SCHEDULE 13D
CUSIP No. M74919107
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. )*
NEXUS TELOCATION SYSTEMS LTD.
-----------------------------
(Name of Issuer)
Ordinary Shares, NIS 0.01 Nominal Value Per Share
-------------------------------------------------
(Title of Class of Securities)
M74919107
----------------
(CUSIP Number)
Stephen M. Vine, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
(212) 872-1000
--------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 20, 2000
------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[__] .
Note. Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
Continued on following page(s)
Page 1 of 91 Pages
Exhibit Index: Page 12
<PAGE>
Page 2 of 91 Pages
CUSIP No. M74919107
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
SOROS FUND MANAGEMENT LLC
2 Check the Appropriate Box If a Member of a Group*
a. [ ]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
Number of 3,096,000 /1/
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 3,096,000 /1/
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,096,000 /1/
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[ ]
13 Percent of Class Represented By Amount in Row (11)
16.52% /1/
14 Type of Reporting Person*
OO;IA
/1/ See Item 5.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 91 Pages
CUSIP No. M74919107
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
GEORGE SOROS (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [ ]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 3,096,000 /1/
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
3,096,000 /1/
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,096,000 /1/
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[ ]
13 Percent of Class Represented By Amount in Row (11)
16.52% /1/
14 Type of Reporting Person*
IA
/1/ See Item 5.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 4 of 91 Pages
CUSIP No. M74919107
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
STANLEY F. DRUCKENMILLER (in the capacity described herein)
2 Check the Appropriate Box If a Member of a Group*
a. [ ]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 3,096,000 /1/
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
3,096,000 /1/
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,096,000 /1/
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares*
[ ]
13 Percent of Class Represented By Amount in Row (11)
16.52% /1/
14 Type of Reporting Person*
IA
/1/ See Item 5.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 5 of 91 Pages
This Statement on Schedule 13D relates to Ordinary Shares, NIS
0.01 nominal value per share (the "Shares"), of Nexus Telocation Systems Ltd.
(the "Issuer"). This Statement is being filed by the Reporting Persons (as
defined herein) to report the recent acquisition of Shares of the Issuer, as a
result of which the Reporting Persons may be deemed to be the beneficial owners
of more than 5% of the outstanding Shares of the Issuer.
Item 1. Security and Issuer.
This Statement relates to the Shares. The address of the
principal executive office of the Issuer is 6B Tfutzot Israel Street, Givatayim,
53583, Israel.
Item 2. Identity and Background.
This Statement is being filed on behalf of each of the following
persons (collectively, the "Reporting Persons"):
i) Soros Fund Management LLC ("SFM LLC");
ii) Mr. George Soros ("Mr. Soros"); and
iii) Mr. Stanley F. Druckenmiller ("Mr. Druckenmiller").
This Statement relates to the Shares held for the account of QEG-NTS
Holdings LLC, a Delaware limited liability company ("QEG-NTS").
The Reporting Persons
The business of SFM LLC is managed through a Management
Committee (the "Management Committee") comprised of Mr. Soros, Mr. Druckenmiller
and Mr. Duncan Hennes. SFM LLC, a Delaware limited liability company, has its
principal office at 888 Seventh Avenue, 33rd Floor, New York, New York 10106.
Its principal business is to serve, pursuant to contract, as the principal
investment manager to several foreign investment companies (the "SFM Clients"),
including Quantum Emerging Growth Partners C.V. ("QEG") and Quantum Partners LDC
("Quantum Partners"). Each of QEG and Quantum Partners has its principal office
at Kaya Flamboyan 9, Willemstad, Curacao, Netherlands Antilles. Mr. Soros, as
Chairman of SFM LLC, has the ability to direct the investment decisions of SFM
LLC and as such may be deemed to have investment discretion over the securities
held for the accounts of the SFM Clients. Mr. Druckenmiller, as Lead Portfolio
Manager of SFM LLC, has the ability to direct the investment decisions of SFM
LLC and as such may be deemed to have investment discretion over the securities
held for the accounts of the SFM Clients. Set forth in Annex A hereto and
incorporated by reference in response to this Item 2, and elsewhere in this
Schedule 13D as applicable, is a list of the Managing Directors of SFM LLC.
Each of QEG and Quantum Partners owns 50% of the outstanding
interest of QEG-NTS.
The principal occupation of Mr. Soros, a United States
citizen, is his direction of the activities of SFM LLC, which is carried out in
his capacity as Chairman of SFM LLC at SFM LLC's principal office.
The principal occupation of Mr. Druckenmiller, a United States
citizen, is his position as Lead Portfolio Manager and a Member of the
Management Committee of SFM LLC, which is carried out at SFM LLC's principal
office.
Pursuant to regulations promulgated under Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Act"), SFM LLC, Mr. Soros, in
his capacity as Chairman of SFM LLC, and Mr. Druckenmiller, in his capacity as
Lead Portfolio Manager of SFM LLC, each may be deemed a beneficial owner of the
Shares held for the account of QEG-NTS.
<PAGE>
Page 6 of 91 Pages
During the past five years, none of the Reporting Persons and,
to the best of the Reporting Persons' knowledge, no other person identified in
response to this Item 2 has been (a) convicted in a criminal proceeding or (b) a
party to any civil proceeding as a result of which it or he has been subject to
a judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws, or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
QEG-NTS expended approximately $7,740,000 of its working
capital to purchase the 3,096,000 Shares reported herein as being acquired in
the last 60 days.
The securities held for the accounts of QEG-NTS may be held
through margin accounts maintained with brokers, which extend margin credit as
and when required to open or carry positions in their margin accounts, subject
to applicable federal margin regulations, stock exchange rules and such firms'
credit policies. The positions which may be held in the margin accounts,
including the Shares, are pledged as collateral security for the repayment of
debit balances in the respective accounts.
Item 4. Purpose of Transaction.
Except as described in this Initial Statement, all of the
securities reported herein as having been acquired for the account of QEG-NTS
were acquired for investment purposes, and neither the Reporting Persons nor, to
the best of their knowledge, any of the other persons identified in response to
Item 2, has any plans or proposals that relate to or would result in any of the
transactions described in subparagraphs (a) through (j) of Item 4 of Schedule
13D.
The Reporting Persons reserve the right to acquire, or cause
to be acquired, additional securities of the Issuer, to dispose of, or cause to
be disposed, such securities at any time or to formulate other purposes, plans
or proposals regarding the Issuer or any of its securities, to the extent deemed
advisable in light of general investment and trading policies of the Reporting
Persons, market conditions or other factors.
Item 5. Interest in Securities of the Issuer.
(a) Each of SFM LLC, Mr. Soros and Mr. Druckenmiller may be deemed the
beneficial owner of the 3,096,000 Shares (representing approximately 16.52% of
the total number of outstanding Shares, without giving effect to the issuance of
the Shares described in the last paragraph of this Item 5) held for the account
of QEG-NTS.
(b) (i) SFM LLC may be deemed to have the sole power to direct the
voting and disposition of the 3,096,000 Shares held for the account of QEG-NTS.
(ii) Each of Mr. Soros and Mr. Druckenmiller, as a result of their
positions with SFM LLC, may be deemed to have the shared power to direct the
voting and disposition of the 3,096,000 Shares held for the account of QEG-NTS.
(c) Except for the transactions listed on Annex B hereto, there have
been no transactions effected with respect to the Shares since November 21, 1999
(60 days prior to the date hereof) by any of the Reporting Persons.
(d) The members of QEG-NTS have the right to participate in the receipt
of dividends from, or proceeds from the sale of, the Shares held for the account
of QEG-NTS in accordance with their ownership interests in QEG-NTS.
(e) Not applicable.
<PAGE>
Page 7 of 91 Pages
In addition to the foregoing, pursuant to the Securities Purchase
Agreement (as defined herein) QEG-NTS has the obligation, subject to the
satisfaction by the Issuer of certain conditions on or prior to March 15, 2000,
to purchase 2,064,000 additional Shares for a purchase price of $5,160,000.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
On January 10, 2000, QEG-NTS entered into a Securities
Purchase Agreement (the "Securities Purchase Agreement") with the Issuer and the
purchasers (together with QEG-NTS, the "Purchasers") set forth therein (a copy
of which is attached hereto as Exhibit D and incorporated herein by reference in
response to this Item 6) pursuant to which QEG-NTS purchased 3,096,000 Shares
for an aggregate purchase price of $7,740,000.
Pursuant to Article 2 and Article 6 of the Securities Purchase
Agreement, QEG-NTS has the obligation, subject to the satisfaction by the Issuer
of certain conditions set forth therein on or prior to March 15, 2000, to
purchase 2,064,000 additional Shares for an aggregate purchase price of
$5,160,000.
Pursuant to Section 5.1(a) of the Securities Purchase
Agreement, the Issuer is required to amend its Articles of Association to
provide for (i) an increase in the Issuer's share capital, (ii) the right of
QEG-NTS, subject to certain conditions, to appoint one member to the board of
directors of the Issuer and (iii) the right of QEG-NTS, subject to certain
conditions, to assign its right to appoint one member to the board of directors
of the Issuer.
Pursuant to Section 5.11 of the Securities Purchase Agreement,
the Purchasers have certain preemptive rights in instances where the Issuer
issues any new Shares, or securities convertible into or exercisable for Shares,
at any time prior to January 10, 2003.
Pursuant to Section 5.12 of the Securities Purchase Agreement,
until the earlier to occur of the date that (a) QEG-NTS holds less than
2,000,000 Shares (3,500,000 Shares if the second closing pursuant to the
Securities Purchase Agreement occurs) or (b) the Purchasers, in the aggregate,
hold less than 15% of the outstanding Ordinary Share capital of the Issuer, the
Issuer is prohibited from taking certain actions set forth therein.
The foregoing description of the Securities Purchase Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Securities Purchase Agreement (attached as Exhibit D to this Initial
Statement), which is incorporated herein by reference.
On January 10, 2000, QEG-NTS entered into a Registration
Rights Agreement (the "Registration Rights Agreement") with the Issuer and the
Purchasers (a copy of which is attached hereto as Exhibit E and incorporated
herein by reference in response to this Item 6) pursuant to which the Issuer
agreed to file a "Shelf" registration statement (the "Initial Registration
Statement") on Form F-3, pursuant to Rule 415 of the Securities Act of 1933, as
amended (the "Securities Act").
Pursuant to Section 2(b) of the Registration Rights Agreement,
at any time when the Initial Registration Statement is not effective, the
Purchasers have certain rights to demand that the Issuer register under the
Securities Act unregistered securities of the Issuer held by the Purchasers.
Pursuant to Section 6(d) of the Registration Rights Agreement,
the Purchasers were granted certain piggy-back registration rights at any time
when a registration statement with respect to the Purchasers' Shares is not
effective, which, if exercised, entitles the Purchasers to participate in
registered offerings by the Issuer.
The foregoing description of the Registration Rights Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Registration Rights Agreement (attached as Exhibit E to this Initial
Statement), which is incorporated herein by reference.
<PAGE>
Page 8 of 91 Pages
On January 10, 2000, QEG-NTS entered into a Shareholders'
Agreement (the "Shareholders' Agreement") with the Issuer and the Purchasers and
the shareholders (together with QEG-NTS, the "Shareholders") set forth therein
(a copy of which is attached hereto as Exhibit F and incorporated herein by
reference in response to this Item 6).
Pursuant to Section 1 of the Shareholders' Agreement (i)
QEG-NTS has the right, subject to certain conditions, to designate one member to
the board of directors of the Issuer, (ii) the Shareholders agreed to approve an
amendment to the Issuer's Articles of Association to provide for such right and
(iii) the Shareholders agreed to approve QEG-NTS's designee.
Pursuant to Section 2 of the Shareholders' Agreement, until
the earlier to occur of the date that (a) QEG-NTS holds less than 2,000,000
Shares (3,500,000 Shares if the second closing pursuant to the Securities
Purchase Agreement occurs) or (b) the Purchasers, in the aggregate, hold less
than 15% of the outstanding Ordinary Share capital of the Issuer, the
Shareholders agreed not to vote any Shares owned by them to permit or direct the
Issuer to take certain actions set forth therein.
The foregoing description of the Shareholders' Agreement does
not purport to be complete and is qualified in its entirety by reference to the
Shareholders' Agreement (attached as Exhibit F to this Initial Statement), which
is incorporated herein by reference.
From time to time, each of the Reporting Persons may lend
portfolio securities to brokers, banks or other financial institutions. These
loans typically obligate the borrower to return the securities, or an equal
amount of securities of the same class, to the lender and typically provide that
the borrower is entitled to exercise voting rights and to retain dividends
during the term of the loan. From time to time, to the extent permitted by
applicable laws, each of the Reporting Persons may borrow securities, including
the Shares, for the purpose of effecting, and may effect, short sale
transactions, and may purchase securities for the purpose of closing out short
positions in such securities.
Except as described above, the Reporting Persons do not have
any contracts, arrangements, understandings or relationships with respect to any
securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
A. Power of Attorney dated as of January 1, 1997 granted by
Mr. Soros in favor of Mr. Sean C. Warren and Mr. Michael C. Neus.
B. Power of Attorney dated as of January 1, 1997 granted by
Mr. Druckenmiller in favor of Mr. Sean C. Warren and Mr. Michael C. Neus.
C. Joint Filing Agreement dated January 20, 2000 by and among
SFM LLC, Mr. Soros and Mr. Druckenmiller.
D. Securities Purchase Agreement, dated as of January 10,
2000, by and among the Issuer, QEG-NTS and the Purchasers named therein.
E. Registration Rights Agreement, dated as of January 10,
2000, by and among the Issuer, QEG-NTS and the Purchasers named therein.
F. Shareholders' Agreement, dated as of January 10, 2000, by
and among the Issuer, QEG-NTS and the Shareholders named therein.
<PAGE>
Page 9 of 91 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this Statement is
true, complete and correct.
Date: January 20, 2000
SOROS FUND MANAGEMENT LLC
By: /s/ Micheal C. Neus
-------------------------
Michael C. Neus
Assistant General Counsel
GEORGE SOROS
By: /s/ Micheal C. Neus
-------------------------
Michael C. Neus
Attorney-in-Fact
STANLEY F. DRUCKENMILLER
By: /s/ Michael C. Neus
-------------------------
Michael C. Neus
Attorney-in-Fact
<PAGE>
Page 10 of 91 Pages
ANNEX A
The following is a list of all of the persons (other than
Stanley Druckenmiller) who serve as Managing Directors of SFM LLC.
Scott K. H. Bessent
Walter Burlock
L. Kevin Dann
Duncan Hennes
Ron Hiram
Michael Karsh
Sheldon Kasowitz
David N. Kowitz
Carson Levit
Alexander C. McAree
Steven Okin
Michael Pendy
Frank Sica
Sean C. Warren
Each of the above-listed persons is a United States citizen whose
principal occupation is serving as Managing Director of SFM LLC, and each has a
business address c/o Soros Fund Management LLC, 888 Seventh Avenue, 33rd Floor,
New York, New York 10106.
To the best of the Reporting Persons' knowledge:
(a) None of the above persons hold any Shares.
(b) None of the above persons has any contracts,
arrangements, understandings or relationships with respect to the Shares.
<PAGE>
Page 11 of 91 Pages
ANNEX B
RECENT TRANSACTIONS IN THE SECURITIES OF
NEXUS TELOCATION SYSTEMS LTD.
<TABLE>
<S> <C> <C> <C> <C>
Date of Nature of Number of
For the Account of
- ------------------ Transaction Transaction Securties Price
----------- ----------- --------- -----
QEG-NTS 1/10/00 PURCHASE 3,096,000 $7,740,000
</TABLE>
<PAGE>
Page 12 of 91 Pages
EXHIBIT INDEX
Page No.
--------
A. Power of Attorney dated as of January 1, 1997 granted
by Mr. George Soros in favor of Mr. Sean C.
Warren and Mr. Michael C. Neus..................... 13
B. Power of Attorney dated as of January 1, 1997 granted
by Mr. Stanley F. Druckenmiller in favor of Mr. Sean C.
Warren and Mr. Michael C. Neus.......................... 14
C. Joint Filing Agreement dated January 20, 2000 by and
among Soros Fund Management LLC, Mr. George Soros and
Mr. Stanley F. Druckenmiller........................... 15
D. Securities Purchase Agreement, dated as of January 10,
2000, by and among Nexus Telocation Systems Ltd. (the
"Issuer"), QEG-NTS Holdings LLC ("QEG-NTS") and the
Purchasers named therein................................. 16
E. Registration Rights Agreement, dated as of January 10,
2000, by and among the Issuer, QEG-NTS and the Purchasers
named therein............................................ 55
F. Shareholders' Agreement, dated as of January 10, 2000,
by and among the Issuer, QEG-NTS and the Shareholders
named therein............................................ 82
<PAGE>
Page 13 of 91 Pages
EXHIBIT A
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, GEORGE SOROS, hereby make, constitute
and appoint each of SEAN C. WARREN and MICHAEL C. NEUS, acting individually, as
my agent and attorney-in-fact for the purpose of executing in my name, (a) in my
personal capacity or (b) in my capacity as Chairman of, member of or in other
capacities with Soros Fund Management LLC, all documents, certificates,
instruments, statements, filings and agreements ("documents") to be filed with
or delivered to any foreign or domestic governmental or regulatory body or
required or requested by any other person or entity pursuant to any legal or
regulatory requirement relating to the acquisition, ownership, management or
disposition of securities or other investments, and any other documents relating
or ancillary thereto, including but not limited to, all documents relating to
filings with the United States Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934
(the "Act") and the rules and regulations promulgated thereunder, including: (1)
all documents relating to the beneficial ownership of securities required to be
filed with the SEC pursuant to Section 13(d) or Section 16(a) of the Act
including, without limitation: (a) any acquisition statements on Schedule 13D or
Schedule 13G and any amendments thereto, (b) any joint filing agreements
pursuant to Rule 13d-1(f) and (c) any initial statements of, or statements of
changes in, beneficial ownership of securities on Form 3, Form 4 or Form 5 and
(2) any information statements on Form 13F required to be filed with the SEC
pursuant to Section 13(f) of the Act.
All past acts of the attorney-in-fact in furtherance of the foregoing are hereby
ratified and confirmed.
