| |
The
Company did not commit within the framework of the Agreement, to make any Sales at any
minimum amount. |
| |
The
Agreement provides that the Offered Shares will be issued or sold to the Offeree at the
lowest Volume Weighted Average Price of the shares (the “VWAP”) in the five
trading days after a notice of Sale is given to the Offeree, as reported by Bloomberg LP. |
| |
The
Agreement further provides that in consideration of the Offeree’s obligations, the
Company will pay the Offeree a 5% commission out of the remuneration received by the
Company from the Sales, as well as the amounts detailed below: |
| |
l
|
$90,000
to be paid after a an order of effectiveness is issued by the SEC for the
Registration Statement covering the Offered Shares; |
| |
l
|
$111,000
to be paid at the earliest of the following: (i) upon receipt of aggregated payments from
Sales totaling more than $2,000,000; or (ii) upon the first Sale notice given one year
after the beginning of the Obligation Period. |
According to the Agreement, the
Company may pay the additional amounts in cash or in Ordinary Shares, at the VWAP on the
date of the signing of the Agreement.
In addition, it was determined in the
Agreement that the Company will pay the escrow company, that manages the execution of the
Sales for their services, $10,000 at the beginning of the Obligation Period and an
additional $500 for each Sale.
The Agreement provides that the total
number of Ordinary Shares to be held by the Offeree as a result of any Sale may not exceed
5% of the then outstanding shares of the Company. The Offeree undertook that in the event
that a Sale notice might cause it to hold more than 5% of the Company’s ordinary
shares, it will sell, before the actual issuance of the shares, such number of Ordinary
Shares that will guarantee that its holdings will not exceed 5% of the outstanding shares
of the Company.
The Agreement provides that during
the Obligation Period, the Company will not issue or sell shares for no payment or for a
price lower than the closing price of the shares, last known before the issuance in the
main market in which the shares are traded in the United States (the “Closing
Price”), and will not issue or sell convertible securities (with the exception of
stock option plans for employees), which grant the holder the right to purchase Ordinary
Shares without payment or at a price lower than the Closing Price.
The Company additionally committed to
notify the Offeree, at the beginning of each quarter of the amounts that the Company
reasonably expects to obtain from Sales to the Offeree during the upcoming quarter. The
Agreement indicates that such estimation will not obligate the Company to seek the
mentioned amounts or any other amount, and will not in any way limit the Company’s
rights to make Sales to the Offeree.
The Company agreed to indemnify the
Offeree, its employees, directors, partners and agents for any damage caused to them by
false representation given by the Company in the Agreement and in the accompanying
agreements, by breach of the Agreement and of the accompanying agreements, or in the event
of any claim brought against it, that is caused by the execution of the Agreement and
which is not caused by any action or omission of the Offeree. The maximum amount of
indemnification was limited in the Agreement to the aggregated remuneration that the
Company will receive for the Sales.
The Offeree agreed to indemnify the
Company, its managers, employees, shareholders and agents for any false representation
given by the Offeree in the Agreement and in the accompanying agreements, by breach of the
Agreement and in the accompanying agreements, or in the event of any claim brought against
them, that is caused by the breach of the Agreement or the accompanying agreements by the
Offeree or caused by any action or omission of the Offeree, connected to the Agreement
execution. The maximum amount of indemnification was limited in the Agreement to the net
aggregate remuneration that the Offeree will receive from the sales of the Offered Shares.
