Exhibit 3.2
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THE COMPANIES ORDINANCE
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A COMPANY LIMITED BY SHARES
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ARTICLES OF ASSOCIATION
OF
RTS SOFTWARE LTD.
P R E L I M I N A R Y
1. Second Schedule Excluded
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The regulations contained in the second schedule to the Companies
Ordinance (New Version), 5743-1983 shall not apply to the Company.
2. Interpretation
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(a) Unless the subject or the context otherwise requires: words and
expressions defined in the Companies Ordinance in force on the date
when these Articles or any amendment thereto, as the case may be,
first became effective shall have the same meanings herein; words and
expressions importing the singular shall include the plural and vice
versa; words and impressions importing the masculine gender shall
include the feminine gender; and words and expressions importing
persons shall include bodies corporate.
(Two) The captions in these Articles are for convenience only and shall
not be deemed a part hereof or affect the construction of any provision
hereof.
(Three) In these Articles the term the Companies Ordinance, shall mean
the Companies Ordinance (New Version), 5743-1983 or any statutory re-
enactment or modification thereof for the time being in force
including the Companies Law-1999; and any reference to any section or
provision of the Companies Ordinance shall include a reference to any
statutory re-enactment or modification thereof for the time being in
force including the relevant provisions of the Companies Law-1999.
3. Private Company
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The Company is a private company and accordingly:
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(a) the number of members for the time being of the Company (exclusive of
persons who are in the employment of the Company and of persons who
having been formerly in the employment of the Company were, while in
such employment, and have continued after termination of such
employment to be, members of the Company), shall not exceed fifty
(50), but where 2 or more persons jointly own one or more shares in
the Company, they shall, for the purpose of this Article be treated as
a single member;
(b) any invitation to the public to subscribe for any shares or debentures
or debenture stock of the Company is prohibited; and
(c) the right to transfer shares in the Company shall be restricted as
hereinafter provided.
SHARE CAPITAL
4. Share Capital
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(a) The registered share capital of the Company is three and a half
million New Israeli Shekels (NIS 3,500,000) divided into eighteen
million and nine hundred thousand (18,900,000) ordinary shares of a
nominal value of ten Agorot (NIS 0.1) each (the "Ordinary Shares"),
six million one hundred and thirty three thousand, three hundred and
thirty (6,133,330) Series A Preferred Shares of a nominal value of ten
Agorot (NIS 0.1) each (the "Series A Preferred Shares"), eight hundred
sixty six thousand and six hundred and seventy (866,670) Series B Non
Voting Preferred Shares of a nominal value of ten Agorot (NIS 0.1)
each (the "Series B Non Voting Preferred Shares"), four million
(4,000,000) Series C-1 Preferred Shares of a nominal value of ten
Agorot (NIS 0.1) each (the "Series C-1 Preferred Shares") and five
million and one hundred thousand (5,100,000) Series C-2 Preferred
Shares of a nominal value of ten Agorot (NIS 0.1) each (the "Series C-
2 Preferred Shares").
(The Series A Preferred Shares, Series B Non Voting Preferred Shares,
Series C-1 Preferred Shares and Series C-2 Preferred Shares shall be
referred to herein collectively as the "Preferred Shares" and the
Series C-1 Preferred Shares and Series C-2 Preferred Shares shall be
referred to herein collectively as the "Series C Preferred Shares").
(b) Each Ordinary Share (including Ordinary Shares converted from the
Series A Preferred Shares, the Series B Non Voting Preferred Shares
and from the Series C Preferred Shares) entitles its holder to receive
notice of, and to participate in, all General Meetings of the Company,
and to one (1) vote in such meeting for every share, and the other
rights he is legally entitled to and as specified in these Articles.
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5. Preferred Shares
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The Preferred Shares confer on the holders thereof all rights accruing to
holders of Ordinary Shares in the Company and, in addition, bear the
following rights:
(a) Subject to any provision hereof conferring special rights as to
voting, or restricting the right to vote, every holder of Preferred
Shares shall have one vote for each Ordinary Share into which the
Preferred Shares held by him of record could be converted (as provided
in this Article), on every resolution, without regard to whether the
vote thereon is conducted by a show of hands, by written ballot or by
any other means.
Anything else in these Articles to the contrary notwithstanding, the
Series B Non Voting Preferred Shares will not have any voting rights;
provided, however, that upon the transfer from the Original Holder
(i.e. the holder which holds them on the date the previous Amendment
first became effective), the holder following such transfer may, by
written notice to the Company delivered by hand or by air courier
within fifteen (15) days following such transfer, elect that such
shares will have voting rights while held by such holder, and shall
thereafter be automatically converted into Series A Preferred Shares.
(b) Each Preferred Share shall be convertible at the option of the holder
thereof, at any time after the date of issuance of such share, at the
office of the Company, into such number of fully paid and non-
assessable Ordinary Shares equal to the number which is determined by
dividing the applicable Original Issue Price (as defined below) by the
applicable Conversion Price (as defined in and subject to adjustment
under Article 5(d)) at the time in effect for such share (the
"Conversion Ratio"); provided, however, that with respect to each
Series C Preferred Share, its Conversion Ratio shall be further
adjusted prior to its conversion into Ordinary Shares by adding the
Adjustment (as such a term is defined in Article 5(d)(i)(A)(b)(iii) or
Article 5(d)(i)(A)(c)(iii), as the case may be) to the applicable
Conversion Ratio for the Series C Preferred Shares, such that each
Series C Preferred Share shall be convertible into such number of
fully paid and non assessable Ordinary Shares equal to the sum of the
Series C-1 Preferred Shares or Series C-2 Preferred Shares Conversion
Ratio, as the case may be, plus the appropriate Adjustment.
(i) With respect to Series A Preferred Shares and Series B Non Voting
Preferred Shares: in the event that fewer than an aggregate of
one million five hundred and eight thousand and ninety three
(1,508,093) Series A Preferred Shares and Series B Non Voting
Preferred Shares, remain issued and outstanding as a result of
optional conversions pursuant to Article 5(b), then the Company
may, at its option, cause the conversion of each and every issued
and outstanding Series A Preferred Share and Series B Non Voting
Preferred Share into a number of fully paid and non-assessable
Ordinary Shares equal to the number which is determined by
dividing the applicable Original Issue Price by the applicable
Conversion Price (subject to adjustment under
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Article 5(d)) at the time in effect for such share, by
delivery of written notice to the holders of such Preferred
Shares.
(ii) With respect to Series C Preferred Shares: in the event that
fewer than one million, six hundred and fifty seven
thousand, five hundred and eighty six (1,657,586) Series C
Preferred Shares, remain issued and outstanding as a result
of optional conversions pursuant to Article 5(b) then the
Company may, at its option, cause the conversion of each and
every issued and outstanding Series C Preferred Share into a
number of fully paid and non-assessable Ordinary Shares
equal to the sum of the Series C Preferred Shares Conversion
Ratio then in effect plus the Adjustment (as described in
Article 5(b) above), by delivery of written notice to the
holders of Series C Preferred Shares.
Each Preferred Share shall, immediately upon the closing of
the Company's sale of its Ordinary Shares to the public in a
bona fide underwriting pursuant to a registration statement
under the U.S. Securities Act of 1933, as amended, the
Israeli Securities Law, 1968, or similar securities laws of
another jurisdiction, at a price per share of not less than
six U.S. Dollars and ninety nine cents (US$6.99) (as
adjusted for share combinations or subdivisions or other
recapitalizations of the Company's shares) with net proceeds
to the Company of not less than Seven Million Five Hundred
Thousand United States Dollars (US$7,500,000) (the "IPO"),
automatically be converted into such number of fully paid
and non-assessable Ordinary Shares as is determined by
dividing the applicable Original Issue Price by the
applicable Conversion Price (subject to adjustment under
Article 5(d)) at the time in effect for such share;
provided, however, that each Series C Preferred Share shall
instead be converted into such number of fully paid and non
assessable Ordinary Shares equal to the sum of the Series
C-1 Preferred Shares or Series C-2 Preferred Shares
Conversion Ratio, as the case may be, plus the appropriate
Adjustment (as described in Article 5(b) above).
The "Original Issue Price" of the Series A Preferred Shares
is two dollars and thirty-three cents (U.S.$2.33); the
"Original Issue Price" of the Series B Non Voting Preferred
Shares is two dollars and thirty-three cents (U.S.$2.33);
the "Original Issue Price" of the Series C-1 Preferred
Shares is three dollars and ninety cents (U.S.$3.90); and
the "Original Issue Price" of the Series C-2 Preferred
Shares is five dollars and seventy five cents (U.S.$5.75).
Anything else in these Articles to the contrary
notwithstanding, the Series B Non Voting Preferred Shares
will not be convertible at the option of the Original Holder
thereof pursuant to the first sentence of Article 5(b);
provided, however, that immediately after there are fewer
than 1,508,090 Series A Preferred Shares remaining issued
and outstanding as a result of optional conversions pursuant
to the first
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sentence of Article 5(b) or upon the closing of the IPO, the
earlier of the two, each Series B Non Voting Preferred Share
shall be automatically converted, without any action by the
holders of such Series B Non Voting Preferred Shares, into
such number of fully-paid and non-assessable Ordinary Shares
as is determined by dividing the applicable Conversion Price
(subject to adjustment under Article 5(d)) at the time in
effect for such share.
(c) Before any holder of Preferred Shares shall be entitled (in the case
of a conversion at such holder's option) to convert the same into
Ordinary Shares, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company, and shall give
written notice by mail, postage prepaid, to the Company at its
principal corporate office, of the election to convert the same and
shall state therein the name or names of any nominee for such holder
in which the certificate or certificates for Ordinary Shares are to be
issued. Such conversion (in the case of a conversion at such holder's
option) shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the certificate
representing the Preferred Shares to be converted, and the person or
persons entitled to receive the Ordinary Shares issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such Ordinary Shares as of such date. If the conversion is
at the option of the Company (pursuant to subsection (i) or subsection
(ii) of this Article 5(b)) or is in connection with an IPO, then the
conversion shall be deemed to have taken place automatically
regardless of whether the certificates representing such shares have
been tendered to the Company, but from and after such conversion any
such certificates not tendered to the Company shall be deemed to
evidence solely the Ordinary Shares received upon such conversion and
the right to receive a certificate for such Ordinary Shares. If the
conversion is in connection with an IPO, the conversion may, at the
option of any holder tendering Preferred Shares for conversion, be
conditioned upon the closing with the underwriter of the sale of
securities pursuant to such offering, in which event the person(s)
entitled to receive the Ordinary Shares issuable upon such conversion
of the Preferred Shares shall not be deemed to have converted such
Preferred Shares until immediately prior to the closing of such sale
of securities. The Company shall, as soon as practicable after the
conversion and tender of the certificate for the Preferred Shares
converted, issue and deliver at such office to such holder of
Preferred Shares or to the nominee or nominees of such holder of
Preferred Shares or to the nominee or nominees of such holder, a
certificate or certificates for the number of Ordinary Shares to which
such holder shall be entitled as aforesaid.
(d) The initial Conversion Price for the Series A Preferred Shares shall
be two United States Dollars and thirty-three cents (U.S.$2.33)
(subject to any adjustments under this Article 5(d), the "Series A
Conversion Price"); the initial conversion price for the Series B Non
Voting Preferred Shares shall be two United States Dollars and thirty-
three cents (U.S.$2.33) (subject to any adjustments under this Article
5(d), the "Series B Conversion Price");
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the initial Conversion Price for the Series C-1 Preferred Shares shall
be three United States Dollars and ninety cents (U.S.$3.90) (subject
to any adjustments under this Article 5(d), the "Series C-1 Conversion
Price"); and the initial Conversion Price for the Series C-2 Preferred
Shares shall be five United States Dollars and seventy five cents
(U.S.$5.75) (subject to any adjustments under this Article 5(d), the
"Series C-2 Conversion Price"). The Series A Conversion Price, the
Series B Conversion Price, the Series C-1 Conversion Price and the
Series C-2 Conversion Price shall be adjusted from time to time as
follows:
(i) (A) (a) With respect to Series A Preferred Shares and Series B
Non Voting Preferred Shares:
Upon each issuance by the Company of any Additional Shares (as
defined below) at a price per share less than the applicable
Series A Conversion Price and/or Series B Conversion Price, as
the case may be, then in effect, such Series A Conversion Price
and/or Series B Conversion Price, as the case may be, will be
reduced to an amount equal to a fraction (i) the numerator of
which is the sum of (A) the total number of Ordinary Shares
outstanding prior to the issuance of such Additional Shares (on a
fully-diluted basis after giving effect to all options to
purchase Ordinary Shares and assuming the conversion into
Ordinary Shares of all convertible securities) multiplied by the
applicable Series A Conversion Price and/or Series B Conversion
Price, as the case may be, in effect prior to the issuance of
such Additional Shares plus (B) the total amount of the
consideration received by the Company for such Additional Shares,
and (ii) the denominator of which is the sum of the total number
of Ordinary Shares outstanding immediately prior to the issuance
of such Additional Shares (on a fully-diluted basis after giving
effect to all options to purchase Ordinary Shares and assuming
the conversion into Ordinary Shares of all convertible
securities) plus the number of such Additional Shares issued.
(b) With respect to Series C-1 Preferred Shares:
(i) Upon each issuance by the Company of any
Additional Shares (as defined below) at a price
per share which is less than the Series C-1
Conversion Price then in effect but which is equal
to or above three U.S. Dollars and fifty cents
(U.S.$3.50) per share (as adjusted for share
combinations or subdivisions or other
recapitalizations of the Company's shares) (the
"C-1 Additional Share Price") then the Series C-1
Conversion Price will be reduced to an amount
equal to the C-1 Additional Share Price.
(ii) Upon each issuance by the Company of any
Additional Shares (as defined below) at a price
per share which is less than three U.S. Dollars
and fifty cents (U.S.$3.50)
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(as adjusted for share combinations or
subdivisions or other recapitalizations of the
Company's shares), such Series C-1 Conversion
Price will be adjusted in two steps as follows:
At the first step: the Series C-1 Conversion
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Price will be adjusted to the lesser of (x) the
then current Series C-1 Conversion Price or (y)
three U.S. Dollars and fifty cents (U.S.$3.50),
(as adjusted for share combinations or
subdivisions or other recapitalizations of the
Company's shares) (the "Interim Series C-1
Conversion Price"); and
At the second step the Series C-1 Conversion
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Price will be reduced to an amount equal to a
fraction: (i) the numerator of which is the sum
of (A) the total number of Ordinary Shares
outstanding prior to the issuance of such
Additional Shares (on a fully diluted basis after
giving effect to all options to purchase Ordinary
Shares and assuming the conversion into Ordinary
Shares of all convertible securities) multiplied
by the Interim Series C-1 Conversion Price
calculated in the immediately preceding first
step plus (B) the total amount of the
consideration received by the Company for such
Additional Shares, and (ii) the denominator of
which is the sum of the total number of Ordinary
Shares outstanding immediately prior to the
issuance of such Additional Shares (on a fully
diluted basis after giving effect to all options
to purchase Ordinary Shares and assuming the
conversion into Ordinary Shares of all
convertible securities) plus the number of such
Additional Shares issued.
