SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of
April 2005
RADA ELECTRONIC INDUSTRIES LIMITED
(Name of Registrant)
7 Giborei Israel Street, Netanya 42504, Israel
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-_________
This Form 6-K is being incorporated by reference into the Registrant's
Form F-3 Registration Statements File Nos. 333- 12074, 333-115598 and
333-117954, and Form S-8 Registration Statements File Nos. 333-12844 and
333-111437.
RADA ELECTRONIC INDUSTRIES LTD.
6-K Items
1. Form of Securities Purchase Agreement dated as of April 6, 2005.
2. Form of Registration Rights Agreement dated as of April 6, 2005.
3. Form of Warrant.
ITEM 1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of April 6, 2005,
by and among RADA Electronic Industries Ltd., a corporation organized under the
laws of the State of Israel, with headquarters located at 7 Giborei Israel
Street, Netanya 42504, Israel (the "Company"), and the investors listed on the
Schedule of Buyers attached hereto (individually, a "Buyer" and collectively,
the "Buyers").
WHEREAS:
A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate number of the
Company's Ordinary Shares, NIS 0.005 nominal value per share (the "Ordinary
Shares") set forth opposite such Buyer's name in column (3) on the Schedule of
Buyers (which aggregate number for all Buyers shall be 965,934 Ordinary Shares
and shall collectively be referred to herein as the "Purchased Shares") and (ii)
a warrant to acquire up to that number of additional Ordinary Shares set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (the
"Warrants"), in substantially the form attached hereto as Exhibit A (as
exercised, collectively, the "Warrant Shares").
C. Contemporaneously with the execution and delivery of this Agreement, (i)
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Purchased Shares and the Warrant Shares
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws, and (ii) the Buyers, pursuant to that certain
securities purchase agreement, dated July 9, 2004, by and among the Company and
the investors ascribed thereto (the "Original Securities Purchase Agreement"),
are exercising Additional Investment Rights (as defined in the Original
Securities Purchase Agreement) at an exercise price of $2.10 per Additional
Investment Right Share (as defined in the Original Securities Purchase
Agreement) for that number of Additional Investment Right Shares set forth
opposite such Buyer's name in column (7) on the Schedule of Buyers.
D. The Purchased Shares, the Warrants and the Warrant Shares collectively
are referred to herein as the "Securities".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PURCHASED SHARES AND WARRANTS.
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(a) Purchase of Purchased Shares and Warrants.
(i) Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 6 and 7 below, the Company shall issue and sell to
each Buyer, and each Buyer severally, but not jointly, agrees to
purchase from the Company on the Closing Date (as defined below), (y)
the number of Purchased Shares as is set forth opposite such Buyer's
name in column (3) on the Schedule of Buyers and (z) Warrants to
acquire up to that number of Warrant Shares as is set forth opposite
such Buyer's name in column (4) on the Schedule of Buyers (the
"Closing").
(ii) Closing. The date and time of the Closing (the "Closing
Date") shall be 10:00 a.m., New York City Time, on April 7, 2005 (or
such later date as is mutually agreed to by the Company and each
Buyer) after notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6 and 7 below at the
offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New
York 10022.
(iii) Purchase Price. The aggregate purchase price for the
Purchased Shares and the Warrants to be purchased by each Buyer at the
Closing (the "Purchase Price") shall be the amount set forth opposite
such Buyer's name in column (5) of the Schedule of Buyers. Each Buyer
shall pay $1.13 per Purchased Share and related Warrants to be
purchased by such Buyer at the Closing.
(b) Form of Payment. On the Closing Date, (i) each Buyer shall pay its
Purchase Price to the Company for the Purchased Shares and the Warrants to
be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer (A) one or
more share certificates (in such denominations as such Buyer shall request)
which such Buyer is then purchasing and (B) the Warrants (in the amounts as
such Buyer shall request) such Buyer is purchasing, in each case duly
executed on behalf of the Company and registered in the name of such Buyer
or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself that:
(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the
Purchased Shares and the Warrants (ii) upon exercise of the Warrants (other
than pursuant to a Cashless Exercise (as defined in the Warrants)) will
acquire the Warrant Shares for its own account and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, such Buyer
does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act. Such Buyer is acquiring the Securities
hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.
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(b) Accredited Investor Status. Such Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy
of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth
herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of
the Company and have received to their satisfaction answers to such
questions. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on
the Company's representations and warranties contained herein. Such Buyer
understands that its investment in the Securities involves a high degree of
risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.
(e) No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of
the offering of the Securities.
(f) Transfer or Resale. Such Buyer understands that except as provided
in the Registration Rights Agreement: (i) the Securities have not been and
are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to
the Company an opinion of counsel reasonably acceptable to the Company, in
a generally acceptable form, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Buyer provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933
Act, as amended, (or a successor rule thereto) (collectively, "Rule 144");
(ii) any sale of the Securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in which
the seller (or the Person (as defined in Section 3(s)) through whom the
sale is made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other Person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder.
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(g) Legends. Such Buyer understands that the certificates or other
instruments representing the Warrants and, until such time as the resale of
the Purchased Shares and the Warrant Shares have been registered under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Purchased Shares and the Warrant Shares,
except as set forth below, shall bear any legend as required by the "blue
sky" laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of
such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [EXERCISABLE] HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY,
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is stamped, if, unless otherwise required by state securities laws, (i)
such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides
the Company with an opinion of counsel reasonably satisfactory to the
Company, in a generally acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act and that such legend is
no longer required, or (iii) such holder provides the Company with
reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A.
(h) Validity; Enforcement. This Agreement and the Registration Rights
Agreement to which such Buyer is a party have been duly and validly
authorized (for any such Buyer that is not a natural person), executed and
delivered on behalf of such Buyer and shall constitute the legal, valid and
binding obligations of such Buyer enforceable against such Buyer in
accordance with their respective terms, except as such enforceability may
be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
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(i) No Conflicts. The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement to which such
Buyer is a party and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) for any such Buyer that is not
a natural person, result in a violation of the organizational documents of
such Buyer or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Buyer
is a party, or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws)
applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
(j) Residency. Such Buyer is a resident of that jurisdiction specified
below its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. The Company and its sole active
subsidiary listed in Schedule 3(a) hereto (the "Subsidiary") are entities
duly organized and validly existing under the laws of the jurisdiction in
which they are formed, and have the requisite power and authorization to
own their properties and to carry on their business as now being conducted.
The Subsidiary does not engage in any business other than the testing and
repairing of commercial aviation automated testing equipment. The
operations of the Company's subsidiaries (including the Subsidiary) are not
material to the Company. No proceeding has been instituted by the Registrar
of Companies in Israel (the "Registrar") for the dissolution of the
Company. Each of the Company and its Subsidiary is duly qualified as a
foreign entity to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted
by it makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not have a Material
Adverse Effect. As used in this Agreement, "Material Adverse Effect" means
any material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiary, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by
the agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company
has no active subsidiaries except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has the
requisite power and authority to enter into and perform its obligations
under this Agreement, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b)), the Warrants, and
each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement
(collectively, the "Transaction Documents") and to issue the Securities in
accordance with the terms hereof and thereof. The execution and delivery of
the Transaction Documents by the Company and the consummation by
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the Company of the transactions contemplated hereby and thereby, including,
without limitation, the issuance of the Purchased Shares and the Warrants,
the reservation for issuance and the issuance of the Warrant Shares
issuable upon exercise of the Warrants have been duly authorized by the
Company's Board of Directors and (other than (i) the filing with the SEC of
one or more Registration Statements in accordance with the requirements of
the Registration Rights Agreement, (ii) the consent of the OCS (as defined
below), and (iii) filing of a Share Allotment Report with the Registrar),
no further filing, consent, or authorization is required by the Company,
its Board of Directors or its shareholders. This Agreement and the other
Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their respective terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies. As of the Closing, the Transaction Documents dated after the date
hereof and required to have been executed and delivered shall have been
duly executed and delivered by the Company, and shall constitute the legal,
valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of applicable
creditor's rights and remedies.
(c) Issuance of Securities. The issuance of the Purchased Shares and
the Warrants are duly authorized, and, subject to Shareholder Approval, the
issuance of the Warrant Shares are duly authorized. Other than Israeli
stamp tax and withholding tax, there is no tax, levy, impost, duty, fee,
assessment or other governmental charge, or any deduction or withholding,
imposed by any governmental agency or authority in or of Israel either (A)
on or by virtue of the execution or delivery of the Transaction Documents
to which the Company is a party, (B) the issuance of the Securities
pursuant hereto or (C) on any payment to be made by Company pursuant to the
Transaction Documents. As of the Closing, subject to the Shareholder
Approval, a number of Ordinary Shares shall have been duly authorized and
reserved for issuance which equals 130% of the maximum number of Ordinary
Shares issuable upon exercise of the Warrants. Upon exercise in accordance
with the Warrants, the Warrant Shares will be validly issued, fully paid
and nonassessable and free from all preemptive or similar rights, taxes,
liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Ordinary Shares. Assuming
the accuracy of each Buyer's representations herein, the offer and issuance
by the Company of the Securities is exempt from registration under the 1933
Act. The Company is not required to publish a prospectus in Israel under
the Israeli Securities Law--1968 in connection with the offer and issuance
of the Securities.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Purchased Shares and Warrants and
reservation for issuance and issuance of the Warrant Shares) will not (i)
result in a violation of the Articles of Association (as defined in Section
3(r)) of the Company, any capital stock of the Company or Memorandum (as
defined in Section 3(r)) of the Company or its Subsidiary (subject to the
Shareholder Approval) or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to
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others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or its
Subsidiary is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of The Nasdaq
SmallCap Market (the "Principal Market")) applicable to the Company or its
Subsidiary or by which any property or asset of the Company or its
Subsidiary is bound or affected.
(e) Consents. Except as disclosed in Schedule 3(e), the Company is not
required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents, in each case in accordance with the terms hereof
or thereof. All consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the Closing Date, and the
Company and its Subsidiary are unaware of any facts or circumstances which
might prevent the Company from obtaining or effecting any of the
registration, application or filings pursuant to the preceding sentence.
(f) Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and that no
Buyer is (i) an officer or director of the Company, (ii) an "affiliate" of
the Company (as defined in Rule 144) or (iii) to the knowledge of the
Company, a "beneficial owner" of more than 10% of the Ordinary Shares (as
defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the "1934 Act")). The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a
Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to such Buyer's purchase of the Securities. The
Company further represents to each Buyer that the Company's decision to
enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(g) No General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall be responsible for the
payment of any placement agent's fees, financial advisory fees, or brokers'
commissions (other than for persons engaged by any Buyer or its investment
advisor) relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney's fees
and out-of-pocket expenses) arising in connection with any such claim. The
Company acknowledges that it has engaged Olympus Securities LLC as
placement agent (the "Agent") in connection with the sale of the
Securities. Other than the Agent, the Company has not engaged any placement
agent or other agent in connection with the sale of the Securities.
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(h) No Integrated Offering. None of the Company, its Subsidiaries, any
of their affiliates, and any Person acting on 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 require
registration of any of the Securities under the 1933 Act or cause this
offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable shareholder approval
provisions, including, without limitation, under the rules and regulations
of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated. None of the Company,
its Subsidiaries, their affiliates and any Person acting on their behalf
will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or
cause the offering of the Securities to be integrated with other offerings.
(i) Dilutive Effect. The Company understands and acknowledges that the
number of Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. The Company further acknowledges that
its obligation to issue Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, absolute
and unconditional regardless of the dilutive effect that such issuance may
have on the ownership interests of other shareholders of the Company.
(j) Application of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Articles of
Association or the laws of the jurisdiction of its formation which is or
could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the
Company's issuance of the Securities and any Buyer's ownership of the
Securities. The Company has not adopted a shareholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of
Ordinary Shares or a change in control of the Company.
(k) SEC Documents; Financial Statements. Since December 31, 2002, the
Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements, notes
and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents"). The Company has delivered
to the Buyers or their respective representatives true, correct and
complete copies of those requested SEC Documents not available on the EDGAR
system. To the Company's knowledge, as of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally
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accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). No
other information provided by or on behalf of the Company to the Buyers
which is not included in the SEC Documents, including, without limitation,
information referred to in Section 2(d) of this Agreement, contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
(l) Absence of Certain Changes. Since December 31, 2003, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise),
results of operations or prospects of the Company or its Subsidiaries.
Since December 31, 2003, the Company has not (i) declared or paid any
dividends, (ii) sold any assets, individually or in the aggregate, in
excess of $250,000 outside of the ordinary course of business or (iii) had
capital expenditures, individually or in the aggregate, in excess of
$250,000. The Company has not taken any steps to seek protection pursuant
to any bankruptcy or reorganization law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy or reorganization proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The
Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be
Insolvent (as defined below). For purposes of this Section 3(l),
"Insolvent" means (i) the present fair saleable value of the Company's
assets is less than the amount required to pay the Company's total
Indebtedness (as defined in Section 3(s)), (ii) the Company is unable to
pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured, (iii) the Company
intends to incur or believes that it will incur debts that would be beyond
its ability to pay as such debts mature or (iv) the Company has
unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted and is proposed to be
conducted.
(m) No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or
is contemplated to occur with respect to the Company or its Subsidiaries or
their respective business, properties, prospects, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form F-1 filed
with the SEC relating to an issuance and sale by the Company of its
Ordinary Shares and which has not been publicly announced.
(n) Conduct of Business; Regulatory Permits.
