SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of April 16, 2004 (this
"Agreement"), is entered into by and between BVR TECHNOLOGIES LTD., an Israeli
corporation with headquarters located at Raoul Wallenberg 12, Ramat Hachayal,
Tel Aviv, Israel 69719 (the "Company"), and each individual or entity named on a
signature page hereto (as used herein, each such signatory is referred to as the
"Buyer") (each agreement with a Buyer being deemed a separate and independent
agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer [each, an
"Other Buyer"] under such agreement and the Transaction Agreements, as defined
below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration for offers and sales to accredited investors afforded, inter alia,
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer desires to purchase and the Company desires to sell,
upon the terms and conditions set forth in this Agreement, the number of shares
specified on the Buyer's signature page of this Agreement (the "Purchased
Shares") of the Company's Ordinary Shares, nominal value NIS 0.01 each ("Common
Stock"), in consideration for the payment by Purchaser to the Company of US$0.10
per share (the "Per Share Purchase Price"), or the aggregate amount specified on
the Buyer's signature page (the "Purchase Price"); and
WHEREAS, in connection with the Purchaser's purchase of the Purchased
Shares, the Company will issue to the Purchaser the Warrants (as defined below),
which Warrants may be exercised for the purchase of shares of Common Stock (the
"Warrant Shares");
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE OF SECURITIES. On the Closing Date (as defined below), the
Company shall sell and deliver to the Buyer, and the Buyer agrees to purchase
from the Company, the Purchased Shares and the Warrants (collectively, the
"Purchased Securities") in consideration for the Purchase Price. The aggregate
Purchase Price of all Buyers is US$2,250,000 (the "Total Purchase Price").
B. CERTAIN DEFINITIONS. As used herein, each of the following terms has
the meaning set forth below, unless the context otherwise requires:
"Affiliate" means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.
"Buyer's Allocable Share" means the fraction, of which the numerator is
the Buyer's Purchase Price and the denominator is the Total Purchase Price.
"Certificates" means (i) the certificates representing the Purchased
Shares and (ii) the relevant Warrants, each duly executed by the Company and
issued on the Closing Date in the name of the Buyer.
"Closing Price" shall mean the 4:00 P.M. closing bid price of the Common
Stock (in U.S. Dollars) on the Principal Trading Market on the relevant Trading
Day(s), as reported by the Reporting Service.
"Closing Date" means the date of the closing of the purchase and sale of
the Purchased Securities.
"Company Control Person" means each director, executive officer, promoter,
and such other Persons as may be deemed in control of the Company pursuant to
Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).
"Effective Date" means the date the Registration Statement covering the
Registrable Securities is declared effective by the SEC.
"Escrow Agent" means the escrow agent identified in the Joint Escrow
Instructions attached hereto as ANNEX II (the "Joint Escrow Instructions").
"Escrow Funds" means the Purchase Price delivered to the Escrow Agent as
contemplated by Sections 1(c) and (d) hereof.
"Escrow Property" means the Escrow Funds and the Certificates delivered to
the Escrow Agent as contemplated by Section 1(c) hereof.
"Finder" means Econor Investments Corporation.
"Holder" means the Person holding the relevant Securities at the relevant
time.
"Last Audited Date" means December 31, 2002.
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"Buyer Control Person" means each director, executive officer, promoter,
and such other Persons as may be deemed in control of the Buyer pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act.
"Majority in Interest of the Holders" means one or more Holders whose
respective Purchase Prices aggregate more than fifty percent (50%) of the Total
Purchase Price.
"Material Adverse Effect" means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (w) adversely
affect the legality, validity or enforceability of the Securities or any of the
Transaction Agreements, (x) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole, (y) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Agreements or the transactions contemplated thereby, or (z)
materially and adversely affect the value of the rights granted to the Buyer in
the Transaction Agreements.
"New Common Stock" means shares of Common Stock and/or securities
convertible into, and/or other rights exercisable for, the issuance of Common
Stock, which are offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or lender
(howsoever denominated) in a New Transaction.
"New Transaction" means the offer or sale of New Common Stock by or on
behalf of the Company to a New Investor in a transaction offered or consummated
after the date hereof (it being specifically understood that the term "New
Transaction" does not include the sale of the Purchased Shares to the Buyer and
the Other Buyers).
"Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin Board or
such other market on which the Common Stock is principally traded at the
relevant time, but shall not included the "pink sheets."