(iii) In addition to Article 5(d)(i)(A)(b)(i) and
Article 5(d)(i)(A)(b)(ii) above, except for the
issuance of Ordinary Shares pursuant to stock
options outstanding on February 26, 1998 held by
the Company's employees, consultants, contractors
and directors to purchase up to 1,862,435
Ordinary Shares (as adjusted for share
combinations or subdivisions or other
recapitalizations of the Company's shares) (the
"C-1 Existing Options"), in the event that from
and after February 26, 1998 and until the IPO the
Company shall grant or issue any Ordinary Shares,
options to purchase Ordinary Shares or other
securities convertible into or exchangeable for
Ordinary Shares to its employees, consultants,
contractors and/or directors (if in transactions
with primarily non-financing purposes, provided,
however, that all transactions with
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employees, consultants, contractors and/or
directors shall be deemed for non-financing
purposes unless the Company's Board of Directors,
including at least one of the Preferred Shares
Director, determines otherwise) that together in
the aggregate exceed the "Employee Reserve" (as
defined below) (as adjusted for share
combinations or subdivisions or other
recapitalizations of the Company's shares), then
the applicable Conversion Ratio of the Series C-1
Preferred Shares shall be adjusted by adding
0.00091 to the applicable Conversion Ratio of the
Series C-1 Preferred Shares for every 10,000 (as
adjusted for share combinations or subdivisions
or other recapitalizations of the Company's
shares) additional Ordinary Shares issued
(including Ordinary Shares deemed to be issued
pursuant to subsections 5(d)(i)(E)(i) or
5(d)(i)(E)(ii)) to employees, consultants,
contractors and/or directors (if in transactions
with primarily non financing purposes, as
described above) in excess of the Employee
Reserve (as adjusted for share combinations or
subdivisions or other recapitalizations of the
Company's shares (the "C-1 Adjustment") according
to the formula specified below:
C-1 Adjustment = (0.00091 * (X/10,000))
Where:
X= the number of Ordinary Shares issued
(including Ordinary Shares deemed issued pursuant
to section 5(d)(i)(E)(i) or 5(d)(i)(E)(ii)) in
excess of the Employee Reserve (except for the
issuance of Ordinary Shares pursuant to the
exercise of C-1 Existing Options) with both such
Employee Reserve and the 10,000 number adjusted
for share combinations or subdivisions or other
recapitalizations of the Company's shares); and
Employee Reserve = 150,000 (as adjusted for share
combinations or subdivisions or other
recapitalizations of the Company's shares) plus
that number (as adjusted for share combinations
or subdivisions or other recapitalizations of the
Company's shares) which are no longer issuable
pursuant to C-1 Existing Options because of the
termination, without exercise, of such C-1
Existing Options.
An example of the application of the
abovementioned anti dilution provisions is
attached hereto as Exhibit A to this Amendment.
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Such C-1 Adjustment shall be added to the
applicable Series C-1 Preferred Shares Conversion
Ratio only upon the conversion of the Series C-1
Preferred Shares into Ordinary Shares and not
prior to such date and for all purposes of these
Articles the phrase "on an as converted basis"
shall not include the C-1 Adjustment.
(c) With respect to Series C-2 Preferred Shares:
(i) Upon each issuance by the Company of any
Additional Shares (as defined below) at a price
per share which is less than the Series C-2
Conversion Price then in effect but which is equal
to or above five U.S. Dollars and eighteen cents
(U.S.$5.18) per share (as adjusted for share
combinations or subdivisions or other
recapitalizations of the Company's shares) (the
"C-2 Additional Share Price") then the Series C-2
Conversion Price will be reduced to an amount
equal to the C-2 Additional Share Price.
(ii) Upon each issuance by the Company of any
Additional Shares (as defined below) at a price
per share which is less than five U.S. Dollars and
eighteen cents (U.S.$5.18) (as adjusted for share
combinations or subdivisions or other
recapitalizations of the Company's shares), such
Series C-2 Conversion Price will be adjusted in
two steps as follows:
At the first step: the Series C-2 Conversion Price
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will be adjusted to the lesser of (x) the then
current Series C-2 Conversion Price or (y) five
U.S. Dollars and eighteen cents (U.S.$5.18), (as
adjusted for share combinations or subdivisions or
other recapitalizations of the Company's shares)
(the "Interim Series C-2 Conversion Price"); and
At the second step the Series C-2 Conversion Price
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will be reduced to an amount equal to a fraction:
(i) the numerator of which is the sum of (A) the
total number of Ordinary Shares outstanding prior
to the issuance of such Additional Shares (on a
fully diluted basis after giving effect to all
options to purchase Ordinary Shares and assuming
the conversion into Ordinary Shares of all
convertible securities) multiplied by the Interim
Series C-2 Conversion Price calculated in the
immediately preceding first step plus (B) the
total amount of the consideration received by the
Company for such Additional Shares, and (ii) the
denominator of which is the sum of the total
number of Ordinary Shares outstanding immediately
prior to the issuance of
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such Additional Shares (on a fully diluted basis
after giving effect to all options to purchase
Ordinary Shares and assuming the conversion into
Ordinary Shares of all convertible securities)
plus the number of such Additional Shares issued.
(iii) In addition to Article 5(d)(i)(A)(c)(i) and
Article 5(d)(i)(A)(c)(ii) above, except for the
issuance of Ordinary Shares pursuant to stock
options outstanding on June 1, 1999 held by the
Company's employees, consultants, contractors and
directors to purchase Ordinary Shares or options
reserved for such purposes as of such date (as
adjusted for share combinations or subdivisions or
other recapitalizations of the Company's shares)
(the "C-2 Existing Options"), in the event that
from and after June 1, 1999 and until the IPO the
Company shall grant or issue any Ordinary Shares,
options to purchase Ordinary Shares or other
securities convertible into or exchangeable for
Ordinary Shares to its employees, consultants,
contractors and/or directors (if in transactions
with primarily non-financing purposes, provided,
however, that all transactions with employees,
consultants, contractors and/or directors shall be
deemed for non-financing purposes unless the
Company's Board of Directors, including at least
one of the Preferred Shares Director, determines
otherwise) that together in the aggregate exceed
the C-2 Existing Options, then the applicable
Conversion Ratio of the Series C-2 Preferred
Shares shall be adjusted by adding 0.00067 to the
applicable Conversion Ratio of the Series C-2
Preferred Shares for every 10,000 (as adjusted for
share combinations or subdivisions or other
recapitalizations of the Company's shares)
additional Ordinary Shares issued (including
Ordinary Shares deemed to be issued pursuant to
subsections 5(d)(i)(E)(i) or 5(d)(i)(E)(ii)) to
employees, consultants, contractors and/or
directors (if in transactions with primarily non
financing purposes, as described above) in excess
of the Employee Reserve (as adjusted for share
combinations or subdivisions or other
recapitalizations of the Company's shares (the "C-
2 Adjustment") according to the formula specified
below:
C-2 Adjustment = (0.00067 * (X/10,000))
Where:
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X= the number of Ordinary Shares issued (including
Ordinary Shares deemed issued pursuant to section
5(d)(i)(E)(i) or 5(d)(i)(E)(ii)) in excess of the
C-2 Existing Options (except for the issuance of
Ordinary Shares pursuant to the exercise of C-2
Existing Options) with both such C-2 Existing
Options and the 10,000 number adjusted for share
combinations or subdivisions or other
recapitalizations of the Company's shares).
An example of the application of the
abovementioned anti dilution provisions is
attached hereto as Exhibit B to this Amendment.
Such C-2 Adjustment shall be added to the
applicable Series C-2 Preferred Shares Conversion
Ratio only upon the conversion of the Series C-2
Preferred Shares into Ordinary Shares and not
prior to such date and for all purposes of these
Articles the phrase "on an as converted basis"
shall not include the C-2 Adjustment.
(B) No adjustments of a Conversion Price shall be made in
an amount less than one cent (US$0.01) per share. No
adjustment of a Conversion Price shall be made if it
has the effect of increasing the Conversion Price
beyond the applicable Conversion Price in effect for
such series of Preferred Shares immediately prior to
such adjustment.
(C) The consideration for the issuance of Additional Shares
shall (a) to the extent it consists of cash, be deemed
to be the amount of cash received therefor after giving
effect to any discounts or commissions paid or incurred
by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof, and (b)
to the extent it consists of property other than cash,
be computed at the fair market value of such property
as determined in good faith by the Company's Board of
Directors, provided, however that if a majority in
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interest of the holders of the Series A Preferred
Shares and Series B Non Voting Preferred Shares or a
majority in interest of the holders of Series C
Preferred Shares dispute the determination by the Board
of Directors then the fair market value of such
property shall be determined by an independent
appraiser selected by a majority in interest of the
holders of Series A Preferred Shares and Series B Non
Voting Preferred Shares or a majority in interest of
the Series C Preferred Shares, as applicable, from a
list of five (5) potential appraisers submitted by the
Board of Directors, the costs and expenses of which
appraisal shall be borne by the Company.
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(D) For purpose of Subarticle (d)(i) hereof, the
consideration for any Additional Shares shall be taken
into account at the U.S. Dollar equivalent thereof, on
the day such Additional Shares are issued or deemed
issued, whichever is earlier.
(E) With respect to Series C Preferred Shares only, in the
case of the issuance of options to purchase Ordinary
Shares, securities by their terms convertible into or
exchangeable for Ordinary Shares or options to purchase
such convertible or exchangeable securities, the
following provisions shall apply for all purposes of
this subsection 5(d)(i) and subsection 5(d)(ii):
(i) The aggregate maximum number of Ordinary Shares
deliverable upon exercise (to the extent then
exercisable) of such options to purchase or
rights to subscribe for Ordinary Shares shall be
deemed to have been issued at the time such
options or rights were issued and for a
consideration equal to the consideration
(determined in the manner provided in subsection
2(d)(i)(C)), if any, received by the Company
upon the issuance of such options or rights plus
the minimum exercise price provided in such
options or rights for the Ordinary Shares
covered thereby.
(ii) The aggregate maximum number of Ordinary Shares
deliverable upon conversion of, or in exchange
(to the extent then convertible or exchangeable)
for, any such convertible or exchangeable
securities or upon the exercise of options to
purchase or rights to subscribe for such
convertible or exchangeable securities and
subsequent conversion or exchange thereof shall
be deemed to have been issued at the time such
securities were issued or such options or rights
were issued and for a consideration equal to the
consideration, if any, received by the Company
for any such securities and related options or
rights (excluding any cash received on account
of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to
be received by the Company upon the conversion
or exchange of such securities or the exercise
of any related options or rights (the
consideration in each case to be determined in
the manner provided in subsection 2(d)(i)(C)).
(iii) In the event of any change in the number of
Ordinary Shares deliverable or in the
consideration payable to the Company upon
exercise of such options or rights or upon
conversion of or in exchange for such
convertible or exchangeable securities,
including, but not limited to, a change
resulting from the anti dilution provisions
thereof, a Conversion Price, to the extent in
any way affected by or
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computed using such options, rights or
securities, shall be recomputed to reflect such
change, but no further adjustment shall be made
for the actual issuance of Ordinary Shares or
any payment of such consideration upon the
exercise of any such options or rights or the
conversion or exchange of such securities.
(iv) Upon the expiration of any such options or
rights, the termination of any such rights to
convert or exchange or the expiration of any
options or rights related to such convertible or
exchangeable securities, a Conversion Price, to
the extent in any way affected by or computed
using such options, rights or securities or
options or rights related to such securities,
shall be recomputed to reflect the issuance of
only the number of shares of Ordinary Shares
(and convertible or exchangeable securities that
remain in effect) actually issued upon the
exercise of such options or rights, upon the
conversion or exchange of such securities or
upon the exercise of the options or rights
related to such securities.
(v) The number of shares of Ordinary Shares deemed
issued and the consideration deemed paid
therefor pursuant to subsections 5(d)(i)(E)(i)
and (ii) shall be appropriately adjusted to
reflect any change, termination or expiration of
the type described in either subsections
5(d)(i)(E)(iii) or (iv).
(ii) "Additional Shares" shall mean any Ordinary Shares or any
Preferred Shares issued by the Company (including only with
respect to Series C Preferred Shares any options or warrants
to purchase Ordinary Shares, securities by their terms
convertible into or exchangeable for Ordinary Shares or
options to purchase such convertible or exchangeable
securities) other than:
(A) Ordinary Shares or any options or warrants to purchase
Ordinary Shares, securities by their terms convertible
into or exchangeable for Ordinary Shares or options or
warrants to purchase such convertible or exchangeable
securities, issued pursuant to a transaction described
in Subarticles (d)(iii) or (d)(iv) hereof.
(B) Ordinary Shares or any options or warrants to purchase
Ordinary Shares, securities by their terms convertible
into or exchangeable for Ordinary Shares or options or
warrants to purchase such convertible or exchangeable
securities, issued to employees, consultants,
contractors and/or directors of the Company (if in
transactions with primarily non-financing purposes)
directly or pursuant to an escrow arrangement as
approved by the Board of Directors of the Company.
-14-
(C) Ordinary Shares issued upon conversion of the
Preferred Shares.
(D) Ordinary or Preferred Shares issued upon exercise of
options/warrants or any other convertible securities
existing at the date this Amendment to the Articles
first becomes effective.
(E) Strategic Investor Shares. In these Articles
"Strategic Investor Shares" shall mean: shares of any
kind or any options or warrants to purchase Ordinary
Shares, securities by their terms convertible into or
exchangeable for Ordinary Shares or options or
warrants to purchase such convertible or exchangeable
securities, issued to an investor ("Strategic
Investor") which is capable of materially
contributing, directly or indirectly, (other than by
investing capital in the Company) to the Company's
marketing, distribution or sales and which is approved
as such by at least two of the Directors appointed by
the holders of Preferred Shares (of which one is the
Preferred C Director as defined below).