This power of attorney shall be valid from the date hereof until revoked by me.
IN WITNESS WHEREOF, I have executed this instrument as of the 1st day of
January, 1997.
/s/ George Soros
------------------
GEORGE SOROS
<PAGE>
Page 14 of 91 Pages
EXHIBIT B
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, STANLEY F. DRUCKENMILLER, hereby make,
constitute and appoint each of SEAN C. WARREN and MICHAEL C. NEUS, acting
individually, as my agent and attorney-in-fact for the purpose of executing in
my name, (a) in my personal capacity or (b) in my capacity as Lead Portfolio
Manager of, member of or in other capacities with Soros Fund Management LLC, all
documents, certificates, instruments, statements, filings and agreements
("documents") to be filed with or delivered to any foreign or domestic
governmental or regulatory body or required or requested by any other person or
entity pursuant to any legal or regulatory requirement relating to the
acquisition, ownership, management or disposition of securities or other
investments, and any other documents relating or ancillary thereto, including
but not limited to, all documents relating to filings with the United States
Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of
1933 or the Securities Exchange Act of 1934 (the "Act") and the rules and
regulations promulgated thereunder, including: (1) all documents relating to the
beneficial ownership of securities required to be filed with the SEC pursuant to
Section 13(d) or Section 16(a) of the Act including, without limitation: (a) any
acquisition statements on Schedule 13D or Schedule 13G and any amendments
thereto, (b) any joint filing agreements pursuant to Rule 13d-1(f) and (c) any
initial statements of, or statements of changes in, beneficial ownership of
securities on Form 3, Form 4 or Form 5 and (2) any information statements on
Form 13F required to be filed with the SEC pursuant to Section 13(f) of the Act.
All past acts of the attorney-in-fact in furtherance of the foregoing are hereby
ratified and confirmed.
This power of attorney shall be valid from the date hereof until revoked by me.
IN WITNESS WHEREOF, I have executed this instrument as of the 1st day of
January, 1997.
/s/ Stanley F. Druckenmiller
-------------------------------------
STANLEY F. DRUCKENMILLER
<PAGE>
Page 15 of 91 Pages
EXHIBIT C
JOINT FILING AGREEMENT
The undersigned hereby agree that the statement on Schedule 13D with
respect to the Ordinary Shares of Nexus Telocation Systems Ltd. dated January
20, 2000 is, and any amendments thereto signed by each of the undersigned shall
be, filed on behalf of each of us pursuant to and in accordance with the
provisions of Rule 13d-1(f) under the Securities Exchange Act of 1934.
Date: January 20, 2000
SOROS FUND MANAGEMENT LLC
By: /s/ Michael C. Neus
-------------------------
Michael C. Neus
Assistant General Counsel
GEORGE SOROS
By: /s/ Michael C. Neus
-------------------------
Michael C. Neus
Attorney-in-Fact
STANLEY F. DRUCKENMILLER
By: /s/ Michael C. Neus
-------------------------
Michael C. Neus
Attorney-in-Fact
Page 16 of 91 Pages
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
dated as of January 10, 2000
between
NEXUS TELOCATION SYSTEMS, LTD.
and
THE PURCHASERS SET FORTH HEREIN
- --------------------------------------------------------------------------------
<PAGE>
Page 17 of 91 Pages
TABLE OF CONTENTS
Page
Article 1 DEFINITIONS; CERTAIN REFERENCES.................................1
Section 1.1 Definitions................................................1
Section 1.2 Terms Generally............................................7
Article 2 CLOSING AND PAYMENT.............................................7
Section 2.1 Time and Place of the Closings.............................7
Section 2.2 Transaction at Closing.....................................8
Section 2.3 Company Closing Deliveries.................................8
Article 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................10
Section 3.1 Organization, Power, Authority, Etc.......................10
Section 3.2 Due Authorization; No Conflicts...........................11
Section 3.3 Validity, Etc.............................................11
Section 3.4 Capitalization of the Company and Subsidiaries............11
Section 3.5 Financial Statements......................................12
Section 3.6 SEC Documents.............................................12
Section 3.7 Contingent Liabilities....................................13
Section 3.8 Absence of Certain Developments; No Material
Adverse Change............................................13
Section 3.9 Approvals.................................................13
Section 3.10 No Existing Violation, Default, Etc.......................13
Section 3.11 Licenses, Etc.............................................14
Section 3.12 Title to Properties.......................................14
Section 3.13 Environmental Matters.....................................14
Section 3.14 Taxes.....................................................14
Section 3.15 Litigation................................................15
Section 3.16 Indebtedness..............................................15
Section 3.17 Finder's Fees.............................................15
Section 3.18 Securities Law Matters....................................15
Section 3.19 Intellectual Property Rights..............................16
Section 3.20 Disclosure................................................16
Section 3.21 Form F-3 Eligibility......................................16
Section 3.22 Listing and Maintenance Requirements Compliance...........16
Section 3.23 Transactions With Affiliates..............................17
Section 3.24 Foreign Corrupt Practices.................................17
Section 3.25 Year 2000 Compliance......................................17
Section 3.26 Other Agreements..........................................17
<PAGE>
Page 18 of 91 Pages
Article 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...............17
Section 4.1 Organization, Good Standing, Power, Authority, Etc........18
Section 4.2 No Conflicts; No Consents.................................18
Section 4.3 Acquisition for Own Account...............................18
Section 4.4 Investor Suitability......................................18
Section 4.5 Disclosure of Information.................................18
Section 4.6 Investment Experience.....................................19
Section 4.7 Restricted Securities.....................................19
Section 4.8 Finder's Fees.............................................19
Article 5 COVENANTS OF THE PARTIES.......................................19
Section 5.1 Shareholders Meeting; Amended Articles....................19
Section 5.2 Amendment/Waiver of Certain Agreements....................20
Section 5.3 Legends...................................................20
Section 5.4 Use of Proceeds...........................................21
Section 5.5 No Inconsistent Agreements................................21
Section 5.6 Information; Access.......................................22
Section 5.7 Ordinary Course Brokerage and Trading.....................22
Section 5.8 Publicity.................................................23
Section 5.9 Other Actions.............................................23
Section 5.10 Integration...............................................23
Section 5.11 Preemptive Rights.........................................23
Section 5.12 Major Decisions...........................................24
Section 5.13 GWH Option Agreement Tax Indemnity........................25
Article 6 CONDITIONS TO THE SECOND CLOSING...............................25
Section 6.1 Second Closing............................................25
Article 7 SURVIVAL AND INDEMNIFICATION...................................26
Section 7.1 Survival Periods..........................................26
Section 7.2 Indemnification by the Company............................26
Section 7.3 Notification..............................................27
Article 8 MISCELLANEOUS..................................................28
Section 8.1 Notices...................................................28
Section 8.2 Fees and Expenses.........................................29
Section 8.3 BVR Technologies, Ltd. Management Fee.....................29
Section 8.4 Amendment; Waiver.........................................29
Section 8.5 Severability..............................................29
Section 8.6 Headings..................................................29
Section 8.7 Entire Agreement..........................................29
Section 8.8 Counterparts..............................................30
Section 8.9 Assignment................................................30
Section 8.10 Remedies..................................................30
Section 8.11 Independent Nature of Purchasers'Obligations and Rights...30
Section 8.12 Payment Set Aside.........................................30
<PAGE>
Page 19 of 91 Pages
Section 8.13 Third-Party Beneficiaries.................................31
Section 8.14 Governing Law.............................................31
Section 8.15 Submission to Jurisdiction; Waiver of Jury Trial..........31
Schedules
Schedule 1.1(a) Option Waiver Agreement
Schedule 1.1(b) Voting Agreements
Schedule 2.3(a)(xii) Registration Rights Waivers
Schedule 2.3(a)(xiii) Preemptive Rights Waivers
Schedule 3.1 Subsidiaries
Schedule 3.4 Capitalization of the Company and Subsidiaries
Schedule 3.6(e) Material Agreements
Schedule 3.7 Contingent Liabilities
Schedule 3.8 Material Adverse Changes
Schedule 3.10 No Existing Violations, Defaults, Etc.
Schedule 3.12 Liens of Property
Schedule 3.13 Environmental Matters
Schedule 3.14 Taxes
Schedule 3.15 Litigation
Schedule 3.16 Indebtedness
Schedule 3.17 Finder's Fee
Schedule 3.19 Intellectual Property Rights
Schedule 3.22 Listing and Maintenance RequirementsCompliance
Schedule 3.23 Transactions With Affiliates
Exhibits
Exhibit A Purchasers
Exhibit B AMR Warrant Agreement
Exhibit C GWH Preferred Stock Purchase Agreement
Exhibit D Registration Rights Agreement
Exhibit E Shareholders' Agreement
Exhibit F Stock Pledge Agreement
Exhibit G Third Quarter Financials
<PAGE>
Page 20 of 91 Pages
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT dated as of January __, 2000, between
NEXUS TELOCATION SYSTEMS, LIMITED, a company organized under the laws of Israel
(the "Company"), and the purchasers set forth on Exhibit A hereto (each, a
------- ---------
"Purchaser" and, collectively, the "Purchasers").
--------- ----------
WITNESSETH:
WHEREAS, as of the date hereof, the Company has issued and outstanding
13,583,803 ordinary shares, nominal value NIS 0.01 per share (the "Ordinary
--------
Shares"), being 100% of the issued and outstanding share capital of the Company
- ------
as of such date;
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to issue to each Purchaser, and each Purchaser desires to
purchase from the Company that number of Ordinary Shares as set forth herein;
and
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the Company and the Purchasers agree as follows:
Article 1
DEFINITIONS; CERTAIN REFERENCES
Section 1.1 Definitions. The terms defined in this Article 1, whenever used in
-----------
this Agreement, shall have the following meanings for all purposes of this
Agreement:
"Act" means the Securities Act of 1933, as amended, and the
---
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
"Affiliate" of any specified Person means:
---------
(a) any other Person which, directly or indirectly, is in
control of, is controlled by or is under common control with such specified
Person; or
(b) any other Person which beneficially owns or holds ten
percent or more of any class of the share capital normally entitled to vote in
the election of directors of such specified Person; or
(c) any other Person of which ten percent or more of the share
capital normally entitled to vote in the election of directors of such Person is
beneficially owned or held by such specified Person or a subsidiary of such
specified Person; or
<PAGE>
Page 21 of 91 Pages
(d) any other Person who is a director or officer (i) of such
specified Person; (ii) of any Subsidiary of such specified Person or (iii) of
any Person described in paragraph (a) above; and
for purposes of this definition, "control" of a Person means the power, direct
or indirect, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means this Securities Purchase Agreement,
---------
including all exhibits and schedules attached hereto.
"AMR Business" means the business of the Company and its
-------------
Subsidiaries related to automated meter reading.
"AMR Shares" means the ordinary shares of Aptel to be issued
----------
upon the exercise of the AMR Warrants.
"AMR Warrant Agreement" means the Share Purchase Agreement,
----------------------
dated the date hereof, entered into among the Company and the Purchasers,
substantially in the form attached hereto as Exhibit B.
"AMR Warrants" means the Warrants required to be issued to the
------------
Purchasers pursuant to the AMR Warrant Agreement.
"Annual Report" means the Company's Annual Report on Form 20-F
-------------
for the 1998 Fiscal Year, as filed with the SEC.
"Approval" means each and every authorization, approval,
--------
consent, license, filing and registration by, with or from any nation or state
or other political subdivision thereof or by or with any regulatory or
Governmental Authority of any nation or state or other political subdivision
thereof, self-regulatory organization, stock exchange or stock market, or other
party necessary to authorize or permit the execution, delivery or performance of
this Agreement or any other Transaction Document or for the validity,
enforceability or admissibility into evidence hereof or thereof.
"Aptel" means Aptel Ltd., a company organized under the laws
-----
of Israel.
"Business Day" means any day which is neither a Saturday or
-------------
Sunday nor a legal holiday on which banks are authorized or required to be
closed in New York, New York and Tel-Aviv, Israel.
"Code" means the United States Internal Revenue Code of 1986,
----
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of the Code also refer to any successor sections.
"Company" shall have the meaning set forth in the preamble
-------
hereto.
2
<PAGE>
Page 22 of 91 Pages
"Dollars" and the sign "$" mean lawful money of the United
-------
States.
"Environmental Laws" shall have the meaning set forth in
-------------------
Section 3.13.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"First Closing" shall have the meaning set forth in Section
--------------
2.1(a).
"First Closing Date" shall have the meaning set forth in
--------------------
Section 2.1(a).
"First Closing Shares" means, with respect to each Purchaser,
--------------------
the number of Ordinary Shares set forth beside such Purchaser's name on Part I
of Exhibit A hereto.
---------
"Fiscal Year" means any period of 12 consecutive calendar
------------
months ending on the Saturday closest to December 31; references to a Fiscal
Year with a number corresponding to any calendar year (e.g. the "1999 Fiscal
Year") refer to the Fiscal Year ending on the Saturday closest to December 31
occurring during such calendar year (or the preceding fiscal year in the event
that the Saturday closest to December 31 of such Fiscal Year is in January).
"GAAP" means generally accepted accounting principles
----
consistently applied in Israel, unless any other jurisdiction is specified, in
which case it shall be the equivalent set of accounting principles for such
jurisdiction.
"Governmental Authority" means any court, tribunal,
-------------------------
governmental department, agency, board or commission, regulatory authority, or
other governmental body, subdivision or instrumentality.
"GWH" shall mean Global Wireless Holdings, Inc., a Delaware
---
corporation.
"GWH Investment" means the Company's proposed acquisition of
--------------
Series B perpetual convertible preferred stock of GWH pursuant to the terms of
the GWH Preferred Stock Purchase Agreement.
"GWH Option Agreement" means the GWH Option Agreement, dated
--------------------
the date hereof, entered into among GWH, Global Wireless Communications, L.P.
and the Purchasers, relating to the granting by GWH to the Purchasers of an
option to purchase GWH Series B Convertible Preferred Stock.
"GWH Preferred Stock Purchase Agreement" means the
----------------------------------------------
Subscription Agreement dated the date hereof, between the Company and GWH,
substantially in the form attached hereto in Exhibit B, relating to the purchase
by Nexus of shares of GWH Series B Convertible Preferred Stock.
"Indebtedness" shall mean (i) any obligation of the Company or
------------
any Subsidiary of the Company, contingent or otherwise, which under GAAP is
required to be shown on the balance sheet of the Company or such Subsidiary as a
liability and (ii) any guaranty or similar obligation by the Company or any of
its Subsidiaries of the indebtedness of any Person. Any obligation secured by a
3
<PAGE>
Page 23 of 91 Pages
Lien on, or payable out of the proceeds of or production from, property of the
Company or any Subsidiary of the Company shall be deemed to be indebtedness even
though such obligation is not assumed by the Company or Subsidiary.
"Indebtedness for Borrowed Money" shall mean (a) all
-------------------------------------
Indebtedness in respect of money borrowed including, without limitation,
Indebtedness which represents the unpaid amount of the purchase price of any
property and is incurred in lieu of borrowing money or using available funds to
pay such amounts and not constituting an account payable or expense accrual
incurred or assumed in the ordinary course of business of the Company or any
Subsidiary of the Company, (b) all Indebtedness evidenced by a promissory note,
bond or similar written obligation to pay money, and (c) all such Indebtedness
guaranteed by the Company or any Subsidiary of the Company or for which the
Company or any Subsidiary of the Company is otherwise contingently liable by
contract.
"Instrument" means any contract, agreement, indenture,
----------
mortgage, security, document or writing under which any obligation is evidenced,
assumed or undertaken, or any Security Interest is granted or perfected.
"Intellectual Property Rights" shall have the meaning set
------------------------------
forth in Section 3.20.
"Investment Agreements" means this Agreement and each
-----------------------
Instrument to be executed or delivered pursuant hereto including, without
limitation, the AMR Warrant Agreement, the Registration Rights Agreement, the
Shareholders' Agreement and the Stock Pledge Agreements.
"Last Closing Date" means the Second Closing Date, unless the
-----------------
Second Closing shall fail to occur, in which case it means the First Closing
Date.
"Lead Investor" means QEG-NTS Holdings LLC; provided that to
-------------
the extent that QEG-NTS Holdings LLC transfers any of the Shares to any of
Quantum Emerging Growth Fund, N.V. or its affiliates (such term shall include
any funds managed by Soros Fund Management LLC or any of its affiliates), then
the term "Lead Investor" shall collectively refer to QEG-NTS Holdings LLC and
such other entities.
"Liabilities" shall have the meaning set forth in Section 7.2.
-----------
"Licenses" shall have the meaning set forth in Section 3.11.
--------
"Lien" shall mean any mortgage, pledge, security interest,
----
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the
laws of any relevant jurisdiction and including any lien or charge arising by
statute or other law.
"Material Adverse Effect" means a material adverse effect on
------------------------
the assets, results of operations, business, prospects or condition (financial
or otherwise) of the specified entity and its Subsidiaries, if any, taken as a
whole.
4
<PAGE>
Page 24 of 91 Pages
"Memorandum and Articles of Association" shall mean the
------------------------------------------
Memorandum and Articles of Association of the Company dated April 17, 1994, in
effect as of the date hereof, and as amended, supplemented or restated from time
to time.
"New Securities" means any type of equity shares of the
---------------
Company, rights, options or warrants to purchase such equity shares, and
securities of any type whatsoever that are, or may become, convertible into
equity shares; provided that New Securities shall not include (i) securities
issued upon conversion of any outstanding rights, options or warrants or other
securities, outstanding on the date hereof, convertible into equity shares as
disclosed by the Company to the Purchasers in the schedules to this Agreement;
(ii) Ordinary Shares or options to purchase Ordinary Shares issued to employees,
consultants or directors of the Company pursuant to a plan approved by the Board
of Directors of the Company; and (iii) securities issued to any strategic
investor which are expected to substantially benefit the business of the
Company; provided that no determination shall be made with respect to whether a
potential investor qualifies as a strategic investor within the meaning of this
sentence without the prior written consent of the Lead Investor, which consent
shall not be unreasonably withheld.
"NIS" means New Israeli Shekel, the lawful money of Israel.