"Registrable Securities" shall have the meaning ascribed to it in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement in
the form annexed hereto as ANNEX IV as executed by the Buyer and the Company
simultaneously with the execution of this Agreement.
"Registration Statement" means an effective registration statement
covering the Registrable Securities.
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"Reporting Service" means Bloomberg LP or if that service is not then
reporting the relevant information regarding the Common Stock, a comparable
reporting service of national reputation selected by a Majority in Interest of
the Holders and reasonably acceptable to the Company.
"Securities" means the Purchased Shares, the Warrants and the Warrant
Shares.
"Shares" means the shares of Common Stock representing any or all of the
Purchased Shares and the Warrant Shares.
"State of Incorporation" means Israel.
"Trading Day" means any day during which the Principal Trading Market
shall be open for business.
"Transaction Agreements" means the Securities Purchase Agreement, the
Registration Rights Agreement, the Joint Escrow Instructions, and the Warrants,
and includes all ancillary documents referred to in those agreements.
"Transfer Agent" means, at any time, the transfer agent for the Company's
Common Stock.
C. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars to the Escrow Agent no later than
the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly following
payment by the Buyer to the Escrow Agent of the Purchase Price, the Company
shall deliver the Certificates to the Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
D. METHOD OF PAYMENT. Payment into escrow of the relevant Purchase Price
shall be made by wire transfer of funds to:
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Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager LLP
Account No.: [To be provided to the Buyer by Krieger & Prager LLP]
Re: BVR 04/1 Transaction
For: [Name of Buyer]
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
A. Without limiting Buyer's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act,
the Buyer is purchasing the Securities for its own account for investment only
and not with a view towards the public sale or distribution thereof and not with
a view to or for sale in connection with any distribution thereof.
B. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its Affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and to evaluate the merits and risks of an investment in the
Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
C. All subsequent offers and sales of the Securities by the Buyer shall be
made pursuant to registration of the relevant Securities under the 1933 Act or
pursuant to an exemption from registration.
D. The Buyer understands that the Securities are being offered and sold to
it in reliance on specific exemptions from the registration requirements of the
1933 Act and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
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E. The Buyer and its advisors, if any, have been furnished with or have
been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Purchased Shares and the Warrants which have been requested by the Buyer,
including those set forth on in any annex attached hereto. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management and have received complete and satisfactory answers
to any such inquiries. Without limiting the generality of the foregoing, the
Buyer has also had the opportunity to obtain and to review the Company's filings
on EDGAR listed on ANNEX VI hereto (the documents listed on such Annex VI, to
the extent available on EDGAR or otherwise provided to the Buyer as indicated on
said Annex VI, collectively, the "Company's SEC Documents").
F. The Buyer understands that its investment in the Securities involves a
high degree of risk.
G. The Buyer hereby represents that, in connection with its purchase of
the Securities, it has not relied on any statement or representation by the
Company or the Finder or any of their respective officers, directors and
employees or any of their respective attorneys or agents or the Finder, except
as specifically set forth herein. The Finder is a third party beneficiary of
this provision.
H. The Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
I. This Agreement and the other Transaction Agreements to which the Buyer
is a party, and the transactions contemplated thereby, have been duly and
validly authorized, executed and delivered on behalf of the Buyer and are valid
and binding agreements of the Buyer enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to
the Buyer as of the Closing Date that, except as otherwise provided in the ANNEX
V or in the Company's SEC Documents:
A. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no preemptive
rights of any shareholder of the Company, as such, to acquire the Purchased
Shares, the Warrants or the Shares. No party other has a currently exercisable
right of first refusal which would be applicable to any or all of the
transactions contemplated by the Transaction Agreements.
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B. STATUS. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Incorporation and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have
or result in a Material Adverse Effect. The Company has registered its stock and
is obligated to file reports pursuant to Section 12 or Section 15(d) of the
Securities and Exchange Act of 1934, as amended (the "1934 Act"). The Common
Stock is quoted on the Principal Trading Market. The Company has received no
notice, either oral or written, with respect to the continued eligibility of the
Common Stock for such quotation on the Principal Trading Market, and the Company
has maintained all requirements on its part for the continuation of such
quotation.