(iii) If the Company subdivides or combines its Ordinary Shares,
the Conversion Price shall be proportionately reduced, in
case of subdivision of shares, as at the effective date of
such subdivision, or if the Company fixes a record date for
the purpose of so subdividing, as at such record date,
whichever is earlier, or shall be proportionately increased,
in the case of combination of shares, as the effective date
of such combination, or, if the Company fixes a record date
for the purpose of so combining, as at such record date,
whichever is earlier.
(iv) If the Company at any time pays a dividend, with respect to
its Ordinary Shares only, payable in additional shares of
Ordinary Shares or other securities or rights convertible
into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Ordinary Shares, without
any comparable payment or distribution to the holders of
Preferred Shares (hereinafter referred to as "Ordinary
Shares Equivalents"), then the Conversion Price shall be
adjusted as at the date the Company fixes as a record date
for the purpose of receiving such dividend (or if no such
record date is fixed, as at the date of such payment) to
that price determined by multiplying the applicable
Conversion Price in effect immediately prior to such record
date (or if no record date is fixed then immediately prior
to such payment) by a fraction (a) the numerator of which
shall be the total number of Ordinary Shares outstanding and
those issuable with respect to Ordinary Shares Equivalents
prior to the payment of such dividend, and (b) the
denominator of which shall be the total number of shares of
Ordinary Shares outstanding and those issuable with respect
to such Ordinary Shares Equivalents immediately after the
payment of such dividend (plus, in the event that the
Company paid cash for fractional shares, the number of
additional shares which would have
-15-
been outstanding had the Company issued fractional shares in
connection with such dividend).
(e) In the event the Company declares a distribution payable in
securities of other persons, evidences of indebtedness issued by
the Company or other persons, assets (excluding cash dividends) or
options or rights not referred to in Subarticle (d)(iv), then, in
each such case, the holders of the Preferred Shares shall be
entitled to receive such distribution, in respect of their
holdings on an as-converted basis as of the record date for such
distribution.
(f) If at any time or from time to time there shall be a
recapitalization of the Ordinary Shares (other than a subdivision,
combination or merger or sale of assets transaction provided for
elsewhere in this Article), provision shall be made so that the
holders of the Preferred Shares shall thereafter be entitled to
receive upon conversion of the Preferred Shares the number of
Ordinary Shares or other securities or property of the Company or
otherwise, to which a holder of Ordinary Shares deliverable upon
conversion of the Preferred Shares would have been entitled
immediately prior to such recapitalization. In any such case,
appropriate adjustments shall be made in the application of the
provisions of this Article 5 with respect to the rights of the
holders of the Preferred Shares after the recapitalization to the
end that the provisions of this Article 5 (including adjustments
of the Conversion Price then in effect and the number of shares
issuable upon conversion of the Preferred Shares) shall be
applicable after that event as nearly equivalent as may be
practicable.
(g) The Company will not, by amendment of these Articles or through
any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed
hereunder in this Article 5 by this Company, but will at all times
in good faith assist in the carrying out of all the provisions of
this Article 5 and in taking of all such action as may be
necessary or appropriate in order to protect the conversion rights
of the holders of the Preferred Shares against impairment.
(h) No fractional shares shall be issued upon conversion of the
Preferred Shares, and the number of shares of Ordinary Shares to
be issued shall be rounded to the nearest whole share with all
shares held by the same holder aggregated for the purposes of such
rounding.
(i) Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Article 5, the
Company, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Preferred
Shares a certificate setting forth each adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall
furnish or cause to be furnished to such holder a like
certificate setting forth (A)
-16-
such adjustment or readjustment, (B) the Conversion Price,
as the case may be, at the time in effect, and (C) the
number of shares of Ordinary Shares and the amount, if any,
of other property which at the time would be received upon
the conversion of a Preferred Share.
(j) In the event of any taking by the Company of a record of the
holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend
(including a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of any
class or any other securities or property, or to receive any other
right, the Company shall mail to each holder of Preferred Shares,
at least twenty (20) days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
(k) The Company shall at all times reserve and keep available out of
its authorized but unissued Ordinary Shares, solely for the
purpose of effecting the conversion of the Preferred Shares, such
number of its Ordinary Shares as shall from time to time be
sufficient to effect the conversion of all issued and outstanding
Preferred Shares; and if at any time the number of authorized but
unissued Ordinary Shares shall not be sufficient to effect the
conversion of all then outstanding Preferred Shares, in addition
to such other remedies as shall be available to the holders of
such Preferred Shares, the Company will take such corporate action
as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued Ordinary Shares capital to such number
of shares as shall be sufficient for such purposes.
6. Increase of Share Capital
-------------------------
(a) Subject to Article 74, the Company may, from time to time, by a
resolution of shareholders holding 75% or more of the voting power
present at the meeting in person or by proxy and voting thereon (a
"Special Resolution"), whether or not all the shares then
authorized have been issued, and whether or not all the shares
theretofore issued have been called up for payment, increase its
share capital by the creation of new shares. Any such increase
shall be in such amount and shall be divided into shares of such
nominal amounts, and such shares shall confer such rights and
preferences, and shall be subject to such restrictions, as such
Special Resolution shall provide.
(b) Except to the extent otherwise provided in such Special
Resolution, such new shares shall be subject to all the provisions
applicable to the shares of the original capital.
7. Special Rights: Modifications of Rights
---------------------------------------
(a) Subject to the provisions of the Memorandum of Association of the
Company, and without prejudice to any special rights previously
conferred
-17-
upon the holders of existing shares in the Company, and subject to
Article 74, the Company may, from time to time, by Special
Resolution, provide for shares with such preferred or deferred
rights or rights of redemption or other special rights and/or such
restrictions, whether in regard to dividends, voting, repayment of
share capital or otherwise, as may be stipulated in such Special
Resolution.
(b) (i) If at any time, the share capital is divided into different
classes of shares, the rights attached to any class, unless
otherwise provided by these Articles, may be modified or abrogated
by the Company, by Special Resolution, subject to the consent in
writing of the holders of seventy-five per cent (75%) of the
issued shares of such class or the sanction of a Special
Resolution passed at a separate General Meeting of the holders of
the shares of such class and subject to the provisions of Article
74.
(ii) The provisions of these Articles relating to General Meetings
shall, mutatis mutandis, apply to any separate General Meeting of
the holders of the shares of a particular class.
(iii) Unless otherwise provided by these Articles, the enlargement
of an existing class of shares, or the issuance of additional
shares thereof, shall not be deemed, for purposes of this Article
7(b), to modify or abrogate the rights attached to the previously
issued shares of such class or of any other class.
8. Consolidation, Subdivision, Cancellation and Reduction of Share Capital
-----------------------------------------------------------------------
(a) The Company may, from time to time, by Special Resolution
(subject, however, to the provisions of Articles 7(b) and 74
hereof and to applicable law):
(i) consolidate and divide all or any of its issued or unissued
share capital into shares of larger nominal value than its
existing shares,
(ii) subdivide its shares (issued or unissued) or any of them,
into shares of smaller nominal value than is fixed by the
Memorandum of Association (subject, however, to the
provisions of the Companies Ordinance), and the resolution
whereby any share is subdivided may determine that, as among
the holders of the shares resulting from such subdivision,
one or more of the shares may, as compared with the others,
have any such preferred or deferred rights or rights of
redemption or other special rights, or be subject to any
such restrictions, as the Company has power to attach to
unissued or new shares.
(iii) cancel any shares which, at the date of the adoption of such
Special Resolution, have not been taken or agreed to be
taken by any person, and diminish the amount of its share
capital by the amount of the shares so canceled, or
-18-
(iv) reduce its share capital in any manner, and with and subject
to any incident authorized, and consent required, by law.
(b) With respect to any consolidation of issued shares into shares of
larger nominal value, and with respect to any other action which
may result in fractional shares, the Board of Directors may settle
any difficulty which may arise with regard thereto, as it deems
fit, including, inter alia, resort to one or more of the following
actions:
(i) determine, as to the holder of shares so consolidated, which
issued shares shall be consolidated into each share of
larger nominal value;
(ii) allot, in contemplation of or subsequent to such
consolidation or other action, such shares or fractional
shares sufficient to preclude or remove fractional share
holdings;
(iii) redeem, in the case of redeemable preference shares, and
subject to applicable law, such shares or fractional shares
sufficient to preclude or remove fractional share holdings;
(iv) cause the transfer of fractional shares by certain
shareholders of the Company to other shareholders thereof so
as to most expediently preclude or remove any fractional
shareholdings, and cause the transferees to pay the
transferors the fair value of fractional shares so
transferred, and the Board of Directors is hereby authorized
to act as agent for the transferors and transferees with
power of substitution for purposes of implementing the
provisions of this sub-Article 8(b)(iv).
SHARES
9. Issuance of Share Certificates; Replacement of Lost Certificates
----------------------------------------------------------------
(a) Share certificates shall be issued under the rubber stamp of the
Company and shall bear the signatures of two Directors (or if
there be only one Director, the signature of such Director), or of
any other person or persons authorized thereto by the Board of
Directors.
(b) Each member shall be entitled to one numbered certificate for all
the shares of any class registered in his name, and if the Board
of Directors so approves, to several certificates, each for one or
more of such shares. Each certificate shall specify the serial
numbers of the shares represented thereby and may also specify the
amount paid up thereon.
(c) A share certificate registered in the names of two or more persons
shall be delivered to the person first named in the Registrar of
Members in respect of such co-ownership.
-19-
(d) If a share certificate is defaced, lost or destroyed, it may be
replaced, upon payment of such fee, and upon the furnishing of
such evidence of ownership and such indemnity, as the Board of
Directors may think fit.
10. Registered Holder
-----------------
Except as otherwise provided in these Articles, the Company shall be
entitled to treat the registered holder of any share as the absolute
owner thereof, and, accordingly, shall not, except as ordered by a court
of competent jurisdiction, or as required by statute, be bound to
recognize any equitable or other claim to, or interest in such share on
the part of any other person.
11. Allotment of Shares; Pre-emptive Rights
---------------------------------------
(a) Subject to the provisions of Articles 11(b) and 74 the shares
shall be under the control of the Board of Directors, who shall
have the power to allot shares or otherwise dispose of them to
such persons, on such terms and conditions (including inter alia
terms relating to calls as set forth in Article 13(f) hereof), and
either at par or at a premium, or, subject to the provisions of
the Companies Ordinance, at a discount, and at such times, as the
Board of Directors may think fit, and the power to give to any
person the option to acquire from the Company any shares, either
at par or at a premium, or, subject as aforesaid, at a discount,
during such time and for such consideration as the Board of
Directors may think fit.
(b) Prior to the IPO each shareholder has rights of first refusal to
purchase, pro-rata, all (or any part) of New Securities (as
defined below) that the Company may, from time to time, propose to
sell and issue. The shareholder's pro rata share shall be the
ratio of the number of shares of the Company's Ordinary Shares
(assuming for purposes of this Article that all Preferred Shares
have been converted into Ordinary Shares) then held by the
shareholder as of the date of the Rights Notice (as defined in
Article 11(b)(ii)), to the sum of the total number of Ordinary
Shares as of such date.
(i) "New Securities" shall mean any Ordinary Shares or Preferred
Shares of any kind of the Company, whether now or hereafter
authorized, and rights, options, or warrants to purchase said
Ordinary Shares or Preferred Shares, and securities of any type
whatsoever that are, or may become, convertible into said Ordinary
Shares or Preferred Shares; provided, however, that "New
Securities" shall not include (i) securities issuable upon
conversion of Preferred Shares; (ii) securities offered to the
public in the Initial Public Offering; (iii) securities issued in
connection with the acquisition of another corporation, business
entity or line of business of another business entity by the
Company by merger, consolidation, purchase of all or substantially
all of the assets, or other reorganization as a result of which
the Company owns not less than fifty percent (50%) of the voting
power of such corporation; (iv) the Company's Ordinary Shares or
Preferred Shares issued in connection with any stock split, stock
dividend, recapitalization, reclassification or similar event by
the
-20-
Company; (v) securities authorized by the Company's Board of
Directors including the affirmative vote of at least two of the
directors appointed by the holders of Preferred Shares to be
issued in connection with the acquisition of assets by the Company
or supply arrangements for the Company; (vi) Ordinary Shares to be
issued to employees, directors or consultants of the Company in
accordance with the Board of Directors resolutions; (vii)
securities issued to a Strategic Investor (as such term is defined
in Article 5(d)(ii)(E) above) (viii) securities issued upon the
exercise of outstanding options granted prior to or at the date
these Articles first become effective; or (ix) securities to be
sold and issued by the Company which securities have been exempt
from the definition of "New Securities" by a resolution
unanimously adopted, in the best interest of the Company, by all
the directors lawfully entitled to vote on such a resolution.
(ii) If the Company proposes to issue New Securities, it shall
give the shareholders written notice (the "Rights Notice") of its
intention, describing the New Securities, the price, the general
terms upon which the Company proposes to issue them, and the
number of shares that the shareholder has the right to purchase
under this Article 11. Each shareholder shall have twenty one (21)
days from delivery of the Rights Notice to agree to purchase (i)
all or any part of its pro-rata share of such New Securities and
(ii) all or any part of the pro-rata share of any other
shareholder (including for this purpose any permitted transferee
of the shareholder) entitled to such rights to the extent that
such other shareholder does not elect to purchase its full
pro-rata share, in each case for the price and upon the general
terms specified in the Rights Notice, by giving written notice to
the Company setting forth the quantity of New Securities to be
purchased. If the shareholders who elect to purchase their full
pro-rata shares also elect to purchase in the aggregate more than
100% of the New Securities, such New Securities shall be sold to
such shareholders in accordance with their respective pro-rata
shares.
(iii) If the shareholders fail to exercise in full the right of
first refusal within the period specified in 11(b)(ii) above, the
Company shall have ninety (90) days after delivery of the Rights
Notice to sell the unsold New Securities at a price and upon
general terms no more favorable to the purchasers thereof than
specified in the Company's notice. If the Company has not sold the
New Securities within said ninety (90) day period the Company
shall not thereafter issue or sell any New Securities without
first offering such securities to the shareholders in the manner
provided above.
12. Payment in Installments
-----------------------
If by the terms of allotment of any share, the whole or any part of the
price thereof shall be payable in installments, every such installment
shall, when due, be paid to the Company by the then registered holder(s)
of the share of the person(s) entitled thereto.