(i) Neither the Company nor its Subsidiary is in violation of any
term of or in default under its Articles of Association or Memorandum
or their organizational charter or memorandum of association or
bylaws, respectively (subject to the Shareholder Approval). Neither it
nor any its Subsidiary is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the
Company or its Subsidiary, and neither
9
the Company nor its Subsidiary will conduct its business in violation
of any of the foregoing, except for possible violations which would
not, individually or in the aggregate, have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Company is not
in violation of any of the rules, regulations or requirements of the
Principal Market and has no knowledge of any facts or circumstances
which would reasonably lead to delisting or suspension of the Ordinary
Shares by the Principal Market in the foreseeable future. Since
December 31, 2003, (i) the Ordinary Shares have been designated for
quotation on the Principal Market, (ii) trading in the Ordinary Shares
have not been suspended by the SEC or the Principal Market and (iii)
the Company has received no communication, written or oral, from the
SEC or the Principal Market regarding the suspension or delisting of
the Ordinary Shares from the Principal Market. The Company and its
Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate regulatory authorities necessary to conduct
their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually
or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit.
(ii) The Company is in compliance in all material respects with
all conditions and requirements stipulated by the instruments of
approval granted to it with respect to the "Approved Enterprise"
status of any of the Company's facilities by Israeli laws and
regulations relating to such "Approved Enterprise" status and other
tax benefits received by the Company; and the Company has not received
any notice of any proceeding or investigation relating to revocation
or modification of any "Approved Enterprise" status granted with
respect to any of the Company's facilities. All information supplied
by the Company with respect to such applications was true, correct and
complete in all material respects when supplied to the appropriate
authorities.
(iii) Except as disclosed in Schedule 3(n), the Company is not in
violation of any condition or requirement stipulated by the
instruments of approval granted to the Company by the Office of Chief
Scientist in the Israeli Ministry of Industry and Trade (the "OCS")
and any applicable laws and regulations with respect to any research
and development grants given to it by such office. All information
supplied by the Company with respect to such applications was true,
correct and complete in all material respects when supplied to the
appropriate authorities. Schedule 3(n)(iii) provides a correct and
complete list of the aggregate amount of pending and outstanding
grants from the OCS, net of royalties paid.
(o) Foreign Corrupt Practices. Neither the Company, nor its
Subsidiary, nor has any director, officer, agent, employee or other Person
acting on behalf of the Company or any of its Subsidiaries, in the course
of its actions for, or on behalf of, the Company (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from corporate funds; (iii) violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made
any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
10
(p) Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the
date hereof, except where such noncompliance would not have, individually
or in the aggregate, a Material Adverse Effect.
(q) Transactions With Affiliates. Except as set forth in the SEC
Documents filed at least ten days prior to the date hereof and other than
the grant of stock options disclosed on Schedule 3(r), none of the
officers, directors, employees or 25% shareholder of the Company is
presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any such officer, director, employee or 25% shareholder
or, to the knowledge of the Company, any corporation, partnership, trust or
other entity in which any such officer, director, employee or 25%
shareholder has a substantial interest or is an officer, director, trustee
or partner.
(r) Equity Capitalization. As of the date hereof, the authorized share
capital of the Company consists of 45,000,000 Ordinary Shares, of which as
of the date hereof, 20,458,364 are issued and outstanding, 2,039,434 shares
are reserved for issuance pursuant to the Company's stock option and
purchase plans and 21,343,783 shares are reserved for issuance pursuant to
securities (other than the Warrants) exercisable or exchangeable for, or
convertible into, Ordinary Shares. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(r): (i) none of the
Company's share capital is subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, or exercisable or exchangeable
for, any share capital of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to issue additional share
capital of the Company or any of its Subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any share capital of the Company or its
Subsidiary; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness ( as defined in 3(s) below) of the Company or its
Subsidiary or by which the Company or its Subsidiary is or may become
bound; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection
with the Company; (v) there are no agreements or arrangements under which
the Company or its Subsidiary is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights
Agreement); (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or its Subsidiary is or may become bound
to redeem a security of the Company or its Subsidiary; (vii) there are no
securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities; (viii) the
Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement; and (ix) the Company
and its
11
Subsidiaries have no liabilities or obligations required to be disclosed in
the SEC Documents but not so disclosed in the SEC Documents, other than
those incurred in the ordinary course of the Company's or its Subsidiaries'
respective businesses and which, individually or in the aggregate, do not
or would not have a Material Adverse Effect. Except as disclosed in
Schedule 3(r), the Company has furnished to the Buyer true, correct and
complete copies of the Company's Articles of Association, as amended and as
in effect on the date hereof (the "Articles of Association"), and the
Company's Memorandum of Association, as amended and as in effect on the
date hereof and as filed with the SEC (the "Memorandum"), and the terms of
all securities convertible into, or exercisable or exchangeable for,
Ordinary Shares and the material rights of the holders thereof in respect
thereto.
(s) Indebtedness and Other Contracts. Except as disclosed in Schedule
3(s), neither the Company nor its Subsidiary (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement
or instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would result in a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness,
except where such violations and defaults would not result, individually or
in the aggregate, in a Material Adverse Effect, or (iv) is a party to any
contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. Schedule 3(s) provides a
detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "Indebtedness" of any
Person means, without duplication (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the deferred purchase
price of property or services (other than trade payables entered into in
the ordinary course of business), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in
either case with respect to any property or assets acquired with the
proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under
any leasing or similar arrangement which, in connection with generally
accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, lien, pledge, charge, security interest or
other encumbrance upon or in any property or assets (including accounts and
contract rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses
(A) through (G) above; (y) "Contingent Obligation" means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person
with respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person incurring
such liability, or the primary effect thereof, is to provide assurance to
the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with,
or that the holders of such liability will be protected (in whole or in
part) against loss with
12
respect thereto; and (z) "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(t) Absence of Litigation. Except as disclosed under the caption
"Legal Proceedings" in the Company's Annual Report on Form 20-F for the
fiscal year ended December 31, 2003 of the SEC Documents and in Schedule
3(t), there is no material action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, the
Ordinary Shares or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in their
capacities as such.
(u) Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.
(v) Employee Relations. (i) Neither the Company nor the Subsidiary is
a party to any collective bargaining agreement or employs any member of a
union. The Company believes that its relations with its employees are good.
No executive officer of the Company (as defined in Rule 501(f) of the 1933
Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company.
No executive officer of the Company, to the knowledge of the Company, is,
or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and to the Company's knowledge the continued
employment of each such executive officer does not subject the Company to
any liability with respect to any of the foregoing matters.
(ii) Neither the Company nor any of its Subsidiaries is subject
to, nor do any of its employees benefit from, whether pursuant to
applicable employment laws, regulations, extension orders ("tzavei
harchava") or otherwise, any agreement, arrangement, understanding or
custom with respect to employment (including, without limitation,
termination thereof), other than the minimum benefits and working
conditions required by law to be provided pursuant to rules and
regulations of the Histadrut (General Federation of Labor), the
Coordinating Bureau of Economic Organization and the Industrialists'
Association or extension orders that apply to all employees in Israel
or to all employees in the Company's industry in Israel. The severance
pay due to the Employees is fully funded or provided for in accordance
with generally accepted accounting principles, consistently applied.
13
(iii) The Company is in compliance with all applicable laws and
regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
(w) Title. Except as disclosed in Schedule 3(w), the Company and its
Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by
them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects except
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries. Any real property and facilities held
under lease by the Company and any of its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
(x) Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("Intellectual Property Rights") necessary to conduct their respective
businesses as now conducted. None of the Company's Intellectual Property
Rights have expired or terminated, or are expected to expire or terminate,
within three years from the date of this Agreement. The Company does not
have any knowledge of any infringement by the Company or its Subsidiaries
of Intellectual Property Rights of others. There is no claim, action or
proceeding being made or brought, or to the knowledge of the Company, being
threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights. The Company is unaware of any facts or
circumstances which might give rise to any of the foregoing infringements
or claims, actions or proceedings. The Company and its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.
(y) Environmental Laws. To the Company's knowledge, the Company (i) is
in compliance with any and all Environmental Laws (as hereinafter defined),
(ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all material terms and
conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "Environmental Laws" means all applicable Israeli
laws relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or
wastes (collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
14
injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(z) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital
securities of its Subsidiaries as owned by the Company or such Subsidiary.
(aa) Tax Status. The Company (i) has made or filed all Israeli income
and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except
those being contested in good faith or for which extensions for the payment
thereof have been granted and with respect to which adequate reserves have
been set aside and (iii) has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods
to which such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any
such claim.
(bb) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities
at reasonable intervals and appropriate action is taken with respect to any
difference.
(cc) Taxes. Except as disclosed in Schedule 3(cc) no tax, levy,
impost, duty, fee, assessment or other governmental charge or any deduction
or withholding imposed by any governmental agency or authority in or of the
State of Israel is payable by or on behalf of the Buyers or any assignee of
any of the Buyers (i) as a result of the execution, delivery or performance
by the Company of any of the Transaction Documents, including, but not
limited to, the issuance by the Company of the Securities or (ii) assuming
no Buyer holds 10% or more of the voting power of the Company, any resale
by the Buyers of any of the Securities in accordance with the terms thereof
and this Agreement.
(dd) Form F-3 Eligibility; Foreign Private Issuer Status. The Company
is eligible to register the resale by the Buyers of the Ordinary Shares
acquired pursuant to the Transaction Documents on a registration statement
on Form F-3 under the 1933 Act. The Company qualifies as a "foreign private
issuer" as such term is defined in the 1934 Act . There is no agreement to
which the Company is a party which would restrict or delay the Company from
filing a registration statement pursuant to the terms of the Registration
Rights Agreement.
(ee) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that
15
the Company believes constitutes material, non-public information. The
Company understands and confirms that the Buyers will rely on the foregoing
representations and covenants in effecting transactions in securities of
the Company.
4. COVENANTS.
---------
(a) Reasonable Best Efforts. Each party shall use its reasonable best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall,
on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Buyers at the Closing pursuant to
this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the Buyers on or
prior to the Closing Date. The Company shall make all filings and reports
that it reasonably determines are necessary relating to the offer and sale
of the Securities required under applicable securities or "Blue Sky" laws
of the states of the United States following the Closing Date. 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.
(c) Reporting Status. Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the
Warrant Shares and none of the Warrants is outstanding (the "Reporting
Period"), the Company shall file all reports required to be filed with the
SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise permit
such termination.
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Securities for working capital purposes and not for the (i)
repayment of any other outstanding Indebtedness of the Company or any of
its Subsidiaries or (ii) redemption or repurchase of any of its equity
securities.
(e) Financial Information. The Company agrees to send the following to
each Investor during the Reporting Period (i) unless the following are
filed with the SEC through EDGAR and are available to the public through
the EDGAR system, within one (1) Business Day after the filing thereof with
the SEC, a copy of its Annual Reports on Form 20-F, any interim reports or
any consolidated balance sheets, income statements, shareholders' equity
statements and/or cash flow statements for any period other than annual,
any Current Reports on Form 6-K and any registration statements (other than
on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same
day as the release thereof, facsimile copies of all press releases issued
by the Company or any of its Subsidiaries, and (iii) copies of any notices
and
16
other information made available or given to the shareholders of the
Company generally, contemporaneously with the making available or giving
thereof to the shareholders.
(f) Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which the Ordinary Shares are then listed (subject to
official notice of issuance) and shall maintain such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall use its reasonable best efforts to
maintain the Ordinary Shares' authorization for quotation on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take any
action which would be reasonably expected to result in the delisting or
suspension of the Ordinary Shares on the Principal Market. The Company
shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).
(g) Fees. Subject to Section 8 below, at the Closing, the Company
shall pay an expense allowance of $40,000 to Smithfield Fiduciary LLC (a
Buyer) or its designee(s) (in addition to any other expense amounts paid to
any Buyer prior to the date of this Agreement), which amount shall be
withheld by such Buyer from its Purchase Price at the Closing. The Company
shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or broker's commissions (other than for Persons
engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agent. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment. Except as otherwise
set forth in the Transaction Documents, each party to this Agreement shall
bear its own expenses in connection with the sale of the Securities to the
Buyers.
(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration
Rights Agreement) in connection with a bona fide margin agreement or other
loan or financing arrangement that is secured by the Securities. The pledge
of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities
shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or
any other Transaction Document, including, without limitation, Section 2(f)
hereof; provided that an Investor and its pledgee shall be required to
comply with the provisions of Section 2(f) hereof in order to effect a
sale, transfer or assignment of Securities to such pledgee. The Company
hereby agrees to execute and deliver such documentation as a pledgee of the
Securities may reasonably request in connection with a pledge of the
Securities to such pledgee by an Investor.
(i) Disclosure of Transactions and Other Material Information. On or
before 9:30 a.m., New York Time, on April 7, 2005, the Company shall file a
Current Report on Form 6-K describing the terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934
Act and attaching the material Transaction Documents (including, without
limitation, this Agreement (and all schedules to this Agreement), the form
of each of the Warrant and the Registration Rights Agreement) as exhibits
to such filing (including all attachments, the "6-K Filing"). From and
after the filing of the 6-K Filing with the SEC, no
17
Buyer shall be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in the 6-K
Filing. The Company shall not, and shall cause each of its Subsidiaries and
its and each of their respective officers, directors, employees and agents,
not to, provide any Buyer with any material, nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing
of the 6-K Filing with the SEC without the express written consent of such
Buyer. In the event of a breach of the foregoing covenant by the Company,
any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided
herein or in the Transaction Documents, a Buyer shall have the right to
make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without
the prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have
any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, shareholders or agents for any
such disclosure. Subject to the foregoing, neither the Company nor any
Buyer shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to
make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 6-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).
(j) Variable Securities; Dilutive Issuances. (i) As long as any
Warrants remain outstanding, the Company shall not, in any manner, enter
into or affect any Dilutive Issuance (as defined in the Warrant) if the
effect of such Dilutive Issuance is to cause (A) the Company to be required
to issue upon exercise of any Warrant any Ordinary Shares in excess of that
number of Ordinary Shares which the Company may issue upon exercise of the
Warrants without breaching the Company's obligations under the rules or
regulations of the Principal Market or (B) the respective Exercise Prices
of the Warrants, but for the provisions of Section 2(a)(vi) of each of the
Warrants, to be less than the amounts set forth in such sections.