C. AUTHORIZED SHARES. The authorized capital stock of the Company consists
of 200,000,000 shares of Ordinary Shares, nominal value NIS 0.01 each ("Common
Stock"), of which approximately 98,377,010 are outstanding as of the date
hereof. All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as may be
necessary to effect the issuance of the Shares. As of the Closing Date, the
Shares shall have been duly authorized by all necessary corporate action on the
part of the Company, and, when issued on the Closing Date or upon exercise of
the Warrants in accordance with their terms, will be duly and validly issued,
fully paid and non-assessable and will not subject the Holder thereof to
personal liability by reason of being such Holder.
D. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each of the other
Transaction Agreements, and the transactions contemplated thereby, have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Warrants
and each of the other Transaction Agreements, when executed and delivered by the
Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally.
E. NON-CONTRAVENTION. The execution and delivery of this Agreement and
each of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Warrants and the other Transaction
Agreements do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the certificate of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, or (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
not have or result in a Material Adverse Effect.
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F. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
G. FILINGS. None of the Company's SEC Documents contained, at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading. Since March 1, 2003, the Company has timely filed all requisite
forms, reports and exhibits thereto required to be filed by the Company with the
SEC.
t 6 0 H. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date, there
has been no material adverse change and no Material Adverse Effect, except as
disclosed in the Company's SEC Documents. Since the Last Audited Date, except as
provided in the Company's SEC Documents, the Company has not (i) incurred or
become subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with past
practices; (ii) discharged or satisfied any material lien or encumbrance or paid
any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to shareholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other tangible assets, or
canceled any debts owed to the Company by any third party or claims of the
Company against any third party, except in the ordinary course of business
consistent with past practices; (v) waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of any material
amount of existing business; (vi) made any increases in employee compensation,
except in the ordinary course of business consistent with past practices; or
(vii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment.
I. FULL DISCLOSURE. To the best of the Company's knowledge, there is no
fact known to the Company (other than general economic conditions known to the
public generally or as disclosed in the Company's SEC Documents) that has not
been disclosed in writing to the Buyer that would reasonably be expected to have
or result in a Material Adverse Effect.
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J. ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or nongovernmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements. The Company is not aware of any valid basis for any such claim that
(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.
K. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company or its subsidiary is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a Material Adverse
Effect.
L. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR EVENTS. To the
Company's knowledge, none of the following has occurred during the past five (5)
years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state insolvency
law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such
Company Control Person, or any partnership in which he was a general
partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer
at or within two years before the time of such filing;
(2) Such Company Control Person was convicted in a criminal proceeding or
is a named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or dealer
in securities, or as an affiliated person, director or employee of
any investment company, bank, savings and loan association or
insurance company, as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor
broker, any other Person regulated by the Commodity Futures Trading
Commission ("CFTC") or engaging in or continuing any conduct or
practice in connection with such activity;
(ii) engaging in any type of business practice; or
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(iii) engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal commodities
laws;
(4) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or
state authority barring, suspending or otherwise limiting for more than 60
days the right of such Company Control Person to engage in any activity
described in paragraph (3) of this item, or to be associated with Persons
engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the CFTC or SEC has not been subsequently reversed, suspended,
or vacated.
M. NO UNDISCLOSED LIABILITIES OR EVENTS. To the best of the Company's
knowledge, the Company has no liabilities or obligations other than those
disclosed in the Transaction Agreements or the Company's SEC Documents or those
incurred in the ordinary course of the Company's business since the Last Audited
Date, or which individually or in the aggregate, do not or would not have a
Material Adverse Effect. No event or circumstances has occurred or exists with
respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to
be under consideration by the Board of Directors or the executive officers of
the Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
N. NO INTEGRATED OFFERING. Neither the Company nor any of its Affiliates
nor any Person acting on its or their behalf has, directly or indirectly, at any
time since September 1, 2003, made any offer or sales of any security or
solicited any offers to buy any security under circumstances that would
eliminate the availability of the exemption from registration under Regulation D
in connection with the offer and sale of the Securities as contemplated hereby.
O. DILUTION. The number of shares issuable on the Closing Date and upon
exercise of the Warrants may have a dilutive effect on the ownership interests
of the other shareholders (and Persons having the right to become shareholders)
of the Company. The Company's executive officers and directors have studied and
fully understand the nature of the Securities being sold hereby and recognize
that they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Warrant Shares upon exercise of the Warrants is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company, and the Company will honor such obligations, including honoring every
Notice of Exercise (as contemplated by the Warrants), unless the Company is
subject to an injunction (which injunction was not sought by the Company)
prohibiting the Company from doing so.