-21-
13. Calls on Shares
---------------
(a) The Board of Directors may, from time to time make such calls as
it may think fit upon members in respect of any sum unpaid in
respect of shares held by such members which is not, by the terms
of allotment thereof or otherwise, payable at a fixed time, and
each member shall pay the amount of every call so made upon him
(and of each installment thereof if the same is payable in
installments), to the person(s) and at the time(s) and place(s)
designated by the Board of Directors, as any such time(s) may be
thereafter extended and/or such person(s) or place(s) changed.
Unless otherwise stipulated in the resolution of the Board of
Directors (and in the notice hereafter referred to), each payment
in response to a call shall be deemed to constitute a pro rata
payment on account of all shares in respect of which such call was
made.
(b) Notice of any call shall be given in writing to the member(s) in
question not less than fourteen (14) days prior to the time of
payment, specifying the time and place of payment, and designating
the person to whom such payment shall be made, provided, however,
that before the time for any such payment, the Board of Directors
may, by notice in writing to such member(s), revoke such call in
whole or in part, extend such time, or alter such person and/or
place. In the event of a call payable in installments, only one
notice thereof need be given.
(c) If, by the terms of allotment of any share or otherwise, any
amount is made payable at any fixed time, every such amount shall
be payable at such time as if it were a call duly made by the
Board of Directors and of which due notice had been given, and all
the provisions herein contained with respect to such calls shall
apply to each such amount.
(d) The joint holders of a share shall be jointly and severally liable
to pay all calls in respect thereof and all interest payable
thereon.
(e) Any amount unpaid in respect of a call shall bear interest from
the date on which it is payable until actual payment thereof, at
such rate (not exceeding the then prevailing debt rate charged by
leading commercial banks in Israel), and at such time(s) as the
Board of Directors may prescribe.
(f) Upon the allotment of shares, the Board of Directors may provide
for differences among the allottees of such shares as to the
amount of calls and/or the times of payment thereof.
14. Prepayment
----------
With the approval of the Board of Directors, any member may pay to the
Company any amount not yet payable in respect of his shares, and the
Board of Directors may approve the payment of interest on any such amount
until the same would be payable if it had not been paid in advance, at
such rate and time(s) as may be approved by the Board of Directors. The
Board of Directors
-22-
may at any time cause the Company to repay all or any part
of the money so advanced, without premium or penalty.
Nothing in this Article 14 shall derogate from the right of
the Board of Directors to make any call before or after
receipt by the Company of any such advance.
15. Forfeiture and Surrender
------------------------
(a) If any member fails to pay any amount payable in respect of
a call, or interest thereon as provided for herein, on or
before the day fixed for payment of the same, the Company,
by resolution of the Board of Directors, may at any time
thereafter, so long as the said amount or interest remains
unpaid, forfeit all or any of the shares in respect of which
said call had been made. Any expense incurred by the Company
in attempting to collect any such amount or interest,
including, inter alia, attorneys' fees and costs of suit,
shall be added to, and shall, for all purposes (including
the accrual of interest thereon), constitute a part of the
amount payable to the Company in respect of such call.
(b) Upon the adoption of a resolution of forfeiture, the Board
of Directors shall cause notice thereof to be given to such
member, which notice shall state that, in the event of the
failure to pay the entire amount so payable within a period
stipulated in the notice (which period shall not be less
than fourteen (14) days and which may be extended by the
Board of Directors), such shares shall be ipso facto
forfeited, provided, however, that, prior to the expiration
of such period, the Board of Directors may nullify such
resolution of forfeiture, but no such nullification shall
stop the Board of Directors from adopting a further
resolution of forfeiture in respect of the non-payment of
the same amount.
(c) Whenever shares are forfeited as herein provided, all
dividends theretofore declared in respect thereof and not
actually paid shall be deemed to have been forfeited at the
same time.
(d) The Company, by resolution of the Board of Directors, may
accept the voluntary surrender of any share.
(e) Any share forfeited or surrendered as provided herein shall
become the property of the Company, and the same, subject to
the provisions of these Articles, may be sold, re-allotted
or otherwise disposed of as the Board of Directors thinks
fit.
(f) Any member whose shares have been forfeited or surrendered
shall cease to be a member in respect of the forfeited or
surrendered shares, but shall, notwithstanding, be liable to
pay, and shall forthwith pay, to the Company, all calls,
interest and expenses owing upon or in respect of such
shares at the time of forfeiture or surrender, together with
interest thereon from the time of forfeiture or surrender
until actual payment, at the rate prescribed in Article
13(e) above, and the Board of Directors, in its discretion,
may enforce the payment of such moneys, or any part thereof,
but shall not be under any obligation to do so. In the event
of such forfeiture or surrender,
-23-
the Company, by resolution of the Board of Directors, may
accelerate the date(s) of payment of any or all amounts then
owing by the member in question (but not yet due) in respect
of all shares owned by such member, solely or jointly with
another, and in respect of any other matter or transaction
whatsoever.
(g) The Board of Directors may at any time, before any share so
forfeited or surrendered shall have been sold, re-allotted
or otherwise disposed of, nullify the forfeiture or
surrender on such conditions as it thinks fit, but no such
nullification shall stop the Board of Directors from re-
exercising its powers of forfeiture pursuant to this Article
15.
16. Lien
----
(a) Except to the extent the same may be waived or subordinated
in writing, the Company shall have a first and paramount
lien upon all the shares registered in the name of each
member (without regard to any equitable or other claim or
interest in such shares on the part of any other person),
and upon the proceeds of the sale thereof, for his debts,
liabilities and engagements arising from any cause
whatsoever, solely or jointly with another, to or with the
Company, whether the period for the payment, fulfillment or
discharge thereof shall have actually arrived or not. Such
lien shall extend to all dividends from time to time
declared in respect of such share. Unless otherwise
provided, the registration by the Company of a transfer of
shares shall be deemed to be a waiver on the part of the
Company of the lien (if any) existing on such shares
immediately prior to such transfer.
(b) The Board of Directors may cause the Company to sell any
shares subject to such lien when any such debt, liability or
engagement has matured, in such manner as the Board of
Directors may think fit, but no such sale shall be made
unless such debt, liability or engagement has not been
satisfied within fourteen (14) days after written notice of
the intention to sell shall have been served on such member,
his executors or administrators.
(c) The net proceeds of any such sale, after payment of the
costs thereof, shall be applied in or toward satisfaction of
the debts, liabilities or engagements of such member
(whether or not the same have matured), or any specific part
of the same (as the Company may determine), and the residue
(if any) shall be paid to the member, his executors,
administrators or assigns.
17. Sale after Forfeiture or Surrender or in Enforcement of Lien
------------------------------------------------------------
Upon any sale of shares after forfeiture or surrender or for
enforcing a lien, the Board of Directors may appoint some person
to execute an instrument of transfer of the shares so sold and
cause the purchaser's name to be entered in the Register of
Members in respect of such shares, and the purchaser shall not be
bound to see to the regularity of the proceedings, or to the
application of the purchase money, and after his name has been
entered in the Register of Members in respect of such shares, the
validity of the sale shall not be
-24-
impeached by any person, and the remedy of any person aggrieved
by the sale shall be in damages only and against the Company
exclusively.
18. Redeemable Shares
-----------------
The Company may, subject to applicable law, issue redeemable
shares and redeem the same.
19. Conversion of Shares into Stock
-------------------------------
(a) The Board of Directors may, with the sanction of the members
previously given by Special Resolution and subject to
Article 74, convert any paid-up shares into stock, and may,
with like sanction, reconvert any stock into paid-up shares
of any denomination.
(b) The holders of stock may transfer the same, or any part
thereof, in the same manner and subject to the same
regulations, as the shares from which the stock arose might
have been transferred prior to conversion, or as near
thereto as circumstances admit, provided, however, that the
Board of Directors may from time to time fix the minimum
amount of stock so transferable, and restrict or forbid the
transfer of fractions of such minimum, but the minimum shall
not exceed the nominal value of each of the shares from
which such stock arose.
(c) The holders of stock shall, in accordance with the amount of
stock held by them, have the same rights and privileges as
regards dividends, voting at meetings of the Company and
other matters as if they held the shares from which such
stock arose, but no such right or privilege, except
participation in the dividends and profits of the Company,
shall be conferred by any such aliquot part of such stock as
would not, if existing in shares, have conferred that right
or privilege.
(d) Such of the Articles of the Company as are applicable to
paid-up shares shall apply to stock, and the words "share"
and "shareholder" (or "member") therein shall include
"stock" and "stockholder".
TRANSFER OF SHARES
20. Effectiveness and Registration
------------------------------
(a) No transfer of shares in the Company, and no assignment of
an option to acquire such shares from the Company, shall be
effective unless the transfer or assignment has been
approved by the Board of Directors, but the Board of
Directors shall not withhold its approval of any such
transfer or assignment made in accordance with this Article
20.
(b) No transfer of shares shall be registered unless a proper
instrument of transfer (in form and substance satisfactory
to the Board of Directors) has
-25-
been submitted to the Company, together with the share
certificate(s) and such other evidence of title as the Board
of Directors may reasonably require. Until the transferee
has been registered in the Register of Members in respect of
the shares so transferred, the Company may continue to
regard the transferor as the owner thereof. The Board of
Directors, may, from time to time, prescribe a fee for the
registration of a transfer.
(c) Without derogating from the provisions of Article 20(a) or
(b), the following provisions shall govern transfers of
shares in the Company, except to the extent waived in
writing (before or after the effective date of these
Articles) by any shareholder (as to such shareholder) who
would otherwise be entitled thereto. No shareholder shall
sell, assign, transfer, pledge, hypothecate, mortgage or
dispose of, by gift or otherwise, or in any way encumber all
or any of the shares in the capital stock of the Company, of
any class or series, now owned or hereafter acquired by him
except as set forth below in this Article 20(c):
(i) (w) Any holder of Ordinary Shares or Preferred Shares
proposing to transfer all or any of his shares (in this
Article 20(c)(i), the "Offeror") shall, upon receipt of
an offer from a potential purchaser, first request the
Company, by written notice (which shall contain all the
information necessary to enable the Company so to do
including, without limitation, the identity of the
prospective purchaser), to offer such shares (in this
Article 20(c)(i), the "Offered Shares"), on the terms
of the proposed transfer, to all the shareholders of
the Company (in this Article 20(c)(i), the "Offerees").
The Company shall comply with such request by sending
the Offerees a written notice (in this Article
20(c)(i), the "Offer"), stating therein the identity of
the Offeror and of the proposed transferee(s) and the
proposed terms of sale of the Offered Shares. Any
Offeree may accept such offer in respect of all or any
of the Offered Shares by giving the Company notice to
that effect within fifteen (15) days after being served
with the Offer.
(x) If the acceptances, in the aggregate, are in
respect of all of, or more than, the Offered
Shares, then the accepting Offerees shall acquire
the Offered Shares, on the terms aforementioned,
in proportion to their respective holdings
provided that no Offerees shall be entitled to
acquire under the provisions of this Article
20(c)(i)(y) more than the number of Offered Shares
initially accepted by such Offeree, and upon the
allocation to him of the full number of shares so
accepted, he shall be disregarded in any
subsequent computations and allocations hereunder.
Any shares remaining after the computation of such
respective entitlements shall be re-allocated
among the accepting Offerees (other than those to
be disregarded as aforesaid), in the same manner,
until one hundred per cent (100%) of the Offered
Shares have been allocated as aforesaid.
-26-
(y) If the acceptances, in the aggregate, are in
respect of less than the number of Offered
Shares, then the accepting offerees shall not be
entitled to acquire the Offered Shares, and the
Offeror, at the expiration of the aforementioned
fifteen (15) day period, shall be entitled to
transfer all (but not less than all) of the
Offered Shares to such proposed transferee(s),
provided, however, that in no event shall the
Offeror transfer any of the Offered Shares to
any transferee other than such accepting
Offerees or such proposed transferee(s) or
transfer the same on terms more favorable to the
buyer(s) than those stated in the Offer, and
provided further that any of the Offered Shares
not transferred within sixty (60) days after the
expiration of such fifteen (15) day period,
shall again be subject to the provisions of this
Article 20(c)(i).
(z) Should the purchase price specified in the Offer
be payable in property other than cash or
evidences of indebtedness, the Offerees shall
have the right to pay the purchase price in the
form of cash equal in amount to the value of
such property which shall be determined by
independent certified appraisers or reputable
bankers (at the expense of the Company), the
identity of which shall be determined by the
Company, and if the consideration payable is
shares that are publicly traded, the value of
such shares shall be the market value thereof as
of the date of the payment.
(ii) For the purposes of any Offer under Article 20(c)(i),
the respective holdings of any number of accepting
Offerees shall mean the respective proportions of the
aggregate number of Ordinary Shares (including, for
purposes of such determination, Ordinary Shares
issuable upon conversion of Preferred Shares) held by
such accepting Offerees as determined prior to such
Offer.
(iii) Prior to the earlier of (i) the closing of the
Company's initial underwritten public offering of its
Ordinary Shares pursuant to an effective registration
statement under the United States Securities Act of
1933, as amended, or the Israeli Securities Law, 1968,
or equivalent law of another jurisdiction or (ii)
three years from the date of the 1996 Shareholders
Agreement (September 30, 1996), each of Samuel HaCohen
("HaCohen") and Vladimir Morgernstern ("Morgernstern")
shall not sell, assign, transfer, pledge, hypothecate,
mortgage or dispose of, by gift or otherwise, or in
any way encumber all or any of the shares in the
capital stock of the Company, of any class or series,
owned by them as of the date these Articles first
became effective or hereafter acquired by each of them
(such shares are hereinafter collectively referred to
as the "Securities").
Notwithstanding anything else to the contrary in these
Articles, (but subject to Article 20(c)(i) hereof)
each of HaCohen and Morgernstern
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may, following the date which is eighteen months after
the date of the 1996 Shareholders Agreement (September
30, 1996), freely transfer without any restrictions
each year, 10% (not including transfers pursuant to
the last paragraph of this Article 20(c)(iii)) of his
shares in the Company provided that each of HaCohen
and Morgernstern will not transfer more than a total
of 30% (not including transfers pursuant to the last
paragraph of this Article 20(c)(iii)) of his current
shareholding unless otherwise permitted herein.
Notwithstanding anything else to the contrary in these
Articles, each of HaCohen and Morgernstern may freely
transfer without any restrictions or first refusal
rights by the parties hereto up to 2% of the Company's
issued share capital (on a fully diluted basis).
