WARRANT CERTIFICATE
OF
ENDAN IT SOLUTIONS LTD.
Effective as of ____________ (the "Effective Date"), dsIT Technologies Ltd.
(the "Holder") is entitled to purchase from Endan IT Solutions Ltd. (the
"Company"), subject to the terms and conditions hereof, shares of the Company
of the Most Senior Class (the "Warrant Shares"), in such number as shall
constitute subject to the provisions of this Warrant, 10% of the Company's
equity calculated on a fully diluted (post-issuance) basis, for an aggregate
consideration (the "Aggregate Exercise Price") of US$ 200,000. For the
purpose of this Warrant the "Most Senior Class" shall mean the most senior
class of shares issued by the Company prior to the date of exercise of this
Warrant, other than any class of senior shares issued in connection with an
investment in cash made by any investor on the basis of a pre-money valuation
of at least US$2 million.
1. Term
This Warrant may be exercised, in whole at any time during a period
beginning on the Effective Date and ending upon the expiration of seven
years following the Effective Date (the "Warrant Period").
2. Exercise of Warrant
2.1. Exercise for Cash
This Warrant may be exercised in whole during the Warrant Period, by
the surrender of the Warrant at the principal office of the Company,
together with a duly exercised Notice of Exercise in the form
attached hereto as Exhibit A and the payment to the Company, in cash
or by certified, cashier's or other check acceptable to the Company,
of an amount equal to the Aggregate Exercise Price for the Warrant
Shares being purchased.
2.2. Issuance of Shares on Exercise
The Company agrees that the Warrant Shares so purchased shall be
issued against receipt of the Notice of Exercise and payment (as
provided in Section 2.1 herein) and that the Holder shall be deemed
the record owner of such Warrant Shares as of and from the close of
business on the date on which this Warrant shall be surrendered,
together with payment in full, as adjusted in accordance with the
provision of Section 4 below. The Company shall promptly deliver to
the Holder a share certificate for the purchased Warrant Shares.
In the event that the Holder intends to exercise this Warrant in
connection with an anticipated M&A transaction or an IPO, the Holder
shall be entitled to condition such exercise on the consummation of
such event and shall indicate such on the Notice of Exercise form.
3. Fractional Interest
No fractional shares will be issued in connection with any exercise of
this Warrant, but in lieu of such fractional shares the Company shall
round the number of Warrant Shares to the nearest whole number.
4. Adjustment of Warrant Price and Number of Shares
The number and type of securities purchasable upon the exercise of this
Warrant and the exercise price per Warrant Share (the "Exercise Price")
shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
4.1. Stock Splits, Stock Dividends, Combinations and Reorganizations. In
the event that the Company shall at any time subdivide the class of
Warrant Shares or shall issue a stock dividend on its outstanding
class of Warrant Shares, the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such subdivision or to
the issuance of such stock dividend shall be proportionately
increased, and the Exercise Price shall be proportionately
decreased. In the event that the Company shall at any time combine
the outstanding shares of the class of Warrant Shares, the number of
shares of the class of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such combination shall be
proportionately decreased, and the Exercise Price shall be
proportionately increased. The above adjustments shall be effective
at the close of business on the date of such subdivision, share
dividend or combination, as the case may be.
4.2. Payments of Cash Dividends and Other Amounts to Shareholders. The
Aggregate Exercise Price shall be reduced by an amount equal to 10%
of any payment, including without limitation dividends, management
fees or any other sums paid by the Company to its shareholders or
any of their affiliates (the "Related Parties"), other than payments
associated with (i) repayment of principal and fair market interest
(not to exceed LIBOR + 1.5% per annum) paid to any of the Related
Parties on loans granted by them to the Company (or granted by them
to the Holder prior to the Effective Date and assigned to the
Company as part of the Restructuring (as such term is defined in the
SPA); (ii) fair market prices paid to any of the Related Parties for
the purchase of materials or services provided by them, or (iii)
amounts paid and benefits granted to Mr. Jacob Neuwirth and Mr.