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P. FEES TO BROKERS, FINDERS AND OTHERS. Except for payment of the Finder's
Compensation (as defined below) to the Finder, payment of which is the sole
responsibility of the Company, the Company has taken no action which would give
rise to any claim by any Person for brokerage commission, finder's fees or
similar payments by Buyer relating to this Agreement or the transactions
contemplated hereby. Buyer shall have no obligation with respect to such fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this paragraph that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when incurred. The term
"Finder's Compensation" means, in connection with the consummation of the
transactions contemplated by this Agreement, the consideration contemplated by
the Joint Escrow Instructions.
Q. CONFIRMATION. The Company confirms that all statements of the Company
contained herein shall survive acceptance of this Agreement by the Buyer. The
Company agrees that, if any events occur or circumstances exist prior to the
Closing Date or the release of the Purchase Price to the Company which would
make any of the Company's representations, warranties, agreements or other
information set forth herein materially untrue or materially inaccurate as of
such date, the Company shall immediately notify the Buyer and the Escrow Agent
in writing prior to such date of such fact, specifying which representation,
warranty or covenant is affected and the reasons therefor.
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4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the Purchased
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that, until such
time as the relevant Shares have been registered under the 1933 Act, as
contemplated by the Registration Rights Agreement, and sold in accordance with
an effective Registration Statement or otherwise in accordance with another
effective registration statement, the certificates and other instruments
representing any of the Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL
OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
C. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Buyer under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
D. REPORTING STATUS. So long as the Buyer owns any of the Securities, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its
control to ensure that adequate current public information with respect to the
Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is
publicly available, and shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company will take all
reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be,
applicable to it at least through the date which is sixty (60) days after the
date on which all of the Warrants have been exercised or have expired.
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E. USE OF PROCEEDS. The Company will use the proceeds received hereunder
(excluding amounts paid by the Company for Finder's Compensation in connection
with the sale of the Securities or legal and escrow fees contemplated by the
Joint Escrow Instructions) for general corporate purposes.
F. WARRANTS.
(i) The Company agrees to issue to the Buyer on the Closing Date three (3)
separate transferable warrants (each, a "Warrant" and, collectively, the
"Warrants"), designated as Class 2004-A ("Class A"), Class 2004-B ("Class B")
and Class 2004-C ("Class C") Warrants, respectively.
(ii) Each Warrant shall be for the purchase the a number of shares of
Common Stock equal to the Purchased Shares (a total of 300% of the Purchased
Shares for all Warrants combined); provided, however, that the Class C Warrants
shall provide that they are exercisable in an amount determined by multiplying
(x) the number of shares originally stated in such Class C Warrant (as the same
may be adjusted pursuant to the term of that Warrant), by (y) the fraction, of
which the numerator is the number of shares for which one or more notices of
exercise pursuant to the Class A Warrants have been duly submitted (and the
appropriate purchase price paid for) as by the Buyer (and any direct or indirect
transferee, assignee or designee of the Buyer) and the denominator is the number
of shares originally stated in the Buyer's Class A Warrants (as such numerator
and denominator may be adjusted to reflect stock splits, reverse stock splits
and similar changes in the capital structure of the Company).1
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1 By way of illustration: Assume that each of the Buyer's Class A Warrants
and Class C Warrants are for 1,000,000 shares. The Buyer's Class A
Warrants have been exercised for 500,000 shares (50%). The Class C
Warrants are exercisable for 500,000 shares (50%). If, after the exercise
of the Class A Warrants, there had been a 2:1 stock split, the Class C
Warrants would be exercisable for 1,000,000 shares (50% of adjusted
2,000,000 shares).
13
(iii) Each Warrant shall have an exercise price (each, an "Exercise
Price") as follows: (i) Class A - US$0.20; (ii) Class B - US$0.35; and (iii)
Class C- US$0.50; each such Exercise Price will be subject to adjustment as
provided in the Warrant. Each Warrant will expire as follows: (i) Class A - on
the Class A Expiration Date (as defined below); and (ii) Class B and Class C -
on the date which is on the last day of the calendar month in which the third
annual anniversary of the relevant Closing Date occurs. The term "Class A
Expiration Date" means the date which is eight (8) months after the Effective
Date, but not counting for such purposes the days, if any, during which sale of
Registrable Securities was suspended after the Effective Date.2
(iv) Each of the Warrants shall be in the form annexed hereto as ANNEX I.