---
"Option Waiver Agreements" means the agreements entered into
-------------------------
between the Company and the holders of options, warrants and convertible
debentures attached hereto as Schedule 1.1(a).
"Ordinary Shares" shall have the meaning set forth in the
----------------
recitals hereto.
"Person" means any natural person, corporation, firm,
------
association, government, governmental agency or any other entity, whether acting
in an individual, fiduciary or other capacity.
"Purchase Price" means, with respect to each Purchaser, (i)
---------------
with respect to the First Closing, the amount set forth beside such Purchaser's
name on Part I of Exhibit A hereto, payable by such Purchaser to the Company at
---------
the First Closing for the purchase of the First Closing Shares and (ii) with
respect to the Second Closing, the amount set forth beside such Purchaser's name
on Part II of Exhibit A hereto, payable by such Purchaser to the Company at the
---------
Second Closing for the purchase of the Second Closing Shares.
"Purchaser" or "Purchasers" shall have the meaning set forth
--------- ----------
in the preamble hereto; provided that to the extent that QEG-NTS Holdings LLC
--------
transfers any of the Shares to any of Quantum Emerging Growth Fund, N.V. or its
affiliates (such term shall include any funds managed by Soros Fund Management
LLC or any of its affiliates), then the term "Purchasers" shall include QEG-NTS
Holdings LLC and such other entities.
"Registration Rights Agreement" means the Registration Rights
------------------------------
Agreement, dated the date hereof, entered into among the Company and the
Purchasers, substantially in the form attached hereto in Exhibit D.
---------
"Required Approvals" shall have the meaning set forth in
-------------------
Section 5.1.
5
<PAGE>
Page 25 of 91 Pages
"Required Registrar Approval" shall have the meaning set forth
---------------------------
in Section 5.1.
"Required Shareholder Approval" shall have the meaning set
-------------------------------
forth in Section 5.1.
"SEC" means the U.S. Securities and Exchange Commission.
---
"SEC Documents" means all documents filed by the Company with
-------------
the SEC since January 1, 1994.
"Second Closing" shall have the meaning set forth in Section
---------------
2.1(b).
"Second Closing Date" shall have the meaning set forth in
---------------------
Section 2.1(b).
"Second Closing Shares" means, with respect to each Purchaser,
---------------------
the number of Ordinary Shares set forth beside such Purchaser's name on Part II
of Exhibit A hereto.
---------
"Security Interest" means any mortgage, pledge, hypothecation,
-----------------
assignment, deposit arrangement, encumbrance, lien (statutory or other) or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement), or any financing lease involving substantially the same
economic effect as any of the foregoing.
"Shares" means (i) prior to the Second Closing, the First
------
Closing Shares and (ii) upon the Second Closing, the First Closing Shares and
the Second Closing Shares.
"Shareholders' Agreement" means the Shareholders' Agreement,
------------------------
dated the date hereof, entered into among the Company, the Purchasers, BVR
Technologies Ltd, CLAL Industries and Investments, CLAL Industries and
Technologies (1997) Ltd. and CLAL (Israel) Ltd., substantially in the form
attached hereto in Exhibit E.
---------
"Stock Pledge Agreement" means the Stock Pledge Agreements,
-----------------------
dated the date hereof, entered into between the Company and each of the
Purchasers, substantially in the form attached hereto as Exhibit F.
---------
"Subsidiary" means, as to any Person, (a) any corporation 51%
----------
or more of the outstanding share capital of which having ordinary voting power
for the election of directors is owned directly or indirectly by such Person and
(b) any partnership, association, joint venture or other entity in which such
Person and/or one or more Subsidiaries of such Person has 51% or more of an
equity interest at the time.
"Taxes" shall mean all taxes, assessments or other charges
-----
payable to or imposed by any Governmental Authority, including without
limitation, income, estimated income, business, occupation, franchise, gross
receipts, profits, real property, personal property, sales, use, transfer,
gains, registration, value-added, alternative or add-on minimum, commercial rent
or withholding taxes, including any interest, penalty or addition thereto,
whether disputed or not.
6
<PAGE>
Page 26 of 91 Pages
"Tax Return" shall mean Tax returns, declarations, statements,
----------
reports, schedules, forms and information returns and any amendments thereto.
"Third Quarter Financials" shall have the meaning set forth in
------------------------
Section 3.5.
"Transaction Documents" means (i) the Investment Agreements,
----------------------
(ii) the GWH Preferred Stock Purchase Agreement and each Instrument, to be
executed or delivered pursuant to the GWH Preferred Stock Purchase Agreement,
including, without limitation, the certificate of designation, (iii) the Option
Waiver Agreements and the Voting Agreements and (iv) the waivers delivered by
the Company at the First Closing pursuant to Section 2.3(a)(xii) and
2.3(a)(xiii) hereto.
"Transaction Expenses" means the reasonable out-of-pocket
---------------------
expenses of the Purchasers or any of their respective Affiliates (whether or not
incurred prior to the date hereof), including without limitation, the fees,
disbursements and other reasonable expenses of lawyers, accountants, actuaries,
appraisers, consultants and any other advisors thereto, arising out of or
relating to the discussion, evaluation, negotiation, documentation and closing
or potential closing of the transactions contemplated by the Investment
Agreements, without regard to whether or not such transactions are consummated.
"United States" or "U.S." means the United States of America,
-------------- ----
its 50 states and the District of Columbia.
"Voting Agreements" means the agreements, attached hereto as
------------------
Schedule 1.1(b), entered into between the Company and the holders of Ordinary
- ----------------
Shares in connection with the Required Shareholder Approval.
"Year 2000 Problem" shall have the meaning set forth in
-------------------
Section 3.26.
Section 1.2 Terms Generally. The definitions in Section 1.1 shall apply equally
---------------
to both the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP.
Article 2
CLOSING AND PAYMENT
Section 2.1 Time and Place of the Closings
------------------------------
(a) First Closing. The initial closing (the "First Closing") for the
------------- --------------
transactions contemplated in Section 2.2(a) shall take place at the offices of
Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New
York 10022, immediately following the execution hereof and on the date and
simultaneously with the time of the first closing contemplated by the GWH
Preferred Stock Purchase Agreement (provided that solely for purposes of
--------
determining the temporal order of the First Closing and the first closing
contemplated by the GWH Preferred Stock Purchase Agreement, the First Closing
shall be deemed to have occurred immediately prior to the first closing
contemplated by the GWH Preferred Stock Purchase Agreement), or on such other
date and/or at such other place as the parties shall mutually agree (the "First
-----
Closing Date").
- ------------
7
<PAGE>
Page 27 of 91 Pages
(b) Second Closing. The second closing for the transactions
----------------
contemplated in Section 2.2(b) (the "Second Closing") shall take place on a date
--------------
mutually acceptable to the parties as soon as reasonably practicable following
the receipt of the Required Approvals on the date and simultaneously with the
time of the second closing contemplated by the GWH Preferred Stock Purchase
Agreement (provided that solely for purposes of determining the temporal order
--------
of the Second Closing and the second closing contemplated by the GWH Preferred
Stock Purchase Agreement, the Second Closing shall be deemed to have occurred
immediately prior to the second closing contemplated by the GWH Preferred Stock
Purchase Agreement), but in no event later than March 15, 2000 (the "Second
------
Closing Date").
- ------------
Section 2.2 Transaction at Closing.
----------------------
(a) First Closing. At the First Closing, subject to the terms and
--------------
conditions of this Agreement, the Company shall issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, shall purchase from
the Company the First Closing Shares. The Purchase Price with respect to each
Purchaser shall be payable by wire transfer in immediately available funds to an
account or accounts previously designated in writing by the Company at least two
Business Days prior to the First Closing Date. At the First Closing, the Company
shall deliver, or cause to be delivered, to each Purchaser certificates
representing the First Closing Shares and each Purchaser or its nominee shall be
registered as the owner of the First Closing Shares in the Company's membership
registry, and each Purchaser shall pay to the Company the Purchase Price.
(b) Second Closing. At the Second Closing, subject to the terms and
--------------
conditions of this Agreement, including, without limitation, Article 6, the
Company shall issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, shall purchase from the Company the Second Closing Shares. The
Purchase Price with respect to each Purchaser shall be payable by wire transfer
in immediately available funds to an account or accounts previously designated
in writing by the Company at least two Business Days prior to the Second Closing
Date. At the Second Closing, the Company shall deliver, or cause to be
delivered, to each Purchaser certificates representing the Second Closing Shares
and each Purchaser or its nominee shall be registered as the owner of the First
Closing Shares in the Company's membership registry, and each Purchaser shall
pay to the Company the Purchase Price.
Section 2.3 Company Closing Deliveries.
--------------------------
(a) First Closing. At the First Closing, the Company shall deliver, or
-------------
cause to be delivered, to each Purchaser the following:
(i) Share certificates with respect to the First Closing Shares;
(ii) The opinion of Yigal Arnon & Co. as Israeli counsel to the
Company, in form and substance satisfactory to Purchasers;
8
<PAGE>
Page 28 of 91 Pages
(iii) The opinion of Yigal Arnon & Co., as Israeli counsel to
Aptel, in form and substance satisfactory to the Purchasers;
(iv) The opinion of Carter, Ledyard & Milburn, as U.S. counsel to
the Company, in form and substance satisfactory to Purchasers;
(v) The opinion of Carter, Ledyard & Milburn, as U.S. counsel to
Aptel, in form and substance satisfactory to Purchasers;
(vi) The AMR Warrant Agreement and the Warrants required to be
issued to the Purchasers thereunder at the First Closing;
(vii) The Shareholders' Agreement;
(viii) The Voting Agreements;
(ix) The Option Waiver Agreements;
(x) The Registration Rights Agreement;
(xi) The GWH Preferred Stock Purchase Agreement and related
certificate of designation;
(xii) Waivers in form and substance satisfactory to the Lead
Investor from parties currently entitled to registration rights with respect to
at least 4 million shares of the Company's Ordinary Shares (attached hereto as
Schedule 2.3(a)(xii)) whereby each such party waives (A) its "piggy-back"
- ---------------------
registration rights with respect to the Shares that the Company is required to
register on behalf of the Purchasers pursuant to the Registration Rights
Agreement and (B) any provisions of the agreements granting the above-listed
parties registration rights which conflict with the provisions of the
Registration Rights Agreement;
(xiii) Waivers in form and substance satisfactory to the Lead
Investor (attached hereto as Schedule 2.3(a)(xiii)) from each of (A) CLAL
----------------------
Industries and Investments, (B) CLAL Industries and Technologies (1997) Ltd.,
(C) Global Wireless Communications, L.P. and (D) Global Wireless Holdings, Inc.
with respect to any preemptive or similar rights with respect to the securities
of the Company, or any similar right to participate in or preclude the
transactions contemplated by this Agreement or any other Transaction Document;
(xiv) The opinion of Golfarb, Levy, Eran & Co., as Israeli tax
counsel to the Company, in form and substance satisfactory to the Lead Investor;
(xv) Pre-Ruling of Israeli income tax authority with respect to
non-taxability upon disposition of the Shares by the Purchasers;
(xvi) Consent of Bank Hapoalim to granting of pledge pursuant to
the Stock Pledge Agreements;
9
<PAGE>
Page 29 of 91 Pages
(xvii) Consent of the Investment Center with respect to the
purchase of the Shares hereunder;
(xviii) Consent of the Office of Chief Scientist with respect to
(A) the purchase of the Shares hereunder (B) the issuance of the AMR Warrants;
(xix) The Stock Pledge Agreements and certificates representing
the shares of Series B Convertible Preferred Stock required to be delivered to
each Purchaser thereunder at the First Closing;
(b) Second Closing. At the Second Closing, the Company shall deliver,
--------------
or cause to be delivered, to each Purchaser the following:
(i) Share certificates with respect to the Second Closing Shares;
(ii) The Warrants required to be issued to the Purchasers under
the AMR Warrant Agreement at the Second Closing;
(iii) The Articles of Association of the Company amended and
approved as contemplated in Section 5.1 hereof;
(iv) Evidence of the Required Registrar Approval;
(v) A certificate of a duly authorized executive officer of the
Company, to the effect that the conditions specified in Article 6 have been
satisfied as of the Second Closing Date;
(vi) Certificates representing the shares of Series B Convertible
Preferred Stock required to be delivered to each Purchaser under the Stock
Pledge Agreements at the Second Closing; and
(vii) Such other documents as the Purchasers shall reasonably
request.
Article 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and
warranties to the Purchasers, each of which is true and correct on the date
hereof and, except as otherwise expressly set forth in the Agreement, shall be
true and correct as of the Second Closing Date:
Section 3.1 Organization, Power, Authority, Etc. The Company is a company duly
--------------------------------------
organized and validly existing under the laws of Israel; each Subsidiary of the
Company is listed on Schedule 3.1 and is duly organized and validly existing
-------------
under the laws of its jurisdiction of incorporation; each of the Company and
each Subsidiary of the Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
business makes such qualification necessary, except, with respect to foreign
jurisdictions, where the failure to be so qualified or licensed and in good
10
<PAGE>
Page 30 of 91 Pages
standing would not have a Material Adverse Effect on the Company; and the
Company and each of its Subsidiaries has full power and authority to own and
hold under lease its property and to conduct its business substantially as
presently conducted by it. The Company has full power and authority to enter
into and perform its obligations under this Agreement and each other Transaction
Document executed or to be executed by it.
Section 3.2 Due Authorization; No Conflicts. The execution and delivery by the
--------------------------------
Company of this Agreement, each other Transaction Document and each other
certificate or document executed or to be executed by it, the performance by the
Company of its obligations hereunder and thereunder and the issuance of the
Ordinary Shares by the Company pursuant to this Agreement (A) have been duly
authorized by all necessary corporate proceedings, except, with respect to the
Second Closing, for the Required Approvals, on the part of the Company (and no
other corporate proceedings or actions on the part of the Company or its board
of directors or shareholders are necessary therefor), (B) do not require any
Approval, except, with respect to the Second Closing, for the Required
Approvals, which has not been obtained, (C) do not and will not conflict with,
result in any violation of, or constitute any default under, any provision of
the Memorandum and Articles of Association of the Company, any provision of any
material Instrument of the Company or any Subsidiary of the Company or any
present law, governmental regulation or rule of any stock market applicable to
the Company, any Subsidiary of the Company or any of its or their assets,
properties or operations or any court decree or order applicable to the Company,
any Subsidiary of the Company or its or their assets, properties or operations
and will not, other than as specifically contemplated by the Transaction
Documents, result in or require the creation or imposition of any Security
Interest on any of the properties of the Company or any Subsidiary of the
Company pursuant to any material Instrument or result in the acceleration of any
Indebtedness of the Company or any of its Subsidiaries.
Section 3.3 Validity, Etc. This Agreement constitutes, and each other
----------------
Transaction Document executed by the Company will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
Section 3.4 Capitalization of the Company and Subsidiaries. The authorized and
----------------------------------------------
issued share capital of the Company and each of its Subsidiaries and the
ownership thereof is as set forth on Schedule 3.4(a). At the First Closing and
---------------
the Second Closing, all of the Shares will be duly authorized and, the Shares,
when issued in accordance with this Agreement, will be validly issued, fully
paid and nonassessable and free of all Liens and shall be quoted on Nasdaq.
Except as set forth on Schedule 3.4(b), there are no outstanding (A) securities
---------------
or obligations of the Company or any of its Subsidiaries convertible into or
exchangeable for any shares of the share capital of the Company or any of its
Subsidiaries, (B) warrants, rights or options to subscribe for or purchase from
the Company or any of its Subsidiaries any shares of the share capital or any
such convertible or exchangeable securities or obligations or (C) obligations of
the Company or any of its Subsidiaries to issue such shares, any such
convertible or exchangeable securities or obligations, or any such warrants,
rights or options. Except as set forth on Schedule 3.4(c), no person has
----------------
11
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preemptive or similar rights with respect to the securities of the Company or
any of its Subsidiaries, or any similar right to participate in the transactions
contemplated by this Agreement or any other Transaction Document. Except as set
forth on Schedule 3.4(d), the Company has not granted or agreed to grant to any
---------------
Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the SEC or any other governmental
authority which have not been satisfied.
Section 3.5 Financial Statements. The audited consolidated financial statements
--------------------
and related schedules and notes included in the SEC Documents comply in all
material respects with the requirements of the Exchange Act and the Act, were
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as may be indicated in the notes thereto) and fairly present,
in all material respects, the consolidated financial condition, results of
operations, cash flows and changes in shareholders' equity of the Company and
its consolidated Subsidiaries at the dates and for the periods presented. The
unaudited consolidated financial statements for the period ending September 30,
1999 attached hereto as Exhibit G (the "Third Quarter Financials"), fairly
--------- --------------------------
present, in all material respects, the consolidated financial condition, results
of operations, and changes in shareholders' equity of the Company and its
Subsidiaries at the dates and for the periods to which they relate, subject to
year-end audit adjustments (consisting only of normal recurring accruals), have
been prepared in accordance with GAAP applied on a consistent basis except as
otherwise stated therein and have been prepared on a basis consistent with that
of the audited financial statements referred to above except as otherwise stated
therein.
Section 3.6 SEC Documents.
-------------
(a) The Company has delivered or made available to the Purchasers true and
complete copies of: (i) the Annual Report, (ii) any other reports filed under
cover of Form 6-K filed with the SEC since December 31, 1998, and (iii) all
other SEC Documents.
(b) As of its filing date, each SEC Document (including all exhibits and
schedules thereto and documents incorporated by reference therein) referred to
in (a) above, filed, as amended or supplemented, if applicable, pursuant to the
Exchange Act (i) complied in all material respects with the applicable
requirements of the Exchange Act and (ii) did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(c) Each registration statement (including all exhibits and schedules
thereto and documents incorporated by reference therein) referred to in clause
(a)(iii) filed, as amended or supplemented, if applicable, pursuant to the Act,
as of the date such statement or amendment became or will become effective (i)
complied in all material respects with the applicable requirements of the Act
and (ii) did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any prospectus, in light of
the circumstances under which they were made).
12
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(d) The Company has delivered or made available to the Purchasers true and
complete copies of all correspondence between the SEC and the Company or its
legal counsel, accountants or other advisors since January 1, 1998. The Company
is not aware of any issues raised by the SEC with respect to any of the SEC
Documents, other than those disclosed to the Purchaser pursuant to this Section
3.6(d).