George Morgenstern or any company affiliated with them in
consideration for their services as CEO and Chairman, respectively,
of the Company; provided, however, that payments made to Mr. George
Morgenstern or a company affiliated with him, in consideration for
his services as Chairman of the Company, shall not exceed US$10,000
per month.
4.3. Adjustments Resulting from Additional Investments Prior to the
Exercise of the Warrant. In the event that a third party shall
invest in the Company, prior to the exercise of this Warrant, on the
basis of a pre-money valuation of at least US$2 million, then this
Warrant shall grant the Holder the right to acquire 10% equity
interest in the Company, calculated on the basis of the Company's
fully-diluted share capital, excluding the shares issued in
connection with such third party investment. If any investment is
made in the Company on the basis of a pre-money valuation of less
than US$2 million (whether prior to the exercise of the Warrant or
thereafter, but prior to the expiration of the Warrant Period), then
this Warrant shall grant the Holder the right to acquire 10% equity
interest in the Company for an Aggregate Exercise Price equal to 10%
of the lowest pre-money valuation of the Company on the basis of
which any such investment in the Company is made.
4.4. Adjustments Resulting from Additional Investments Following the
Exercise of the Warrant. In the event that a third party shall
invest in the Company, following the exercise of this Warrant and
during the Warrant Period, at a price per share lower than the
Exercise Price (such price, the "Lower Price"), then additional
Warrant Shares shall be issued to the Holder to reflect an Exercise
Price equal to such Lower Price, with the Aggregate Exercise Price
remaining the same.
4.5. Conversion or Redemption of Warrant Shares. Should all of the
Warrant Shares be, or if outstanding would be, at any time prior to
the expiration of this Warrant, redeemed or converted into Ordinary
Shares, then this Warrant shall become immediately exercisable for
that number of Ordinary Shares equal to the number of Ordinary
Shares that would have been received if this Warrant had been
exercised in full and the Warrant Shares received thereupon had been
simultaneously converted immediately prior to such event, and the
Exercise Price shall immediately be adjusted to equal the quotient
obtained by dividing (x) the Aggregate Exercise Price of the maximum
number of Warrant Shares for which this Warrant was exercisable
immediately prior to such conversion or redemption, by (y) the
number of Ordinary Shares for which this Warrant is exercisable
immediately after such conversion or redemption.
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4.6. General Protection. The Company will not, by amendment of its
Articles of Incorporation or Bylaws or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, 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, but will at all times in good faith assist in
the carrying out of all the provisions hereof and in taking of all
such actions and making all such adjustments as may be necessary or
appropriate in order to protect the rights of the Holder against
impairment.
4.7. Adjustment of Exercise Price. Upon each adjustment in the number of
Warrant Shares purchasable hereunder, the Exercise Price shall be
proportionately increased or decreased, as the case may be, in a
manner that is the inverse of the manner in which the number of
Warrant Shares purchasable hereunder shall be adjusted.
4.8. Notice of Adjustments. Whenever the Exercise Price or the number
Warrant Shares purchasable hereunder shall be adjusted pursuant to
this Section 4, the Company shall provide written notice to the
Holder setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Exercise Price and the number of
Warrant Shares purchasable hereunder after giving effect to such
adjustment, and shall cause copies of such documentation to be
mailed (by registered mail) to the Holder.
5. Termination
All, but not less than all, outstanding Warrants may be terminated at any
time by the written consent of the Holder. 6. Information Regarding the
Company
The Company shall deliver to the Holder, upon the request of the Holder,
of:
6.1. Copies of the audited Annual Financial Statements of the Company and
unaudited Quarterly Financial Statements of the Company, to the
extent Quarterly Financial Statements are prepared by the Company;
6.2. Copies of all the minutes of any Shareholders' Meeting of the
Company;
6.3. Any resolution regarding, or any other undertaking concerning, the
payment of any funds by the Company to any of its shareholders,
other than the payments specified in Subparagraphs (i) through (iii)
in Section 4.2 above;
6.4. Summaries of the terms negotiated with third parties regarding any
investment in the Company and copies of any such final agreement
reached with the investors;
6.5. Any resolution concerning the issuance of any class of securities of
the Company;
6.6. A copy of any agreement embodying a Related Party transaction;
6.7. a copy of any agreement or resolution embodying a recapitalization
or reorganization of the Company;
6.8. Any signed agreement embodying an M&A transaction or any
non-confidential filing made in respect of an IPO;
6.9. Any amendments to the Company's Articles of Association; and
6.10. Audit letters delivered by the Company or its legal counsels to the
Company's independent auditors.