(k) Corporate Existence. (i) So long as any Buyer beneficially owns
any Securities, the Company shall not be party to any Fundamental
Transaction (as defined in the Warrant) unless the Company is in compliance
with the applicable provisions governing Fundamental Transactions set forth
in the Warrants.
(l) Reservation of Shares. The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance,
after the Closing Date, 130% of the number of Ordinary Shares issuable upon
exercise of the Warrants.
(m) Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would
not result, either individually or in the aggregate, in a Material Adverse
Effect.
(n) Additional Issuances of Securities.
18
(i) For purposes of this Section 4(n), the following definitions
shall apply.
(1) "Convertible Securities" means any stock or securities
(other than Options) convertible into or exercisable or
exchangeable for Ordinary Shares.
(2) "Excluded Securities" means Ordinary Shares issued or
issuable: (i) in connection with any Approved Stock Plan; (ii)
upon conversion of the Warrants; (iii) pursuant to a bona fide
firm commitment underwritten public offering with a nationally
recognized underwriter which generates gross proceeds to the
Company in excess of $25,000,000 (other than an "at-the-market
offering" as defined in Rule 415(a)(4) under the 1933 Act and
"equity lines"); and (iv) upon conversion of any Options or
Convertible Securities which are outstanding on the day
immediately preceding the Closing Date, provided that the terms
of such Options or Convertible Securities are not amended,
modified or changed on or after the Closing Date.
(3) "Options" means any rights, warrants or options to
subscribe for or purchase Ordinary Shares or Convertible
Securities.
(4) "Ordinary Share Equivalents" means, collectively,
Options and Convertible Securities.
(ii) From the date hereof until the date that is 90 Trading Days
(as defined in the Warrants) following the Effective Date (as defined
in the Registration Rights Agreement) (the "Trigger Date"), the
Company will not, directly or indirectly, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition of) any of
its or its Subsidiaries' equity or equity equivalent securities,
including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under
any circumstances, convertible into or exchangeable or exercisable for
Ordinary Shares or Ordinary Share Equivalents (any such offer, sale,
grant, disposition or announcement being referred to as a "Subsequent
Placement").
(iii) From the Trigger Date until the eighteen month anniversary
thereof, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with
this Section 4(n)(iii).
(1) The Company shall deliver to each Buyer who purchased
Ordinary Shares on the Closing Date a written notice (the "Offer
Notice") of any proposed or intended issuance or sale or exchange
(the "Offer") of the securities being offered (the "Offered
Securities") in a Subsequent Placement, which Offer Notice shall
(w) identify and describe the Offered Securities, (x) describe
the price and other terms upon which they are to be issued, sold
or exchanged, and the number or amount of the Offered Securities
to be issued, sold or exchanged, (y) identify the persons or
entities (if known) to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with such Buyers all of the Offered
Securities, allocated among such Buyers (a) based on such Buyer's
pro rata portion of Ordinary Shares purchased hereunder (the
"Basic Amount"), and (b) with
19
respect to each Buyer that elects to purchase its Basic Amount,
any additional portion of the Offered Securities attributable to
the Basic Amounts of other Buyers as such Buyer shall indicate it
will purchase or acquire should the other Buyers subscribe for
less than their Basic Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part, such Buyer must
deliver a written notice to the Company prior to the end of the
tenth (10th) Business Day after such Buyer's receipt of the Offer
Notice (the "Offer Period"), setting forth the portion of such
Buyer's Basic Amount that such Buyer elects to purchase and, if
such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to
purchase (in either case, the "Notice of Acceptance"). If the
Basic Amounts subscribed for by all eligible Buyers are less than
the total of all of the Basic Amounts, then each Buyer who has
set forth an Undersubscription Amount in its Notice of Acceptance
shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed
for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the
Basic Amounts and the Basic Amounts subscribed for (the
"Available Undersubscription Amount"), each Buyer who has
subscribed for any Undersubscription Amount shall be entitled to
purchase only that portion of the Available Undersubscription
Amount as the Basic Amount of such Buyer bears to the total Basic
Amounts of all eligible Buyers that have subscribed for
Undersubscription Amounts, subject to rounding by the Company to
the extent its deems reasonably necessary.
(3) The Company shall have ten (10) Business Days from the
expiration of the Offer Period above to offer, issue, sell or
exchange all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by the eligible Buyers
(the "Refused Securities"), but only to the offerees described in
the Offer Notice (if so described therein) and only upon terms
and conditions (including, without limitation, unit prices and
interest rates) that are not more favorable to the acquiring
person or persons or less favorable to the Company than those set
forth in the Offer Notice.
(4) In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and
on the terms specified in Section 4(n)(iii)(3) above), then each
Buyer may, at its sole option and in its sole discretion, reduce
the number or amount of the Offered Securities specified in its
Notice of Acceptance to an amount that shall be not less than the
number or amount of the Offered Securities that such Buyer
elected to purchase pursuant to Section 4(n)(iii)(2) above
multiplied by a fraction, (i) the numerator of which shall be the
number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities
to be issued or sold to Buyers pursuant to Section 4(n)(iii)(3)
above prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Offered Securities. In the
event that any Buyer so elects to reduce the number or amount of
Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such
securities have again been offered to the Buyers in accordance
with Section 4(n)(iii)(1) above.
20
(5) Upon the closing of the issuance, sale or exchange of
all or less than all of the Refused Securities, the Buyers shall
acquire from the Company, and the Company shall issue to the
Buyers, the number or amount of Offered Securities specified in
the Notices of Acceptance, as reduced pursuant to Section
4(n)(iii)(3) above if the Buyers have so elected, upon the terms
and conditions specified in the Offer. The purchase by the Buyers
of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Buyers
of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and
their respective counsel.
(6) Any Offered Securities not acquired by the Buyers or
other persons in accordance with Section 4(n)(iii)(3) above may
not be issued, sold or exchanged until they are again offered to
the eligible Buyers under the procedures specified in this
Agreement.
(iv) The restrictions contained in subsections (ii) and (iii) of
this Section 4(n) shall not apply in connection with the issuance of
any Excluded Securities.
(v) Shareholder Approval. The Company shall provide each
shareholder entitled to vote at a special or annual meeting of
shareholders of the Company (the "Shareholder Meeting"), which shall
be promptly called and held not later than June 15, 2005 (the
"Shareholder Meeting Deadline"), a proxy statement, substantially in
the form which has been previously reviewed by the Buyers and a
counsel of their choice, soliciting each such shareholder's
affirmative vote at the Shareholder Meeting for approval of
resolutions providing for (A) the Company's issuance of all of the
Securities as described in the Transaction Documents in accordance
with applicable law and the rules and regulations of the Principal
Market and (B) the increase in the authorized Ordinary Shares from
45,000,000 Ordinary Shares to no less than 47,500,000 Ordinary Shares
(such affirmative approval being referred to herein as the
"Shareholder Approval"), and the Company shall use its best efforts to
solicit its shareholders' approval of such resolutions and to cause
the Board of Directors of the Company to recommend to the shareholders
that they approve such resolutions. The Company shall be obligated to
seek to obtain the Shareholder Approval by the Shareholder Meeting
Deadline. If, despite the Company's best efforts the Shareholder
Approval is not obtained on or prior to the Shareholder Meeting
Deadline, the Company shall cause an additional Shareholder Meeting to
be held each calendar quarter thereafter until such Shareholder
Approval is obtained.
(o) Antidilution Waiver. Each Buyer hereby agrees to waive, solely
with respect to the issuance of the Securities hereunder, the application
of the adjustment provisions set forth in (i) Section 7 of the convertible
note, (ii) Section 2 of the warrant and (iii) Section 2 of the additional
investment right, in each case, issued pursuant to that certain securities
purchase agreement, dated July 9, 2004, by and among the Company and the
investors ascribed thereto, to any such securities held by such Buyer (or
its affiliates) as of the date hereof.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
-------------------------------------
(a) Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate
by notice to each holder of
21
Securities), a register for the Ordinary Shares and the Warrants, in which
the Company shall record the name and address of the Person in whose name
the Ordinary Shares and Warrants have been issued (including the name and
address of each transferee) and the number of Warrants Shares issuable upon
exercise of the Warrants held by such Person. The Company shall keep the
register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to
issue certificates or credit shares to the applicable balance accounts at
The Depository Trust Company ("DTC"), registered in the name of each Buyer
or its respective nominee(s), for the Purchased Shares and the Warrant
Shares issued at the Closing or upon exercise of the Warrants in such
amounts as specified from time to time by each Buyer to the Company upon
exercise of the Warrants in the form of Exhibit C attached hereto (the
"Irrevocable Transfer Agent Instructions"). The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 5(b), and stop transfer instructions to give effect to
Section 2(g) hereof, will be given by the Company to its transfer agent,
and that the Securities shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale, assignment
or transfer of the Securities in accordance with Section 2(f), the Company
shall permit the transfer and shall promptly instruct its transfer agent to
issue one or more certificates or credit shares to the applicable balance
accounts at DTC in such name and in such denominations as specified by such
Buyer to effect such sale, transfer or assignment. In the event that such
sale, assignment or transfer involves Ordinary Shares, or Warrant Shares
sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144, the transfer agent shall issue such
Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to a Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach
of its obligations under this Section 5(b) will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that a Buyer shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or
other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
Closing Date. The obligation of the Company hereunder to issue and
sell the Purchased Shares and the related Warrants to each Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Buyer with prior written notice
thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the
Company.
(ii) Such Buyer and each other Buyer shall have delivered to the
Company the Purchase Price (less, in the case of Smithfield Fiduciary
LLC, the amounts
22
withheld pursuant to Section 4(g)) for the Purchased Shares and the
related Warrants being purchased by such Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
(iii) Such Buyer and each other Buyer shall have signed the
undertaking to the OCS contained in Exhibit F.
(iv) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by such Buyer at or prior to the Closing Date.
(v) Such Buyer shall have exercised its Additional Investment
Right for that number of Additional Investment Right Shares set forth
opposite such Buyer's name in column (7) on the Schedule of Buyers.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
Closing Date. The obligation of each Buyer hereunder to purchase the
Purchased Shares and the related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with prior written notice thereof:
(i) The Company shall have executed and delivered to such Buyer
(i) each of the Transaction Documents, (ii) certificates for the
Purchased Shares (in such denominations as such Buyer shall request)
being purchased by such Buyer at the Closing pursuant to this
Agreement, and (iii) the Warrants (in such amounts as such Buyer shall
request) being purchased by such Buyer at the Closing pursuant to this
Agreement; provided, however, that the Company may furnish to each
Buyer a facsimile copy of the stock certificate representing the
Purchased Shares, with the original stock certificate held in trust by
counsel for the Company until delivery thereof on the second (2nd)
Business Day following the Closing.
(ii) Such Buyer shall have received the opinions of Carter,
Ledyard & Milburn LLP, the Company's United States outside counsel,
and S. Friedman & Co, Advocates and Notaries, the Company's Israeli
outside counsel, each dated as of the Closing Date, in substantially
the form of Exhibits D-1 and D-2 attached hereto.
(iii) The Company shall have delivered to such Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit C
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(iv) The Company shall have delivered to such Buyer a certified
copy of the Articles of Association as certified by the Chief
Executive Officer of the Company.
23
(v) The Company shall have delivered to such Buyer a certificate,
executed by the Chief Executive Officer of the Company and dated as of
the Closing Date, as to (i) the resolutions consistent with Section
3(b) as adopted by the Company's Board of Directors in a form
reasonably acceptable to such Buyer (the "Transaction Resolutions"),
(ii) the Articles of Association and (iii) the Memorandum, each as in
effect at the Closing, in the form attached hereto as Exhibit E.
(vi) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties
that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to
the Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by such Buyer in the form attached
hereto as Exhibit E.
(vii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of Ordinary
Shares outstanding as of a date within five days of the Closing Date.
(viii) The Ordinary Shares (I) shall be designated for quotation
or listed on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market
from trading on the Principal Market nor shall suspension by the SEC
or the Principal Market have been threatened, as of the Closing Date,
either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum listing maintenance requirements of the
Principal Market.
(ix) The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale
of the Securities. Without limiting the generality of the foregoing,
the Company shall also have obtained approval by the OCS of the
transactions contemplated hereunder, evidence of which shall have been
provided to the Buyers.
(x) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
8. TERMINATION. In the event that the Closing shall not have occurred with
respect to a Buyer on or before ten (10) Business Days from the date hereof due
to the Company's or such Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, this if this Agreement is terminated pursuant to this Section
8, the Company shall remain obligated to reimburse the non-breaching Buyers for
the expenses described in Section 4(g) above.
24
9. MISCELLANEOUS.
-------------
(a) Governing Law; Jurisdiction; Jury Trial. Except for matters that
are inherently governed by the corporate laws of the State of Israel, all
questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of
the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the non-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 suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address for such 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 HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were
an original, not a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be amended other than by an
25
instrument in writing signed by the Company and the holders of at least a
majority of the aggregate number of Registrable Securities issued and
issuable hereunder, and any amendment to this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on all Buyers and
holders of Securities, as applicable. No provision hereof may be waived
other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the applicable
Securities then outstanding. No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration also is
offered to all of the parties to the Transaction Documents, holders of the
Warrants, as the case may be. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of
the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) three Business
Days after deposit with an overnight courier service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company:
RADA Electronic Industries Ltd.
7 Giborei Israel Street
Netanya 42504
Israel
Telephone: (011) 972-9-892-1129
Facsimile: (011) 972-9-885-5885
Attention: Elan Sigal, Chief Financial Officer
Copy to:
Carter Ledyard & Milburn LLP
2 Wall Street
New York, New York 10005
Telephone: (212) 732-3200
Facsimile: (212) 732-3232
Attention: Steven J. Glusband, Esq.
and
S. Friedman & Co, Advocates and Notaries
The Trade Tower
25 Hamered Street
26
P.O.B. 50222 Tel Aviv 61500, Israel
Telephone: (011) 972-3-796-1501
Facsimile: (011) 972-3-796-1500
Attention: Sarit Molcho, Adv.