All Warrants will provide for cashless exercise rights, exercisable beginning on
the first anniversary of the Closing Date if, but only if, the Effective Date
has not occurred by such first anniversary of the Closing Date.
(v) All Warrant Shares shall be subject to the provisions of the
Registration Rights Agreement.
G. CERTAIN AGREEMENTS.
- ----------
2 By way of illustration: If the Effective Date is June 30, 2004, the
initial Class A Expiration Date would be February 28, 2005. If, however,
the sale of Registrable Securities was suspended in the interim for ten
(10) days, the applicable Class A Expiration Date will be March 10, 2005.
If on March 5, 2005, the sale of Registrable Securities was suspended
again for five (5) days, the Class A Expiration Date will be March 15,
2005.
14
(i) (A) The Company covenants and agrees that, except for the sale of
Purchased Securities to the Other Buyers and subject to the other provisions of
this Section 4(g) and Section 4(h), during the period (the "New Transaction
Period") from the Closing Date and continuing through and including the Final
Lock-up Date (as defined below), it will not, without the prior written consent
of a Majority in Interest of the Holders in each instance, enter into a New
Transaction where either the lowest fixed purchase price of any shares of the
New Common Stock contemplated in the New Transaction is below the Threshold
Price (as defined below) or the lowest conversion price which would be
applicable under the terms of the New Transaction is below the Threshold Price.
The term "Threshold Price" means US$0.10 per share (subject to adjustment in the
same manner as the Exercise Price of the Warrant is adjusted). The term "Final
Lock-up Date" means the date which is one hundred eighty (180) days after the
Effective Date, but not counting for such purposes the days, if any, during
which sale of Registrable Securities was suspended after the Effective Date.3
(B) In the event there is a New Transaction during the New
Transaction Period which breaches the provisions of the preceding subparagraph
(i)(A) of this Section 4(g),
(1) the Per Share Purchase Price shall be adjusted to an amount (the
"Adjusted Per Share Purchase Price") equal to the lower of (x) the lowest
fixed purchase price of any shares of the New Common Stock contemplated in
the New Transaction or (y) the lowest conversion price which would be
applicable under the terms of the New Transaction;
(2) the Company will issue to the Holder additional shares of Common Stock
("Additional Shares") equal to the excess, if any, of (x) (I) the Purchase
Price divided by (II) the Adjusted Per Share Purchase Price, over (y) the
number of Purchased Shares and Additional Shares previously issued, if
any;
(3) the number of Warrants issued shall be adjusted to equal the number of
shares equal to (x) (I) the higher of one hundred percent (100%) or (II)
the Alternative Warrant Percentage (as defined below), of (y) the Purchase
Price divided by the Adjusted Per Share Purchase Price;
- ----------
3 By way of illustration: If the sale of Registrable Securities was
suspended for ten (10) days in the interim, the applicable Final Lock-up
Date will be one hundred ninety (190) days after the Effective Date. If on
the 188th day after the Effective Date, the sale of Registrable Securities
was suspended again for five (5) days, the Final Lock-up Date will be one
hundred ninety-five (195) days after the Effective Date. This example
assumes there is no Early Lock-up Termination Date.
15
(4) if the exercise price of the warrants, option or similar instrument
(howsoever denominated; collectively, "New Transaction Warrants") included
in the New Transaction (the "New Transaction Exercise Price") is lower
than the then effective Exercise Price on the Warrants, the Exercise Price
of the Warrants shall be adjusted to equal the New Transaction Exercise
Price; and
(5) if the provisions of the New Transaction Warrant are more beneficial
to the holder of such instrument than the corresponding terms of the
Warrant,4 or if the terms which are beneficial to the Company in the
Warrant are not included in the corresponding instrument in the New
Transaction, then, unless waived by the Holder, the Warrant terms shall be
modified to reflect similar terms (based on the original issue date of the
Warrants).
(ii) The term "Alternative Warrant Percentage" means (x) the number of
shares which are eligible to be purchased under the New Transaction Warrants,
divided by (y) the aggregate of the shares of New Common Stock issued or
issuable in such transaction (excluding the shares issuable on exercise of the
New Transaction Warrants).
(iii) The foregoing provisions of Section 4(g) do not apply to the
issuance of New Common Stock in connection with a Person's exercise of
conversion or other rights it may have under documents executed and transactions
consummated prior to the date of this Agreement.