(e) Except as set forth on Schedule 3.6(e), all agreements to which the
----------------
Company or any Subsidiary of the Company is a party or to which the property or
assets of the Company or any Subsidiary of the Company are subject and which are
required to be filed as exhibits to the SEC Documents, including agreements
entered into after December 31, 1998, have been filed as exhibits to the SEC
Documents as required and neither the Company nor any Subsidiary of the Company
nor, to the Company's knowledge, any other party is in breach of any such
agreement and all such agreements, including any agreements listed on Schedule
3.6(e), are in full force and effect.
Section 3.7 Contingent Liabilities. Except as set forth on Schedule 3.7 or as
----------------------- ------------
fully reflected or reserved against in the financial statements included in the
Annual Report, or disclosed in the footnotes contained in such financial
statements, the Company and its Subsidiaries have no material liabilities
(including tax liabilities), absolute or contingent.
Section 3.8 Absence of Certain Developments; No Material Adverse Change.
--------------------------------------------------------------
Except as disclosed (i) in the Third Quarter Financials, (ii) the SEC Documents
filed prior to the First Closing Date, or (iii) as set out in Schedule 3.8,
-------------
since the end of the 1998 Fiscal Year, (A) the Company and its Subsidiaries have
not incurred any material liability, guarantee or obligation (indirect, direct
or contingent), or entered into any material oral or written agreement or other
transaction, that is not in the ordinary course of business or that could
reasonably be expected to result in a Material Adverse Effect on the Company;
(B) the Company and its Subsidiaries have not sustained any material loss or
interference with its business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance); (C) there has
been no material change in the Indebtedness of the Company and its Subsidiaries,
and no dividend or distribution of any kind declared, paid or made by the
Company or any of its Subsidiaries (other than dividends or distributions
declared, paid or made by a wholly owned Subsidiary of the Company on any class
of its shares); (D) neither the Company nor any of its Subsidiaries has made
(nor does it propose to make) (i) any material change in its accounting methods
or practices or (ii) any material change in the depreciation or amortization
policies or rates adopted by it, in either case, except as may be required by
law or applicable accounting standards; and (E) there has been no event causing
a Material Adverse Effect on the Company, nor any developments that could,
singly or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company.
Section 3.9 Approvals. Except for the Required Approvals, no Approval is
---------
required to be obtained by the Company or any Subsidiary of the Company for the
consummation of the transactions contemplated by this Agreement or by any of the
Transaction Documents, which has not already been obtained.
Section 3.10 No Existing Violation, Default, Etc. None of the Company or any of
-------------------------------------
the Company's Subsidiaries is in violation of (A) its memorandum or articles of
association, articles of incorporation, by-laws or other organization documents
13
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or (B) except as set forth on Schedule 3.10, any applicable material law,
--------------
ordinance, administrative, governmental, stock exchange or stock market rule or
regulation, or (C) except as set forth on Schedule 3.10, any material order,
--------------
decree or judgment of any court or governmental agency or body having
jurisdiction over the Company or any such Subsidiary. Except as disclosed on
Schedule 3.10, no material event of default or event that, but for the giving of
- -------------
notice or the lapse of time or both, would constitute a material event of
default exists or, upon the consummation by the Company of the transactions
contemplated by this Agreement or any of the Transaction Documents, will exist
under any Instrument to which the Company or any of the Company's Subsidiaries
is a party or by which the Company or any such Subsidiary is bound or to which
any of the properties, assets or operations of the Company or any such
Subsidiary is subject.
Section 3.11 Licenses, Etc. The Company and each of its Subsidiaries possess all
--------------
material certificates, authorizations, licenses, easements, consents, approvals,
orders and permits necessary to own, lease and operate their respective
properties and to conduct their respective businesses as currently conducted
("Licenses"), and there is no proceeding pending, or, to the knowledge of the
--------
Company, threatened, relating to the revocation, modification, suspension or
cancellation of any License. Neither the Company nor any of the Subsidiaries is
in conflict with or default or violation of any License.
Section 3.12 Title to Properties.Except as set forth on Schedule 3.12, the
-------------------- --------------
Company and its Subsidiaries have good and marketable title to all material
properties (real and personal) owned by the Company and any such Subsidiary that
are necessary for the conduct of the business of the Company and such
Subsidiaries as currently conducted, free and clear of any Lien that may
materially interfere with the conduct of the business of the Company and such
Subsidiaries, taken as a whole, and all material properties held under lease by
the Company or the Subsidiaries are held under valid, subsisting and enforceable
leases.
Section 3.13 Environmental Matters. Except as set forth on Schedule 3.13, the
---------------------- -------------
Company and its Subsidiaries (i) are in material compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
-------------------
have received all material permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in material compliance with all terms and conditions of any such
permits, licenses or other approvals.
Section 3.14 Taxes. The Company and all of its Subsidiaries have each timely
-----
filed all Tax Returns required by law to have been filed by it and paid all
Taxes thereby shown to be owing, except any such Taxes which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books. Each Tax Return filed by the Company or any of its Subsidiaries correctly
and accurately reflects the amount of its liability for Taxes thereunder in all
material respects and makes all material disclosures required by applicable
provisions of law. Except as set forth in Schedule 3.14, neither the Company nor
-------------
any of its Subsidiaries has been advised that any of its Tax Returns have been
14
<PAGE>
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or are being audited as of the date hereof, and no deficiency assessment or
proposed adjustment of Taxes of each of the Company or any of its Subsidiaries
has been threatened. There are no liens for Taxes upon any of the assets of the
Company or any of its Subsidiaries, except for Taxes not yet otherwise due or
payable. The Company and each of its Subsidiaries has taken all reasonable and
customary steps to ensure that it has complied with all applicable Tax laws and
Tax regulations of any Governmental Authority which affect the operation,
properties, financial condition, operating results or business prospects of the
Company or such Subsidiary to which the Company or such Subsidiary may otherwise
be subject. None of the Company's Subsidiaries is a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Internal
Revenue Code of 1986, as amended.
Section 3.15 Litigation. Except as set forth on Schedule 3.15, there is no
---------- --------------
pending action, suit, proceeding, arbitration or investigation against or
affecting the Company or any of its Subsidiaries or any of their respective
properties, assets or operations, or with respect to which the Company or any
such Subsidiaries is responsible by way of indemnity or otherwise, (A) that is
required under the Exchange Act to be described in the SEC Documents and was not
so described, (B) that questions the validity of this Agreement or any of the
other Transaction Documents or any action to be taken pursuant to this Agreement
or any of the other Transaction Documents, or (C) that would individually, or in
the aggregate with all other such actions, suits, investigations or proceedings,
reasonably be expected to have, a Material Adverse Effect on the Company or an
adverse effect on the ability of the Company to perform its obligations under
this Agreement or any of the Transaction Documents; and, to the best knowledge
of the Company, except as set forth on Schedule 3.15, no such actions, suits,
--------------
proceedings or investigations are threatened or contemplated.
Section 3.16 Indebtedness. Schedule 3.16 contains a true and complete list,
------------ --------------
including the names of the parties thereto, of all debt instruments, loan
agreements, indentures, guaranties or other obligations, whether written or
oral, exceeding $10,000 in amount, relating to (i) Indebtedness for Borrowed
Money or (ii) money loaned to others by the Company or its Subsidiaries. All of
the aforesaid items are valid and binding, in full force and effect and are
enforceable in accordance with their respective terms and there exists no breach
or default, or any event which with notice or lapse of time or both, would
constitute a breach or default by any party thereto. All of the Company's and
each Subsidiary's Indebtedness for Borrowed Money, as required by GAAP, is
disclosed on the balance sheet contained in the Company's most recent Annual
Report.
Section 3.17 Finder's Fees. No broker, finder or other party is entitled to
--------------
receive from the Company, any of its Subsidiaries or any other Person any
brokerage or finder's fee or any other fee, commission or payment as a result of
the transactions contemplated by this Agreement for which the Purchasers could
have any liability or responsibility.
Section 3.18 Securities Law Matters. Neither the Company nor any person acting
----------------------
on its behalf has, in connection with the sale of the Shares or the granting of
the AMR Warrants, engaged in (A) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Act), (B) (assuming the accuracy of the Purchaser's representations in Section
4.3) any action involving a public offering within the meaning of Section 4(2)
of the Act, or (C) (assuming the accuracy of the Purchaser's representations in
Section 4.3) any action that would require the registration under the Act of the
offering and sale of the Shares pursuant to this Agreement, the granting of the
AMR Warrants or the issuance to the Purchasers of the AMR Shares, or that would
15
<PAGE>
Page 35 of 91 Pages
violate applicable state securities or "blue sky" laws. The Company has not made
and will not make, directly or indirectly, any offer or sale of Ordinary Shares,
the AMR Warrants or the AMR Shares or of securities of the same or a similar
class as the Ordinary Shares, the AMR Warrants or the AMR Shares if, as a
result, the offer and sale of the Ordinary Shares or the granting of the AMR
Warrants or the issuance to the Purchasers of the AMR Shares contemplated hereby
or by the AMR Warrant Agreement could fail to be entitled to exemption from the
registration requirements of the Act. As used herein, the terms "offer" and
"sale" have the meanings specified in Section 2(3) of the Act.
Section 3.19 Intellectual Property Rights. The Company and its Subsidiaries own
-----------------------------
or possess adequate rights or licenses to use all trademarks, trademark
applications, trade names and service marks, whether or not registered, and all
patents, patent applications, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and intellectual property rights
(collectively, "Intellectual Property Rights") which are necessary for use in
------------------------------
connection with their respective businesses as now conducted and as described in
the SEC Documents. Except as set forth on Schedule 3.19, none of the Company's
-------------
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate within two years from the date of this Agreement. Neither
the Company nor any of its Subsidiaries has infringed or is infringing on any of
the Intellectual Property Rights of any Person and, there is no claim, action or
proceeding which has been made or brought or alleged against, or to the
Company's knowledge, is being made, brought or threatened against, the Company
or its Subsidiaries regarding the infringement of any of the Intellectual
Property Rights, and the Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing, except where any
of the foregoing would not have a Material Adverse Effect. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
Section 3.20 Disclosure. No representation or warranty contained in this
----------
Agreement, the schedules or exhibits hereto, the Transaction Documents or
information appearing in any writing furnished by the Company to the Purchasers
or their representatives pursuant hereto or in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading. To the best of the
Company's knowledge, there is no fact which the Company has not disclosed to the
Purchasers in writing which is reasonably likely to have a Material Adverse
Effect or is reasonably likely to adversely affect the ability of the Company to
perform its obligations under this Agreement or the Transaction Documents.
Section 3.21 Form F-3 Eligibility. The Company is eligible to register
----------------------
securities (including the Shares) for resale with the SEC under Form F-3 (or any
successor form) promulgated under the Act.
Section 3.22 Listing and Maintenance Requirements Compliance. The principal
--------------------------------------------------
market on which the Ordinary Shares are currently traded is Nasdaq. Except as
disclosed on Schedule 3.22, the Company has not in the three years preceding the
date hereof received notice (written or oral) from Nasdaq (or any stock
exchange, market or trading facility on which the Ordinary Shares are or have
been listed (or on which it has been quoted)) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such market or
16
<PAGE>
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exchange. The Company is not aware of any facts which would reasonably lead to
delisting or suspension of the Ordinary Shares by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the other Transaction
Documents, the Company is and will be in compliance with all such maintenance
requirements.
Section 3.23 Transactions With Affiliates. Except as set forth on Schedule 3.23,
---------------------------- -------------
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
Section 3.24 Foreign Corrupt Practices. Neither the Company, nor any of its
---------------------------
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee form corporate funds, (iii)
violated (or is in violation of) any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
Section 3.25 Year 2000 Compliance. Other than those modifications the cost of
--------------------
which is not material, there are no modifications required to any of the
Company's Intellectual Property Rights in order for such property to contain no
deficiencies relating generally to formatting for entering dates (commonly
referred to and referred to herein as the "Year 2000 Problem"). The Company's
and each Subsidiaries' Intellectual Property Rights are susceptible to all
necessary modification and the Company has adequate personnel and consultants
under contract to so timely modify its own Intellectual Property Rights. The
Company is not aware of any inability on the party of any customer, insurance
company or service provider with which the Company transacts business to timely
remedy their own deficiencies in respect of the Year 2000 Problem.
Section 3.26 Other Agreements. The Company has not, directly or indirectly, made
----------------
any agreements with any Purchasers relating to the terms and conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. The Company has made available to Purchasers copies
of all Transaction Documents.
Article 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby, severally but not jointly, represents
and warrants to the Company that:
17
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Section 4.1 Organization, Good Standing, Power, Authority, Etc. Each Purchaser
-----------------------------------------------------
is validly organized and existing and in good standing under the laws of its
jurisdiction of organization and has the full corporate power and authority to
execute and deliver this Agreement and each of the other Investment Agreements
to which it is a party, as applicable, and to perform its obligations hereunder
and thereunder. Each Purchaser has taken all action required by law, its
organizational documents or otherwise required to be taken by it to authorize
the execution and delivery of this Agreement and the other Investment Agreements
to which it is a party and the consummation of the transactions contemplated to
be performed by it hereby and thereby. This Agreement constitutes, and each
other Investment Agreement executed by each Purchaser will, on the due execution
and delivery thereof, constitute, the legal, valid and binding agreement of such
Purchaser, enforceable against such Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 4.2 No Conflicts; No Consents. Neither the execution and delivery
--------------------------
of this Agreement nor the consummation by each Purchaser of the purchase
contemplated hereby will (A) conflict with, or result in any violation of, or
constitute any default under, any provision of its organizational documents, (B)
violate any statute or law or any judgment, order, writ, injunction, decree,
rule or regulation applicable to such Purchaser or (C) violate, conflict with,
or result in a breach of any material Instrument of such Purchaser.
Section 4.3 Acquisition for Own Account. The Shares and the AMR Warrants are
-----------------------------
being acquired by each Purchaser for its own account and not with a view to or
for sale or other disposition in connection with, any distribution of all of the
Shares or AMR Warrants, or any part thereof in any transaction that would be in
violation of the Act or the securities laws of any state; without prejudice,
however, to the rights of each Purchaser at all times to sell or otherwise
dispose of all or any part of the Shares or AMR Warrants under an effective
registration statement under the Act or under an exemption from such
registration available under the Act, or to pledge all or any part of the Shares
or AMR Warrants to secure any obligation of such Purchaser.
Section 4.4 Investor Suitability. Each Purchaser is an "accredited investor" as
--------------------
such term is defined in Rule 501 under the Act.
Section 4.5 Disclosure of Information. Each Purchaser acknowledges that it or
-------------------------
its representatives have been furnished with all information regarding the
Company and its business, assets, results of operations and financial condition
that such Purchaser has requested. Each Purchaser further represents that it has
had an opportunity to ask questions of and receive answers from the Company
regarding the Company and its business, assets, results of operations, and
financial condition and the terms and conditions of the issuance of the Shares
and AMR Warrants; however, no representations or warranties have been made by
the Company except as are set forth in this Agreement and the other Transaction
Documents. Nothing contained in this Section 4.5 and no investigation by
Purchasers shall in any way affect the Purchasers' right to rely upon the
Company's representations and covenants contained in this Agreement and the
other Transaction Documents.
18
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Section 4.6 Investment Experience. Purchasers each represent that they have suc
---------------------
knowledge, experience and skill in evaluating and investing in ordinary shares,
options and other securities, based on actual participation in financial,
investment and business matters, so that they are each capable of evaluating the
merits and risks of an investment in the Shares and receipt of the AMR Warrants
and have such knowledge, experience and skill in financial and business matters
that they are each capable of evaluating the merits and risks of the investment
in the Company and the suitability of the Shares and AMR Warrants as an
investment and can bear the economic risk of an investment in the Shares and AMR
Warrants.
Section 4.7 Restricted Securities. Purchasers understand that the Shares and th
---------------------
AMR Warrants will not have been registered pursuant to the Act or any applicable
state securities laws, that the Shares and the AMR Warrants will be
characterized as "restricted securities" under federal securities laws, and that
under such laws and applicable regulations the Shares and the AMR Warrants
cannot be sold or otherwise disposed of without registration under the Act or an
exemption therefrom. In this connection, Purchasers each represent that they are
familiar with Rules 144 and 144A promulgated under the Act, as currently in
effect, and understand the resale limitations imposed thereby and by the Act.
Stop transfer instructions may be issued to the respective transfer agents for
securities of the Company (or a notation may be made in the appropriate records
of the Company) in connection with the Shares and the AMR Warrants, but only to
the extent customary for securities which are "restricted securities." The
Company shall also be entitled to request an opinion of counsel to the
Purchaser, reasonably acceptable in form and substance to the Company, that a
transfer of the Shares and the AMR Warrants, other than pursuant to an effective
registration statement, does not require registration under the Act.
Section 4.8 Finder's Fees. No broker, finder or other party is entitled to
--------------
receive from any Purchaser, any brokerage or finder's fee or any other fee,
commission or payment as a result of the transactions contemplated by this
Agreement for which the Company could have any liability or responsibility.
Article 5
COVENANTS OF THE PARTIES
Section 5.1 Shareholders Meeting; Amended Articles. As soon as practicable
-----------------------------------------
following the First Closing Date but in no event later than March 15, 2000, the
Company shall cause:
(a) an extraordinary general meeting of the shareholders of the Company to
take place in order to approve the amendment of the Company's Articles of
Association to provide for:
i. the increase of the share capital of the Company necessary to permit
(A) the issuance of the Shares in the Second Closing and (B) the
exercise of all of the outstanding convertible securities of the
Company;
19
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Page 39 of 91 Pages
ii. the right of the Lead Investor to appoint one member to the board of
directors of the Company until such time as (A) the Lead Investor
holds less than (x) 2,000,00 Shares purchased by it hereunder if the
Second Closing shall not have occurred and (y) 3,500,000 Shares
purchased by it hereunder if the Second Closing shall have occurred or
(B) the Purchasers, in the aggregate, hold less than 10% of the
outstanding share capital of the Company; and
iii. the right of the Lead Investor to assign its right in clause (ii)
above (with the consent of the Company not to be unreasonably
withheld) to a transferee so long as (A) the Lead Investor transfers
to such transferee not less than (x) 2,000,000 Shares purchased by the
Lead Investor hereunder if the Second Closing shall not have occurred
or (y) 3,500,000 Shares purchased by the Lead Investor hereunder if
the Second Closing shall have occurred; provided that such transferee
--------
shall only have the right to appoint a director to the board of
directors of the Company as long as (A) the transferee holds more than
(x) 2,000,000 Shares purchased by it from the Lead Investor if the
Second Closing shall not have occurred or (y) 3,500,000 Shares
purchased by it from the Lead Investor if the Second Closing shall
have occurred and (B) the Purchasers, including such transferee, in
the aggregate, hold more than 10% of the outstanding share capital of
the Company;
(Clauses (i), (ii) and (iii) are collectively referred to as the "Required
--------
Shareholder Approval").