If to the Transfer Agent:
American Stock Transfer & Trust Co.
59 Maiden Lane
New York, New York 10038
Telephone: (718) 921-8275
Facsimile: (718) 921-8331
Attention: Paula Caropoli
If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set
forth on the Schedule of Buyers,
with a copy (for informational purposes only) to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
Attention: Eleazer N. Klein, Esq.
or to such other address and/or facsimile number and/or to the attention of
such other Person as the recipient party has specified by written notice
given to each other party five (5) days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt
from an overnight courier service in accordance with clause (i), (ii) or
(iii) above, respectively.
The Company hereby irrevocably appoints Puglisi & Associates at 850
Library Avenue, Suite 204, Newark, Delaware 19711, Telephone: (302)
738-6680, Facsimile: (302) 738-7210, Attention: Mr. Donald J. Puglisi,
Managing Director, as its agent for the receipt of service of process in
connection with any action pursuant to any Transaction Document in the
United States. The Company agrees that any document may be effectively
served on it in connection with any action, suit or proceeding in the
United States by service on its agents.
Any document shall be deemed to have been duly served if marked for
the attention of the agent at its address (as set out above) or such other
address in the United States as may be notified to the party wishing to
serve the document and delivered in accordance with the notice provisions
set forth in this Section 9(f).
27
If the Company's agent at any time ceases for any reason to act as
such, the Company shall appoint a replacement agent having an address for
service in the United States and shall notify each Buyer in writing of the
name and address of the replacement agent. Failing such appointment and
notification, each Buyer shall be entitled by notice to the Company to
appoint a replacement agent to act on the Company's behalf. The provisions
of this Section 9(f) applying to service on an agent apply equally to
service on a replacement agent.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Warrants. The Company shall not
assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of at least a majority of the
aggregate number of Registrable Securities issued and issuable hereunder,
including by way of a Fundamental Transaction (unless the Company is in
compliance with the applicable provisions governing Fundamental
Transactions set forth in the Warrants). A Buyer may assign some or all of
its rights hereunder without the consent of the Company, in which event
such assignee shall be deemed to be a Buyer hereunder with respect to such
assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4,
5 and 9 shall survive the Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(k) Indemnification. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under
the Transaction Documents, the Company shall defend, protect, indemnify and
hold harmless each Buyer and each other holder of the Securities and all of
their shareholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons' agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys'
fees and disbursements (the "Indemnified Liabilities"), incurred by any
Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument
or document
28
contemplated hereby or thereby, (b) any breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative
action brought on behalf of the Company) and arising out of or resulting
from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities, (iii) any disclosure made by such Buyer
pursuant to Section 4(i), or (iv) the status of such Buyer or holder of the
Securities as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the
same as those set forth in Section 6 of the Registration Rights Agreement.
(l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
(m) Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders
have under any law. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other
rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Buyers. The Company therefore agrees that the
Buyers shall be entitled to seek temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages and
without posting a bond or other security.
(n) Payment Set Aside. To the extent that the Company makes a payment
or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, foreign,
state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff
had not occurred.
(o) Tax Adjustments.
29
(i) All payments by the Company to the Buyers and any of their
respective assignees in regard or in connection with this Agreement,
the other Transaction Documents or any of the Securities shall be made
in freely transferable United States Dollars and free and clear of and
without deduction for any present or future income, excise, stamp,
documentary, property or franchise taxes and other taxes, levies,
fees, duties, withholdings or other charges of any nature whatsoever
("Taxes"), whether of any governmental agency or authority in Israel
or otherwise, and including any stamp taxes or any other similar taxes
which may be required in Israel for enforcement purposes or any stamp
tax due upon issuance of the Purchased Shares or the Ordinary Shares
issuable upon exercise of the Warrants. In the event that any
withholding or deduction from any interest, distribution or payment to
be made by the Company hereunder, the other Transaction Documents or
any of the Securities is required in respect of any Taxes pursuant to
any applicable law, rule or regulation, then the Company shall
promptly:
(1) pay directly or caused to be paid directly to the
relevant authority the full amount required to be so withheld or
deducted;
(2) forward to the applicable Buyer an official receipt or
other documentation satisfactory to such Buyer evidencing such
payment to such authority; and
(3) pay to the applicable Buyer such additional amount or
amounts as is necessary to ensure that the net amount actually
received by such Buyer will equal the full amount such Buyer
would have received had no such withholding or deduction been
required.
(ii) The Company further agrees that if any present or future
taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, including franchise taxes
and taxes imposed on or measured by any Buyer's net income or receipts
("Further Taxes") are directly or indirectly asserted against such
Buyer with respect to any payment of any additional amount described
in paragraph (iii) and received by such Buyer hereunder, such Buyer
may pay such Further Taxes and the Company will promptly pay to such
Buyer such additional amounts (including all penalties, interest or
expenses) that such Buyer specifies as necessary to preserve the
after-tax return that such Buyer would have received if such Taxes or
Further Taxes had not been imposed.
(iii) If the Company fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the applicable Buyer
the required receipts or other required documentary evidence, the
Company shall indemnify such Buyer for any incremental Taxes,
interest, penalties, expenses and costs that may become payable or are
incurred by such Buyer as a result of any such failure. In addition to
the foregoing, the Company hereby indemnifies and holds each Buyer
harmless for any and all payments made by any Buyer of any Taxes and
Further Taxes and for any liabilities (including penalties, interest,
legal costs and expenses) incurred by any Buyer or which may be
imposed on any Buyer in connection therewith or any delays in their
payment.
30
(p) Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and
not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other
Buyer under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Buyer pursuant
hereto or thereto, shall be deemed to constitute the Buyers as a
partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Buyers are in any way acting in concert or
as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents and the Company acknowledges that
the Buyers are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors. Each Buyer shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an
additional party in any proceeding for such purpose.
[Signature Page Follows]
31
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
COMPANY:
RADA ELECTRONIC INDUSTRIES
LTD.
By:
----------------------
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
BUYERS:
SMITHFIELD FIDUCIARY LLC
By:
----------------------
Name: Adam J. Chill
Title: Authorized Signatory
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
OMICRON MASTER TRUST
By:
----------------------
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
IROQUOIS MASTER FUND LTD.
By:
----------------------
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.
PORTSIDE GROWTH AND OPPORTUNITY FUND
By:
----------------------
Name:
Title:
SCHEDULE OF BUYERS
------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6) (7)
------------------------------------------------------------------------------------------------------------------------------------
Number of
Number of Number of Additional
Purchased Warrant Purchase Legal Representative's Investment
Buyer Address and Facsimile Number Shares Shares Price Address and Facsimile Number Right Shares
------------------------------------------------------------------------------------------------------------------------------------
Smithfield Fiduciary c/o Highbridge Capital 243,459 472,584 $275,108.67 Schulte Roth & Zabel LLP 229,125
LLC Management, LLC 919 Third Avenue
9 West 57th Street, 27th Floor New York, New York 10022
New York, New York 10019 Attention: Eleazer Klein, Esq.
Attention: Ari J. Storch Facsimile: (212) 593-5955
Adam J. Chill Telephone: (212) 756-2376
Facsimile: (212) 751-0755
Telephone: (212) 287-4720
Residence: Cayman Islands
------------------------------------------------------------------------------------------------------------------------------------
Omicron Master Trust c/o Omicron Capital 198,823 385,941 $224,669.99 187,118
810 Seventh Avenue
39th Floor
New York, New York 10019
Attention: Brian Daly
Facsimile: (212) 803-5263
Telephone: (212) 803-5269
Residence: Bermuda
------------------------------------------------------------------------------------------------------------------------------------
Iroquois Master Iroquois Master Fund Ltd.
Fund Ltd. 641 Lexington Ave. 324,829 630,534 $367,056.77 305,705
26th Floor
New York, New York 10022
Facsimile: (646) 274-1728
Telephone: (212) 974-3070
Attention: Joshua Silverman
Residence:
------------------------------------------------------------------------------------------------------------------------------------
Portside Growth and c/o Ramius Capital Group, L.L.C. 198,823 385,941 $224,669.99 187,118
Opportunity Fund 666 Third Avenue,
26th Floor
New York, New York 10017
Attention: Jeffrey Smith
MIchael Neidell
Facsimile: (212) 845-7999
Telephone: (212) 845-7955
Residence: Cayman Islands
------------------------------------------------------------------------------------------------------------------------------------
EXHIBITS
--------
Exhibit A Form of Warrants
Exhibit B Registration Rights Agreement
Exhibit C Irrevocable Transfer Agent Instructions
Exhibit D-1 Form of US Company Counsel Opinion
Exhibit D-2 Form of Israeli Company Counsel Opinion
Exhibit E Form of Officer's Certificate
Exhibit F Form of OCS Undertaking
SCHEDULES
---------
Schedule 3(a) Subsidiaries
Schedule 3(e) Consents
Schedule 3(n) Conduct of Business; Regulatory Permits
Schedule 3(n)(iii) Aggregate Amount of Pending and Outstanding Grants
From the OCS
Schedule 3(r) Capitalization
Schedule 3(s) Indebtedness and Other Contracts
Schedule 3(t) Litigation
Schedule 3(w) Title
Schedule 3(cc) Taxes
ITEM 2
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of April 6,
2005, by and among RADA Electronic Industries Ltd., a corporation organized
under the laws of the State of Israel, with headquarters located at 7 Giborei
Israel Street, Netanya 42504, Israel (the "Company"), and the undersigned buyers
(each, a "Buyer", and collectively, the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions set forth in
the Securities Purchase Agreement, to issue and sell to each Buyer (i) 965,934
of the Company's ordinary shares (the "Purchased Shares"), NIS 0.005 nominal
value per share (the "Ordinary Shares") and (ii) certain warrants (the
"Warrants") which will be exercisable to purchase additional Ordinary Shares (as
exercised, the "Warrant Shares") in accordance with the terms of the Warrants.
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree as follows:
1. Definitions.
-----------
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreement. As used
in this Agreement, the following terms shall have the following meanings:
a. "Business Day" means any day other than Saturday, Sunday or any
other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
b. "Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
c. "Effective Date" means the date the Registration Statement has been
declared effective by the SEC.
d. "Effectiveness Deadline" means the date which is 90 days after the
Closing Date, or if there is a review of the Registration Statement by the
SEC, 120 days after the Closing Date.
e. "Filing Deadline" means 30 days after the Closing Date.
f. "Investor" means a Buyer or any transferee or assignee thereof to
whom a Buyer assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section
9 and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by
the provisions of this Agreement in accordance with Section 9.
g. "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
h. "register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant
to Rule 415 and the declaration or ordering of effectiveness of such
Registration Statement(s) by the SEC.
i. "Registrable Securities" means (i) the Purchased Shares, (ii) the
Warrant Shares issued or issuable upon exercise of the Warrants and (iii)
any share capital of the Company issued or issuable with respect to the
Purchased Shares, the Warrant Shares or the Warrants as a result of any
share split, share dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on exercises of the Warrants.
j. "Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act covering
the Registrable Securities.
k. "Required Holders" means the holders of at least a majority of the
Registrable Securities.
l. "Required Registration Amount" means the sum of (i) the number of
Purchased Shares and (ii) 130% of the sum of the number of Warrant Shares
issued and issuable pursuant to the Warrants as of the trading day
immediately preceding the date the Registration Statement is initially
filed with the SEC, all subject to adjustment as provided in Section 2(e).
m. "Rule 415" means Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous or delayed basis.
n. "SEC" means the United States Securities and Exchange Commission.
2. Registration.
------------
a. Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than the Filing Deadline, file with the
SEC the Registration Statement on Form F-3 covering the resale of all of
the Registrable Securities. In the event that Form F-3 is unavailable for
such a registration, the Company shall use such other form as is available
for such a registration, subject to the provisions of Section 2(d). The
Registration Statement prepared pursuant hereto shall register for resale
at least the number of Ordinary
Shares equal to the Required Registration Amount. The Registration
Statement shall contain (except if otherwise directed by the Required
Holders) the "Selling Shareholders" and "Plan of Distribution" sections in
substantially the form attached hereto as Exhibit B. The Company shall use
its reasonable best efforts to have the Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the
Effectiveness Deadline.
b. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and any
increase in the number of Registrable Securities included therein shall be
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement
covering such initial number of Registrable Securities or increase thereof
is declared effective by the SEC. In the event that an Investor sells or
otherwise transfers any of such Investor's Registrable Securities, each
transferee shall be allocated a pro rata portion of the then remaining
number of Registrable Securities included in such Registration Statement
for such transferor. Any Ordinary Shares included in a Registration
Statement and which remain allocated to any Person which ceases to hold any
Registrable Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by
such Registration Statement. In no event shall the Company include any
securities other than Registrable Securities on any Registration Statement
without the prior written consent of the Required Holders.
c. Legal Counsel. Subject to Section 5 hereof, the Required Holders
shall have the right to select one legal counsel to review and oversee any
registration pursuant to this Section 2 ("Legal Counsel"), which shall be
Schulte Roth & Zabel LLP or such other counsel as thereafter designated by
the Required Holders. The Company and Legal Counsel shall reasonably
cooperate with each other in performing the Company's obligations under
this Agreement.
d. Ineligibility for Form F-3. In the event that Form F-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the
Required Holders and (ii) undertake to register the Registrable Securities
on Form F-3 as soon as such form is available, provided that the Company
shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form F-3 covering the
Registrable Securities has been declared effective by the SEC.