(iv) Nothing in the foregoing provisions reflects either an obligation on
the part of any Buyer to participate in any New Transaction or a limitation on
any Buyer from participating in any New Transaction.
(v) Any of the foregoing provisions of this Section 4(g) or any other
provision of this Agreement (including but not limited to Section 4(h) hereof)
or any of the other Transaction Agreements to the contrary notwithstanding, the
Company shall not engage in any offers, sales or other transactions of its
securities which would adversely affect the exemption from registration
available for the transactions contemplated by the Transaction Agreements.
H. AVAILABLE SHARES. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, a number of shares (the
"Minimum Available Shares") at least equal to one hundred ten percent (110%) of
the number of shares issuable upon exercise of all outstanding Warrants held by
all Holders (in each case, whether such Warrants were originally issued to the
Holder, the Buyer or to any other party). For the purposes of such calculations,
the Company should assume that all Warrants were then issued and exercisable, in
each case without regard to any restrictions which might limit any Holder's
right to exercise any of the Warrants held by any Holder.
- ----------
4 Without limiting the foregoing, by way of example: the expiration date of
the instrument in the New Transaction is more than three years from its
original issue date. Notwithstanding the foregoing, the expiration date of
the Class A Warrants shall not be extended based on this provision.
16
I. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties agrees that it
will not disseminate any information relating to the Transaction Agreements or
the transactions contemplated thereby, including issuing any press releases,
holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects. In furtherance of the foregoing, the
Company will provide to the Buyer drafts of the applicable text of any filing
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least two
(2) business days before such filing will be made) and will not include in such
filing any statement or statements or other material to which the other party
reasonably objects. Notwithstanding the foregoing, each of the parties hereby
consents to the inclusion of the text of the Transaction Agreements in filings
made with the SEC (but any descriptive text accompanying or part of such filing
shall be subject to the other provisions of this paragraph).
5. TRANSFER AGENT INSTRUCTIONS.
A. The Company warrants that, with respect to the Securities, other than
the stop transfer instructions to give effect to Section 4(a) hereof, it will
give the Transfer Agent no instructions inconsistent with instructions to issue
Common Stock representing the Purchased Shares and from time to time upon
exercise of the Warrants in such amounts as specified from time to time by the
Company to the Transfer Agent, bearing the restrictive legend specified in
Section 4(b) of this Agreement prior to registration of the Shares under the
1933 Act, registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Holder in connection therewith. Except as
so provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Agreements. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Buyer of any of the Securities in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the 1933 Act, the Company
shall (except as provided in clause (2) of Section 4(a) of this Agreement)
permit the transfer of the Securities and, in the case of the Purchased Shares
or of the Warrant Shares, promptly instruct the Transfer Agent to issue one or
more certificates for Common Stock without legend in such name and in such
denominations as specified by the Buyer.
B. Subject to the provisions of this Agreement, the Company will permit
the Buyer to exercise its right to exercise the Warrants in the manner
contemplated by the Warrants.
17
C. In lieu of delivering physical certificates representing the Common
Stock issuable upon exercise of a Warrant or at the request of the Holder with
respect to the Purchased Shares or Warrant Shares previously issued, provided
the Transfer Agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Holder and its
compliance with the provisions contained in this paragraph, so long as the
certificates therefor do not bear a legend and the Holder thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause the Transfer Agent to electronically
transmit to the Holder the Common Stock issuable upon exercise of the Warrant or
in replacement of Purchased Shares or Warrant Shares previously issued by
crediting the account of Holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system.
D. The Company shall assume any fees or charges of the Transfer Agent or
Company counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to Registrable Securities, and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee or to a transferee as contemplated by an effective Registration
Statement.
E. The Company will authorize the Transfer Agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative, to the extent such
information relates to (i) the status of shares of Common Stock issued or
claimed to be issued to the Buyer in connection with a Notice of Exercise, or
(ii) the number of outstanding shares of Common Stock of all shareholders as of
a current or other specified date. At the request of the Buyer, the Company will
provide the Buyer with a copy of the authorization so given to the Transfer
Agent.
6. CLOSING DATE.
A. The Closing Date shall occur on the date which is the first Trading Day
after each of the conditions contemplated by Sections 7 and 8 hereof shall have
either been satisfied or been waived by the party in whose favor such conditions
run.