- --------------------
(b) the amendments to Articles of Association contemplated by paragraph (a)
above to be approved by the Registrar of Companies in Israel (the "Required
--------
Registrar Approval" and together with the Required Shareholder Approval, the
- -------------------
"Required Approvals").
------------------
Section 5.2 Amendment/Waiver of Certain Agreements. The Company shall not amend
--------------------------------------
or waive, or permit the amendment or waiver of, any of the Option Waiver
Agreements and/or the Voting Agreements or any of the waivers obtained pursuant
to Section 2.3(a)(xii) and (xiii). The Company shall take all necessary action
to enforce the provisions of such agreements and waivers.
Section 5.3 Legends.
-------
(a) Each Purchaser agrees to the imprinting, so long as is required by this
Section 5.3(a), of the following legend on the Shares:
THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
20
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AMENDED, AND UNDER ANY APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN
APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER.
(b) The Shares shall not contain the legend set forth above (or any other
legend) (i) at any time while a registration statement is effective under the
Act covering such security, (ii) if in the written opinion of counsel to the
Company experienced in the area of United States securities laws such legend is
not required under applicable requirements of the Act (including judicial
interpretations and pronouncements issued by the staff of the SEC) or (iii) if
the Shares may be sold pursuant to Rule 144. The Company agrees that it will
provide each Purchaser, upon request, with a certificate or certificates
representing the Shares, free from such legend at such time as such legend is no
longer required hereunder. If such certificate or certificates had previously
been issued with such a legend or any other legend, the Company shall, upon
request and delivery of such certificate or certificates to the Company by such
Purchaser, reissue to such Purchaser such certificate or certificates free of
any legend.
Section 5.4 Use of Proceeds.
---------------
(a) The sum of (A) the aggregate Purchase Price of $12,900,000 received in
respect of the First Closing and (B) the aggregate purchase price of $2,025,000
to be received by Aptel at the First Closing for the issuance of the AMR
Warrants, shall be used by the Company (i) to pay the approximate $8.9 million
purchase price in connection with the first closing under the GWH Preferred
Stock Purchase Agreement and (ii) for working capital in an aggregate amount of
approximately $3,000,000 and the remainder by Aptel to invest in developing its
AMR Business.
(b) The sum of (A) the aggregate Purchase Price of $8,600,000 received in
respect of the Second Closing and (B) the aggregate purchase price of $1,350,000
to be received by Aptel at the Second Closing for issuance of the AMR Warrants,
shall be used by the Company (i) to pay the purchase price of approximately
$5.95 million in connection with the second closing under the GWH Preferred
Stock Purchase Agreement and (ii) for working capital in an aggregate amount of
approximately $2,000,000 and the remainder by Aptel to invest in developing the
AMR Business.
(c) The Company may apply the proceeds to such other purposes or in such
other amounts as the Lead Investor may agree in writing, such consent not to be
unreasonably withheld.
Section 5.5 No Inconsistent Agreements. The Company and its Subsidiaries shall
---------------------------
not enter into any Instrument, or enter into any amendment or other modification
to any currently existing Instrument, restricting the Company's ability to
perform any of its obligations under this Agreement or restricting the Company's
rights or obligations under any of the other Transaction Documents. The Company
shall not, while the GWH Option Agreement is in effect, amend or waive any
provisions of the GWH Preferred Stock Purchase Agreement or the related
certificate of designation, or exercise any registration rights under the GWH
Preferred Stock Purchase Agreement, without the prior written consent of the
Lead Investor. The Company shall not, following exercise by the Purchasers of
the option granted pursuant to the GWH Option Agreement, vote to amend or waive
any provisions of the certificate of designation with respect to the Series B
21
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Convertible Preferred Stock of GWH without the prior written consent of the Lead
Investor. In addition, the Purchasers agree among themselves that, in the event
of a transfer of shares of GWH Series B Convertible Preferred Stock to any of
the Purchasers pursuant to the Stock Pledge Agreements prior to the exercise by
the Purchasers of the option under the GWH Option Agreement, no such Purchaser
shall exercise any registration rights that it may have under the GWH Preferred
Stock Purchase Agreement as a result of such transfer, without the prior written
consent of the Lead Investor.
Section 5.6 Information; Access.
-------------------
(a) So long as any Purchaser owns any of the Shares, the Company shall
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) with the SEC and with any U.S. or foreign stock
exchange or stock market on which any securities of the Company are listed, the
information, documents and other reports that are required to be filed with the
SEC pursuant to Sections 13 and 15 of the Exchange Act, whether or not the
Company has or is required to have a class of securities registered under the
Exchange Act and whether or not the Company is then subject to the reporting
requirements of the Exchange Act, at the time the Company is or would be
required to file the same with the SEC and, promptly after the Company is or
would be required to file such reports, information or documents with the SEC,
and so long as the Purchasers hold in the aggregate at least 5% of the
outstanding Ordinary Share capital of the Company, to mail copies of such
reports, information and documents (including any registration statements filed
with the SEC (without exhibits)) to such Purchasers at their addresses set forth
in the register maintained by the transfer agent of the Company therefor.
(b) So long as the Lead Investor owns at least 5% of the outstanding
Ordinary Share capital of the Company, the Company shall furnish to the director
designated by the Lead Investor (or to such other person designated by the Lead
Investor if no such director has been designated) as soon as practicable upon
the request of the Lead Investor reasonable access during normal business hours
to the Company's and its Subsidiaries' properties, books, contracts and records
and personnel and advisors (who will be instructed by the Company to cooperate)
and the Company shall (and shall cause each of the Subsidiaries to) furnish
promptly to the director designated by the Lead Investor (or to such other
person designated by the Lead Investor if no such director has been designated)
all information concerning its business, properties, tax matters and personnel
as the Lead Investor may reasonably request. Each Purchaser will keep, and will
cause their respective representatives to keep, all information and documents
obtained pursuant to this Section 5.6(b) confidential except to the extent
otherwise publicly disclosed by the Company.
Section 5.7 Ordinary Course Brokerage and Trading. Subject to compliance with
---------------------------------------
all applicable securities laws and Nasdaq regulations, no Purchaser shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Company's Ordinary Shares; provided that the personnel engaged
--------
in such activities have not been involved with the transactions contemplated
hereby and have not been provided with confidential information with respect to
the Company.
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Section 5.8 Publicity. Each Purchaser and the Company will consult with each
---------
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by the Transaction Documents and the GWH Investment
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable law and
provided that each Purchaser shall be entitled to disclose information with
respect to its investment in the Company on any reports such Purchaser furnishes
to its investors.
Section 5.9 Other Actions. Each of the Company and the Purchasers agrees to
--------------
execute and deliver such other documents and take such other acts, as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the other Transaction Documents. At any time that any party hereto
is in breach of any representation, warranty, covenant or agreement in this
Agreement or any of the other Transaction Documents, such party shall inform the
other parties of such breach, and shall take all actions necessary to mitigate
the adverse effects of such breach; provided that in no event will disclosure of
--------
a breach relieve the breaching party from any of its obligations or affect the
rights of any other party hereto or be deemed to amend or supplement any
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
Section 5.10 Integration. The Company shall not sell, offer to sell or solicit
-----------
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Act) that would be integrated with the offer or sale of the
Shares or the grant of the AMR Warrants in a manner that would require the
registration under the Act of the sale of the Shares or the grant of the AMR
Warrants to any Purchaser or cause the offering of such securities to be
integrated with any other offering of securities by the Company for the purpose
of any stockholder approval provision applicable to the Company or its
securities.
Section 5.11 Preemptive Rights.
-----------------
(a) Until the third anniversary of the First Closing Date, the Company
hereby grants to each Purchaser the right to purchase a pro rata share of all
New Securities which the Company may, from time to time, propose to sell and
issue. A Purchaser's pro rata share, for purposes of this right, is the ratio of
the number of Ordinary Shares owned by such Purchaser on a fully diluted basis
immediately prior to the issuance of New Securities, to the total number of
Ordinary Shares of the Company issued and outstanding on a fully diluted basis
immediately prior to the issuance of New Securities.
(b) If a Purchaser does not or does not fully exercise its rights under
Section 5.11(a), the remaining Purchasers shall be entitled to purchase a pro
rata share of all such unclaimed New Securities. A Purchaser's pro rata share,
for purposes of this Section 5.11(b), is the ratio of the number of Ordinary
Shares owned by such Purchaser immediately prior to the issuance of New
Securities, to the total number of Ordinary Shares owned by the Purchasers at
such time.
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser prior written notice of its intention,
describing the type of New Securities, their price and the general terms upon
which the Company proposes to issue the same. Each Purchaser shall have 14 days
23
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after any such notice is delivered to agree to purchase its pro rata share of
such New Securities for the price and upon the terms specified in the notice by
giving written notice to the Company and the other Purchasers. The Company shall
provide the Purchasers reasonable opportunity to exercise their rights under
Section 5.11(b) above.
(d) Whether or not a Purchaser exercises its rights granted in Section
5.11(a) within said 14 day period (or longer to the extent required to provide
the Purchasers reasonable opportunity to exercise their rights under Section
5.11(b)), the Company shall have 60 days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within 60 days from the date of said agreement) to sell the
New Securities for which each such Purchaser's right set forth in this Section
5.11 was or was not exercised, at a price and upon terms no more favorable than
what was offered in the Company's notice pursuant to Section 5.11(a). In the
event the Company has not sold the New Securities within said 60-day period or
entered into an agreement to sell the New Securities in accordance with the
foregoing 60-day period from the date of said agreement, the Company shall not
thereafter issue or sell any New Securities, without first again offering such
securities to the Purchasers in the manner provided in Section 5.11(a) and
5.11(b).
Section 5.12 Major Decisions. At all times until the earlier to occur of (i) the
---------------
Lead Investor holds less than (x) 2,000,000 Shares purchased by it hereunder if
the Second Closing shall not have occurred and (y) 3,500,000 Shares purchased by
it hereunder if the Second Closing shall have occurred or (ii) the Purchasers,
in the aggregate, hold less than 15% of the outstanding Ordinary Share capital
of the Company, without either the prior written consent of the Lead Investor or
the affirmative vote of the Purchaser Nominee (as defined in the Shareholders'
Agreement) in connection with any resolutions of the Board of Directors of the
Company, the Company shall not, and shall ensure that each of its Subsidiaries
does not:
(a) enter into any merger or consolidation with or into any other entity or
the sale, lease or other disposition of any material asset to any other entity;
(b) invest in research and/or development an amount in excess of $4 million
in any twelve (12) month period from the date of the First Closing until the
third anniversary of the date of the First Closing;
(c) make capital expenditures (including the acquisition of assets outside
the ordinary course of business) in an amount in excess of $3 million in any
twelve (12) month period from the date of the First Closing until the third
anniversary of the date of the First Closing;
(d) have outstanding at any time Indebtedness for Borrowed Money (excluding
convertible securities currently owned by BVR Technologies, Ltd.) in excess of
$10 million; or
(e) authorize the issuance of Ordinary Shares or options or warrants to
purchase Ordinary Shares issuable to employees, consultants or directors of the
Company pursuant to a plan approved by the Board of Directors of the Company
which at any time (after taking into account all Ordinary Shares and options and
24
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warrants to purchase Ordinary Shares then issued under all other such plans)
exceeds 15% of the fully diluted Ordinary Share capital of the Company.
Section 5.13 GWH Option Agreement Tax Indemnity. In addition to the indemnity
------------------------------------
provided for in Article 7, the Company hereby covenants to indemnify and hold
harmless each of the Purchasers for the entirety of any amount required to be
paid by any such Purchaser, upon exercise of the option granted pursuant to the
GWH Option Agreement, to any Israeli Tax authority with respect to any Taxes.
Any indemnity payment made hereunder shall be increased by the amount of the
such Purchaser's Tax cost (as defined below). The amount of such Purchaser's Tax
cost shall be equal to the amount of the income (or present value of any
decreased depreciation or amortization deductions) resulting from the receipt of
such indemnity payment, multiplied by the highest marginal income tax rate, U.S.
or foreign, imposed on such Purchaser. For the purpose of this section, present
values will be computed using the midterm applicable federal rate existing at
the time the obligation arises as the discount rate.
Article 6
CONDITIONS TO THE SECOND CLOSING
Section 6.1 Second Closing. The obligations of each of the Purchasers to be
---------------
discharged under this Agreement at the Second Closing are subject to
satisfaction of the following conditions at or prior to the Second Closing
(unless expressly waived in writing by such Purchaser at or prior to the Second
Closing):
(a) First Closing. The First Closing shall have occurred;
-------------
(b) Accuracy of the Company's Representations and Warranties. The
------------------------------------------------------------
representations and warranties of the Company set forth in this Agreement and in
the Investment Agreements shall be true and correct in all material respects as
of the date when made and as of the Second Closing Date as though made at that
time (except for representations and warranties made as of a specific date);
(c) Performance by the Company. The Company shall have performed,
----------------------------
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the other Transaction Documents to
be performed, satisfied or complied with by the Company at or before the Second
Closing Date;
(d) Closing Deliveries. The Company shall have delivered the items
-------------------
specified in Section 2.3(b);
(e) Required Waivers. The waivers obtained pursuant to Sections
-----------------
2.3(a)(xii) and (xiii) shall be in full force and effect through the Second
Closing Date;
(f) Registration Statements for the Shares. The registration statement
---------------------------------------
with respect to the Shares shall have been filed with the Commission; and, if on
or prior to the Second Closing Date such registration statement has been
declared effective under the Securities Act, such registration statement shall
25
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not be subject to any stop order and shall not be subject to any suspension
pursuant to the Registration Rights Agreement, and no stop order shall be
pending or threatened as at the Second Closing Date;
(g) GWH Closing. The second closing under the GWH Preferred Stock
------------
Purchase Agreement shall occur simultaneously with the Second Closing as
contemplated by Section 2.1(b) hereof; and
(h) No Order. No Governmental Authority or court of competent
---------
jurisdiction shall have enacted, issued, promulgated, enforced or entered into
any statute, rule regulations, injunction or other order which is in effect and
has the effect of making the transactions contemplated by this Agreement or the
Transaction Documents illegal or otherwise prohibiting consummation of such
transactions; provided, however, that the parties hereto shall use their
-------- -------
reasonable best efforts to have any such order or injunction vacated.
Article 7
SURVIVAL AND INDEMNIFICATION
Section 7.1 Survival Periods. All representations and warranties contained in
----------------
this Agreement shall survive until the fourth anniversary of the Last Closing
Date, regardless of any investigation made by or on behalf of any Person, except
that the representations and warranties contained in Section 3.4
(Capitalization) shall survive indefinitely. Notwithstanding the preceding
sentence, if notice of a bona fide claim for indemnity hereunder asserted before
a court of competent jurisdiction shall have been given to the party against
whom such indemnity may be sought prior to the time at which a claim under such
representation or warranty would otherwise terminate pursuant to the preceding
sentence, such claim shall survive such time. The covenants and agreements
contained in this Agreement shall survive the Last Closing Date without limit,
except to the extent specifically limited by their terms.
Section 7.2 Indemnification by the Company. In addition to all other sums due
-------------------------------
hereunder or provided for in this Agreement, the Company agrees to indemnify and
hold harmless each Purchaser and its Affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners and controlling persons
(each, an "indemnified party") to the fullest extent permitted by law from and
against any and all losses, claims, damages, expenses (including reasonable fees
and disbursements of counsel) or other liabilities ("Liabilities") resulting
-----------
from any breach of any covenant, agreement, representation or warranty of the
Company in this Agreement or any other Transaction Document or any legal,
administrative or other actions brought by any person or entity, proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of such Purchaser entering into this Agreement
or any other Transaction Document; provided, however, that the Company shall not
-------- -------
be liable under this Section 7.2: (i) for any amount paid in settlement of
claims without its consent (which consent shall not be unreasonably withheld),
(ii) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from a breach by such Purchaser of any
representation, warranty, covenant or agreement of such Purchaser contained in
this Agreement or any other Transaction Document or the gross negligence or
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willful misconduct of such Purchaser or (iii) to any individual Purchaser
(including such Purchaser's Affiliates and their respective officers, directors,
agents, employees, subsidiaries, partners and controlling persons) for any
amounts in excess of the aggregate Purchase Price paid by such Purchaser
hereunder; provided that the limitation on indemnification under this clause
--------
(iii) shall not apply to the Company's indemnification obligations under the
Registration Rights Agreement or the AMR Warrant Agreement. If and to the extent
that the indemnification as provided under this Article 7 is unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of such indemnified liability that shall be permissible under
applicable laws. In connection with the obligations of the Company to indemnify
for Liabilities as set forth above, the Company further agrees to reimburse each
indemnified party for all such expenses (including reasonable fees,
disbursements and other charges of counsel) as they are incurred by such
indemnified party.