Any provision of this Article to the contrary
notwithstanding, each of HaCohen and Morgernstern may
transfer shares in the Company to his parent, sibling,
spouse, lineal descendant, or antecedent, brother or
sister; or to an entity controlled by HaCohen or
Morgernstern (provided that if such entity does not
remain so controlled, such shares shall be transferred
back to HaCohen or Morgernstern or to another such
entity), provided, however, that no such transfer
shall be effective unless the transferee agrees in
writing to remain subject to all of the limitations
and obligations which apply to such shares hereunder
and not to make any further sale, assignment,
transfer, pledge, or disposal of such shares except
back to HaCohen or Morgernstern.
Notwithstanding any other provision of this Agreement,
upon the death of HaCohen or Morgernstern, the
provisions of Articles 20(c)(iii)(x) and 20(c)(iii)(y)
shall not apply to any sale by their heirs.
(iv) Anything in this Article 20(c) to the contrary
notwithstanding, (a) any of the shareholders may
freely transfer any of its shares in the Company to
(i) such shareholder's spouse, lineal descendant or
antecedent, brother or sister, or (ii) an entity
controlled by, controlling or under common control,
with such shareholder (provided that if such entity
does not remain so controlled or controlling such
shares shall be transferred back to the original
shareholder or to another such entity), (b) as to any
shareholder which is a partnership, in addition to
(a)(ii) above, such shareholder may transfer to such
shareholder's partners and to affiliated partnerships
managed by the same management company or the same
managing general partner as such shareholder, (c) as
to any shareholder's partner which is a limited
liability company, following transfer of such
shareholder's shares of the Company to such a limited
liability company, such limited liability company may
freely transfer such shares to such limited liability
company's members, (d) as to Yozma Venture Capital
Ltd. ("Yozma"), STAR Management of Investments (1993)
Limited Partnership ("STAR") transfers to any of the
partners of STAR, and
-28-
any entity to which STAR would be permitted to freely
transfer shares in the Company under this Article
20(c)(iv), (e) any of Bessemer Venture Investors L.P.,
Bessemer Venture Partners IV L.P., and Bessec Ventures
IV L.P. may freely transfer any of its shares of the
Company to any of the other Bessemer Shareholders (as
defined in Schedule 2 of the Shareholders Agreement,
dated April 5, 2000) (f) as to GE Capital Advent
Investment Corp. ("GE Capital"), any affiliate or
related entity (including any partnership or other
entity in which GE Capital or any affiliate or related
entity is a general partner) (g) as to Samuel HaCohen,
transfer of up to 18,750 Ordinary Shares to Evan Chaim
Goldman, (h) as to Yitzhak Chemo, transfer of up to
9,370 Ordinary Shares to Evan Chaim Goldman, (i) as to
Shimon Katz, transfer of up to 9,380 Ordinary Shares
to Evan Chaim Goldman (j) as to Vladimir Morgensten,
transfer of up to 18,750 Ordinary Shares to Evan Chaim
Goldman, (k) as to Sequel Technology Ltd., transfer of
up to 18,750 Ordinary Shares to Evan Chaim Goldman. No
transfer of any securities pursuant to this Article
20(c)(iv) may be made, unless the transferee thereof
agrees in writing to be bound by all agreements
binding upon the shareholders immediately prior to
such transfer.
(d) Any other provision of these Articles to the contrary
notwithstanding, in the event that any person or entity makes an
offer to purchase all of the issued and outstanding share capital
of the Company or to merge the Company with or into another
entity, and members holding more than 75% of each class of the
issued and outstanding share capital of the Company indicate
their acceptance of such offer (it being understood that solely
for purposes of a decision on this matter Ordinary Shares
received upon conversion of Preferred Shares, shall vote as one
class together with the class of Preferred Shares from which they
were converted), and such offer is approved by a majority of the
Company's Board of Directors, then, at the closing of such
offered purchase of all the issued and outstanding share capital
of the Company or merger, all of the holders of Ordinary Shares
in the Company will transfer such Ordinary Shares or Preferred
Shares to such person or entity; provided, however, that the
--------
consideration for all of the Company's shares shall in any event
be allocated among the members in accordance with Articles 72 and
73.
21. Suspension of Registration
--------------------------
The Board of Directors may suspend the registration of transfers
during the fourteen (14) days immediately preceding the Annual General
Meeting.
TRANSMISSION OF SHARES
22. Descendants' Shares
------------------
(a) In case of a share registered in the names of two or more
holders, the Company may recognize the survivor(s) as the sole
owner(s) thereof
-29-
unless and until the provisions of Article 22(b) have been
effectively invoked.
(b) Any person becoming entitled to a share in consequence of the
death of any person, upon producing evidence of the grant of
probate or letters of administration or declaration of succession
shall be registered as a member in respect of such share, or may,
subject to the regulations as to transfer herein contained,
transfer such share.
23. Receivers and Liquidators
-------------------------
(a) The Company may recognize the receiver or liquidator of any
corporate member in winding-up or dissolution, or the receiver or
trustee in bankruptcy of any member, as being entitled to the
shares registered in the name of such member.
(b) The receiver or liquidator of a corporate member in winding-up or
dissolution, or the receiver or trustee in bankruptcy of any
member, upon producing such evidence as the Board of Directors
may deem sufficient that he sustains the character in respect of
which he proposes to act under this Article or of his title,
shall with the consent of the Board of Directors (which the Board
of Directors may grant or refuse in its absolute discretion), be
registered as a member in respect of such shares, or may, subject
to the regulations as to transfer herein contained, transfer such
shares.
GENERAL MEETINGS
24. Annual General Meeting
----------------------
An Annual General Meeting shall be held once in every calendar year at
such time (within a period of not more than fifteen (15) months after
the last preceding Annual General Meeting) and at such place either
within or without the State of Israel as may be determined by the
Board of Directors.
25. Extraordinary General Meetings
------------------------------
All General Meetings other than the Annual General Meetings shall be
called "Extraordinary General Meetings." The Board of Directors may,
whenever it thinks fit, convene an Extraordinary General Meeting at
such time and place, within or without the State of Israel, as may be
determined by the Board of Directors, and shall be obliged to do so
upon a requisition in writing in accordance with Section 109 of the
Companies Ordinance.
26. Notice of General Meetings; Omission to Give Notice
---------------------------------------------------
(a) Not less than seven (7) days' prior notice shall be given of
every General Meeting (including a General Meeting adopting a
Special Resolution). Each such notice shall specify the place and
the day and hour of the
-30-
meeting and the general nature of each item to be acted upon
thereat. Notice shall be given to all members who would be
entitled to attend and vote at such meeting, if it were held on
the date when such notice is issued. Anything herein to the
contrary notwithstanding, with the consent of all members
entitled to vote thereon, a resolution may be proposed and passed
at such meeting although a lesser notice than hereinabove
prescribed has been given.
(b) The accidental non-receipt of notice sent to such member, shall
not invalidate the proceedings at such meeting.
PROCEEDINGS AT GENERAL MEETINGS
27. Quorum
------
(a) Two or more members (not in default in payment of any sum
referred to in Article 33(a) hereof), present in person or by
proxy and holding shares conferring in the aggregate a majority
of the voting power of the Company, shall constitute a quorum at
General Meetings. No business shall be transacted at a General
Meeting, or at any adjournment thereof, unless the requisite
quorum is present when the meeting proceeds to business.
(b) If within an hour from the time appointed for the meeting a
quorum is not present, the meeting, if convened upon requisition
under Sections 109 or 110 of the Companies Ordinance, shall be
dissolved, but in any other case it shall stand adjourned to the
same day in the next week, at the same time and place, or to such
day and at such time and place as the Chairman may determine with
the consent of the holders of a majority of the voting power
represented at the meeting in person or by proxy and voting on
the question of adjournment. No business shall be transacted at
any adjourned meeting except business which might lawfully have
been transacted at the meeting as originally called. At such
adjourned meeting, any two (2) members (not in default as
aforesaid) present in person or by proxy, shall constitute a
quorum.
28. Chairman
--------
The Chairman, if any, of the Board of Directors shall preside as
Chairman at every General Meeting of the Company. If there is no such
Chairman, or if at any meeting he is not present within fifteen (15)
minutes after the time fixed for holding the meeting or is unwilling
to act as Chairman, the members present shall choose someone of their
number to be Chairman. The office of Chairman shall not, by itself,
entitle the holder thereof to vote at any General Meeting nor shall it
entitle such holder to a second or casting vote (without derogating,
however, from the rights of such Chairman to vote as a shareholder or
proxy of a shareholder if, in fact, he is also a shareholder or such
proxy).
-31-
29. Adoption of Resolutions at General Meetings
-------------------------------------------
Subject to the provisions of Article 74:
(a) (i) An Ordinary Resolution shall be deemed adopted if approved
by the holders of a majority of the voting power represented at
the meeting in person or by proxy and voting thereon.
(ii) A Special or Extraordinary Resolution shall be deemed
adopted if approved by the holders of not less than
seventy-five percent (75%) of the voting power represented
at the meeting in person or by proxy and voting thereon.
(b) Every question submitted to a General Meeting shall be decided by
a show of hands, but if a written ballot is demanded by any
member present in person or by proxy and entitled to vote at the
meeting, the same shall be decided by such ballot. A written
ballot may be demanded before the proposed resolution is voted
upon or immediately after the declaration by the Chairman of the
results of the vote by a show of hands. If a vote by written
ballot is taken after such declaration, the results of the vote
by a show of hands shall be of no effect, and the proposed
resolution shall be decided by such written ballot. The demand
for a written ballot may be withdrawn at any time before the same
is conducted, in which event another member may then demand such
written ballot. The demand for a written ballot shall not prevent
the continuance of the meeting for the transaction of business
other than the question on which the written ballot has been
demanded.
(c) A declaration by the Chairman of the meeting that a resolution
has been carried unanimously, or carried by a particular
majority, or lost, and an entry to that effect in the minute book
of the Company, shall be conclusive evidence of the fact without
proof of the number or proportion of the votes recorded in favor
of or against such resolution.
30. Resolutions in Writing
----------------------
A resolution in writing signed by all members of the Company then
entitled to attend and vote at General Meetings or to which all such
members have given their written consent (by letter, facsimile
[telecopier], telegram, telex or otherwise) shall be deemed to have
been unanimously adopted by a General Meeting duly convened and held.
31. Power to Adjourn
----------------
(a) The Chairman of a General Meeting at which a quorum is present
may, with the consent of the holders of a majority of the voting
power represented in person or by proxy and voting on the
question of adjournment (and shall if so directed by the
meeting), adjourn the meeting from time to time and from place to
place, but no business shall be
-32-
transacted at any adjourned meeting except business which might
lawfully have been transacted at the meeting as originally called.
(b) It shall not be necessary to give any notice of an adjournment,
whether pursuant to Article 27(b) or Article 31(a), unless the
meeting is adjourned for thirty (30) days or more in which event
notice thereof shall be given in the manner required for the
meeting as originally called.
32. Voting Power
------------
Subject to the provisions of Articles 5(a) and 33(a) and subject to any
provision hereof conferring special rights as to voting, or restricting
the right to vote, every member shall have one vote for each share held
by him of record, on every resolution, without regard to whether the vote
thereon is conducted by a show of hands, by written ballot or by any
other means.
33. Voting Rights
-------------
(a) No member shall be entitled to vote at any General Meeting (or be
counted as a part of the quorum thereat), unless all calls and
other sums then payable by him in respect of his shares in the
Company have been paid.
(b) A company or other corporate body being a member of the Company
may, by resolution of its directors or any other managing body
thereof, authorize any person to be its representative at any
meeting of the Company. Any person so authorized shall be entitled
to exercise on behalf of such member all the power which the
latter could have exercised if it were an individual shareholder.
Upon the request of the Chairman of the meeting, written evidence
of such authorization (in form acceptable to the Chairman) shall
be delivered to him.
(c) Any member entitled to vote may vote either personally or by proxy
(who need not be a member of the Company), or, if the member is a
company or other corporate body, by a representative authorized
pursuant to Article 33(b).
(d) If two or more persons are registered as joint holders of any
share, the vote of the senior who tenders a vote, in person or by
proxy, shall be accepted to the exclusion of the vote(s) of the
other joint holder(s); and for this purpose seniority shall be
determined by the orders in which the names stand in the Register
of Members.
PROXIES
34. Instrument of Appointment
-------------------------
(a) The instrument appointing a proxy shall be in writing and shall be
substantially in the following form:
-33-
"I _________________________ of _________________________________
(Name of Shareholder) (Address of Shareholder)
being a member of ________________________________ hereby appoint
(Name of the Company)
________________________________ of ______________________________
(Name of Proxy) (Address of Proxy)
as my proxy to vote for me and on my behalf at the General Meeting
of the Company to be held on the ______ day of ___________ , 19__,
and at any adjournment(s) thereof.
Signed this _____ day of __________ , 19__.
______________________________
(Signature of Appointer)"
or in any usual or common form or in such other form as may be
approved by the Board of Directors. It shall be duly signed by the
appointer or his duly authorized attorney or, if such appointer is
a company or other corporate body, under its common seal or stamp
or the hand of its duly authorized agent(s) or attorney(s).
(b) The instrument appointing a proxy (and the power of attorney or
other authority, if any, under which such instrument has been
signed) shall either be delivered to the Company (at its
Registered Office, or at its principal place of business or at
such place as the Board of Directors may specify) not less than
forty-eight (48) hours before the time fixed for the meeting at
which the person named in the instrument proposes to vote, or
presented to the Chairman at such meeting.
35. Effect of Death of Appointer or Revocation of Appointment
---------------------------------------------------------
A vote cast pursuant to an instrument appointing a proxy shall be valid
notwithstanding the previous death of the appointing member (or of his
attorney-in-fact, if any, who signed such instrument), or the revocation
of the appointment or the transfer of the share in respect of which the
vote is cast, provided no written intimation of such death, revocation or
transfer shall have been received by the Company or by the Chairman of
the meeting before such vote is cast and provided, further, that the
appointing member, if present in person at said meeting, may revoke the
appointment by means of a writing, oral notification to the Chairman, or
otherwise.