B. The closing of the purchase and issuance of Purchased Securities shall
occur on the Closing Date at the offices of the Escrow Agent and shall take
place no later than 3:00 P.M., New York time, on such day or such other time as
is mutually agreed upon by the Company and the Buyer.
C. Notwithstanding anything to the contrary contained herein, the Escrow
Agent will be authorized to release the Escrow Funds to the Company and to
others and to release the other Escrow Property on the relevant Closing Date
upon satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
18
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Purchased
Securities to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon:
A. The execution and delivery of this Agreement by the Buyer on or before
the Closing Date;
B. Delivery by the Buyer to the Escrow Agent by the Closing Date of good
funds as payment in full of an amount equal to the Purchase Price in accordance
with this Agreement;
C. The accuracy on such Closing Date of the representations and warranties
of the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date; and
D. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Purchased Securities on the Closing Date is conditioned upon:
A. The execution and delivery of this Agreement and the other Transaction
Agreements by the Company on or before the Closing Date;
B. Delivery by the Company to the Escrow Agent of the relevant
Certificates in accordance with this Agreement;
C. On such Closing Date, each of the Transaction Agreements executed by
the Company on or before such date shall be in full force and effect and the
Company shall not be in default thereunder;
D. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
19
E. On such Closing Date, the Buyer shall have received an opinion of
counsel for the Company, dated such Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, substantially to the effect set forth in
ANNEX III attached hereto;
F. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained; and
G. From and after the date hereof to and including the Closing Date, each
of the following conditions will remain in effect: (i) the trading of the Common
Stock shall not have been suspended by the SEC or on the Principal Trading
Market; (ii) trading in securities generally on the Principal Trading Market
shall not have been suspended or limited; (iii), no minimum prices shall been
established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market
that, in the reasonable judgment of the Buyer, makes it impracticable or
inadvisable to purchase the Securities.
9. INDEMNIFICATION AND REIMBURSEMENT.
A. (i) The Company agrees to indemnify and hold harmless the Buyer and its
officers, directors, employees, and agents, and each Buyer Control Person from
and against any losses, claims, damages, liabilities or expenses incurred
(collectively, "Damages"), joint or several, and any action in respect thereof
to which the Buyer, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Buyer Control Person becomes subject
to, resulting from, arising out of or relating to any misrepresentation, breach
of warranty or nonfulfillment of or failure to perform any covenant or agreement
on the part of Company contained in this Agreement, as such Damages are
incurred, except to the extent such Damages result primarily from Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's gross negligence, recklessness or bad faith in performing its
obligations under this Agreement.
(ii) The Company hereby agrees that, if the Buyer, other than by reason of
its gross negligence or willful misconduct (in each case, as determined by a
non-appealable judgment to such effect), (x) becomes involved in any capacity in
any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by this Agreement or the other Transaction Agreements,
or if the Buyer is impleaded in any such action, proceeding or investigation by
any Person, or (y) becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC, any self-regulatory organization or other body
having jurisdiction, against or involving the Company or in connection with or
as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements, or (z) is impleaded in any such
action, proceeding or investigation by any Person, then in any such case, the
Company shall indemnify, defend and hold harmless the Buyer from and against and
in respect of all losses, claims, liabilities, damages or expenses resulting
from, imposed upon or incurred by the Buyer, directly or indirectly, and
reimburse such Buyer for its reasonable legal and other expenses (including the
cost of any investigation and preparation) incurred in connection therewith, as
such expenses are incurred. The indemnification and reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Buyer who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and Buyer Control
Persons (if any), as the case may be, of the Buyer and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, the Buyer, any such Affiliate and
any such Person. The Company also agrees that neither the Buyer nor any such
Affiliate, partner, director, agent, employee or Buyer Control Person shall have
any liability to the Company or any Person asserting claims on behalf of or in
right of the Company in connection with or as a result of the consummation of
this Agreement or the other Transaction Agreements, except as may be expressly
and specifically provided in or contemplated by this Agreement.