e. Sufficient Number of Shares Registered. In the event the number of
shares available under a Registration Statement filed pursuant to Section
2(a) is insufficient to cover all of the Registrable Securities required to
be covered by such Registration Statement or an Investor's allocated
portion of the Registrable Securities pursuant to Section 2(b), the Company
shall amend the applicable Registration Statement, or file a new
Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the Required Registration
Amount as of the trading day immediately preceding the date of the filing
of such amendment or new Registration Statement, in each case, as soon as
practicable, but in any event not later than fifteen (15) days after the
necessity therefor arises. The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. For purposes
of the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of the
Registrable Securities" if at any time the number of Registrable Securities
issued and issuable upon exercise of the Warrants covered by such
Registration Statement is greater than 110% of the number of Ordinary
Shares available for resale under such Registration Statement. The
calculation set forth in the foregoing sentence shall be made without
regard to any limitations on the exercise of the Warrants and such
calculation shall assume that the Warrants are then exercisable for
Ordinary Shares at the then prevailing Exercise Price (as defined in the
Warrants).
f. Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. If (i) a Registration Statement covering all of the
Registrable Securities required to be covered thereby and required to be
filed by the Company pursuant to this Agreement is (A) not filed with the
SEC on or before the respective Filing Deadline (a "Filing Failure") or (B)
not declared effective by the SEC on or before the respective Effectiveness
Deadline (an "Effectiveness Failure") or (ii) on any day after the
Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during
an Allowable Grace Period (as defined in Section 3(r)) pursuant to such
Registration Statement (including, without limitation, because of a failure
to keep such Registration Statement effective, to disclose such information
as is necessary for sales to be made pursuant to such Registration
Statement or to register a sufficient number of Ordinary Shares) (a
"Maintenance Failure") then, as partial relief for the damages to any
holder by reason of any such delay in or reduction of its ability to sell
the underlying Ordinary Shares (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to
each holder of Registrable Securities relating to such Registration
Statement an amount in cash equal to one and one half percent (1 1/2%) of
the aggregate Purchase Price (as such term is defined in the Securities
Purchase Agreement) of such Investor's Registrable Securities included in
such Registration Statement on each of the following dates: (i) the day of
a Filing Failure and on every thirtieth day (pro rated for periods totaling
less than thirty days) thereafter until such Filing Failure is cured; (ii)
the day of an Effectiveness Failure (pro rated for periods totaling less
than thirty days) and on every thirtieth day thereafter until such
Effectiveness Failure is cured; (iii) the initial day of a Maintenance
Failure and on every thirtieth day (pro rated for periods totaling less
than thirty days) thereafter until such Maintenance Failure is cured. The
payments to which a holder shall be entitled pursuant to this Section 2(f)
are referred to herein as "Registration Delay Payments." Registration Delay
Payments shall be paid on the earlier of (I) the last day of the calendar
month during which such Registration Delay Payments are incurred and (II)
the third Business Day after the event or failure giving rise to the
Registration Delay Payments is cured. In the event the Company fails to
make Registration Delay Payments in a timely manner, such Registration
Delay Payments shall bear interest at the rate of 1.5% per month (prorated
for partial months) until paid in full.
3. Related Obligations.
-------------------
At such time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), 2(d) or 2(e), the Company will use its
best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
a. The Company shall submit to the SEC, within three (3) Business Days
after the Company learns that no review of a particular Registration
Statement will be made by the staff of the SEC or that the staff has no
further comments on a particular Registration Statement, as the case may
be, a request for acceleration of effectiveness of such Registration
Statement to a time and date not later than 48 hours after the submission
of such request. The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until the earlier of (i) the
date as of which the Investors may sell all of the Registrable Securities
covered by such Registration Statement without restriction pursuant to Rule
144(k) (or any successor thereto) promulgated under the 1933 Act or (ii)
the date on which the Investors shall have sold all of the Registrable
Securities covered by such Registration Statement (the "Registration
Period"). The Company shall ensure that each Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or necessary to
make the statements therein (in the case of prospectuses, in the light of
the circumstances in which they were made) not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such
period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(b)) by reason of the
Company filing a report on Form 6-K, Form 20-F or any analogous report
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Company shall have incorporated such report by reference into such
Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is
filed which created the requirement for the Company to amend or supplement
such Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and comment
upon (i) a Registration Statement at least five (5) Business Days prior to
its filing with the SEC and (ii) all amendments and supplements to all
Registration Statements (except for Annual Reports on Form 20-F, and
Reports on Form 6-K and any similar or successor reports) within a
reasonable number of days prior to their filing with the SEC, and (B) not
file any Registration Statement or amendment or supplement thereto in a
form to which Legal Counsel reasonably objects. The Company shall not
submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval
of Legal Counsel, which consent shall not be unreasonably withheld. The
Company shall furnish to Legal Counsel, without charge, (i) copies of any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii) promptly after
the same is prepared and filed with the SEC, one copy of any Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by
an Investor, and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto. The Company shall reasonably cooperate with Legal Counsel in
performing the Company's obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one
copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor and not otherwise available on the
EDGAR System, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request
from time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
e. The Company shall use its reasonable best efforts to (i) register
and qualify, unless an exemption from registration and qualification
applies, the resale by Investors of the Registrable Securities covered by a
Registration Statement under such other securities or "blue sky" laws of
all applicable jurisdictions in the United States, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(e), (y) subject itself to general taxation
in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify Legal
Counsel and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of
any proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in writing
of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that in
no event shall such notice contain any material, nonpublic information),
and, subject to Section 3(r), promptly prepare a supplement or amendment to
such Registration Statement to correct such untrue statement or omission,
and deliver ten (10) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as Legal Counsel
or such Investor may reasonably request). The Company shall also promptly
notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel and each Investor by facsimile on the same day
of such effectiveness and by overnight mail), (ii) of any request by the
SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement
would be appropriate.
g. The Company shall use its reasonable best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of
the Registrable Securities for sale in any jurisdiction and, if such an
order or suspension is issued, to obtain the withdrawal of such order or
suspension at the earliest possible moment and to notify Legal Counsel and
each Investor who holds Registrable Securities being sold of the issuance
of such order and the resolution thereof or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.
h. At the reasonable request of any Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the
Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
Investors, and (ii) an opinion, dated as of such date, from each of the
U.S. and Israeli counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the Investors.
i. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other
agents retained by the Investors (collectively, the "Inspectors"), all
pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Inspector, and cause the Company's
officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector
shall agree to hold in strict confidence and shall not make any disclosure
(except to an Investor) or use of any Record or other information which the
Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of
such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement or is otherwise required under the 1933 Act, (b)
the release of such Records is ordered pursuant to a final, non-appealable
subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of
this or any other agreement of which the Inspector has knowledge. Each
Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. Nothing herein (or in any other confidentiality
agreement between the Company and any Investor) shall be deemed to limit
the
Investors' ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
j. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this
Agreement or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt written notice to such Investor and allow
such Investor, at the Investor's expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such
information.
k. The Company shall use its reasonable best efforts either to (i)
cause all of the Registrable Securities covered by a Registration Statement
to be listed on each securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) secure designation and quotation of all of the
Registrable Securities covered by a Registration Statement on the Nasdaq
SmallCapMarket. The Company shall pay all fees and expenses in connection
with satisfying its obligation under this Section 3(k).
l. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, facilitate the
timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may
request.
m. If requested by an Investor, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be
included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being offered or sold, the purchase price
being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) as soon as practicable make
all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement if
reasonably requested by an Investor holding any Registrable Securities.
n. The Company shall use its reasonable best efforts to cause the
Registrable Securities covered by a Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may
be necessary to consummate the disposition of such Registrable Securities.
o. The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close
of the period covered thereby, an earnings statement (in form complying
with, and in the manner provided by, the provisions of Rule 158 under the
1933 Act) covering a twelve-month period beginning not later than the first
day of the Company's fiscal quarter next following the effective date of a
Registration Statement.
p. The Company shall otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the SEC in connection
with any registration hereunder.
q. Within two (2) Business Days after a Registration Statement which
covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to
the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
r. Notwithstanding anything to the contrary herein, at any time after
the Registration Statement has been declared effective by the SEC, the
Company may delay the disclosure of material, non-public information
concerning the Company the disclosure of which at the time is not, in the
good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel
to the Company, otherwise required (a "Grace Period"); provided, that the
Company shall promptly (i) notify the Investors in writing of the existence
of material, non-public information giving rise to a Grace Period (provided
that in each notice the Company will not disclose the content of such
material, non-public information to the Investors) and the date on which
the Grace Period will begin, and (ii) notify the Investors in writing of
the date on which the Grace Period ends; and, provided further, that no
Grace Period shall exceed ten (10) consecutive days and during any three
hundred sixty five (365) day period such Grace Periods shall not exceed an
aggregate of twenty (20) business days and the first day of any Grace
Period must be at least two (2) trading days after the last day of any
prior Grace Period (each, an "Allowable Grace Period"). For purposes of
determining the length of a Grace Period above, the Grace Period shall
begin on and include the date the Investors receive the notice referred to
in clause (i) and shall end on and include the later of the date the
Investors receive the notice referred to in clause (ii) and the date
referred to in such notice. The provisions of Section 3(g) hereof shall not
be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the
first sentence of Section 3(f) with respect to the information giving rise
thereto unless such material, non-public information is no longer
applicable. Notwithstanding anything to the contrary, the Company shall
cause its transfer agent to deliver unlegended Ordinary Shares to a
transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities
with respect to which an Investor has entered into a contract for sale, and
delivered a copy of the prospectus included as part of the applicable
Registration Statement, prior to the Investor's receipt of the notice of a
Grace Period and for which the Investor has not yet settled.
4. Obligations of the Investors.
----------------------------
a. At least five (5) Business Days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as
shall be reasonably required to effect the effectiveness of the
registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may
reasonably request.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) or receipt of
notice that no supplement or amendment is required. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to
deliver unlegended Ordinary Shares to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's
receipt of a notice from the Company of the happening of any event of the
kind described in Section 3(g) or the first sentence of 3(f) and for which
the Investor has not yet settled.
d. Each Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of Registrable Securities pursuant to the
Registration Statement.
5. Expenses of Registration.
------------------------
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company. The Company shall also
reimburse the Investors for the standard fees and disbursements of Legal Counsel
in connection with registration, filing or qualification pursuant to Sections 2
and 3 of this Agreement which amount shall be limited to $10,000.
6. Indemnification.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, members, partners, employees, agents, representatives
of, and each Person, if any, who controls any Investor within the meaning
of the 1933 Act or the 1934 Act (each, an "Indemnified Person"), against
any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "Claims") incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before
any court or governmental, administrative or other regulatory agency, body
or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of
them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("Blue Sky Filing"), or the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to
state therein any material fact necessary to make the statements made
therein, in the light of the circumstances under which the statements
therein were made, not misleading, (iii) any violation or alleged violation
by the Company of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities
pursuant to a Registration Statement or (iv) any material violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations"). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not
apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(d); (ii) with respect to any preliminary prospectus,
shall not inure to the benefit of any such Person from whom the Person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any Person controlling such Person)
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section
3(d), and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a violation and
such Indemnified Person, notwithstanding such advice, used it or failed to
deliver the correct prospectus as required by the 1933 Act and such correct
prospectus was timely made available pursuant to Section 3(d); (iii) shall
not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made
available by the Company, including a corrected prospectus, if such
prospectus or corrected prospectus was timely made available by the Company
pursuant to Section 3(d); and (iv) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld or delayed. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement and each Person,
if any, who controls the Company within the meaning of the 1933 Act or the
1934 Act (each, an "Indemnified Party"), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the
1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise
out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement;
and, subject to Section 6(c), such Investor will reimburse any legal or
other expenses reasonably incurred by an Indemnified Party in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything
to the contrary contained herein, the indemnification agreement contained
in this Section 6(b) with respect to any preliminary prospectus shall not
inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a
Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
control of
the defense thereof with counsel mutually satisfactory to the indemnifying
party and the Indemnified Person or the Indemnified Party, as the case may
be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses
of not more than one counsel for such Indemnified Person or Indemnified
Party to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with
any negotiation or defense of any such action or Claim by the indemnifying
party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person reasonably apprised at all times as
to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall,
without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or
other compromise which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim
or litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified
Party or Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person
or Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified
Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent
permitted by law; provided, however, that: (i) no Person involved in the sale of
Registrable Securities which Person is guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) in connection with such
sale shall be entitled to contribution from any Person involved in such sale of
Registrable Securities who was not guilty of fraudulent misrepresentation; and
(ii) contribution by any seller of Registrable Securities shall be limited in
amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities pursuant to such Registration Statement.
8. Reports Under the 1934 Act.
--------------------------
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements and the filing of
such reports and other documents is required for the applicable provisions
of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company,
if true, that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual report
of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. Assignment of Registration Rights.
---------------------------------
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of such Investor's Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.
10. Amendment of Registration Rights.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the Required
Holders. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.
11. Miscellaneous.
-------------
a. A Person is deemed to be a holder of Registrable Securities whenever
such Person owns or is deemed to own of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) three Business Days after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
RADA Electronic Industries Ltd.
7 Giborei Israel Street
Netanya 42504
Israel
Telephone: (011) 972-9-892-1129
Facsimile: (011) 972-9-885-5885
Attention: Elan Sigal, Chief Financial
Officer
Copy to:
Carter Ledyard & Milburn LLP
2 Wall Street
New York, New York 10005
Telephone: 212-732-3200
Facsimile: 212-732-3232
Attention: Steven J. Glusband, Esq.
and
S. Friedman
The Trade Tower
25 Hamered Street
P.O.B. 50222
Tel Aviv 61500, Israel
Telephone: (011) 972-3-796-1501
Facsimile: (011) 972-3-796-1500
Attention: Sarit Molcho, Adv.