BOARD OF DIRECTORS
36. Powers of Board of Directors
----------------------------
(a) In General
----------
-34-
The management of the business of the Company shall be vested in
the Board of Directors, which may exercise all such powers and do
all such acts and things as the Company is authorized to exercise
and do, and are not hereby or by law required to be exercised or
done by the Company in General Meeting. The authority conferred on
the Board of Directors by this Article 36 shall be subject to the
provisions of the Companies Ordinance, of these Articles and any
regulation or resolution consistent with these Articles adopted
from time to time by the Company in General Meeting, provided,
however, that no such regulation or resolution shall invalidate
any prior act done by or pursuant to a decision of the Board of
Directors which would have been valid if such regulation or
resolution had not been adopted.
(b) Borrowing Power
---------------
The Board of Directors may from time to time, in its discretion,
cause the Company to borrow or secure the payment of any sum or
sums of money for the purposes of the Company, and may secure or
provide for the repayment of such sum or sums in such manner, at
such times and upon such terms and conditions in all respects as
it thinks fit, and, in particular, by the issuance of bonds,
perpetual or redeemable debentures, debenture stock, or any
mortgages, charges, or other securities on the undertaking or the
whole or any part of the property of the Company, both present and
future, including its uncalled or called but unpaid capital for
the time being.
(c) Reserves
--------
The Board of Directors may, from time to time, set aside any
amount(s) out of the profits of the Company as a reserve or
reserves for any purpose(s) which the Board of Directors, in its
absolute discretion, shall think fit, and may invest any sum so
set aside in any manner and from time to time deal with and vary
such investments, and dispose of all or any part thereof, and
employ any such reserve or any part thereof in the business of the
Company without being bound to keep the same separate from other
assets of the Company, and may subdivide or redesignate any
reserve or cancel the same or apply the funds therein for another
purpose, all as the Board of Directors may from time to time think
fit.
37. Exercise of Powers of Directors
-------------------------------
(a) A meeting of the Board of Directors at which a quorum is present
shall be competent to exercise all the authorities, powers and
discretions vested in or exercisable by the Board of Directors.
(b) Subject to the provisions of Article 74, a resolution proposed at
any meeting of the Board of Directors shall be deemed adopted if
approved by a majority of the Directors present when such
resolution is put to a vote and voting thereon.
-35-
(c) A resolution in writing signed by all Directors then in office and
lawfully entitled to vote thereon (as conclusively determined by
the Chairman of the Audit Committee (Va'adat Bikoret), (if any)
and in the absence of such determination - by the Chairman of the
Board of Directors) or to which all such Directors have given
their written consent (by letter, telegram, telex, facsimile,
telecopier or otherwise) shall be deemed to have been unanimously
adopted by a meeting of the Board of Directors duly convened and
held.
38. Delegation of Powers
--------------------
(a) The Board of Directors may, subject to the provisions of the
Companies Ordinance, delegate any or all of its powers to
committees, each consisting of two or more persons (all of whose
members must be Directors), and it may from time to time revoke
such delegation or alter the composition of any such committee.
Any Committee so formed (in these Articles referred to as a
"Committee of the Board of Directors"), shall, in the exercise of
the powers so delegated, conform to any regulations imposed on it
by the Board of Directors. The meetings and proceedings of any
such Committee of the Board of Directors shall, mutatis mutandis,
be governed by the provisions herein contained for regulating the
meetings of the Board of Directors, so far as not superseded by
any regulations adopted by the Board of Directors under this
Article. Unless otherwise expressly provided by the Board of
Directors in delegating powers to a Committee of the Board of
Directors, such Committee shall not be empowered to further
delegate such powers.
(b) With derogating from the provisions of Article 51, the Board of
Directors may, subject to the provisions of the Companies
Ordinance, from time to time appoint a Secretary to the Company,
as well as officers, agents, employees and independent
contractors, as the Board of Directors may think fit, and may
terminate the service of any such person. The Board of Directors
may, subject to the provisions of the Companies Ordinance,
determine the powers and duties, as well as the salaries and
emoluments, of all such persons, and may require security in such
cases and in such amounts as it thinks fit.
(c) The Board of Directors may from time to time, by power of attorney
or otherwise, appoint any person, company, firm or body of persons
to be the attorney or attorneys of the Company at law or in fact
for such purpose(s) and with such powers, authorities and
discretions, and for such period and subject to such conditions,
as it thinks fit, and any such power of attorney or other
appointment may contain such provisions for the protection and
convenience of persons dealing with any such attorney as the Board
of Directors may think fit, and may also authorize any such
attorney to delegate all or any of the powers, authorities and
discretions vested in him.
39. Number of Directors
-------------------
-36-
Until otherwise determined by Ordinary Resolution of the Company and
subject to Article 74, the Board of Directors of the Company shall
consist of not less than three (3) nor more than eight (8) Directors.
40. Appointment and Removal of Directors
------------------------------------
The Company's Board of Directors (the "Board") shall be composed of eight
(8) directors, out of whom: two (2) directors (the "Preferred A and B
Shares Directors") shall be designated by written notice to the Company
by the holders, from time to time, of a majority of the Series A
Preferred Shares (including Series A Preferred Shares received upon
conversion of Series B Non Voting Preferred Shares) (including all
Ordinary Shares received upon conversion of Series A Preferred Shares and
Series B Non Voting Preferred Shares); one (1) Director (the "Preferred C
Director") shall be designated by written notice to the Company by the
holders, from time to time, of a majority of the Series C-1 Preferred
Shares (including all Ordinary Shares received upon Conversion of Series
C-1 Preferred Shares) (the "Preferred A and B Directors" and the
"Preferred C Director" shall be referred to herein collectively as the
"Preferred Shares Directors"); two (2) Directors (the "Management Shares
Directors") shall be designated by written notice to the Company by the
holders, from time to time, of a majority of the Management Shares
("Management Shares" in this Article shall mean the shares held by Samuel
HaCohen, Vladimir Morgernstern, Ian Coldwell, Menachem Ish Shalom, Ami
Rosenblat, and Yohanan Engelhardt); one (1) Director (the "Ordinary
Shares Director") shall be designated by written notice to the Company by
the holders, from time to time, of a majority of the Ordinary Shares
(including Management Shares but not including Ordinary Shares received
upon conversion of Preferred Shares); and one (1) director (the "Seventh
Director") shall be designated by written notice to the Company jointly
by the holders, from time to time, of a majority of the Ordinary Shares
(including Management Shares but not including Ordinary Shares received
upon conversion of Preferred Shares) and of the Preferred Shares
(including Ordinary Shares received upon conversion of Preferred Shares)
(voting as separate classes). If the majority of the Preferred Shares
(including Ordinary Shares received upon conversion of Preferred Shares)
(as a class) and the majority of the Ordinary Shares (including
Management Shares but not including Ordinary Shares received upon
conversion of Preferred Shares) (as a class) cannot agree on such a
director within a month from the date that either class has suggested the
nomination of an individual to the board of directors then the holders of
Preferred Shares (including Ordinary Shares received upon conversion of
Preferred Shares) shall offer to the holders of Ordinary Shares
(including Management Shares but not including Ordinary Shares received
upon conversion of Preferred Shares) a list of names of three individuals
from whom the holders of Ordinary Shares (including Management Shares but
not including Ordinary Shares received upon conversion of Preferred
Shares) shall elect one as the Seventh Director; provided however that
the Seventh Director shall be an individual who is not associated with or
affiliated with the holders of the Preferred Shares (including Ordinary
Shares received upon conversion of Preferred Shares) unless, and for as
long as, the holders of the Ordinary Shares (including Management Shares
but not including Ordinary
-37-
Shares received upon conversion of Preferred Shares) do not object to
such association or affiliation; and one (1) director (the "Clal
Director") shall be designated by written notice to the Company by the
Clal Shareholders for as long as the Clal Shareholders have not sold more
than (i) 25% of the shares issuable thereto upon conversion of the
Convertible Debentures issued thereto on the date these Articles first
became effective (the "Convertible Debentures") or (ii) 25% of their
holdings in the Company's share capital as of the date hereof. For the
purposes of this Section the terms associate and affiliate shall have the
same meaning ascribed to such term pursuant to the United States
Securities Act of 1933 and Exchange Act of 1934.
Any Director(s) may only be removed from office by the holders of the
class(es) of shares that designated such Director, and any vacancy,
however created, in the Board of Directors may only be filled by the
holders of the class(es) of shares that designated the previous incumbent
of such vacancy; provided however that the Seventh Director may be
removed by either the majority of the Ordinary Shares (including
Management Shares but not including Ordinary Shares received upon
conversion of Preferred Shares) and/or by the majority of the Preferred
Shares (including Ordinary Shares received upon conversion of Preferred
Shares) and his replacement shall be designated as detailed above. Any
such act shall become effective on the date fixed in such notice, or upon
the delivery thereof to the Company, whichever is later.
Notwithstanding anything to the contrary herein, the right to appoint a
Management Shares Director shall be of no force and effect if the holders
of the Management Shares sell more than 50% of their holding of shares in
the Company (on a fully diluted basis and taking into account all their
options and treating the expiration or termination of options as sales)
on the date that these Articles first became effective.
The STAR Shareholders and the Jerusalem Pacific Ventures (1994) L.P.,
ATV, and the Clal Shareholders (as such terms are defined in Schedule 1
and Schedule 4 to that certain Amendment and Restatement to Shareholders
Agreement entered into by and among certain shareholders of the Company
dated as of April 5, 2000, the "Shareholders Agreement"), shall each, at
any time that any such group does not actually designate a director to
the Board, be entitled to designate a non-voting observer to the
Company's Board. Such observer shall be entitled to attend all Board
meetings, shall be entitled to receive all documents and information
provided to any director, but will not be entitled to vote at any Board
meeting. Any observer may only be removed from office by the holders who
designated such observer. Should such group's holding of the Company's
shares be reduced so that such holder holds less than four percent (4%)
of the issued and outstanding share capital of the Company (assuming for
purposes of such determination, that all options and warrants to purchase
the Company's shares have been exercised), then such group will cease to
possess the right to designate an observer, and any observer so
designated will automatically and without further action be removed from
office.
-38-
In addition, in the event that the Bessemer Venture Partners IV L.P
designates, according to the provisions of the Shareholders Agreement, a
person to the Company's Board who is not affiliated with the Bessemer
Shareholders (as defined in Schedule 2 of the Shareholders Agreement) or
any of them and such designee is approved by a majority of the Company's
Board (excluding an existing director designated by the Bessemer Venture
Partners IV L.P) then the Bessemer Shareholders (as such a term is
defined in Schedule 2 of the Shareholders Agreement) would be entitled to
designate a non-voting observer to the Company's Board; provided,
however, that such approval by a majority of the other directors shall in
no way be a condition to such designee becoming a director or serving as
a director. Such observer shall be entitled to attend all Board meetings,
shall be entitled to receive all documents and information provided to
any director, but will not be entitled to vote at any Board meeting. Such
observer may only be removed from office by the holders who designated
such observer. Should the Bessemer Shareholders' holdings of the
Company's shares be reduced so that they hold less than four percent (4%)
of the issued and outstanding share capital of the Company (assuming for
purposes of such determination, that all options and warrants to purchase
the Company's shares have been exercised) then such group will cease to
possess the right to designate an observer, and any observer so
designated will automatically and without further action be removed from
office.
GE Capital shall be entitled to designate a non-voting observer to the
Company's Board. Such observer, who shall be selected by GE Capital and
approved by the Company's Board (which approval shall not be unreasonably
withheld), shall be entitled to attend all Board meetings, shall be
entitled to receive all documents and information provided to any
director, but will not be entitled to vote at any Board meeting. Such
observer may only be removed from office by GE Capital. Should the
holdings of GE Capital (together with its permitted transferees pursuant
to Article 20(c)(iv) be reduced so that such holders hold in the
aggregate less than two percent (2%) of the issued and outstanding share
capital of the Company (assuming for purposes of such determination, that
all options and warrants to purchase the Company's shares have been
exercised), then such group will cease to possess the right to designate
an observer, and any observer so designated will automatically and
without further action be removed from office. The documents and other
information received by the GE Capital observer pursuant to this
paragraph shall be used by such observer and GE Capital and its
affiliates and permitted transferees pursuant to Article 20(c)(iv),
solely for purposes of monitoring the performance and prospects of, and
managing their investment in, the Company.
41. Qualification of Directors
--------------------------
No person shall be disqualified as a Director by reason of his not
holding shares in the Company or by reason of his having served as a
Director in the past.
42. Continuing Directors in the Event of Vacancies
----------------------------------------------
In the event of one or more vacancies in the Board of Directors, the
continuing Directors may continue to act in every matter, and, pending
the filling of any
-39-
vacancy pursuant to the provisions of Article 40, may temporarily fill
any such vacancy until the holders of shares eligible to designate a
director to fill such vacancy have done so.
43. Vacation of Office
------------------
(a) The office of a Director shall be vacated, ipso facto, upon his
death, or if he be found lunatic or become of unsound mind, or if
he become bankrupt, or, if the Director is a company, upon its
winding-up.
(b) The office of the Director shall be vacated by his written
resignation. Such resignation shall become effective on the date
fixed therein, or upon the delivery thereof to the Company,
whichever is later.
44. Remuneration of Directors
-------------------------
No director shall be paid any remuneration by the Company for his
services as Director except as may be approved pursuant to the provisions
of the Companies Ordinance.
45. Conflict of Interests
---------------------
Subject to the provisions of the Companies Ordinance, the Company may
enter into any contract or otherwise transact any business with any
Director in which contract or business such Director has a personal
interest, directly or indirectly; and may enter into any contract of
otherwise transact any business with any third party in which contract or
business a Director has a personal interest, directly or indirectly.
46. Alternate Directors
-------------------
(a) A Director may, by written notice to the Company, appoint an
alternate for himself (in these Articles referred to as "Alternate
Director"), remove such Alternate Director and appoint another
Alternate Director in place of any Alternate Director appointed by
him whose office has been vacated for any reason whatsoever.
Unless the appointing Director, by the instrument appointing an
Alternate Director or by written notice to the Company, limits
such appointment to a specified period of time or restricts it to
a specified meeting or action of the Board of Directors, or
otherwise restricts its scope, the appointment shall be for an
indefinite period, and for all purposes.
(b) Any notice given to the Company pursuant to Article 46(a) shall
become effective on the date fixed therein, or upon the delivery
thereof to the Company, whichever is later.
(c) An Alternate Director shall have all the rights and obligations of
the Director who appointed him, provided, however, that he may not
in turn appoint an alternate for himself (unless the instrument
appointing him otherwise expressly provides), and provided further
that an Alternate
-40-
Director shall have no standing at any meeting of the Board of
Directors or any committee thereof while the Director who
appointed him is present.