20
B. All claims for indemnification by any Indemnified Party (as defined
below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which any Person
claiming indemnification under any provision of this Section (an "Indemnified
Party") might seek indemnity under paragraph (a) of this Section is asserted
against or sought to be collected from such Indemnified Party by a Person other
than a party hereto or an Affiliate thereof (a "Third Party Claim"), the
Indemnified Party shall deliver a written notification, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for such Third
Party Claim and for the Indemnified Party's claim for indemnification that is
being asserted under any provision of this Section against any Person (the
"Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
21
paragraph (b) of this Section, then the Indemnifying Party shall have the
right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party
(but only with the consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages as to which
the Indemnified Party shall not be indemnified in full pursuant to
paragraph (a) of this Section). The Indemnifying Party shall have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at
the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the first
sentence of this subparagraph (x), file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate protect its interests; and
provided further, that if requested by the Indemnifying Party, the
Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in
contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this subparagraph (x), and except as
provided in the preceding sentence, the Indemnified Party shall bear its
own costs and expenses with respect to such participation. Notwithstanding
the foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it irrevocably
waives its right to indemnity under paragraph (a) of this Section with
respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third
Party Claim pursuant to paragraph (b) of this Section, or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be
settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld).
The Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party,
provide reasonable cooperation to the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is
contesting. Notwithstanding the foregoing provisions of this subparagraph
(y), if the Indemnifying Party has notified the Indemnified Party within
the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute is resolved in favor
of the Indemnifying Party in the manner provided in subparagraph(z) below,
the Indemnifying Party will not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this subparagraph (y) or of
the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party
in full for all reasonable costs and expenses incurred by the Indemnifying
Party in connection with such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by
the Indemnified Party pursuant to this subparagraph (y), and the
Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
22
(z) If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under paragraph
(a) of this Section or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or
the amount of its liability to the Indemnified Party with respect to such
Third Party Claim, the amount of Damages specified in the Claim Notice
shall be conclusively deemed a liability of the Indemnifying Party under
paragraph (a) of this Section and the Indemnifying Party shall pay the
amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute; provided, however, that if the dispute is not resolved
within thirty (30) days after the Claim Notice, the Indemnifying Party
shall be entitled to institute such legal action as it deems appropriate.
(ii) In the event any Indemnified Party should have a claim under
paragraph (a) of this Section against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under paragraph (a) of this Section
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim or the amount of the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay
the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
23
C. The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.
10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive a trial by
jury in any action, proceeding or counterclaim brought by either of the Parties
hereto against the other in respect of any matter arising out or in connection
with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
A. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the exclusive jurisdiction of the
federal courts whose districts encompass any part of the County of New York or
the state courts of the State of New York sitting in the County of New York in
connection with any dispute arising under this Agreement or any of the other
Transaction Agreements and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of
or protection of any of its rights under any of the Transaction Agreements.
B. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
C. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
D. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
E. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
24
F. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
G. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
H. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
I. This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement thereof.
J. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
12. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or
(c) the third business day after mailing by domestic or international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: At the address set forth at the head of this Agreement.
Attn: President
Telephone No.: (011 972 3) 699-6060
Telecopier No.: (011 972 3) 699-6262
with a copy to:
Ehud Arad, Adv.
Bach, Arad, Scharf & Co.
2 Hashlom Rd.
Tel Aviv, 67892, Israel
Telephone No.: (011 972 3) 562-5303
Telecopier No.: (011 972 3) 562-5304
25
BUYER: At the address set forth on the signature page of this
Agreement.
with a copy to:
Krieger & Prager LLP, Esqs.
39 Broadway
Suite 1440
New York, NY 10006
Attn: Ronald J. Nussbaum, Esq.
Telephone No.: (212) 363-2900
Telecopier No. (212) 363-2999
ESCROW AGENT: Krieger & Prager LLP, Esqs.
39 Broadway
Suite 1440
New York, NY 10006
Attn: Samuel Krieger, Esq.
Telephone No.: (212) 363-2900
Telecopier No. (212) 363-2999
26
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the payment
of the Purchase Price, and shall inure to the benefit of the Buyer and the
Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
27
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer (if
an entity, by one of its officers thereunto duly authorized) as of the date set
forth below.
PURCHASED SHARES ____________________________________
PURCHASE PRICE: US$_________________________________
SIGNATURES FOR BUYERS
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf as of the date first above written.
________________________________ ________________________________________
Address Printed Name of Buyer
________________________________
By: ____________________________________
Telecopier No. _________________ (Signature of Authorized Person)
________________________________________
______________________________ Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
BVR TECHNOLOGIES LTD.
By: _________________________________
Title: _________________________________
28
ANNEX I FORM OF WARRANT
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE
ANNEX VI COMPANY'S SEC DOCUMENTS AVAILABLE ON EDGAR