Section 7.3 Notification. Each indemnified party under this Article 7 will,
------------
promptly after the receipt of notice of the commencement of any action or other
proceeding against such indemnified party in respect of which indemnity may be
sought from the Company under this Article 7, notify the Company and each other
Purchaser in writing of the commencement thereof. The omission of any
indemnified party so to notify the Company of any such action shall not relieve
the Company from any liability that it may have to such indemnified party except
to the extent that the Company is actually and materially prejudiced by such
failure to give notice. In case any such action or other proceeding shall be
brought against any indemnified party and it shall notify the Company of the
commencement thereof, the Company shall be entitled to participate therein and,
to the extent that either may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however, that any
-------- -------
indemnified party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action or
proceeding in which the Company and an indemnified party are, or are reasonably
likely to become, a party, such indemnified party shall have the right to employ
separate counsel at the expense of the Company and to control its own defense of
such action or proceeding if, in the reasonable opinion of counsel to such
indemnified party, (i) there are or may be legal defenses available to such
indemnified party or to other indemnified parties that are different from or
additional to those available to the Company or (ii) any conflict or potential
conflict of interest exists between the Company and such indemnified party that
would make such separate representation advisable in the view of the indemnified
party; provided, however, that (1) any such separate counsel employed by the
-------- -------
indemnified party at the expense of the Company shall be reasonably satisfactory
to the Company, (2) the indemnified party will not, without the prior written
consent of the Company, settle, compromise or consent to the entry of any
judgment in such action or proceeding unless such settlement, compromise or
consent includes an unconditional release of the Company from all liability
arising or that may arise out of such action or proceeding relating to any
matter subject to indemnification hereunder and (3) in no event shall the
Company be required to pay fees and expenses under this Article 7 for more than
one firm of attorneys representing the indemnified parties in any jurisdiction
in any one legal action or group of related legal actions. The Company agrees
that it will not, without the prior written consent of the Purchasers, and the
Purchasers agree that they will not, without the prior written consent of the
Company, settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding relating to any matter subject
to indemnification hereunder unless such settlement, compromise or consent
includes an unconditional release of the Purchasers or the Company, as the case
may be, and each other indemnified party from all liability arising or that may
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arise out of such claims, action or proceeding. The rights accorded to
indemnified parties hereunder shall be in addition to any rights that any
indemnified party may have at common law, by separate agreement or otherwise.
Article 8
MISCELLANEOUS
Section 8.1 Notices. All notices or other communications given or made hereunder
-------
shall be validly given or made if in writing and delivered by facsimile
transmission or in person at, mailed by registered or certified mail, return
receipt requested, postage prepaid, or sent by a reputable overnight courier to,
the following addresses (and shall be deemed effective at the time of receipt
thereof).
If to the Company:
Nexus Telocation Systems, Limited
6B Tfutzot Israel Street
Givatayim 53583, Israel
Facsimile: (011) 972-3-571-9698
Attention: Ariel Poppel
with a copy to:
Yigal Arnon & Co.
3, Daniel Frisch Street
Tel-Aviv 64731
Israel
Facsimile: (011) 972-3-608-7713
Attention: Eran Ilan, Adv.
If to the Purchasers:
At their respective addresses set forth
on Exhibit A hereto
---------
if to the Lead Investor, with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Facsimile: (212) 872-1002
Attention: Patrick J. Dooley, Esquire
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
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Section 8.2 Fees and Expenses. The Company agrees to pay to the Lead
------------------
Investor the Transaction Expenses of the Lead Investor and its Affiliates, up to
an aggregate of $125,000. Subject to the aggregate limit in the preceding
sentence, the Company shall pay to the Lead Investor at each of the First
Closing and the Second Closing those Transaction Expenses incurred by the Lead
Investor and its Affiliates up to such time as notified to the Company by the
Lead Investor prior to each such closing. The Lead Investor may set-off such
Transaction Expenses due under this Section 8.2 against the aggregate Purchase
Price paid by the Lead Investor. Except as otherwise provided in the preceding
sentence, each party hereto will be responsible for their respective expenses
incurred in connection with the transactions contemplated by this Agreement and
the other Transaction Documents. If the Second Closing does not occur due to the
failure of the conditions set out in Section 6 to be satisfied, the Company
shall promptly pay to the Lead Investor, upon notice from the Lead Investor, any
unpaid Transaction Expenses incurred by the Lead Investor and its Affiliates in
connection with this Agreement and the Investment Agreements. The Lead Investor
shall, upon the request of the Company, provide the Company with a statement of
the Transaction Expenses incurred by the Lead Investor and its Affiliates.
Section 8.3 BVR Technologies, Ltd. Management Fee. The Company shall pay to BVR
--------------------------------------
Technologies, Ltd. a management fee of $50,000 in consideration for services
rendered by BVR Technologies, Ltd. to the Company in connection with the
negotiation and execution of this Agreement and the other Transaction Documents.
Section 8.4 Amendment; Waiver. No provision of this Agreement may be waived or
------------------
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom a waiver of any such provision is sought. The failure at any
time to require performance of any provision hereof shall in no way affect the
full right to require such performance at any time thereafter. The waiver by any
party to this Agreement of a breach of any provision hereof shall not be taken
or held to be a waiver of any succeeding breach of such provision or any other
provision or as a waiver of the provision itself.
Section 8.5 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the provision held to be
invalid, illegal or unenforceable.
Section 8.6 Headings. The index and article and section headings herein are for
--------
convenience only and shall not affect the construction hereof.
Section 8.7 Entire Agreement. This Agreement and the other Investment Agreements
----------------
embody the entire agreement between the parties relating to the subject matter
hereof and any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations, and
memoranda, whether written or oral, between the Company and the Purchasers, or
between or among any of their agents, representatives, parents, Subsidiaries,
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Affiliates, predecessors in interest or successors in interest, with respect to
the subject matter hereof are of no further force and effect.
Section 8.8 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and both of which together shall be
deemed to be one and the same instrument.
Section 8.9 Assignment. All covenants and agreements contained in this Agreement
----------
by or on behalf of the parties hereto shall bind, and inure to the benefit of,
the respective successors and assigns of the parties hereto. The rights and
obligations of the Company may not be assigned without the prior written consent
of the Purchasers.
Section 8.10 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the other Transaction Documents without the showing of
economic loss and without any bond or other security being required. Each of the
Company and the Purchasers (severally and not jointly) agree that monetary
damages would not be adequate compensation for any loss incurred by reason of
any breach of its obligations described in the foregoing sentence and hereby
agree to waive in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
Section 8.11 Independent Nature of Purchasers' Obligations and Rights. The
------------------------------------------------------------
obligations of each Purchaser hereunder are several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
Section 8.12 Payment Set Aside. To the extent that the Company makes a payment
-----------------
or payments to the Purchasers hereunder or pursuant to the Transaction Documents
or the Purchasers enforce or exercise their rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
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<PAGE>
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Section 8.13 Third-Party Beneficiaries. Except for Article 7 with respect to
--------------------------
indemnified parties, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein expressed or implied shall
give or be construed to give to any Person, other than the parties hereto and
such assigns, any legal or equitable rights hereunder.
Section 8.14 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 8.15 Submission to Jurisdiction; Waiver of Jury Trial. Each of the
---------------------------------------------------
Company and the Purchasers hereby submits to the exclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York State Court sitting in the City of New York for purposes of all legal
proceedings which may arise hereunder or under any other Transaction Documents.
The Company irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The Company
hereby consents to process being served in any such proceeding by the mailing of
a copy thereof by registered certified mail, postage prepaid, to its address
specified in Section 8.1 or in any other manner permitted by law. THE COMPANY
AND THE PURCHASERS (AND ANY PERSON CLAIMING THROUGH THEM OR PURSUANT TO THIS
AGREEMENT) HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OF THE PURCHASER OR THE COMPANY. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE PURCHASER'S ENTERING INTO THIS AGREEMENT. The
Company hereby irrevocably designates Nexus America (1998) Inc., as the
designee, appointee and agent of the Company to receive, for and on behalf of
the Company, service of process in such jurisdiction in any legal action or
proceeding with respect to this Agreement or any other Investment Agreement. It
is expected that a copy of such process served on such agent will be promptly
forwarded by mail to the Company at its address set forth in Section 8.1, but
the failure of the Company to receive such copy shall not affect in any way the
service of such process. The Company further irrevocably consents to the service
of process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered certified mail, postage prepaid,
to the Company at such address. Nothing herein shall affect the right of the
Purchasers to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
31
<PAGE>
Page 51 of 91 Pages
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
NEXUS TELOCATION SYSTEMS, LTD.
By:___________________________
Name:
Title:
QEG-NTS HOLDINGS LLC
By:___________________________
Name:
Title:
HAPOALIM ELECTRONICS
COMMUNICATIONS LTD.
By:_________________________
Name:
Title:
BVR TECHNOLOGIES LTD.
By:___________________________
Name:
Title:
______________________________
YARON SHEINMAN
32
<PAGE>
Page 52 of 91 Pages
THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC.
By:__________________________
Name:
Title:
EMV CTSL LLC
By:__________________________
Name:
Title:
CLAL (ISRAEL) LTD.
By:__________________________
Name:
Title:
CLAL INDUSTRIES AND INVESTMENTS LTD.
By:_________________________________
Name:
Title:
STI VENTURE FUND LTD.
By:__________________________
Name:
Title:
33
<PAGE>
Page 53 of 91 Pages
ADASHA PROJECT INITIATION
DEVELOPMENT (TA) LTD.
By:__________________________
Name:
Title:
SHREM, FUDIM, KELNER & CO. LTD.
By:____________________________
Name:
Title:
DS FOUNDERS GROUP L.P.
By:__________________________
Name:
Title:
THE CANADA ISRAEL OPPORTUNITY FUND II
By:__________________________________
Name:
Title:
THE KAHANOFF FOUNDATION
By:__________________________
Name:
Title:
34
<PAGE>
Page 54 of 91 Pages
LEADER HOLDINGS & INVESTMENTS LTD.
By:_______________________________
Name:
Title:
_____________________________
ITZHAK SHREM
_____________________________
ITAMAR PATISHI
35
Page 55 of 91 Pages
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made
---------
and entered into as of January 10, 2000, among Nexus Telocation Systems Ltd., a
corporation organized under the laws of Israel (the "Company"), and the parties
-------
who have executed this Agreement and whose names appear on Schedule I hereto
(each party listed on Schedule I hereto is sometimes individually referred to
herein as a "Purchaser" and all such parties are sometimes collectively referred
---------
to herein as the "Purchasers").
----------
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
-----------
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" has meaning set forth in Section 3(d) hereof.
------
"Affiliate" means, with respect to any Person, any other
---------
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any
------------
day which shall be a legal holiday or a day on which banking institutions in the
State of New York or Israel generally are authorized or required by law or other
government actions to close.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the Company's Ordinary Shares, nominal
------------
value NIS 0.01 per share.
"Demand Registration(s)" has the meaning set forth in Section
-----------------------
2(b) hereof.
"Dollars" or the "$" means United States Dollars, the lawful
-------
money of the United States.
<PAGE>
Page 56 of 91 Pages
"Effectiveness Date" means the earlier of (i) the fifth
-------------------
Business Day after the Company has received notice (written or oral) from the
Commission that the Commission Staff will not be reviewing the Registration
Statement or has no further comments on the Registration Statement or (ii) the
150th day following the First Closing Date; provided, however, that the Company
-------- -------
shall use its best efforts to cause the Registration Statement to be declared
effective within 90 days following the First Closing Date.
"Effectiveness Period" has the meaning set forth in Section
---------------------
2(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
"Filing Date" means as soon as practicable but in no event
------------
later than the 30th day following the First Closing Date.
"First Closing" means the First Closing as defined in the
--------------
Purchase Agreement.
"First Closing Date" means the First Closing Date as defined
--------------------
in the Purchase Agreement.
"Holder" or "Holders" means the holder or holders, as the case
------ -------
may be, from time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c)
------------------
hereof.
"Indemnifying Party" has the meaning set forth in Section 5(c)
------------------
hereof.
"Initial Registration Statement" has the meaning set forth in
-------------------------------
Section 2(a) hereof.
"Lead Investor" means QEG-NTS Holdings LLC; provided that to
------------- --------
the extent that QEG-NTS Holdings LLC transfers any Registrable Securities to any
of Quantum Emerging Growth Fund N.V. or its affiliates (such term shall include
any funds managed by Soros Fund Management LLC or any of its affiliates), then
the term "Lead Investor" shall refer to QEG-NTS Holdings LLC and/or such other
entity or entities.
"Losses" has the meaning set forth in Section 5(a) hereof.
------
"Majority Holders" means the Holders of at least fifty-one
-----------------
(51%) percent of the Registrable Securities.
"Nasdaq" means the SmallCap Market System of the Nasdaq Stock
------
Market.
"NIS" means New Israeli Shekel, the lawful money of Israel.
---
"Person" means an individual or a corporation, partnership,
------
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
2
<PAGE>
Page 57 of 91 Pages
"Per Share Market Value" means on any particular date the
------------------------
closing sale price per share of the Common Stock on such date (as reported by
Bloomberg Information Services, Inc., or any successor reporting service) on
Nasdaq or, if the Common Stock is not then quoted on Nasdaq, any Subsequent
Market on which the Common Stock is then listed.
"Proceeding" means an action, claim, suit, investigation or
----------
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
----------
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the shares of Common Stock
-----------------------
issued to the Purchasers upon the consummation of the First Closing pursuant to
the Purchase Agreement, (ii) the shares of Common Stock issuable to the
Purchasers upon the consummation of the Second Closing pursuant to the Purchase
Agreement, (iii) any shares of Common Stock issued to the Purchasers upon
exercise of their preemptive rights (the "Preemptive Rights") as provided in the
-----------------
Purchase Agreement and (iv) any shares of the Company's capital stock issued to
the Purchasers with respect to (i), (ii) or (iii) as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise.
"Registration Delay Payment" has the meaning set forth in
----------------------------
Section 2(d) hereof.
"Registration Statement" means the Initial Registration
------------------------
Statement and any additional registration statements contemplated by Sections
2(b) and 6(d) hereof, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
---------
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
---------
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
3
<PAGE>
Page 58 of 91 Pages
"Rule 415" means Rule 415 promulgated by the Commission
---------
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Second Closing" shall mean the Second Closing as defined in
---------------
the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Subsequent Market" means the National Market System of the
------------------
Nasdaq Stock Market, the American Stock Exchange or the New York Stock Exchange.
"Trading Day" means a day on which the Nasdaq (or in the event
-----------
the Common Stock is not traded on Nasdaq, such other Subsequent Market on which
the Common Stock is listed) is open for trading.
"Underwritten Offering" means a registration in connection
----------------------
with which securities of the Company are sold to an underwriter for reoffering
to the public pursuant to an effective registration statement.
2. Registration Requirements
-------------------------
(a) Filing and Effectiveness Obligations. On or prior to the
-------------------------------------
Filing Date, the Company shall prepare and file with the Commission a
Registration Statement (the "Initial Registration Statement") which shall cover
-------------------------------
all Registrable Securities for an offering to be made on a continuous basis
pursuant to a "Shelf" registration statement under Rule 415. The Initial
Registration Statement shall be on Form F-3 or any successor form (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form F-3, in which case such registration shall be on another appropriate
form in accordance herewith, subject to the reasonable consent of the Lead
Investor, provided that the Lead Investor owns Registrable Securities at such
time). The Company shall use its best efforts to cause the Initial Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event on or prior to the
Effectiveness Date, and to keep such Initial Registration Statement continuously
effective under the Securities Act, until the date when all Registrable
Securities covered by such Initial Registration Statement have been sold or may
be sold without volume restrictions pursuant to Rule 144, as determined by
counsel to the Company pursuant to a written opinion letter addressed to the
Holders and the Company's transfer agent to such effect (the "Effectiveness
-------------
Period").
- ------
(b) Demand Registration. At any time when an Initial
---------------------
Registration Statement covering the Registrable Securities is not effective
(during any period in which an Initial Registration Statement is otherwise
required to be effective pursuant to Section 2(a)), the Majority Holders may
request in writing that the Company effect a registration under the Securities
Act for all or part of the Registrable Securities for sale in the manner
specified in such request, and on a form that may be used for the registration
of such Registrable Securities. All registrations requested pursuant to the
foregoing are referred to herein as "Demand Registrations." A Demand
----------------------
Registration may be effected on no more than two (2) occasions. Within ten days
4
<PAGE>
Page 59 of 91 Pages
after receipt of any request pursuant to this Section 2(b), the Company will
give written notice of such request to all other Holders of Registrable
Securities, and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within fifteen (15) Business Days after the receipt of the Company's
notice; provided, however, that the Company shall not be required to register
-------- -------
any Registrable Securities pursuant to this Section 2(b) that are eligible for
sale pursuant to Rule 144 without regard to volume restrictions. If requested by
the Majority Holders, a Demand Registration shall be in the form of an
Underwritten Offering. In such event, and if the managing underwriters advise
the Company and such Holders in writing that in their opinion the amount of
Registrable Securities and other securities, if any, proposed to be sold in such
Underwritten Offering exceeds the amount of Registrable Securities and other
securities, if any, which can be sold in such Underwritten Offering, and based
on such determination recommends inclusion in such registration statement of
fewer Registrable Securities than proposed to be sold by the Holders, then (a)
the number of Registrable Securities of the Holders included in such
registration statement shall be reduced pro rata among such Holders (based upon
the number of Registrable Securities requested to be included in the
registration) or (b) none of the Registrable Securities of the Holders shall be
included in such registration statement if the Company, after consultation with
the underwriter(s), recommends the inclusion of none of such Registrable
Securities; provided, however, that if securities are being offered for the
-------- -------
account of other persons or entities (including the Company), such reduction
shall not represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar reductions
imposed on such other persons or entities (including the Company).
(c) Underwriter. If a Demand Registration is an Underwritten
-----------
Offering, the Holders of a majority of the Registrable Securities to be included
in such offering shall designate the lead underwriter, who shall be acceptable
to the Company (such approval not to be unreasonably withheld) and the Company
may designate one or more co-managing underwriters. No Holder may participate in
any Underwritten Offering hereunder unless such Holder (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
entered into in connection therewith and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such agreements.