If to Legal Counsel:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
Attention: Eleazer Klein, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
The Company hereby irrevocably appoints Puglisi & Associates at 850 Library
Avenue, Suite 204, Newark, Delaware 19711, Telephone: (302) 738-6680, Facsimile:
(302) 738-7210, Attention: Mr. Donald J. Puglisi, Managing Director, as its
agent for the receipt of service of process in connection with any action
pursuant to any Transaction Document in the United States. The Company agrees
that any document may be effectively served on it in connection with any action,
suit or proceeding in the United States by service on its agents.
Any document shall be deemed to have been duly served if marked for the
attention of the agent at its address (as set out above) or such other address
in the United States as may be notified to the party wishing to serve the
document and delivered in accordance with the notice provisions set forth in
this Section 11(b).
If the Company's agent at any time ceases for any reason to act as such,
the Company shall appoint a replacement agent having an address for service in
the United States and shall notify each Buyer in writing of the name and address
of the replacement agent. Failing such appointment and notification, each Buyer
shall be entitled by notice to the Company to appoint a replacement agent to act
on the Company's behalf. The provisions of this Section 11(b) applying to
service on an agent apply equally to service on a replacement agent.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting 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 suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such 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.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
e. This Agreement, the other Transaction Documents (as defined in the
Securities Purchase Agreement) and the instruments referenced herein and therein
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall inure to
the benefit of and be binding upon the permitted successors and assigns of each
of the parties hereto.
g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
j. All consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by the Required Holders.
k. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
COMPANY:
RADA ELECTRONIC INDUSTRIES LTD.
By:
----------------------------
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
BUYERS:
SMITHFIELD FIDUCIARY LLC
By:
----------------------------
Name: Adam J. Chill
Title: Authorized Signatory
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
OMICRON MASTER TRUST
By:
----------------------------
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
IROQUOIS MASTER FUND LTD.
By:
----------------------------
Name:
Title:
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Registration Rights Agreement to be duly executed as of
the date first written above.
PORTSIDE GROWTH AND OPPORTUNITY FUND
By:
----------------------------
Name:
Title:
SCHEDULE OF BUYERS
Buyer's Address Buyer's Representative's Address
--------------- --------------------------------
Buyer and Facsimile Number and Facsimile Number
----- -------------------- --------------------
Smithfield Fiduciary LLC c/o Highbridge Capital Management, LLC Schulte Roth & Zabel LLP
9 West 57th Street, 27th Floor 919 Third Avenue
New York, New York 10019 New York, New York 10022
Attention: Ari J. Storch Attn: Eleazer Klein, Esq.
Adam J. Chill Facsimile: (212) 593-5955
Facsimile: (212) 751-0755 Telephone: (212) 756-2000
Telephone: (212) 287-4720
Omicron Master Fund c/o Omicron Capital
810 Seventh Avenue
39th Floor
New York, New York 10019
Attention: Brian Daly
Facsimile: (212) 803-5263
Telephone: (212) 803-5269
Iroquois Master Fund Ltd. c/o Vertical Ventures, LLC
900 Third Avenue, 26th Floor
New York, New York 10022
Facsimile: (646) 274-1728
Telephone: (212) 974-3070
Attention: Joshua Silverman
Portside Growth and Opportunity c/o Ramius Capital Group, L.L.C.
Fund 666 Third Avenue, 26th Floor
New York, New York 10017
Attention: Jeffrey Smith
Michael Neidell
Facsimile: (212) 845-7999
Telephone: (212) 845-7955
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
-------------------------------
OF REGISTRATION STATEMENT
-------------------------
American Stock Transfer & Trust Co.
59 Maiden Lane
New York, New York 10038
Attention: Paula Caroppoli
Re: RADA Electronic Industries Ltd.
Ladies and Gentlemen:
[We are][I am] counsel to RADA Electronic Industries Ltd., a corporation
organized under the laws of the State of Israel (the "Company"), and have
represented the Company in connection with that certain Securities Purchase
Agreement (the "Securities Purchase Agreement") entered into by and among the
Company and the buyers named therein (collectively, the "Holders") pursuant to
which the Company issued to the Holders the Company's ordinary shares, NIS 0.005
nominal value per share (the "Ordinary Shares") and warrants exercisable for
Ordinary Shares (the "Warrants"). Pursuant to the Securities Purchase Agreement,
the Company also has entered into a Registration Rights Agreement with the
Holders (the "Registration Rights Agreement") pursuant to which the Company
agreed, among other things, to register the Registrable Securities (as defined
in the Registration Rights Agreement), including the Ordinary Shares issued
pursuant to the Securities Purchase Agreement and the Ordinary Shares issuable
upon exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 200_, the Company filed a Registration
Statement on Form F-3 (File No. 333-_____________) (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Holders as a selling
shareholder thereunder.
In connection with the foregoing, [we][I] advise you that a member of the
SEC's staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no
knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
This letter shall serve as our standing opinion to you that the Ordinary
Shares are freely transferable by the Holders pursuant to the Registration
Statement, assuming the compliance with any applicable prospectus delivery
requirements of the 1933 Act by the Holders in connection with their disposition
of the Ordinary Shares. You need not require further letters from us to effect
any future legend-free issuance or reissuance of Ordinary Shares to the Holders
as contemplated by the Company's Irrevocable Transfer Agent Instructions dated
April 7, 2005. This letter shall serve as our standing opinion with regard to
this matter.
Very truly yours,
[ISSUER'S COUNSEL]
By:_____________________
CC: [LIST NAMES OF HOLDERS]
EXHIBIT B
SELLING SHAREHOLDERS
The ordinary shares being offered by the selling shareholders were issued
pursuant to a Securities Purchase Agreement, dated as of April 6, 2005, and are
issuable upon exercise of the warrants. For additional information regarding the
issuance of those shares, and warrants, see "Private Placement of Ordinary
Shares and Warrants" above. We are registering the ordinary shares in order to
permit the selling shareholders to offer the shares for resale from time to
time. Except for the ownership of the ordinary shares and the warrants issued
pursuant to the Securities Purchase Agreement and certain notes, warrants,
ordinary shares and additional investment rights issued in a private placement
on July 9, 2004, the selling shareholders have not had any material relationship
with us within the past three years.
The table below lists the selling shareholders and other information
regarding the beneficial ownership of the ordinary shares by each of the selling
shareholders. The second column lists the number of ordinary shares beneficially
owned by each selling shareholder, based on its ownership of the ordinary shares
and warrants, as of ________, 200_, assuming exercise of all the warrants held
by the selling shareholders on that date, without regard to any limitations on
exercise.
The third column lists the ordinary shares being offered by this prospectus
by the selling shareholders.
In accordance with the terms of registration rights agreements with the
selling shareholders, this prospectus generally covers the resale of at least
sum of (i) the number of ordinary shares initially issued pursuant to the
Securities Purchase Agreement and (ii) 130% of the sum of the number of ordinary
shares issuable upon exercise of the related warrants as of the trading day
immediately preceding the date the registration statement is initially filed
with the SEC. Because the exercise price of the warrants may be adjusted, the
number of shares that will actually be issued may be more or less than the
number of shares being offered by this prospectus. The fourth column assumes the
sale of all of the shares offered by the selling shareholders pursuant to this
prospectus.
Under the terms of the warrants, a selling shareholder may not exercise the
warrants, to the extent such exercise would cause such selling shareholder,
together with its affiliates, to beneficially own a number of ordinary shares
which would exceed 4.99% of our then outstanding ordinary shares following such
exercise, excluding for purposes of such determination ordinary shares issuable
upon exercise of the warrants which have not been exercised. The number of
shares in the second column does not reflect this limitation. The selling
shareholders may sell all, some or none of their shares in this offering. See
"Plan of Distribution."
Maximum Number of Shares
------------------------
Number of Shares Owned to be Sold Pursuant to Number of Shares
---------------------- ---------------------- ----------------
Name of Selling Shareholder Prior to Offering this Prospectus Owned After Offering
--------------------------- ----------------- --------------- --------------------
Smithfield Fiduciary LLC (1) 0
Omicron Master Trust (2)
Iroquois Master Fund Ltd. (3)
Portside Growth and
Opportunity Fund (4)
(1) Highbridge Capital Management, LLC ("Highbridge"), is the trading
manager of Smithfield Fiduciary LLC ("Smithfield") and consequently has voting
control and investment discretion over the ordinary shares held by Smithfield.
Glenn Dubin and Henry Swieca control Highbridge. Each of Highbridge and Messrs.
Dubin and Swieca disclaims beneficial ownership of the shares held by
Smithfield.
(2) Omicron Capital, L.P., a Delaware limited partnership ("Omicron
Capital"), serves as investment manager to Omicron Master Trust, a trust formed
under the laws of Bermuda ("Omicron"), Omicron Capital, Inc., a Delaware
corporation ("OCI"), serves as general partner of Omicron Capital, and
Winchester Global Trust Company Limited ("Winchester") serves as the trustee of
Omicron. By reason of such relationships, Omicron Capital and OCI may be deemed
to share dispositive power over the shares of our common stock owned by Omicron,
and Winchester may be deemed to share voting and dispositive power over the
shares of our common stock owned by Omicron. Omicron Capital, OCI and Winchester
disclaim beneficial ownership of such shares of our common stock. Omicron
Capital has delegated authority from the board of directors of Winchester
regarding the portfolio management decisions with respect to the shares of
common stock owned by Omicron and, as of April 21, 2003, Mr. Olivier H. Morali
and Mr. Bruce T. Bernstein, officers of OCI, have delegated authority from the
board of directors of OCI regarding the portfolio management decisions of
Omicron Capital with respect to the shares of common stock owned by Omicron. By
reason of such delegated authority, Messrs. Morali and Bernstein may be deemed
to share dispositive power over the shares of our common stock owned by Omicron.
Messrs. Morali and Bernstein disclaim beneficial ownership of such shares of our
common stock and neither of such persons has any legal right to maintain such
delegated authority. No other person has sole or shared voting or dispositive
power with respect to the shares of our common stock being offered by Omicron,
as those terms are used for purposes under Regulation 13D-G of the Securities
Exchange Act of 1934, as amended. Omicron and Winchester are not "affiliates" of
one another, as that term is used for purposes of the Securities Exchange Act of
1934, as amended, or of any other person named in this prospectus as a selling
stockholder. No person or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended, or the SEC's Regulation 13D-G)
controls Omicron and Winchester.
(3) Joshua Silverman has voting and investment control of the securities
held by Iroquois Master Fund Ltd. Mr. Silverman disclaims beneficial ownership
of the shares held by Iroquois Master Fund Ltd.
(4) Ramius Capital Group, LLC ("Ramius Capital") is the investment adviser
of Portside Growth & Opportunity Fund ("Portside") and consequently has voting
control and investment discretion over securities held by Portside. Ramius
Capital disclaims beneficial ownership of the shares held by Portside. Peter A.
Cohen, Morgan B. Stark, Thomas W. Strauss and Jeffrey M. Solomon are the sole
managing members of C4S& Co., LLC, the sole managing member of Ramius Capital.
As a result, Messrs. Cohen, Stark, Strauss and Solomon may be considered
beneficial owners of any shares deemed to be beneficially owned by Ramius
Capital. Messrs. Cohen, Stark, Strauss and Solomon disclaim beneficial ownership
of these shares.
PLAN OF DISTRIBUTION
We are registering the ordinary shares issued and issuable upon exercise of
the warrants to permit the resale of these ordinary shares by the holders of the
ordinary shares and warrants from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
shareholders of the ordinary shares. We will bear all fees and expenses incident
to our obligation to register the ordinary shares.
The selling shareholders may sell all or a portion of the ordinary shares
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the ordinary
shares are sold through underwriters or broker-dealers, the selling shareholders
will be responsible for underwriting discounts or commissions or agent's
commissions. The ordinary shares may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may
be effected in transactions, which may involve crosses or block transactions,
o on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
o through the writing of options, whether such options are listed on an
options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o sales pursuant to Rule 144;
o broker-dealers may agree with the selling securityholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling shareholders effect such transactions by selling ordinary
shares to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the ordinary shares for whom they may act as agent or to whom they
may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the ordinary shares or otherwise, the selling shareholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the ordinary shares in the course of hedging in positions they assume.
The selling shareholders may also sell ordinary shares short and deliver
ordinary shares covered by this prospectus to close out short positions. The
selling shareholders may also loan or pledge ordinary shares to broker-dealers
that in turn may sell such shares.
The selling shareholders may pledge or grant a security interest in some or
all of the warrants or ordinary shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the ordinary shares from time to time pursuant to this prospectus
or any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933, as amended, amending, if necessary, the
list of selling shareholders to include the pledgee, transferee or other
successors in interest as selling shareholders under this prospectus. The
selling shareholders also may transfer and donate the ordinary shares in other
circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling shareholders and any broker-dealer participating in the
distribution of the ordinary shares may be deemed to be "underwriters" within
the meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the ordinary shares is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of ordinary shares
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the ordinary shares may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the ordinary shares may not be sold unless such shares
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There can be no assurance that any selling shareholder will sell any or all
of the ordinary shares registered pursuant to the shelf registration statement,
of which this prospectus forms a part.
The selling shareholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the ordinary shares by the selling shareholders
and any other participating person. Regulation M may also restrict the ability
of any person engaged in the distribution of the ordinary shares to engage in
market-making activities with respect to the ordinary shares. All of the
foregoing may affect the marketability of the ordinary shares and the ability of
any person or entity to engage in market-making activities with respect to the
ordinary shares.
We will pay all expenses of the registration of the ordinary shares
pursuant to the registration rights agreement, estimated to be $[ ] in total,
including, without limitation, Securities and Exchange Commission filing fees
and expenses of compliance with state securities or "blue sky" laws; provided,
however, that a selling shareholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling shareholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling shareholders will be
entitled to contribution. We may be indemnified by the selling shareholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
shareholder specifically for use in this prospectus, in accordance with the
related registration rights agreements, or we may be entitled to contribution.
Once sold under the shelf registration statement, of which this prospectus
forms a part, the ordinary shares will be freely tradable in the hands of
persons other than our affiliates.