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7. Loss, Theft, Destruction or Mutilation of Warrant
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and in case of
loss, theft or destruction, of an indemnity, or security reasonably
satisfactory to it, and upon surrender and cancellation of this Warrant,
if mutilated, the Company will make and deliver an identical new Warrant
in lieu of this Warrant.
8. Notices
8.1. All notices or other communications provided for in this Warrant
shall be in writing and shall be given in person, by registered
mail, by an overnight courier service which obtains a receipt to
evidence delivery, or by facsimile transmission (provided that
written confirmation of receipt is provided), addressed as set forth
below:
The Company's address is as follows:
Endan IT Solutions Ltd
11 Ben Gurion Street
Givat Shmuel
Fax No.: 03 531 3322
The Holder's address is as follows:
Taldor Computer Systems (1986) Ltd.
13 Hayetzira Street
Petach - Tiqva, Israel 49002
Attention: Asher Baharav, CEO
Fax No.: 03 929 8235
or such other address as any party may designate to the other
in accordance with the aforesaid procedure. All notices and
other communications delivered in person or by courier service
shall be deemed to have been given as of one business day
after sending thereof, those given by facsimile transmission
with confirmed answer back (provided that such date is a
business day in the country of receipt and if not, the next
business day) and all notices and other communications sent by
registered mail shall be deemed given ten (10) days after
posting.
9. Applicable Law; Jurisdiction
This Warrant shall be governed by and interpreted in accordance with the
laws of the State of Israel, without giving effect to the rules respecting
conflict of law. The competent courts in Tel Aviv shall have sole and
exclusive jurisdiction over any dispute between the parties, as set forth
herein.
10. Miscellaneous
This Warrant constitutes the entire agreement between the parties hereto
with regard to the subject matter hereof, and supersedes any prior
communications, agreements and/or understandings between the parties
hereto with regard to the subject matter hereof. The headings of the
sections and subsections of this Warrant are for convenience of reference
only and are not to be considered in construing this Warrant. The failure
or delay of the Holder at any time or times to require performance of any
provisions hereof shall in no manner affect this right at a later time. No
waiver by any party hereto of a breach of any term contained in this
Warrant, in any one or more instances, shall be deemed or construed as a
further or continuing waiver of any such breach or a waiver of a breach of
any other form. This Warrant and the rights hereunder shall not be
transferable to any party, other than to an Affiliate of the Holder. For
the purpose of this Warrant, an Affiliate shall mean any Company (i) in
which the Holder owns at least 51% of the issued share capital or has the
power to appoint at least 50% of the directors; (ii) any Company which
owns at least 51% of issued share capital, or has the power to appoint at
least 50% of the directors, of the Holder (the "Parent Company"), and
(iii) or any subsidiary of the said parent company, in which the Parent
Company owns at least 51% of the issued share capital or has the power to
appoint at least 50% of the directors of such company.
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ENDAN IT SOLUTIONS LTD.
By: _________________
Title: _________________
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EXHIBIT A
NOTICE OF EXERCISE
To:
Endan IT Solutions Ltd.
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Attn: __________
1. The undersigned hereby elects to purchase ___________ Warrant Shares of
Endan IT Solutions Ltd. pursuant to the terms of the attached Warrant, and
(a) tenders herewith payment in full of the Exercise Price for such
shares; or (b) tenders the Warrant for a net exercise pursuant to Section
2.2 thereof.
2. Please issue a certificate representing said amount of Warrant Shares in
the name of the undersigned.
3. This Notice of Exercise is conditioned upon the consummation of the M&A
transaction or the IPO, in connection with which this Notice of Exercise
is being given.]
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(Date) (Print Name)
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(Signature)