participate in the defense
of such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be
reimbursed by the Indemnifying Party as incurred.
(d) In order to provide for just and equitable contribution in the event
of joint liability under the Securities Act in any case in which that
an Indemnified Party or any officer, director or controlling person
thereof, makes a claim for indemnification pursuant to this Section 5
but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time
to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced, notwithstanding the fact that
this Section 5 provides for indemnification in such case, then the
Indemnifying Party will contribute to the aggregate losses, claims,
damages or liabilities to which it may be subject (after contribution
from others) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the relative fault of the
Indemnified Party as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to,
among other things, whether any untrue statement or omission or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information provided by the Indemnifying
Party or the Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing, no person
or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent
misrepresentation.
(e) The provisions of this Section 5 will remain in full force and effect
and survive the sale by the Purchaser of the Registrable Securities
covered by the Registration Statement.
6. [RESERVED].
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a Holder, of
any of their respective obligations under this Agreement, each Holder
or the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of its
rights under this Agreement.
(b) NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent specified
in Schedule 7(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may,
without the consent of the Holder, which consent shall not be
unreasonably withheld, include securities of the Company in any
Registration Statement other than the Registrable Securities, and the
Company shall not after the date hereof enter into any agreement
providing any such right for inclusion of shares in the Registration
Statement to any of its security holders. Except as and to the extent
specified in Schedule 7(b) hereto, the Company has not previously
entered into any agreement granting any registration rights with
respect to any of its securities to any person that have not been
fully satisfied.
(c) COMPLIANCE. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(d) DISCONTINUED DISPOSITION. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the
Company of the occurrence of a Discontinuation Event (as defined
below), such Holder will forthwith discontinue disposition of such
Registrable Securities under the applicable Registration Statement
until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement or until it is
advised in writing by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of
any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph. For purposes of this Section 7(d), a
"Discontinuation Event" shall mean (i) when the Commission notifies
the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete
copies thereof and all written responses thereto to each of the
Holders); (ii) any request by the Commission or any other Federal or
state governmental authority for amendments or supplements to such
Registration Statement or Prospectus or for additional information;
(iii) the issuance by the Commission of any stop order suspending the
effectiveness of such Registration Statement covering any or all of
the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for
such purpose; (v) the occurrence of any event or passage of time that
makes the financial statements included in such Registration Statement
ineligible for inclusion therein or any statement made in such
Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to such Registration Statement,
Prospectus or other documents so that, in the case of such
Registration Statement or Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(e) PIGGY-BACK REGISTRATIONS. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all
of the Registrable Securities and the Company shall determine to
prepare and file with the Commission a registration statement relating
to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form F-4
or Form S-8 (each as promulgated under the Securities Act) or their
then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written
notice of such determination and, if within fifteen (15) days after
receipt of such notice, any such Holder shall so request in writing,
the Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be
registered to the extent the Company may do so without violating
registration rights of others which exist as of the date of this
Agreement, subject to customary underwriter cutbacks applicable to all
holders of registration rights and subject to obtaining the consent of
any selling stockholder(s) to such inclusion under such registration
statement.
(f) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and the Majority Holders.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to
the rights of certain Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least
a majority of the Registrable Securities to which such waiver or
consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(g) NOTICES. Any notice or request hereunder may be given to the Company
or the Purchaser at the respective addresses set forth below or as may
hereafter be specified in a notice designated as a change of address
under this Section 7(g). Any notice or request hereunder shall be
given by registered or certified mail, return receipt requested, hand
delivery, overnight mail, Federal Express or other national overnight
next day carrier (collectively, "Courier") or telecopy (confirmed by
mail). Notices and requests shall be, in the case of those by hand
delivery, deemed to have been given when delivered to any party to
whom it is addressed, in the case of those by mail or overnight mail,
deemed to have been given five (5) business days after the date when
deposited in the mail or three (3) business days after the date when
deposited with the overnight mail carrier, in the case of a Courier,
the two (2) business days following timely delivery of the package
with the Courier, and, in the case of a telecopy, when confirmed. The
address for such notices and communications shall be as follows:
IF TO THE COMPANY: B.O.S. Better On-Line Solutions Ltd.
To the address set forth under the
Company's name on the signature page
hereto.
WITH A COPY TO:
Amit, Pollak, Matalon & ▇▇▇-▇▇▇▇▇▇▇, Erez
& Co.
NYP Tower, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇ ▇▇▇-▇▇▇▇
IF TO A PURCHASER: To the address set forth under Purchaser's
name on the signature page hereto.
IF TO ANY OTHER PERSON WHO IS
THEN THE REGISTERED HOLDER: To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter in accordance
with this Section 7(g) by such person.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior
written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the persons as
permitted under the Note and the Security Agreement with the prior
written consent of the Company, which consent shall not be
unreasonably withheld.
(i) EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed
to be an original and, all of which taken together shall constitute
one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
(j) GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions
contemplated by this Agreement shall be commenced exclusively in the
state and federal courts sitting in the City of New York, Borough of
Manhattan. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that
such Proceeding is improper. Each party hereto hereby irrevocably
waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
either party shall commence a Proceeding to enforce any provisions
hereunder, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its reasonable attorneys fees and
other costs and expenses incurred with the investigation, preparation
and prosecution of such Proceeding.
(k) CUMULATIVE REMEDIES. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(l) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts
to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(m) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
B.O.S. BETTER ON-LINE SOLUTIONS LTD. LAURUS MASTER FUND, LTD.
By: By:
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Name: Name:
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Title: Title:
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ADDRESS FOR NOTICES: ADDRESS FOR NOTICES:
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