(d) Any natural person, whether or not he be a member of the Board of
Directors, may act as an Alternate Director. One person may act as
Alternate Director for several directors, and in such event he
shall have a number of votes (and shall be treated as the number
of persons for purposes of establishing a quorum) equal to the
number of Directors for whom he acts as Alternate Director. If an
Alternate Director is also a Director in his own right his rights
as an Alternate Director shall be in addition to his rights as a
Director.
(e) An Alternate Director shall alone be responsible for his own acts
and defaults and he shall not be deemed the agent of the
Director(s) who appointed him.
(f) The office of an Alternate Director shall be vacated under the
circumstances, mutatis mutandis, set forth in Article 43, and such
office shall ipso facto be vacated if the Director who appointed
such Alternate Director ceases to be a Director.
PROCEEDINGS OF THE BOARD OF DIRECTORS
47. Meetings
--------
(a) The Board of Directors may meet and adjourn its meetings and
otherwise regulate such meetings and proceedings as the Directors
think fit. Subject to all of the other provisions of these
Articles concerning meetings of the Board of Directors, the Board
of Directors may meet by telephone conference call so long as each
Director participating in such call can hear, and be heard by,
each other Director participating in such call.
(b) Any Director may at any time, and the Secretary, upon the request
of such Director, shall, convene a meeting of the Board of
Directors, but not less than three (3) business days' written
notice shall be given of any meeting, unless such notice is waived
in writing by all of the Directors as to a particular meeting.
48. Quorum
------
Until otherwise unanimously decided by the Board of Directors, a quorum
at a meeting of the Board of Directors shall be constituted by the
presence (in person, via telephone conference call, or by proxy) of a
majority of the Directors then in office who are lawfully entitled to
participate in the meeting (as conclusively determined by the Chairman of
the Audit Committee (if any) and in the absence of such determination -
by the Chairman of the Board of Directors), but shall not be less than
three.
-41-
If within thirty (60) minutes from the time appointed for the meeting a
quorum is not present, the meeting shall be dissolved.
49. Chairman of the Board of Directors
----------------------------------
The Board of Directors may from time to time elect one of its members to
be the Chairman of the Board of Directors, remove such Chairman from
office and appoint another in its place. The Chairman of the Board of
Directors shall preside at every meeting of the Board of Directors, but
if there is no such Chairman, or if at any meeting he is not present
within fifteen (15) minutes of the time fixed for the meeting, or if he
is unwilling to take the chair, the Directors present shall choose one of
their number to be the chairman of such meeting. The office of the
Chairman shall not, by itself, entitle the holder thereof to vote at any
General Meeting nor shall it entitle such holder to a second or casting
vote.
50. Validity of Acts Despite Defects
--------------------------------
Subject to the provisions of the Companies Ordinance, all acts done bona
fide at any meeting of the Board of Directors, or of a Committee if the
Board of Directors, or by any person(s) acting as Director(s), shall,
notwithstanding that it may afterwards be discovered that there was some
defect in the appointment of the participants in such meetings or any of
them or any person(s) acting as aforesaid, or that they or any of them
were disqualified, be as valid as if there were no such defect or
disqualification.
GENERAL MANAGER
51. The General Manager
-------------------
The Board of Directors may from time to time appoint one or more persons,
whether or not Directors, as General Manager(s) of the Company and may
confer upon such person(s), and from time to time modify or revoke, such
title(s) (including Managing Director, Director General or any similar or
dissimilar title) and such duties and authorities of the Board of
Directors as the Board of Directors may deem fit, subject to such
limitations and restrictions as the Board of Directors may from time to
time prescribe. Such appointment(s) may be either for a fixed term or
without any limitation of time, and the Board of Directors may from time
to time (subject to the provisions of the Companies Ordinance and of any
contract between any such person and the Company) fix his or their
salaries and emoluments, remove or dismiss him or them from office and
appoint another or others in his or their place or places.
MINUTES
52. Minutes
-------
-42-
(a) Minutes of each General Meeting and of each meeting of the Board
of Directors shall be recorded and duly entered in books provided
for that purpose. Such minutes shall, in all events, set forth the
names of the persons present at the meeting and all resolutions
adopted thereat.
(b) Any minutes as aforesaid, if purporting to be signed by the
chairman of the meeting or by the chairman of the next succeeding
meeting, shall constitute prima facie evidence of the matters
recorded therein.
DIVIDENDS
53. Declaration of Dividends
------------------------
Subject to Article 74, the Board of Directors may from time to time
declare and cause the Company to pay, such interim dividend as may appear
to the Board of Directors to be justified by the profits of the Company.
The final dividend in respect of any fiscal period shall be proposed by
the Board of Directors and shall be payable only after the same has been
approved by Ordinary Resolution of the Company, but no such resolution
shall provide for the payment of an amount exceeding that proposed by the
Board of Directors for the payment of such final dividend, and no such
resolution or any failure to approve a final dividend shall affect any
interim dividend theretofore declared and paid. The Board of Directors
shall determine the time for payment of such dividends, both interim and
final, and the record date for determining the shareholders entitled
thereto.
54. Funds Available for Payment of Dividends
----------------------------------------
No dividend shall be paid otherwise than out of the profits of the
Company.
55. Amount Payable by way of Dividends
----------------------------------
Subject to the rights of the holders of shares with special rights as to
dividends, any dividend paid by the Company shall be allocated among the
members entitled thereto in proportion to the nominal value of their
respective holdings of the shares in respect of which such dividend is
being paid.
56. Interest
--------
No dividend shall carry interest as against the Company.
57. Payment in Specie
-----------------
Upon the recommendation of the Board of Directors approved by Ordinary
Resolution of the Company, a dividend may be paid, wholly or partly, by
the distribution of specific assets of the Company or by distribution of
paid up shares, debentures or debenture stock of the Company or of any
other companies, or in any one or more of such ways.
58. Capitalization of Profits, Reserves, etc.
-----------------------------------------
-43-
Upon the recommendation of the Board of Directors approved by Ordinary
Resolution of the Company, the Company:
(a) may cause any moneys, investments, or other assets forming part of
the undivided profits of the Company, standing to the credit of a
reserve fund, or to the credit of a reserve fund for the
redemption of capital, or in the hands of the Company and
available for dividends, or representing premiums received on the
issuance of shares and standing to the credit of the share premium
account, to be capitalized and distributed among such of the
shareholders as would be entitled to receive the same if
distributed by way of dividend and in the same proportion, on the
footing that they become entitled thereto as capital, or may cause
any part of such capitalized fund to be applied on behalf of such
shareholders in paying up in full, either at par or at such
premium as the resolution may provide, any unissued shares or
debentures or debenture stock of the Company which shall be
distributed accordingly, in payment, in full or in part, of the
uncalled liability on any issued share or debentures or debenture
stock; and
(b) may cause such distribution or payment to be accepted by such
shareholders in full satisfaction of their interest in the said
capitalized sum.
59. Implementation of Powers under Articles 57 and 58
-------------------------------------------------
For the purpose of giving full effect to any resolution under Articles 57
or 58, and without derogating from the provisions of Article 8(b) hereof,
the Board of Directors may settle any difficulty which may arise in
regard to the distribution as it thinks expedient, and, in particular,
may issue fractional certificates, and may fix the value for distribution
of any specific assets, and may determine that cash payments shall be
made to any members upon the footing of the value so fixed, or that
fractions of less value than the nominal value of one share may be
disregarded in order to adjust the rights of all parties, and may vest
any such cash, shares, debentures, debenture stock or specific assets in
trustees upon such trusts for the persons entitled to the dividend or
capitalized fund as may seem expedient to the Board of Directors. Where
requisite, a proper contract shall be filed in accordance with Section
130 of the Companies Ordinance, and the Board of Directors may appoint
any person to sign such contract on behalf of the persons entitled to the
dividend or capitalized fund.
60. Deductions from Dividends
-------------------------
The Board of Directors may deduct from any dividend or other moneys
payable to any member in respect of a share any and all sums of money
then payable by him to the Company on account of calls or otherwise in
respect of shares of the Company and/or on account of any other matter of
transaction whatsoever.
61. Retention of Dividends
----------------------
-44-
(a) The Board of Directors may retain any dividend or other moneys
payable or property distributable in respect of a share on which
the Company has a lien, and may apply the same in or toward
satisfaction of the debts, liabilities, or engagements in respect
of which the lien exists.
(b) The Board of Directors may retain any dividend or other moneys
payable or property distributable in respect of a share in respect
of which any person is, under Articles 22 or 23, entitled to
become a member, or which any person is, under said Articles,
entitled to transfer, until such person shall become a member in
respect of such share or shall transfer the same.
62. Unclaimed Dividends
-------------------
All unclaimed dividends or other moneys payable in respect of a share may
be invested or otherwise made use of by the Board of Directors for the
benefit of the Company until claimed. The payment by the Directors of any
unclaimed dividend or such other moneys into a separate account shall not
constitute the Company a trustee in respect thereof, and any dividend
unclaimed after a period of seven (7) years from the date of declaration
of such dividend, and any such other moneys unclaimed after a like period
from the date the same were payable, shall be forfeited and shall revert
to the Company, provided, however, that the Board of Directors may, at
its discretion, cause the Company to pay any such dividend or such other
moneys, or any part thereof, to a person who would have been entitled
thereto had the same not reverted to the Company.
63. Mechanics of Payment
--------------------
Any dividend or other moneys payable in cash in respect of a share may be
paid by check or warrant sent through the post to, or left at, the
registered address of the person entitled thereto or by transfer to a
bank account specified by such person (or, if two or more persons are
registered as joint holders of such share or are entitled jointly thereto
in consequence of the death or bankruptcy of the holder or otherwise, to
any one of such persons or to his bank account), or to such person and at
such address as the person entitled thereto may be writing direct. Every
such check or warrant shall be made payable to the order of the person to
whom it is sent, or to such person as the person entitled thereto as
aforesaid may direct, and payment of the check or warrant by the banker
upon whom it is drawn shall be a good discharge to the Company. Every
such check or warrant shall be sent at the risk of the person entitled to
the money represented thereby.
64. Receipt from a Joint Holder
---------------------------
If two or more persons are registered as joint holders of any share, or
are entitled jointly thereto in consequence of the death or bankruptcy of
the holder or otherwise, any one of them may give effectual receipts for
any dividend or other moneys payable or property distributable in respect
of such share.
ACCOUNTS
-45-
65. Books of Account
----------------
The Board of Directors shall cause accurate books of account to be kept
in accordance with the provisions of the Companies Ordinance and of any
other applicable law. Such books of account shall be kept at the
Registered Office of the Company, or at such other place or places as the
Board of Directors may think fit, and they shall always be open to
inspection by all Directors. No member, not being a Director, shall have
any right to inspect any account or book or other similar document of the
Company, except as conferred by law or authorized by the Board of
Directors.
66. Audit
-----
At least once in every fiscal year the accounts of the Company shall be
audited and the correctness of the profit and loss account and balance
sheet certified by one or more duly qualified auditors.
67. Auditors
--------
The appointment, authorities, rights and duties of the auditor(s) of the
Company, shall be regulated by applicable law, provided, however, that in
exercising its authority to fix the remuneration of the auditor(s), the
members in General Meeting may, by Ordinary Resolution, act (and in the
absence of any action in connection therewith shall be deemed to have so
acted), to authorize the Board of Directors to fix such remuneration
subject to such criteria or standards, if any, as may be provided in such
Ordinary Resolution, and if no such criteria or standards are so
provided, such remuneration shall be fixed in an amount commensurate with
the volume and nature of the services rendered by such auditor(s).
BRANCH REGISTERS
68. Branch Registers
----------------
Subject to and in accordance with the provisions of Sections 72 to 81,
inclusive, of the Companies Ordinance and to all orders and regulations
issued thereunder, the Company may cause branch registers to be kept in
any place outside Israel as the Board of Directors may think fit, and,
subject to all applicable requirements of law, the Board of Directors may
from time to time adopt such rules and procedures as it may think fit in
connection with the keeping of such branch registers.
RIGHTS OF SIGNATURE AND STAMP
69. Rights of Signature and Stamp
-----------------------------
-46-
(a) The Board of Directors shall be entitled to authorize any person
or persons (who need not be Directors) to act and sign on behalf
of the Company, and the acts and signature of such person(s) on
behalf of the Company shall bind the Company insofar as such
person(s) acted and signed within the scope of his or their
authority.
(b) The Company shall have at least one official stamp.
(c) The Company may exercise the powers conferred by Section 102 of
the Companies Ordinance regarding a seal for use abroad, and such
powers shall be vested in the Board of Directors.
-47-
NOTICES
70. Notices
-------
(a) Any written notice or other document may be served by the Company
on any member either personally or by sending it by prepaid
registered mail (Courier Services such as Fed-ex if sent to a
place outside Israel) addressed to such member at his address as
described in the Register of Members or such other address as he
may have designated in writing for the receipt of notices and
other documents. Any written notice or other document may be
served by any member upon the Company by tendering the same in
person to the Secretary or the General Manager of the Company at
the principal office of the Company or by sending it by prepaid
registered mail (airmail if posted outside Israel) to the Company
at its Registered Address. Any such notice or other document,
shall be deemed to have been served on two (2) business days after
it has been posted (seven (7) business days if sent to a place not
located on the same continent as the place from where it was
posted), or when actually received by the addressee if sooner than
two days or seven days, as the case may be, after it has been
posted, or when actually tendered in person, to such member (or to
the Secretary or the General Manager), provided, however, that
notice may be sent by cablegram, telex, telecopier (facsimile) or
other electronic means and confirmed by registered mail as
aforesaid, and such notice shall be deemed to have been given
twenty-four (24) hours after such cablegram, telex, telecopy or
other electronic communication has been sent or when actually
received by such member (or by the Company), whichever is earlier.
If a notice is, in fact, received by the addressee, it shall be
deemed to have been duly served, when received, notwithstanding
that it was defectively addressed or failed, in some respect, to
comply with the provisions of this Article 70(a).
(b) All notices to be given to the members shall, with respect to any
share to which persons are jointly entitled, be given to whichever
of such persons is named first in the Register of Members, and any
notice so given shall be sufficient notice to the holders of such
share.
(c) Any member whose address is not described in the Register of
Members, and who shall not have designated an address for the
receipt of notices, shall not be entitled to receive any notice
from the Company.