(d) Penalties. If (i) the Initial Registration Statement
---------
covering all the applicable Registrable Securities and required to be filed by
the Company pursuant to this Agreement is not declared effective by the
Commission on or before the Effectiveness Date or (ii) on any day after the
Registration Statement has been declared effective by the Commission sales of
all the Registrable Securities required to be included on a Registration
Statement cannot be made pursuant to the Registration Statement (including,
without limitation, because of a failure to keep the Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to the Initial Registration Statement, or to register sufficient shares
of Common Stock, but excluding any periods when such sales cannot be made solely
by reason of any act or omission attributable to the Purchasers), then, as
partial relief for the damages to any Holder by reason of any such delay in or
reduction of its ability to sell the Registrable Securities (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each Holder an amount in cash (a "Registration Delay
-------------------
5
<PAGE>
Page 60 of 91 Pages
Payment") equal to the difference between (A) the product of (1) the number
- -------
shares of Registrable Securities such Holder attempts to sell and (2) the Per
Share Market Value on the last trading date immediately prior to such sale, and
(B) the purchase price received by the Holder in a bona fide transaction wherein
it has used commercially reasonable efforts to obtain the highest price possible
with respect to the sale of such shares of Common Stock; provided, however, that
-------- -------
nothing contained herein shall require the Holders to effect a Demand
Registration. Notwithstanding the foregoing, if sales cannot be made pursuant to
a Registration Statement for reasons other than the Company's negligence or
failure to act, prior to the imposition of any Registration Delay Payment the
Company shall have five (5) Business Days (beginning on the first day when sales
cannot be made pursuant to such Registration Statement) to cure such condition
so that sales of all Registrable Securities required to be included on a
Registration Statement can be made pursuant to such Registration Statement.
3. Registration Procedures
-----------------------
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Preparation of Registration Statement. Prepare and file
--------------------------------------
with the Commission on or prior to the Filing Date a Registration Statement on
Form F-3 or its successor form (or if the Company is not then eligible to
register for resale the Registrable Securities on Form F-3 such registration
shall be on another appropriate form in accordance herewith (which shall include
a Plan of Distribution substantially in the form of Exhibit A annexed hereto,
---------
unless in connection with an Underwritten Offering) or, in connection with an
Underwritten Offering hereunder, such other form agreed to by the Company and a
majority of the Registrable Securities to be covered by such Registration
Statement), and cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than three (3)
-------- -------
Business Days prior to the filing of the Registration Statement or any related
Prospectus or any amendment or supplement thereto (including any document that
would be incorporated therein by reference), the Company shall, if reasonably
practicable (i) furnish to the Holders and any managing underwriter copies of
all such documents proposed to be filed (including documents incorporated by
reference), which documents will be subject to the review of such Holders and
any managing underwriter, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders
and such underwriters, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file the Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the Lead
Investor or any managing underwriter shall reasonably object, and will not
request acceleration of such Registration Statement without prior notice to such
counsel. The sections of such Registration Statement covering information with
respect to the Holders, the Holder's beneficial ownership of securities of the
Company or the Holders intended method of disposition of Registrable Securities
shall conform to the information provided to the Company by each of the Holders.
(b) Amendments. (i) Prepare and file with the Commission such
----------
amendments, including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously effective
6
<PAGE>
Page 61 of 91 Pages
for the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements as are required to be filed hereunder in
order to register for resale under the Securities Act all of the Registrable
Securities, (ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act, (iii) respond as promptly as possible to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and as promptly as practicable, but in no event later than
five (5) Business Days, (iv) provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement, and (v) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented. In the event the number of shares available under
a Registration Statement filed pursuant to this Agreement becomes insufficient
to cover the Registrable Securities, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefore, if applicable), or both, so as to cover such Registrable Securities,
in each case as soon as practicable, but in any event within twenty (20)
Business Days after the necessity therefor arises. The Company shall use its
best efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof, but in no event
later than ninety (90) days after the date on which the Company reasonably first
determines (or reasonably should have determined) the need therefor. The
provisions of Section 2(d) shall be applicable with respect to such obligation.
(c) Notifications. Notify the Holders of Registrable
-------------
Securities to be sold, and any managing underwriter, as promptly as possible
(and, in the case of (i)(a) below, not less than five (5) days prior to such
filing and, in the case of (i)(c) below, not later than the first Business Day
after effectiveness) and (if requested by any such Person) confirm such notice
in writing no later than one (1) Business Day following the day (i) (a) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed, (b) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(c) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective, (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information, (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose, (iv) any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose, and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
7
<PAGE>
Page 62 of 91 Pages
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (other than with respect to the filing of requisite Forms
6-K and 20-F, which shall be incorporated by reference in the Prospectus).
(d) Advice. Each Holder agrees by its acquisition of such
------
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii),
3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement, or until it is advised in writing (the "Advice")
------
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Holder has entered into a contract for sale prior to the Holder's receipt of a
notice from the Company of the happening of any event of the kind described in
Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) and for which the
Holder has not yet settled.
(e) Supplements and Post-Effective Amendments. Upon the
--------------------------------------------
occurrence of any event contemplated by Section 3(c)(vi), as promptly as
possible prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) Copies of Registration Statement. Furnish to each Holder
---------------------------------
and any managing underwriter, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Holder or such managing underwriter (including those previously furnished
or incorporated by reference) promptly after the filing of such documents with
the Commission.
(g) Copies of Prospectus. Promptly deliver to each Holder and
--------------------
any managing underwriter, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Holder or such managing underwriter may reasonably
request, and the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders and any
8
<PAGE>
Page 63 of 91 Pages
underwriters in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.
(h) Blue Sky. Prior to any public offering of Registrable
--------
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders and any underwriters in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
-------- -------
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Certificates. Cooperate with the Holders and any managing
------------
underwriter to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by
applicable law and the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered in
such names as any Holder or managing underwriter may request.
(j) Listing. (i) Cause all Registrable Securities relating to
-------
such Registration Statement to be authorized for quotation on Nasdaq as soon as
practicable after the Closing; (ii) maintain such listing of all such
Registrable Securities on Nasdaq; (iii) provide the Holders evidence of such
listing; (iv) refrain from taking any action which may result in the delisting
or suspension of the Common Stock on Nasdaq; and (v) pay all fees and expenses
in connection with satisfying its obligations hereunder.
(k) Underwriting Agreement. Enter into such agreements
------------------------
(including an underwriting agreement in form, scope and substance as is
customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriter and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such underwriters
as are customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested, (ii) in the case of an
Underwritten Offering, obtain and deliver copies thereof to the managing
underwriters, if any, or in the case of non-Underwritten Offerings, if
reasonably requested by the selling Holders (and at the expense of such selling
Holders), obtain and deliver copies thereof to such selling Holders, of opinions
of counsel to the Company and updates thereof addressed to each such
underwriter, in form, scope and substance reasonably satisfactory to any such
managing underwriters and counsel to the selling Holders covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by such counsel and such
9
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underwriters, (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, and, in the case of
non-Underwritten Offerings, at such time as the selling Holders may reasonably
request (and at the expense of such selling Holders), obtain and deliver copies
to the Holders and the managing underwriters, if any, of "cold comfort" letters
and updates thereof from the independent certified public accountants of the
Company (and, if required, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be, included
in the Registration Statement), addressed to each of the underwriters, if any,
in form and substance as are customary in connection with Underwritten
Offerings, (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in Section 5
(or such other provisions and procedures acceptable to the managing
underwriters, if any, and Holders of a majority of Registrable Securities
participating in such Underwritten Offering and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their counsel and any managing underwriters
to evidence the continued validity of the representations and warranties made
pursuant to clause 3(k)(i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company.
(l) Due Diligence. Make available for inspection by the
--------------
selling Holders, any representative of such Holders, any underwriter
participating in any disposition of Registrable Securities, and any attorney or
accountant retained by such selling Holders or underwriters, at the offices
where normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case reasonably
requested by any such Holder, representative, underwriter, attorney or
accountant in connection with the Registration Statement; provided, however,
that if any information is determined in good faith by the Company (in writing)
to be of a confidential nature at the time of delivery of such information, then
prior to delivery of such information, the Company and the Holders shall enter
into a confidentiality agreement reasonably acceptable to the Company and the
Holders providing that such information shall be kept confidential, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities (provided,
however, that the Company shall be given notice of any such pending disclosure
so that the Company may seek a protective order), (ii) disclosure of such
information, in the opinion of counsel to such Person, is required by law, (iii)
such information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard by such Person or (iv) such
information becomes available to such Person from a source other than the
Company and such source is not known by such Person to be bound by a
confidentiality agreement with the Company.
(m) Earnings Statement. Comply in all material respects with
-------------------
all applicable rules and regulations of the Commission and make generally
available to its securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158.
10
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(n) Information. The Company may require each selling Holder
-----------
to furnish to the Company information regarding such Holder and the distribution
of such Registrable Securities as is required by law to be disclosed in the
Registration Statement, and the Company may exclude from such registration the
Registrable Securities of any such Holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request, and such
shall not form the basis for penalties pursuant to Section 2(d) hereof.
The Company shall hold in confidence and not make any
disclosure of information concerning a Holder provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction (provided, however,
that the Holder shall be given notice of any such pending disclosure so that the
Holder may seek a protective order), or (iv) such information has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning a Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Holder prior to making such disclosure, and allow the Holder, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
(o) Suspensions. Use its best efforts to avoid the issuance
-----------
of, or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(p) Responses to the Commission. The Company agrees to respond
---------------------------
fully and completely to any and all comments on a Registration Statement
received from the Commission staff as promptly as reasonably possible, but in no
event later than fifteen (15) Business Days of the receipt of such comments,
regardless of whether such comments are in oral or written form.
(q) Confirmation of Effectiveness. Within two (2) Business
-------------------------------
Days after a Registration Statement which covers applicable Registrable
Securities is ordered effective by the Commission, the Company shall deliver,
and shall cause legal counsel for the Company to deliver, to the transfer agent
for such Registrable Securities (with copies to the Holders whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the Commission in the form
attached hereto as Exhibit B.
11
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4. Registration Expenses.
---------------------
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company,
whether or not pursuant to an Underwritten Offering and whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement; provided
that the Company shall not be responsible for fees and commissions of any
underwriters used by the Holders in connection with the Initial Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, reasonable fees and expenses (A) with respect to filings
required to be made with Nasdaq and each other securities exchange or market on
which Registrable Securities are required hereunder to be quoted and (B) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriter, if any, or the Holders of a majority
of Registrable Securities being sold may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing Pospectuses), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company
and the Holders, (v) Securities Act liability insurance, if the Company so
desires such insurance and (vi) reasonable fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, and the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. Indemnification
---------------
(a) Indemnification by the Company. The Company shall,
---------------------------------
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all joint or several losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, "Losses"), as incurred, arising out of or
relating to (i) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
12
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prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon and in conformity with information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, which information was reasonably relied on by the
Company for use therein or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
prospectus or in any amendment or supplement thereto (provided that the Company
amended any disclosure with respect to the method of distribution upon written
notice from the Holders that such section of the Prospectus should be revised in
any way) or (ii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any other law, including, without limitation,
any state securities law, or any rule or regulation thereunder relating to the
offer or sale of Registrable Securities. The Company shall not, however, be
liable for any Losses to any Holder with respect to any untrue or alleged untrue
statement of material fact or omission or alleged omission of material fact if
such statement or omission was made in a preliminary Prospectus and such Holder
did not receive a copy of the final Prospectus (or any amendment or supplement
thereto) at or prior to the confirmation of the sale of the Registrable
Securities in any case where such delivery is required by the Securities Act and
the untrue or alleged untrue statement of material fact or omission or alleged
omission of material fact contained in such preliminary Prospectus was corrected
in the final Prospectus (or any amendment or supplement thereto), unless the
failure to deliver such final Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 3(g) of this Agreement. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
--------------------------
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
in writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus; provided, however, that the indemnity
agreement contained in this Section 5(b) shall not apply to amounts paid in
settlement of any Losses if such settlement is effected without the prior
written consent of such Holder. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
13
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received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
---------------------------------------
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
------------------
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
-------------------
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, however, that the failure of any Indemnified Party to give such notice
- -------- -------
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses, or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding, or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the reasonable
expense of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
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(d) Contribution. If a claim for indemnification under Section
------------
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a court of competent jurisdiction to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. In no event shall any selling Holder be required to
contribute an amount under this Section 5(d) in excess of the net proceeds
received by such Holder upon sale of the Registrable Securities pursuant to the
Registration Statement giving rise to such contribution obligation.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company or by a
--------
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
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(b) No Inconsistent Agreements. Neither the Company nor any of
--------------------------
its subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as disclosed in Schedule 3.4 of the Purchase Agreement, neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Majority Holders, the Company shall not grant to any Person the
right to request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subordinated in all respects to
the rights in full of the Holders set forth in Section 2 herein, and are not
otherwise in conflict or inconsistent with the provisions of this Agreement.
This Agreement, together with the Purchase Agreement, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
(c) No Piggyback on Registrations. The Company shall not after
-----------------------------
the date hereof enter into any agreement providing such right to any of its
securityholders, unless the right so granted is not in conflict or inconsistent
with the provisions of this Agreement.
(d) Piggy-Back Registrations. Except as provided herein if, at
------------------------
any time when there is not an effective Registration Statement covering the
Registrable Securities, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form F-4 (as promulgated under the Securities Act) or
its then equivalent relating to equity securities to be issued solely in
connection with any acquisition of any entity or business, the Company shall
send to each Holder of Registrable Securities written notice of such
determination within two (2) Business Days thereof and, if within ten (10) days
after receipt of such notice, any such Holder shall so request in writing,
(which request shall specify the Registrable Securities intended to be disposed
of by the Holders), the Company will use reasonable efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holder, to the extent requisite
to permit the disposition of the Registrable Securities so to be registered;
provided, that if at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 6(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that the
-------- -------
Company shall not be required to register any Registrable Securities pursuant to
this Section 6(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
16
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underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the underwriter's representative should reasonably
determine that the inclusion of such Registrable Securities would materially
adversely affect the offering contemplated in such registration statement, and
based on such determination recommends inclusion in such registration statement
of fewer Registrable Securities then proposed to be sold by the Holders, then
(x) the number of Registrable Securities of the Holders included in such
registration statement shall be reduced pro rata among such Holders (based upon
the number of Registrable Securities requested to be included in the
registration) or (y) none of the Registrable Securities of the Holders shall be
included in such registration statement if the Company, after consultation with
the underwriter(s), recommends the inclusion of none of such Registrable
Securities; provided, however, that if securities are being offered for the
-------- -------
account of other persons or entities as well as the Company, such reduction
shall not represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar reductions
imposed on such other persons or entities (other than the Company).
Notwithstanding the foregoing, the Company shall not file any registration
statement under the Securities Act (other than on Form F-4) relating to the
offer and sale of any equity securities of the Company, or offer or sell any
equity securities of the Company in a transaction exempt from registration
pursuant to Regulation S under the Securities Act, from the date of this
Agreement until such time as the Initial Registration Statement has been
effective for a period of sixty (60) Trading Days, which period shall be tolled
if the effectiveness of the Initial Registration Statement is suspended for any
reason whatsoever.
(e) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Majority Holders; provided, however, that for the purposes of this
-------- -------
sentence, Registrable Securities that are owned, directly or indirectly, by the
Company, or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by the Majority Holders to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence. Any amendment or waiver effected in
accordance with this Section shall be binding upon each Holder, each future
Holder, and the Company. Upon effectiveness of each such amendment or waiver,
the Company shall promptly give written notice thereof to the Holders who have
not previously consented thereto in writing.
(f) Notices. Any notice or other communication required or permitted to
-------
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 5:00 p.m. New
York City time where such notice is to be received), or the first Business Day
following such delivery (if received after 5:00 p.m. New York City time where
such notice is to be received) or (b) on the second Business Day following the
17
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date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications are (i) if to the Company to 6B Tfutzot
Israel Street Givatayim 53583, Israel, Attn: Ariel Poppel, fax no. (011)
972-3-571-9698, with copies to Yigal Arnon & Co., 3 Daniel Frisch Street, Tel
Aviv, Israel, 64731, Attn: Orly Tsioni, Advocate, fax no. 011-972-3-608-7777 and
to Carter Ledyard & Milburn, 2 Wall Street, New York, New York 10005, Attn:
Steven Glusband, Esq., fax no. 732-3232and (ii) if to any Purchaser to the
address set forth on Schedule I hereto with copies to those specified on the
signature pages hereto and to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590
Madison Avenue, New York, New York 10022, Attn: Patrick Dooley, Esq., fax no.
(212) 872-1002 or such other address as may be designated in writing hereafter,
in the same manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign its rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement. In addition, the rights
of each Holder hereunder, including the right to have the Company register for
resale Registrable Securities in accordance with the terms of this Agreement,
shall be automatically assignable by each Holder if: (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, and (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement. The rights to assignment shall apply to the Holders'(and to
subsequent) successors and assigns.
(h) Notice of Request for Registration. The Company shall
------------------------------------
provide the Holders with written notice of any request made by any Person that
the Company effect a registration under the Securities Act with respect to any
shares of the Company's equity securities. Such notice shall be delivered to the
Holders pursuant to Section 6(f) hereof as promptly as possible, but in no event
later than two (2) Business Days of receipt thereof.
(i) Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing Law. All questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement shall be governed by
18
<PAGE>
Page 73 of 91 Pages
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUIRE, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OR THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREUNDER.
(k) Cumulative Remedies. The remedies provided herein are
--------------------
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever
-----------------------------------------------
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its directly controlled Affiliates shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
19
<PAGE>
Page 74 of 91 Pages
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
NEXUS TELOCATION SYSTEMS LTD.
By:__________________________
Name:
Title:
QEG-NTS HOLDINGS LLC
By:__________________________
Name:
Title:
HAPOALIM ELECTRONICS
COMMUNICATIONS LTD.
By:__________________________
Name:
Title:
BVR TECHNOLOGIES LTD.
By:__________________________
Name:
Title:
_____________________________
YARON SHEINMAN
<PAGE>
Page 75 of 91 Pages
THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC.
By:__________________________
Name:
Title:
EMV CTSL LLC
By:__________________________
Name:
Title:
CLAL (ISRAEL) LTD.
By:__________________________
Name:
Title:
CLAL INDUSTRIES AND INVESTMENTS LTD.
By:________________________________
Name:
Title:
GLADCOVE INTERNATIONAL LTD.
By:__________________________
Name:
Title:
<PAGE>
Page 76 of 91 Pages
ADASHA PROJECT INITIATION
DEVELOPMENT (TA) LTD.