ITEM 3
FORM OF WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
RADA ELECTRONIC INDUSTRIES LTD.
WARRANT TO PURCHASE ORDINARY SHARES
Warrant No.: _________
Number of Ordinary Shares:_____________
Date of Issuance: April 7, 2005 ("Issuance Date")
RADA Electronic Industries Ltd., a corporation organized under the laws of the
State of Israel (the "Company"), hereby certifies that, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
[SMITHFIELD FIDUCIARY LLC][OTHER BUYERS], the registered holder hereof or its
permitted assigns (the "Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company, at the Exercise Price (as defined below)
then in effect, upon surrender of this Warrant to Purchase Ordinary Shares
(including any Warrant to Purchase Ordinary Shares issued in exchange, transfer
or replacement hereof, the "Warrant"), at any time or times on or after the
later of (i) October 6, 2005, and (ii) the date (the "Shareholder Approval
Date") on which the Shareholder Approval (as defined in the Securities Purchase
Agreement) is obtained, but not after 11:59 p.m., New York Time, on the
Expiration Date (as defined below), _____________1 fully paid nonassessable
Ordinary Shares (as defined below) (the "Warrant Shares"). Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 15. This Warrant is one of the Warrants (the "SPA Warrants")
issued pursuant to Section 1 of that certain Securities Purchase
____________________
1 Insert Holder's Pro Rata portion of 1,875,000 Ordinary Shares
Agreement, dated as of April 6, 2005 (the "Subscription Date"), by and among the
Company and the investors (the "Buyers") referred to therein (the "Securities
Purchase Agreement").
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)),
this Warrant may be exercised by the Holder on any day on or after the
later of (x) October 6, 2005, and (y) the Shareholder Approval Date, in
whole or in part, by (i) delivery of a written notice, in the form attached
hereto as Exhibit A (the "Exercise Notice"), of the Holder's election to
exercise this Warrant and (ii) (A) payment to the Company of an amount
equal to the applicable Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the "Aggregate Exercise
Price") in cash or wire transfer of immediately available funds or (B) by
notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be
required to deliver the original Warrant in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice with respect to
less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares. On
or before the first Business Day following the date on which the Company
has received each of the Exercise Notice and the Aggregate Exercise Price
(or notice of a Cashless Exercise) (the "Exercise Delivery Documents"), the
Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company's
transfer agent (the "Transfer Agent"). On or before the third Business Day
following the date on which the Company has received all of the Exercise
Delivery Documents (the "Share Delivery Date"), the Company shall (X)
provided that the Transfer Agent is participating in The Depository Trust
Company ("DTC") Fast Automated Securities Transfer Program, upon the
request of the Holder, credit such aggregate number of Ordinary Shares to
which the Holder is entitled pursuant to such exercise to the Holder's or
its designee's balance account with DTC through its Deposit Withdrawal
Agent Commission system and the Ordinary Shares do not require any legend
or (Y) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and dispatch by overnight courier to the
address as specified in the Exercise Notice, a certificate, registered in
the share register of the Company in the name of the Holder or its
designee, for the number of Ordinary Shares to which the Holder is entitled
pursuant to such exercise. Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (ii)(A) above or
notification to the Company of a Cashless Exercise referred to in Section
1(d), the Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. If this Warrant is submitted
in connection with any exercise pursuant to this Section 1(a) and the
number of Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an
exercise, then the Company shall as soon as practicable and in no event
later than three Business Days after any exercise and at its own expense,
issue a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the number of Warrant Shares purchasable immediately
prior to such exercise under this Warrant, less the number of Warrant
Shares with respect to which this Warrant is exercised. No fractional
Ordinary Shares are to be issued upon the exercise of this Warrant, but
rather the number of Ordinary Shares to be issued shall be
2
rounded up to the nearest whole number. The Company shall pay any and all
taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.
(b) Exercise Price. For purposes of this Warrant, "Exercise Price"
means US $2.10, subject to adjustment as provided herein.
(c) Company's Failure to Timely Deliver Securities. Subject to Section
1(f), if the Company shall fail for any reason or for no reason to issue to
the Holder within three (3) Business Days of receipt of the Exercise
Delivery Documents, a certificate for the number of Ordinary Shares to
which the Holder is entitled or in the event of the sale of the Ordinary
Shares to credit the Holder's balance account with DTC for such number of
Ordinary Shares to which the Holder is entitled upon the Holder's exercise
of this Warrant, then, in addition to all other remedies available to the
Holder, the Company shall pay in cash to the Holder on each day after such
third Business Day that the issuance of such Ordinary Shares is not timely
effected an amount equal to 1.0% of the product of (A) the sum of the
number of Ordinary Shares not issued to the Holder on a timely basis and to
which the Holder is entitled and (B) the Closing Sale Price of the Ordinary
Shares on the trading day immediately preceding the last possible date
which the Company could have issued such Ordinary Shares to the Holder
without violating Section 1(a). In addition to the foregoing, if within
three (3) Trading Days after the Company's receipt of the facsimile copy of
a Exercise Notice the Company shall fail to issue and deliver a certificate
to the Holder or in the event of the sale of the Ordinary Shares credit the
Holder's balance account with DTC for the number of Ordinary Shares to
which the Holder is entitled upon such holder's exercise hereunder, and if
on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Ordinary Shares to deliver in satisfaction of a
sale by the Holder of Ordinary Shares issuable upon such exercise that the
Holder anticipated receiving from the Company (a "Buy-In"), then the
Company shall, within three Business Days after the Holder's request and in
the Holder's discretion, either (i) pay cash to the Holder in an amount
equal to the Holder's total purchase price (including brokerage
commissions, if any) for the Ordinary Shares so purchased (the "Buy-In
Price"), at which point the Company's obligation to deliver such
certificate (and to issue such Ordinary Shares) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such Ordinary Shares and pay cash to the Holder
in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Ordinary Shares, times (B) the Closing Bid
Price on the date of exercise.
(d) Cashless Exercise. Notwithstanding anything contained herein to
the contrary, if a Registration Statement (as defined in the Registration
Rights Agreement) covering the Warrant Shares that are the subject of the
Exercise Notice (the "Unavailable Warrant Shares") is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Aggregate Exercise Price, elect
instead to receive upon such exercise the "Net Number" of Ordinary Shares
determined according to the following formula (a "Cashless Exercise"):
3
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which
this Warrant is then being exercised.
B= the Closing Sale Price of the Ordinary Shares (as
reported by Bloomberg) on the date immediately
preceding the date of the Exercise Notice.
C= the Exercise Price then in effect for the
applicable Warrant Shares at the time of such
exercise.
(e) Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares
that are not disputed and resolve such dispute in accordance with Section
12.
(f) Limitations on Exercises.
(i) Beneficial Ownership. The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to
exercise this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person's affiliates) would
beneficially own in excess of 4.99% of the Ordinary Shares outstanding
immediately after giving effect to such exercise. For purposes of the
foregoing sentence, the aggregate number of Ordinary Shares
beneficially owned by such Person and its affiliates shall include the
number of Ordinary Shares issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made, but
shall exclude Ordinary Shares which would be issuable upon (i)
exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other
securities of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes or
convertible preferred stock or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein.
Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. For
purposes of this Warrant, in determining the number of outstanding
Ordinary Shares, the Holder may rely on the number of outstanding
Ordinary Shares as reflected in (1) the Company's most recent Form
20-F, Form 6-K or other public filing with the Securities and Exchange
Commission, as the case may be, (2) a more recent public announcement
by the Company or (3) any other notice by the Company or the Transfer
Agent setting forth the number of Ordinary Shares outstanding. For any
reason at any time, upon the written or oral request of the Holder,
the Company shall within one Business Day confirm orally and in
writing to the Holder the number of Ordinary Shares then outstanding.
In any case, the number of outstanding Ordinary Shares shall be
determined after giving effect to the conversion or exercise of
securities of the Company, including the SPA Warrants, by the
4
Holder and its affiliates since the date as of which such number of
outstanding Ordinary Shares was reported.
(ii) Principal Market Regulation. The Company shall not be
obligated to issue any Ordinary Shares upon exercise of this Warrant
if the issuance of such Ordinary Shares would exceed that number of
Ordinary Shares which the Company may issue upon exercise of this
Warrant without breaching the Company's obligations under the rules or
regulations of the Principal Market (the "Exchange Cap"), except that
such limitation shall not apply in the event that the Company (A)
obtains the approval of its shareholders as required by the applicable
rules of the Principal Market for issuances of Ordinary Shares in
excess of such amount (the "Shareholder Approval") or (B) obtains a
written opinion from outside counsel to the Company that such approval
is not required, which opinion shall be reasonably satisfactory to the
Required Holders. Until such approval or written opinion is obtained,
no Buyer shall be issued, upon exercise or conversion, as applicable,
of any SPA Warrants, Ordinary Shares in an amount greater than the
product of the Exchange Cap multiplied by a fraction, the numerator of
which is the total number of Ordinary Shares issued to such Buyer
pursuant to the Securities Purchase Agreement on the Closing Date (as
defined in the Securities Purchase Agreement) and the denominator of
which is the aggregate number of Ordinary Shares issued to the Buyers
pursuant to the Securities Purchase Agreement on the Closing Date
(with respect to each Buyer, the "Exchange Cap Allocation"). In the
event that any Buyer shall sell or otherwise transfer any of such
Buyer's SPA Warrants, the transferee shall be allocated a pro rata
portion of such Buyer's Exchange Cap Allocation, and the restrictions
of the prior sentence shall apply to such transferee with respect to
the portion of the Exchange Cap Allocation allocated to such
transferee. In the event that any holder of SPA Warrants shall
exercise all of such holder's SPA Warrants into a number of Ordinary
Shares which, in the aggregate, is less than such holder's Exchange
Cap Allocation, then the difference between such holder's Exchange Cap
Allocation and the number of Ordinary Shares actually issued to such
holder shall be allocated to the respective Exchange Cap Allocations
of the remaining holders of SPA Warrants on a pro rata basis in
proportion to the Ordinary Shares underlying the SPA Warrants then
held by each such holder. In the event that the Company is prohibited
from issuing any Warrant Shares for which an Exercise Notice has been
received as a result of the operation of this Section 1(f)(ii), the
Company shall pay cash in exchange for cancellation of such Warrant
Shares, at a price per Warrant Share equal to the difference between
the Closing Sale Price and the Exercise Price as of the date of the
attempted exercise.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:
(a) Adjustment upon Issuance of Ordinary Shares. If and whenever on or
after the Subscription Date the Company issues or sells, or in accordance
with this Section 2 is deemed to have issued or sold, any Ordinary Shares
(including the issuance or sale of Ordinary Shares owned or held by or for
the account of the Company, but excluding Ordinary Shares deemed to have
been issued by the Company in connection with any Excluded Securities (as
defined in the Securities Purchase Agreement)) for a consideration per
share less than a price (the "Applicable Price") equal to the Exercise
Price in effect immediately prior to such issue or
5
sale or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the product of (A) the Exercise
Price in effect immediately prior to such Dilutive Issuance and (B) the
quotient determined by dividing (1) the sum of (I) the product derived by
multiplying the Exercise Price in effect immediately prior to such Dilutive
Issuance and the number of Ordinary Shares Deemed Outstanding immediately
prior to such Dilutive Issuance plus (II) the consideration, if any,
received by the Company upon such Dilutive Issuance, by (2) the product
derived by multiplying (I) the Exercise Price in effect immediately prior
to such Dilutive Issuance by (II) the number of Ordinary Shares Deemed
Outstanding immediately after such Dilutive Issuance. Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares
shall be adjusted to the number of Ordinary Shares determined by
multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares acquirable upon exercise of this
Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment. For purposes
of determining the adjusted Exercise Price under this Section 2(a), the
following shall be applicable:
(i) Issuance of Options. If the Company in any manner grants any
Options and the lowest price per share for which one share of Ordinary
Shares is issuable upon the exercise of any such Option or upon
conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the Applicable
Price, then such share of Ordinary Shares shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share.
For purposes of this Section 2(a)(i), the "lowest price per share for
which one share of Ordinary Shares is issuable upon exercise of such
Options or upon conversion, exercise or exchange of such Convertible
Securities" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Ordinary Shares upon the granting or sale
of the Option, upon exercise of the Option and upon conversion,
exercise or exchange of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Exercise Price
or number of Warrant Shares shall be made upon the actual issuance of
such Ordinary Shares or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Ordinary
Shares upon conversion, exercise or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest price
per share for which one share of Ordinary Shares is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable
Price, then such share of Ordinary Shares shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such
price per share. For the purposes of this Section 2(a)(ii), the
"lowest price per share for which one share of Ordinary Shares is
issuable upon the conversion, exercise or exchange" shall be equal to
the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to one share of Ordinary Shares
upon the issuance or sale of the Convertible Security and upon
conversion, exercise or exchange of such Convertible Security. No
further adjustment of the Exercise Price or number of Warrant Shares
shall be made upon the actual issuance of such Ordinary Shares upon
conversion, exercise or exchange of such Convertible Securities, and
if any such issue or sale of such Convertible
6
Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other provisions
of this Section 2(a), no further adjustment of the Exercise Price or
number of Warrant Shares shall be made by reason of such issue or
sale.
(iii) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for Ordinary Shares increases or decreases at any time,
the Exercise Price and the number of Warrant Shares in effect at the
time of such increase or decrease shall be adjusted to the Exercise
Price and the number of Warrant Shares which would have been in effect
at such time had such Options or Convertible Securities provided for
such increased or decreased purchase price, additional consideration
or increased or decreased conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are increased
or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Ordinary
Shares deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such increase or
decrease. No adjustment pursuant to this Section 2(a) shall be made if
such adjustment would result in an increase of the Exercise Price then
in effect or a decrease in the number of Warrant Shares.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options will be deemed to have been issued for a
consideration of $0.01. If any Ordinary Shares, Options or Convertible
Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the
net amount received by the Company therefor. If any Ordinary Shares,
Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of such consideration
received by the Company will be the fair value of such consideration,
except where such consideration consists of securities, in which case
the amount of consideration received by the Company will be the
Closing Sale Price of such security on the date of receipt. If any
Ordinary Shares, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in
which the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is attributable
to such Ordinary Shares, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the Required
Holders. If such parties are unable to reach agreement within ten (10)
days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be
determined within five (5) Business Days after the tenth day following
the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of
such appraiser shall be final and binding upon all parties absent
manifest error and the fees and expenses of such appraiser shall be
borne by the Company.