INSURANCE AND INDEMNITY
71. Insurance and Indemnity
-----------------------
(a) For purposes of these Articles, the term "Office Holder" shall
mean every Director and every officer of the Company, including,
without limitation,
-48-
each of the persons defined as "Nosei Misra" in Chapter D'1 of the
Companies Ordinance.
(b) Subject to the provisions of the Companies Ordinance, the Company
may enter into a contract for the insurance of all or part of the
liability of any Office Holder, in respect of one of the
following:
(i) a breach of his duty of care to the Company or to another
person;
(ii) a breach of his fiduciary duty to the Company, provided that
the Office Holder acted in good faith and had reasonable cause to
assume that such act would not prejudice the interests of the
Company;
(iii) a financial obligation imposed on him in favor of another
person in respect of an act performed in his capacity as an Office
Holder.
(c) Subject to the provisions of the Companies Ordinance, the Company
may indemnify an Office Holder in respect of one of the following:
(i) a financial obligation imposed on him in favor of another
person by a court judgment, including a compromise judgment or an
arbitrator's award approved by court, in respect of an act
performed in his capacity as an Office Holder;
(ii) reasonable litigation expenses, including attorneys' fees,
expended by an Office Holder or charged to him by a court, in a
proceeding instituted against him by the Company or on its behalf
or by another person, or in a criminal charge from which he was
acquitted, all in respect of an act performed in his capacity as
an Office Holder.
(d) The provisions of Articles 71(a), 71(b) and 71(c) above are not
intended, and shall not be interpreted, to restrict the Company in
any manner in respect of the procurement of insurance and/or in
respect of indemnification (i) in connection with any person who
is not an Office Holder, including, without limitation, any
employee, agent, consultant or contractor of the Company who is
not an Office Holder, and/or (ii) in connection with any Office
Holder to the extent that such insurance and/or indemnification is
not specifically prohibited under law; provided that if the
Company has an Audit Committee, the procurement of any such
insurance and/or the provision of any such indemnification shall
be approved by the Audit Committee (if any) of the Company.
-49-
WINDING UP
72. Winding Up
----------
If the Company be wound up on liquidation or dissolution, then, subject
to applicable law, all the assets of the Company available for
distribution among the members shall be distributed to them in the
following order and preference:
(a) First, each Series C Preferred Share shall entitle its holder to
receive a per share distribution in the amount of its Original
Purchase Price (as adjusted for share combinations or subdivisions
or any other recapitalization of the Company's shares) plus
interest from the date of issuance of such shares to the date of
such distribution at an annual rate equal to LIBOR plus 1.5% prior
to any payments with respect to any other Preferred Shares or
Ordinary Shares. In the event the assets of the Company available
for distribution shall be insufficient to make such per share
distribution, all of such assets shall be distributed among the
holders of Series C Preferred Shares in proportion to the full
preference such holders would otherwise be entitled to receive;
(b) Second, after the payments of all amounts pursuant to Article
72(a) above, each Series A Preferred Share and each Series B Non
Voting Preferred Share shall entitle its holder to a per share
distribution in the amount of two United States Dollars and thirty
three cents (US$2.33) plus interest from the date of issuance of
such Preferred Shares to the date of such distribution at an
annual rate equal to LIBOR plus 1.5%. In the event the assets of
the Company available for distribution shall be insufficient to
make such per share distribution, all of such assets shall be
distributed among the holders of the Series A Preferred Shares and
Series B Non Voting Preferred Shares in proportion to the full
preference such holders would otherwise be entitled to receive;
(c) Third, after payments of all amounts pursuant to Articles 72(a)
and 72(b) above, the Series A Preferred Shares, Series B Non
Voting Preferred Shares and Series C Preferred Shares then
participate with the holders of the Ordinary Shares on an as
converted basis in any proceeds remaining after all liquidation
rights of the Preferred Shares are met.
(d) Notwithstanding the provisions of Articles 72(b) and 72(c) above,
if the total value of all the assets to be distributed per
Ordinary Share (assuming for purposes of such calculation the
conversion of all Series A Preferred Shares, Series B Non Voting
Preferred Shares and Series C Preferred Shares into Ordinary
Shares) is equal to, or greater than twice the Original C-2
Purchase Price (adjusted for share combinations or subdivisions or
other recapitalizations of the Company's shares), then the Series
A Preferred Shares, Series B Non Voting Preferred Shares, Series C
Preferred Shares, and the Ordinary Shares shall entitle their
holders to a per share distribution in proportion to the
respective percentage holdings of all of the Ordinary Shares and
the Ordinary Shares into which all Series
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A Preferred Shares, Series B Non Voting Preferred Shares and
Series C Preferred Shares could, at the time of such distribution,
be converted and Article 72(b) and 72(c) above shall not have any
force or effect.
(e) Notwithstanding the provisions of Articles 72(a), 72(b), 72(c) and
72(d) above, if the total value of the assets to be distributed
per Ordinary Share (assuming for purposes of such calculation the
conversion of all Preferred Shares into Ordinary Shares) is equal
to or greater than seven United States Dollars and eighty cents
($7.80) and less than twice the Original Series C-2 Purchase Price
(adjusted for share combinations or subdivisions or other
recapitalizations of the Company's shares), then following the
distribution to the Series C Preferred Shares as detailed in
Article 72(a) above, the Series A Preferred Shares, Series B Non
Voting Preferred Shares, Series C Preferred Shares and the
Ordinary Shares shall entitle their holders to a per share
distribution in proportion to the respective percentage holdings
of all of the Ordinary Shares and the Ordinary Shares into which
all Preferred Shares could, at the time of such distribution, be
converted and the provisions of Articles 72(a), 72(b), 72(c) and
72(d) above shall have no force or effect.
(f) Notwithstanding the provisions of Articles 72(a), 72(b), 72(c),
72(d) and 72(e) above, if the total value of the assets to be
distributed per Ordinary Share (assuming for purposes of such
calculation the conversion of all Preferred Shares into Ordinary
Shares) is equal to or greater than six United States Dollars and
ninety-nine cents ($6.99) and less than seven United States
Dollars and eighty cents ($7.80) (adjusted for share combinations
or subdivisions or other recapitalizations of the Company's
shares), then following the distribution to the Series C Preferred
Shares as detailed in Article 72(a) above, the Series A Preferred
Shares, Series B Non Voting Preferred Shares, Series C Preferred
Shares and the Ordinary Shares shall entitle their holders to a
per share distribution in proportion to the respective percentage
holdings of all of the Ordinary Shares and the Ordinary Shares
into which all Preferred Shares could, at the time of such
distribution, be converted and the provisions of Articles 72(a),
72(b), 72(c), 72(d) and 72(f) above shall have no force or effect.
73. Deemed Winding Up
-----------------
For purposes of Article 72, in addition to any liquidation, dissolution,
or winding up of the Company under applicable law, the Company shall be
deemed to be wound up: (a) in the event of a consolidation, merger or
reorganization of the Company with or into, or a sale of all or
substantially all of the Company's assets, or substantially all of the
Company's issued and outstanding share capital, to, any other company, or
any other entity or person, other than a wholly-owned subsidiary of the
Company, excluding a transaction in which shareholders of the Company
prior to the transaction will maintain voting control of the resulting
entity after the transaction (provided, however, that shares of the
surviving entity held by shareholders of this Company acquired by means
other than the exchange or conversion of the shares of this Company
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shall not be used in determining if the stockholders of this Company own
more than fifty percent (50%) of the voting power of the surviving entity
(or its parent), but shall be used for determining the total outstanding
voting power of the surviving entity); or (b) in the event of any
transaction or series of related transactions in which more than fifty
percent (50%) of the outstanding share capital of the Company following
such transaction or series of related transactions is held by a
shareholder or group of shareholders (the "New Control Entity") that held
less than fifty percent (50%) of the outstanding share capital of the
Company prior to such transaction or series of related transactions
provided however that this Article 73 shall not apply to a transaction or
series or related transactions in which the New Control Entity purchases
Preferred Shares (or Ordinary Shares received upon conversion of
Preferred Shares) constituting 35% or more of the Company's issued and
outstanding share capital. Upon any deemed winding up of the Company as
described in this Article 73, at the closing of the transaction at which
the Company is deemed for purposes of this Article 73 to be wound up, the
holders of the Preferred Shares shall be paid in cash, securities or a
combination thereof, an amount equal to the amount per share which would
be payable to the holders of Preferred Shares, respectively, pursuant to
Article 72 if all consideration being received by the Company and its
members in connection with such transaction were being distributed in a
liquidation of the Company, and shall be entitled by a majority vote to
cause the immediate winding-up of the Company.
MAJOR DECISIONS
74. Major Decisions
---------------
(a) Prior to the closing of an initial public offering of the
Company's shares, all of the following decisions of the Company
will be brought first to the Board of Directors of the Company for
its approval and, if such decision may be taken by the
Shareholders, require the consent of the holders of at least
662/3% of the Preferred Shares and the consent of the holders of
at least 662/3% of the outstanding shares of Ordinary Shares, each
voting as a separate class. Any of the following decisions shall
not be taken by the Company's Board of Directors without the
consent of one of the director's designated by the holders of the
Preferred Shares and one of the directors designated by the
holders of Management Shares (as defined in Article 40 above).
(i) adopt any amendment of the Memorandum or Articles of
Association of the Company, or any other action, which would have
the effect of amending the rights, preferences or privileges of
the Preferred Shares;
(ii) authorize or issue any equity securities of any class with
rights equal to or superior to those of the Preferred Shares, or
other securities convertible into such securities, or enter into
any contract or grant any option for the issue of any such
securities;
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(iii) merge with or consolidate into any corporation, firm or
entity, or sell, lease or otherwise dispose of all or
substantially all of its assets;
(iv) increase the number of directors above eight (8);
(v) declare or pay any dividend or other distribution of cash,
or other assets to the Company's shareholders in their capacity as
such; and
(vi) appoint or remove from office either of the Company's legal
advisers and/or auditors.
(B) Prior to the closing of the IPO, no amendment of the Articles of
Association amending the rights, preferences or privileges of the
Series C Preferred Shares shall be effective unless the holders of
seventy five percent (75%) of the then outstanding Series C
Preferred Shares shall have first consented in writing to such
amendment.
For the avoidance of doubt, the creation of any new class of
shares with equal or superior rights to the Series C Preferred
Shares and/or the issuance of any additional shares with equal or
superior rights to the Series C Preferred Shares shall not
constitute for itself an amendment of the rights, preferences or
privileges of the Series C Preferred Shares, but the authorization
of additional Series C Preferred Shares not authorized at the date
these Articles of Association first became effective, without
limitation, will constitute an amendment of the rights,
preferences and privileges of the Series C Preferred Shares.
For the purposes of this Article 74 the holders of the Convertible
Debentures shall be entitled to vote as if the Convertible
Debentures held thereby have been converted into Series C-2
Preferred Shares at a conversion price of $10 per share.
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Exhibit A
This Exhibit A to the Articles of RTS Software Ltd., an Israeli company
(the "Company"), is aimed to serve as an illustration of several
scenarios under which Series C Preferred Shares would be entitled to
antidilution adjustments pursuant to the Company's Articles of
Association, as amended, and how such antidilution protection would be
calculated.
All of the scenarios illustrated by this Exhibit A assume that the
initial Series Conversion Price in effect is $3.90 and that the
outstanding share capital (on a fully diluted basis including any
options to purchase Ordinary Shares, securities by their terms
convertible into or exchangeable for Ordinary Shares or options to
purchase such convertible or exchangeable securities) of the Company is
as follows:
2,517,520 Ordinary Shares
3,951,740 Series A Preferred Shares
650,000 Series B Preferred Shares
2,651,667 Series C Preferred Shares
1,558,440 Warrants to purchase Series A Preferred Shares
216,670 Warrants to purchase Series B Preferred Shares
31,795 Warrants to purchase Series C Preferred Shares
1,862,435 Existing Options to Purchase Ordinary Shares
---------
13,440,267 Fully-diluted shares outstanding.
Scenario 1: Assume the Company issues 1,000,000Additional Shares at a purchase
- ----------
price of U.S. $3.75 per share.
Result: The Series C Conversion Price would be adjusted according to
Article 5(d)(i)(A)(b)(i) to be $3.75. Accordingly, 1.04 Ordinary Shares
would then be issuable upon the conversion of each Series C Preferred
Share, since the Original Issue Price ($3.90) divided by the Conversion
Price ($3.75) equals 1.04.
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Scenario 2: Assume the Company issues 1,000,000 Additional Shares at a purchase
- ----------
price of U.S. $3.00 per share.
Result: The Series C Conversion Price would be adjusted according to
Article 5(d)(i)(A)(b)(ii) in two steps:
First: to $3.50; and then
Second:
(13,440,267 x $3.50) + (1,000,000 x $3.00) = $3.46538 = New Series C
------------------------------------------ --------
13,440,267 + 1,000,000 Conversion Price
Accordingly, 1.12542 Ordinary Shares would then be issuable upon the
conversion of each Series C Preferred Share, since the Original Issue
Price ($3.90) divided by the Conversion Price ($3.46538) equals 1.12542.
Scenario 3: Assuming that following the issuance of 1,000,000 Additional Shares
- ----------
at a purchase price of U.S. $3.00 as described in Scenario 2, the
Company then grants after February 26, 1998 options (to the extent then
exercisable) to purchase 400,000 Ordinary Shares to employees in
non-financing transactions. Assuming none of the 1,862,435 Existing
Options have been terminated without exercise, such grant of options to
purchase 400,000 Ordinary Shares is 250,000 Ordinary Shares in excess of
the "Employee Reserve" (400,000 minus 150,000 equals 250,000).
Result: The Series C Conversion Ratio would be 1.12542 (as described in
Scenario 2 above) and then, as a result of the employee option grants in
excess of the Employee Reserve, the Adjustment would be calculated
according to Article 5(d)(i)(A)(b)(iii) as follows:
Adjustment = 0.00091 x (250,000 / 10,000) = 0.02275
Accordingly, 1.14817 Ordinary Shares would then be issuable upon the
conversion of each Series C Preferred Share, which is the result of
dividing the Series C Original Issue Price (3.90) by the revised Series
C Conversion Price ($3.46441, as calculated above in Scenario 2) and
then adding the Adjustment (0.02275, as calculated above) as follows:
($3.90 / $3.46538) + 0.02275 = 1.14817
For the avoidance of doubt, the Adjustment referred to in this Scenario
3 would be added to the applicable Series C Shares Conversion Ratio only
upon the conversion of Series C Preferred Shares into Ordinary Shares
and not prior to such time.