By:__________________________
Name:
Title:
SHREM, FUDIM, KELNER & CO. LTD.
By:____________________________
Name:
Title:
DS FOUNDERS GROUP L.P.
By:__________________________
Name:
Title:
THE CANADA ISRAEL OPPORTUNITY FUND II
By:__________________________________
Name:
Title:
THE KAHANOFF FOUNDATION
By:__________________________
Name:
Title:
<PAGE>
Page 77 of 91 Pages
LEADER HOLDINGS & INVESTMENTS LTD.
By:_______________________________
Name:
Title:
_____________________________
ITZHAK SHREM
_____________________________
ITAMAR PATISHI
<PAGE>
Page 78 of 91 Pages
SCHEDULE I
Purchasers:1
QEG-NTS Holdings LLC
Hapoalim Electronic Communications Ltd.
BVR Technologies Ltd.
The Emerging Markets
Telecommunications Fund, Inc.
EMV CTSL LLC
Gladcove International Ltd.
Clal Industries and Investment Ltd.
Clal (Israel) Ltd.
Yaron Sheinman
Adasha Project
Initiation Development(TA) Ltd.
Leader Holdings & Investments Ltd.
Shrem, Fudim, Kelner & Co. Ltd.
Itzhak Shrem
Itamar Patishi
DS Founders Group L.P.
The Canada Israel Opportunity Fund II
The Kahanoff Foundation
________________________
1 The address each of the Purchasers shall be that address set forth next to
such Purchaser's name on Part I to Exhibit A of the Securities Purchase
Agreement
<PAGE>
Page 79 of 91 Pages
EXHIBIT A
PLAN OF DISTRIBUTION
Our company is registering the shares of common stock on
behalf of the selling stockholders. All costs, expenses and fees in connection
with the registration of the shares offered by this prospectus will be borne by
the Company, other than brokerage commissions and similar selling expenses, if
any, attributable to the sale of shares which will be borne by the selling
stockholders. Sales of shares may be effected by selling stockholders from time
to time in one or more types of transactions (which may include block
transactions) on the SmallCap Market System of the Nasdaq Stock Market, in the
over-the-counter market, in negotiated transactions, through put or call options
transactions relating to the shares, through short sales of shares, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. Such transactions may or may not involve brokers
or dealers. The selling stockholders have advised our company that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor is
there an underwriter or coordinated broker acting in connection with the
proposed sale of shares by the selling stockholders.
The selling stockholders may enter into hedging transactions
with broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in short
sales of the shares or of securities convertible into or exchangeable for the
shares in the course of hedging positions they assume with selling stockholders.
The selling stockholders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealers or other financial institutions of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as amended or supplemented to reflect such
transaction).
The selling stockholders may make these transactions by
selling shares directly to purchasers or to or through broker-dealers, which may
act as agents or principals. Such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from selling stockholders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in
connection with the sale of shares are "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The selling stockholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
<PAGE>
Page 80 of 91 Pages
Because selling stockholders are "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act. Our
company has informed the selling stockholders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to their
sales in the market.
Selling stockholders also may resell all or a portion of the
shares in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of Rule 144.
Upon our company being notified by a selling stockholder that
any material arrangement has been entered into with a broker-dealer for the sale
of shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
o the name of each such selling stockholder and of the
participating broker-dealer(s);
o the number of shares involved;
o the initial price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any
investigation to verify the information set out or
incorporated by reference in this prospectus; and
o other facts material to the transactions.
<PAGE>
Page 81 of 91 Pages
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: NEXUS TELOCATION SYSTEMS LTD.
Ladies and Gentlemen:
We are counsel to Nexus Telocation Systems Ltd., a corporation
organized under the laws of Israel (the "Company"), and have represented the
Company in connection with that certain Securities Purchase Agreement (the
"Purchase Agreement") entered into by and among the Company and the buyers named
therein (collectively, the "Holders") pursuant to which the Company issued to
the Holders shares of the Company's common stock, par value NIS 0.01 per share.
Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Registration Rights
Agreement, on _______________, 1999, the Company filed a Registration Statement
on Form F-3 (File No. _____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
cc: [LIST NAMES OF HOLDERS]
Page 82 of 91 Pages
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made as of January
---------
10, 2000, by and among NEXUS TELOCATION SYSTEMS LTD., a company organized under
the laws of Israel (the "Company"), CLAL Industries and Investments Ltd. ("CII")
------- ---
and CLAL (Israel) Ltd.("CLAL Israel" and together with CII "CLAL"), BVR
------------ ----
Technologies, Ltd. ("BVR") and those persons whose names are set forth on
---
Schedule I hereto (the "Purchasers" and together with CLAL and BVR, the
----------
"Shareholders").
------------
WHEREAS, the Company and the Purchasers, have entered into that certain
Securities Purchase Agreement dated as of the date hereof (the "Securities
----------
Purchase Agreement"), providing, among other things, for the purchase by the
- -------------------
Purchasers of newly issued ordinary shares, nominal value NIS 0.01 per share, of
the Company ("Ordinary Shares");
---------------
WHEREAS, BVR currently owns 4,849,201 Ordinary Shares;
WHEREAS, (i) CII currently owns 1,203,500 Ordinary Shares and (ii) CLAL
Israel currently owns 653,600 Ordinary Shares;
WHEREAS, each of BVR, CLAL Israel and CII is also a Purchaser of
Ordinary Shares under the Securities Purchase Agreement; and
WHEREAS, this is the Shareholders' Agreement referred to in the
Securities Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company and the Shareholders agree as follows:
1. Election of Director. The parties hereto agree that at all times until the
--------------------
earlier to occur of (i) QEG-NTS Holdings LLC (subject to Section 12 hereof, the
"Lead Investor") holds less than (A) 2,000,000 shares of the Ordinary Shares
--------------
purchased under the Securities Purchase Agreement if the Second Closing under
the Securities Purchase Agreement shall not have occurred or (B) 3,500,000
shares of the Ordinary Shares purchased under the Securities Purchase Agreement
if the Second Closing under the Securities Purchase Agreement shall have
occurred; or (ii) the Purchasers, in the aggregate, hold less than 10% of the
outstanding Ordinary Share capital of the Company, the provisions set forth in
this Section 1 shall be in effect.
(a) The Lead Investor shall be entitled to designate one (1) member
(the "Purchaser Nominee") of the Board of Directors of the Company (the "Board
------------------ -----
of Directors") and to have such Purchaser Nominee appointed to any and all
- -------------
committees of the Board of Directors, immediately after the closing of the
initial issuance of the Ordinary Shares under the Securities Purchase Agreement
and thereafter at each ordinary general meeting (or extraordinary general
meeting, as the case may be) of the Company.
<PAGE>
Page 83 of 91 Pages
(b) The Company shall take all necessary measures within its power to
cause the Purchaser Nominee to be appointed to the Board of Directors. The
Company shall take all necessary measures within its power to permit and allow
such Purchaser Nominee to serve on the Board of Directors of the Company as the
Lead Investor requests, to attend meetings in person or by telephone and to
exercise all other rights contemplated by this Agreement.
(c) Pursuant to its obligations under Section 1(b) and as soon as
practicable, but in no event later than March 15, 2000, the Company shall take
all necessary measures within its powers to cause an extraordinary general
meeting of the shareholders of the Company to take place in order to approve the
amendment of the Company's Articles of Association to provide specifically for
the Lead Investor's right to appoint the Purchaser Nominee to the Board of
Directors of the Company as contemplated in this Shareholders' Agreement (the
"Articles Amendment"). The Articles Amendment must be in a form reasonably
-------------------
satisfactory to the Lead Investor.
(d) The Shareholders agree that they will vote, or cause to be voted,
all Ordinary Shares owned by them to approve the Articles Amendment.
(e) Until such time as the Articles Amendment has become effective (or
if the Articles Amendment has ceased to be effective), the Shareholders agree
that they will vote, or cause to be voted, all Ordinary Shares owned by them to
elect, and will otherwise support the election of, the Purchaser Nominee as a
director, including, without limitation voting to demand an extraordinary
general meeting to elect the Purchaser Nominee to the Board of Directors, if
requested by the Lead Investor.
(f) The Shareholders agree that they will not vote, or cause to be
voted, any Ordinary Shares owned by them to (i) dismiss or discharge the
Purchaser Nominee as a director or (ii) amend the Articles of Association of the
Company to remove or in any way limit the Lead Investor's right to appoint the
Purchaser Nominee as provided in the Articles Amendment, unless, in each case,
as otherwise requested by the Lead Investor.
(g) Until such time as the Articles Amendment has become effective
providing the Lead Investor directly with the right to fill a vacancy left by
the Purchaser Nominee (or if the Articles Amendment has ceased to be effective),
in the event that the Purchaser Nominee vacates his seat on the Board of
Directors, whether by resignation, death, removal or otherwise, the Shareholders
agree to vote, or cause to be voted, all Ordinary Shares owned by them to elect,
and will otherwise support the election of, the person designated by the Lead
Investor to fill any such vacancy.
2. Major Decisions. The Shareholders agree that at all times until the earlier
---------------
to occur of (i) the Lead Investor holds less than (A) 2,000,000 shares of the
Ordinary Shares purchased under the Securities Purchase Agreement if the Second
Closing under the Securities Purchase Agreement shall not have occurred or (B)
3,500,000 shares of the Ordinary Shares purchased under the Securities Purchase
Agreement if the Second Closing under the Securities Purchase Agreement shall
have occurred; or (ii) the Purchasers, in the aggregate, hold less than 15% of
the outstanding Ordinary Share capital of the Company, without the prior written
2
<PAGE>
Page 84 of 91 Pages
consent of the Lead Investor, the Shareholders shall not vote, or cause to be
voted, any Ordinary Shares owned by them to permit or direct the Company to:
(a) enter into any merger or consolidation with or into any other
entity or the sale, lease or other disposition of any material asset to any
other entity;
(b) invest in research and/or development an amount in excess of $4
million in any twelve (12) month period from the date of this Agreement until
the third anniversary of the date of this Agreement;
(c) make capital expenditures (including the acquisition of assets
outside the ordinary course of business) in an amount in excess of $3 million in
any twelve (12) month period from the date of this Agreement until the third
anniversary of the date of this Agreement;
(d) have outstanding at any time indebtedness for borrowed money
(excluding convertible securities currently owned by BVR) in excess of $10
million; or
(e) authorize the issuance of Ordinary Shares or options to purchase
Ordinary Shares issuable to employees, consultants or directors of the Company
pursuant to a plan approved by the Board of Directors of the Company which at
any time (after taking into account all Ordinary Shares and options then issued
under all other such plans) exceeds 15% of the fully diluted Ordinary Share
Capital of the Company.
3. Notices. Any notice, request or other communication required or permitted
-------
hereunder will be in writing and will be deemed to have been duly given (a) when
received if delivered by facsimile transmission or in person, (b) on the fifth
day after being sent by registered or certified mail, return receipt requested,
postage prepaid, or (c) on the next business day after being sent by priority
delivery by an established overnight courier, to the parties at their respective
addresses set forth below:
To the Company: Nexus Telocation Systems Limited
6B Tfutzot Israel Street
Givatayim 53583, Israel
Attention: Ariel Poppel
Facsimile: (011) 972-3-571-9698
To the Purchasers: At the addresses forth next to such Purchaser's
name on Part I to Exhibit A of the Securities Purchase Agreement.
To CLAL: Clal Atidim Tower, Bldg. No. 4
P.O. Box 58177
Tel-Aviv 61581, Israel
Attention: Ken Lalo, Adv.
Facsimile: (011) 972-3-765-0360
3
<PAGE>
Page 85 of 91 Pages
To BVR: 1 Korazin Street
Givatayim, Israel
Attention: Yahel Shachar
Facsimile: (011) 972-3-903-8007
4. Specific Performance. The rights of the parties under this Agreement are
---------------------
unique and, accordingly, the parties shall, in addition to such other remedies
as may be available to any of them at law or in equity, have the right to
enforce their rights hereunder by actions for specific performance to the extent
permitted by law.
5. Entire Agreement. This Agreement and (A) with respect to the Company and the
----------------
Purchasers, the Securities Purchase Agreement (including any and all exhibits,
schedules and other instruments contemplated thereby) and (B) with respect to
CLAL and BVR, the Shareholders Agreement, dated April 13, 1998 between CLAL and
BVR, constitute the entire agreements among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
between them or any of them as to such subject matter.
6. Amendment and Waiver. No provision of this Agreement may be waived or amended
--------------------
except in a written instrument signed, in the case of an amendment, by the
Company, CLAL, BVR and the Lead Investor or, in the case of a waiver, by the
party against whom a waiver of any such provision is sought. The failure at any
time to require performance of any provision hereof shall in no way affect the
full right to require such performance at any time thereafter. The waiver by any
party to this Agreement of a breach of any provision hereof shall not be taken
or held to be a waiver of any succeeding breach of such provision or any other
provision or as a waiver of the provision itself.
7. Assignment; Successors and Assigns. This Agreement shall be binding upon and
-----------------------------------
shall inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and permitted transferees. This
Agreement may not be assigned by any party without the prior written consent of
the other parties hereto; provided, that the rights of the Lead Investor under
--------
Section 1 hereof may be assigned by the Lead Investor to a transferee (a
"Transferee") to which the Lead Investor transfers not less than (A) 2,000,000
----------
shares of the Ordinary Shares purchased under the Securities Purchase Agreement
if the Second Closing under the Securities Purchase Agreement shall not have
occurred or (B) 3,500,000 shares of the Ordinary Shares purchased under the
Securities Purchase Agreement if the Second Closing under the Securities
Purchase Agreement shall have occurred; provided, that such assignment may not
--------
be made without the consent of the Company, which consent shall not be
unreasonably withheld; and provided, further, that the Transferee shall continue
-----------------
to hold such right as long as (x) it holds more than (A) 2,000,000 shares of the
Ordinary Shares transferred to it by the Lead Investor if the Second Closing
under the Securities Purchase Agreement shall not have occurred, or (B)
3,500,000 shares of the Ordinary Shares transferred to it by the Lead Investor
if the Second Closing under the Securities Purchase Agreement shall have
occurred; or (y) the Purchasers (including the Transferee), in the aggregate,
hold 10% or more of the outstanding Ordinary Share capital of the Company.
4
<PAGE>
Page 86 of 91 Pages
8. Severability. In case any one or more of the provisions contained in this
------------
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement and such invalid, illegal and
unenforceable provision shall be reformed and construed so that it will be
valid, legal, and enforceable to the maximum extent permitted by law.
9. Counterparts. This Agreement may be executed in two or more counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10. Section Headings. The headings contained in this Agreement are for reference
----------------
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
11. Governing Law. The corporate laws of Israel shall govern all issues
--------------
concerning the relative rights of the Company and the Shareholders as its
shareholders and between the Shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, without regard to principles of conflicts of law. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consent to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
12. Definition of Lead Investor. For purposes of this Agreement, "Lead Investor
---------------------------
means QEG-NTS Holdings LLC; provided that to the extent that QEG-NTS Holdings
--------
LLC transfers any of the Ordinary Shares purchased by it under the Securities
Purchase Agreement to any of Quantum Emerging Growth Fund, N.V. or its
affiliates (such term shall include any funds managed by Soros Fund Management
LLC or any of its affiliates), then the term "Lead Investor" shall collectively
refer to QEG-NTS Holdings LLC and such other entities.
13. Transfers to Affiliates. If any of the Shareholders directly transfers any
-----------------------
Ordinary Shares owned by it to one of more of its Affiliates, then such
Shareholder, upon such transfer, shall cause such Affiliate or Affiliates to
agree to be bound by the provisions of this Agreement. For purposes of this
Section 13, an "Affiliate" of any Shareholder means any person which, directly
---------
or indirectly, is in control of, is controlled by or is under common control
with such specified Shareholder.
5
<PAGE>
Page 87 of 91 Pages
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
COMPANY:
NEXUS TELOCATION SYSTEMS LTD.
By:__________________________
Name:
Title:
SHAREHOLDERS:
QEG-NTS HOLDINGS LLC
By:__________________________
Name:
Title:
BVR TECHNOLOGIES LTD.
By:__________________________
Name:
Title:
THE EMERGING MARKETS
TELECOMMUNICATIONS FUND, INC.
By:__________________________
Name:
Title:
EMV CTSL LLC
By:__________________________
Name:
Title:
6
<PAGE>
Page 88 of 91 Pages
CLAL INDUSTRIES AND INVESTMENTS LTD.
By:__________________________
Name
CLAL (ISRAEL) LTD.
By:__________________________
Name
Title
HAPOALIM ELECTRONICS
COMMUNICATIONS LTD.
By:__________________________
Name
Title
_____________________________
YARON SHEINMAN
GLADCOVE INTERNATIONAL LTD.
By:________________________
Name
Title
7
<PAGE>
Page 89 of 91 Pages
ADASHA PROJECT INITIATION
DEVELOPMENT (TA) LTD.
By:_______________________
Name
Title
SHREM, FUDIM, KELNER & CO. LTD.
By:____________________________
Name
Title
DS FOUNDERS GROUP L.P.
By:__________________________
Name
Title
THE CANADA ISRAEL OPPORTUNITY
FUND II
By:__________________________
Name
Title
THE KAHANOFF FOUNDATION
By:__________________________
Name
Title
8
<PAGE>
Page 90 of 91 Pages
LEADER HOLDINGS & INVESTMENTS LTD.
By:_______________________________
Name:
Title:
_____________________________
ITZHAK SHREM
_____________________________
ITAMAR PATISHI
9
<PAGE>
Page 91 of 91 Pages
SCHEDULE I
NAME OF PURCHASER
QEG-NTS Holdings LLC
Hapoalim Electronic Communications Ltd.
BVR Technologies Ltd.
The Emerging Markets Telecommunications
Fund, Inc.
EMV CTSL LLC
Yaron Sheinman
Clal (Israel) Ltd.
Clal Industries and Investments Ltd.
Gladcove International Ltd.
Adasha Project Initiation Development (TA) Ltd.
Shrem, Fudim, Kelner & Co. Ltd.
DS Founders Group L.P.
The Canada Israel Opportunity Fund II
The Kahanoff Foundation
Leader Holdings & Investments Ltd.
Itzhak Shrem
Itamar Patishi
10