(v) Record Date. If the Company takes a record of the holders of
Ordinary Shares for the purpose of entitling them (A) to receive a
dividend or other
7
distribution payable in Ordinary Shares, Options or in Convertible
Securities or (B) to subscribe for or purchase Ordinary Shares,
Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the Ordinary Shares
deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may
be.
(vi) Until such time as the Company receives the Shareholder
Approval, no adjustment pursuant to Section 2(a) shall cause the
Exercise Price to be less than $1.64, as adjusted for any stock
dividend, stock split, stock combination, reclassification or similar
transaction.
(b) Adjustment upon Subdivision or Combination of Ordinary Shares. If
the Company at any time on or after the Subscription Date subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding Ordinary Shares into a greater number of shares,
the Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding Ordinary Shares into a
smaller number of shares, the Exercise Price in effect immediately prior to
such combination will be proportionately increased and the number of
Warrant Shares will be proportionately decreased. Any adjustment under this
Section 2(b) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(c) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares so as to
protect the rights of the Holder; provided that no such adjustment pursuant
to this Section 2(c) will increase the Exercise Price or decrease the
number of Warrant Shares as otherwise determined pursuant to this Section
2.
3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make
any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Ordinary Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of
Ordinary Shares entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price
determined by multiplying such Exercise Price by a fraction of which (i)
the numerator shall be the Closing Bid Price of the Ordinary Shares on the
trading day immediately preceding such record date minus the value of the
Distribution (as determined in good faith by the Company's Board of
Directors) applicable to one share of Ordinary Shares, and (ii) the
8
denominator shall be the Closing Bid Price of the Ordinary Shares on the
trading day immediately preceding such record date; and
(b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of Ordinary Shares obtainable immediately prior
to the close of business on the record date fixed for the determination of
holders of Ordinary Shares entitled to receive the Distribution multiplied
by the reciprocal of the fraction set forth in the immediately preceding
paragraph (a); provided that in the event that the Distribution is of
Ordinary Shares (or common stock) ("Other Ordinary Shares") of a company
whose Ordinary Shares (or common stock) are traded on a national securities
exchange or a national automated quotation system, then the Holder may
elect to receive a warrant to purchase Other Ordinary Shares in lieu of an
increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Ordinary Shares that would
have been payable to the Holder pursuant to the Distribution had the Holder
exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the
Distribution pursuant to the terms of the immediately preceding paragraph
(a) and the number of Warrant Shares calculated in accordance with the
first part of this paragraph (b).
4. PURCHASE RIGHTS; ORGANIC CHANGE.
(a) Purchase Rights. In addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Ordinary Shares (the "Purchase Rights"), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the
Holder had held the number of Ordinary Shares acquirable upon complete
exercise of this Warrant (without regard to any limitations on the exercise
of this Warrant) immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Ordinary Shares are to
be determined for the grant, issue or sale of such Purchase Rights.
(b) Fundamental Transactions. The Company shall not enter into or be
party to a Fundamental Transaction, unless (i) the Person formed by or
surviving any such Fundamental Transaction (if other than the Company) or
the Person to which such Fundamental Transaction shall have been made
assumes all the obligations of the Company under this Warrant and the other
Transaction Documents (as defined in the Securities Purchase Agreement)
pursuant to written agreements in form and substance satisfactory to the
Required Holders and approved by the Required Holders prior to such
Fundamental Transaction, and including agreements to deliver to each holder
of SPA Warrants in exchange for such SPA Warrants, a security of the Person
formed by or surviving any such Fundamental Transaction (if other than the
Company) or the Person to which such Fundamental Transaction shall have
been made evidenced by a written instrument substantially similar in form
and substance to the SPA Warrants, including, without limitation, an
adjusted exercise price equal to the value for the Ordinary Shares
reflected by the terms of such Fundamental Transaction, and exercisable for
a corresponding number of Ordinary
9
Shares acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant), if the value so
reflected is less than the Exercise Price in effect immediately prior to
such Fundamental Transaction, and (ii) the Company or the Person formed by
or surviving any such Fundamental Transaction or to which such Fundamental
Transaction shall have been made is a publicly traded entity whose common
stock or equivalent equity security is quoted on or listed for trading on
an Eligible Market. Upon any Fundamental Transaction, the successor entity
to such Fundamental Transaction shall succeed to, and be substituted for
(so that from and after the date of such Fundamental Transaction, the
provisions of this Warrant referring to such "Company" shall refer instead
to the successor entity or, if so elected by the Required Holders, by the
entity that, directly or indirectly, controls such successor entity), and
may exercise every right and power of the Company and shall assume all of
the obligations of the Company under this Warrant with the same effect as
if such successor Person had been named as the Company herein; provided,
however, that the predecessor Company shall not be relieved from its
obligations under the Transaction Documents except in the case of a
Fundamental Transaction that meets the requirements of this section. In
addition to and not in substitution for any other rights hereunder, prior
to the consummation of any Fundamental Transaction pursuant to which
holders of Ordinary Shares are entitled to receive securities or other
assets with respect to or in exchange for Ordinary Shares (a "Corporate
Event"), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant, (i) in addition to the Ordinary Shares receivable upon such
exercise, such securities or other assets to which the Holder would have
been entitled with respect to such Ordinary Shares had such Ordinary Shares
been held by the Holder upon the consummation of such Corporate Event
(without regard to any limitations on the exercise of this Warrant) or (ii)
in lieu of the Ordinary Shares otherwise receivable upon such exercise,
such securities or other assets received by the holders of Ordinary Shares
in connection with the consummation of such Corporate Event in such amounts
as the Holder would have been entitled to receive had this Warrant
initially been issued with exercise rights for the form of such
consideration (as opposed to Ordinary Shares) at an exercise price for such
consideration commensurate with the Exercise Price. Provision made pursuant
to the preceding sentence shall be in a form and substance satisfactory to
the Required Holders. The provisions of this Section shall apply similarly
and equally to successive Fundamental Transactions and Corporate Events.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Association, Memorandum of
Association or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, and will at all times in good faith carry out
all the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder. Without limiting the generality of the
foregoing, the Company (i) shall not increase the nominal value of any Ordinary
Shares receivable upon the exercise of this Warrant above the Exercise Price
then in effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Ordinary Shares upon the exercise of this Warrant, and (iii)
shall, so long as any of the SPA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
Ordinary Shares, solely for the purpose of effecting the exercise of the SPA
Warrants, 130% of the number of Ordinary Shares as shall from time to time be
10
necessary to effect the exercise of the SPA Warrants then outstanding (without
regard to any limitations on exercise).
6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
7. REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the
Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant
(in accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant
Shares then underlying this Warrant is being transferred, a new Warrant (in
accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft
or destruction, of any indemnification undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender
and cancellation of this Warrant, the Company shall execute and deliver to
the Holder a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the Warrant Shares then underlying this Warrant.
(c) Warrant Exchangeable for Multiple Warrants. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Warrant or Warrants (in accordance with
Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new
Warrant will represent the right to purchase such portion of such Warrant
Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional Ordinary Shares shall be
given.
11
(d) Issuance of New Warrant. Whenever the Company is required to issue
a new Warrant pursuant to the terms of this Warrant, such new Warrant (i)
shall be of like tenor with this Warrant, (ii) shall represent, as
indicated on the face of such new Warrant, the right to purchase the
Warrant Shares then underlying this Warrant (or in the case of a new
Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of Ordinary
Shares underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of
such new Warrant which is the same as the Issuance Date, and (iv) shall
have the same rights and conditions as this Warrant.
8. NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Ordinary Shares, (B) with respect to any
grants, issues or sales of any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property to holders of Ordinary
Shares or (C) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrants or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrants without the written consent of the Holder. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.
10. GOVERNING LAW. Except for matters that are inherently governed by the
corporate laws of the State of Israel, this Warrant shall be construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against any
person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
12
12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of
the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two Business Days of receipt of the Exercise Notice giving rise
to such dispute, as the case may be, to the Holder. If the Holder and the
Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two Business Days submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company's independent,
outside accountant. The Company shall cause at its expense the investment bank
or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
ten Business Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
14. TRANSFER. This Warrant may not be offered for sale, sold, transferred
or assigned without the consent of the Company, except as may otherwise be
permitted by Section 2(f) of the Securities Purchase Agreement.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) "Bloomberg" means Bloomberg Financial Markets.
(b) "Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
(c) "Closing Bid Price" and "Closing Sale Price" means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported
by Bloomberg, or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade
price, respectively, of
13
such security prior to 4:00:00 p.m., New York Time, as reported by
Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such security in
the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market
makers for such security as reported in the "pink sheets" by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall
be the fair market value as mutually determined by the Company and the
Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant
to Section 12. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
(d) "Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or
exchangeable for Ordinary Shares.
(e) "Effective Date" means the date on which the Registration
Statement (as defined in the Registration Rights Agreement) is first
declared effective by the Securities and Exchange Commission.
(f) "Eligible Market" means the Principal Market, the Nasdaq National
Market or The New York Stock Exchange, Inc.
(g) "Expiration Date" means the date that is the later of (i) the 24
month anniversary of the Effective Date or, if such date falls on a day
other than a Business Day or on which trading does not take place on the
Principal Market (a "Holiday"), the next date that is not a Holiday, and
(ii) the 24 month anniversary of the Shareholder Approval Date or, if such
date falls on a Holiday, the next date that is not a Holiday; provided,
however, if, at any time after the Effective Date and prior to the original
Expiration Date the Registration Statement (as defined in the Registration
Rights Agreement) is not effective and available for the resale of all of
the Registrable Securities (as defined in the Registration Rights
Agreement) (including during an Allowable Grace Period (as defined in the
Registration Rights Agreement)), such original Expiration Date shall
automatically be extended by such number of days after the Effective Date
and prior to the original Expiration Date that the Registration Statement
was not effective and available for the resale of all of the Registrable
Securities.
(h) "Fundamental Transaction" means that the Company shall, directly
or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving
corporation) another Person, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets
of the Company to another Person, or (iii) allow a purchase, tender or
exchange offer to be made to and
14
accepted by the holders of more than the 50% of the outstanding Ordinary
Shares (not including any Ordinary Shares held by the Person or Persons
making or party to, or associated or affiliated with the Persons making or
party to, such purchase, tender or exchange offer), or (iv) enter into a
stock purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person.
(i) "Options" means any rights, warrants or options to subscribe for
or purchase Ordinary Shares or Convertible Securities.
(j) "Ordinary Shares" means (i) the Company's Ordinary Shares, NIS
0.005 nominal value per share, and (ii) any share capita into which such
Ordinary Shares shall have been changed or any share capital resulting from
a reclassification of such Ordinary Shares.
(k) "Ordinary Shares Deemed Outstanding" means, at any given time, the
number of Ordinary Shares actually outstanding at such time, plus the
number of Ordinary Shares deemed to be outstanding pursuant to Sections
2(a)(i) and 2(a)(ii) hereof regardless of whether the Options or
Convertible Securities are actually exercisable at such time, but excluding
any Ordinary Shares owned or held by or for the account of the Company or
issuable upon conversion or exercise, as applicable, of the SPA Warrants.
(l) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(m) "Principal Market" means The Nasdaq Small Cap Market.
(n) "Registration Rights Agreement" means that certain registration
rights agreement by and among the Company and the Buyers.
(o) "Required Holders" means the holders of the SPA Warrants
representing at least a majority of Ordinary Shares underlying the SPA
Warrants then outstanding.
(p) "Trading Day" means any day on which the Ordinary Shares are
traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Ordinary Shares, then on the principal
securities exchange or securities market on which the Ordinary Shares are
then traded; provided that "Trading Day" shall not include any day on which
the Ordinary Shares are scheduled to trade on such exchange or market for
less than 4.5 hours or any day that the Ordinary Shares are suspended from
trading during the final hour of trading on such exchange or market (or if
such exchange or market does not designate in advance the closing time of
trading on such exchange or market, then during the hour ending at 4:00:00
p.m., New York Time).
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Ordinary Shares to be duly executed as of the Issuance Date set out above.
RADA ELECTRONIC INDUSTRIES LTD.
By:
----------------------------
Name:
Title:
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANTS TO PURCHASE ORDINARY SHARES
RADA ELECTRONIC INDUSTRIES LTD.
The undersigned holder hereby exercises the right to purchase
_________________ of the Ordinary Shares ("Warrant Shares") of RADA Electronic
Industries Ltd., a corporation organized under the laws of the State of Israel
(the "Company"), evidenced by the attached Warrant to Purchase Ordinary Shares
(the "Warrant"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
_____ a "Cash Exercise" with respect to _________ Warrant Shares; and/or
_____ a "Cashless Exercise" with respect to ________ Warrant Shares.
2. Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
____________________________________________
Name of Registered Holder
By:
-----------------------------------
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
American Stock Transfer & Trust Co. to issue the above indicated number of
Ordinary Shares in accordance with the Transfer Agent Instructions dated April
7, 2005 from the Company and acknowledged and agreed to by American Stock
Transfer & Trust Co.
RADA ELECTRONIC INDUSTRIES LTD.
By:
----------------------------
Name:
Title:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Rada Electronic Industries Ltd.
(Registrant)
By: /s/Herzle Bodinger
------------------
Herzle Bodinger, Chairman
Date: April 7, 2005