| 5. |
Share
Capital Issued by the Company and the Offeree’s Holdings in the Company |
| |
5.1 |
The
outstanding share capital of the Company before the issuance to the Offeree is comprised
of NIS 5,619,476 divided into 11,238,952 ordinary shares, par value NIS 0.5. |
| |
5.2 |
The
outstanding share capital of the Company after the issuance of the shares to the Offeree,
assuming that all the Offered Shares are issued and the issuance is made at the VWAP on
July 6, 2004 and that the Company does not issue any additional Ordinary Shares during
the Obligation Period, will be comprised of NIS 8,545,319, divided into 17,090,638
ordinary shares, par value NIS 0.5. |
| |
5.3 |
The
outstanding share capital of the Company after the issuance of the Offered Shares for the
Offeree, assuming that all the Offered Shares are issued and the issuance will be made at
the VWAP on July 6, 2004 (approximately $0.94) and that the Company will not issue any
additional ordinary shares during the Obligation Period, and assuming Full Dilution, will
be comprised of NIS 8,878,917, divided into 18,433,738 ordinary shares par value NIS 0.5. |
| |
5.4 |
The
following table represents the amount and percentage of the holding of the Offeree, to
the best of the Company’s knowledge, of interested parties in the Company and the
total holding of other shareholders in the Company’s voting rights and outstanding
shares. |
| The Interested Party |
Amount |
% |
Amount |
% |
Amount |
% |
| Before the Offering |
After the Offering1 |
After the Offering
and Full Dillution1,2 |
| The Offeree3 |
- |
- |
5,851,686 |
34.2% |
5,851,686 |
31.7% |
| Rafael Aravot |
878,042 |
7.8% |
878,042 |
5.3% |
968,042 |
50.2% |
| Noam Kra-Oz4 |
700,478 |
6.2% |
700,478 |
4.3% |
790,478 |
4.3% |
| Haim Schleifer |
701,412 |
6.2% |
701,412 |
4.3% |
791,412 |
4.3% |
| Gideon Missulawin |
702,362 |
6.2% |
702,362 |
4.3% |
752,362 |
4.1% |
| Menachem Zenziper |
1,213,584 |
10.8% |
1,213,584 |
7.4% |
1,263,584 |
6.9% |
| Arie Kraus4 |
721,177 |
6.4% |
721,177 |
4.4% |
771,177 |
4.2% |
| David Israel Rosen |
900,200 |
8.0% |
900,200 |
5.5% |
912,700 |
5.0% |
| The Company |
494,321 |
4.4% |
494,321 |
3.0% |
494,321 |
2.7% |
| Other shareholders |
4,927,376 |
43.8% |
4,927,376 |
28.8% |
5,837,976 |
31.7% |
| |
1 |
Assuming
that all Offered Shares are issued and the issuance is made at the VWAP on July 6, 2004
(approximately $0.94), and assuming that the Company does not issue any other shares
during the Obligation Period. This also assumes that the Offeree does not sell or dispose
of the Ordianry Shares. |
| |
2 |
Assuming
exercise of 1,343,100 outstanding options issued to the Company’s employees,
directors and to an interested party of the Company. |
| |
3 |
The
Agreement provides that the total amount of shares held by the Offeree following any Sale
may not exceed 5% of the outstanding shares of the Company (see Sec. 4 above). Therefore,
the total holdings of the Offeree at any time will not exceed 820,737 shares, and in the
event of Full Dilution will not exceed 887,892 shares. |
| |
4 |
Mr.
Noam Kra-Oz and Mr. Arie Kraus are brothers. |
| 6. |
Payment
and Methods for Determining Payment |
| |
Payment
for the Offered Shares will be calculated before each Sale according to the number of
Offered Shares to be issued in such Sale, and at a price that is equal to the lowest VWAP
in the five trading days after notice of a Sale is given to the Offeree (see Sec. 4
above). |
| |
Payment
will be made in cash at the time of issuance. |
| |
The
Company will pay the Offeree a commission at the rate of 5% of the payment the Company
will receive for the Sale of the Offered Shares and additional amounts totaling
approximately $200,000, as detailed in Section 4 above. |
| |
The
formula for calculating the share price was determined based on the market price of the
Ordinary Shares. The commission and additional amounts to be paid were determined through
negotiation between the Company and the Offeree. |
| |
To
the best of the Company’s knowledge, no significant shareholder in the Company or any
Company officer has a personal interest in the Offeree or in the payments to the Offeree. |
| |
The
average price of the Company’s Ordinary Shares on the Nasdaq SmallCap Market in the
six months prior to the filing of this report was $1.10 per share. The average price of
the Company’s Ordinary Shares on the TASE for the same period was NIS 5.05 per share. |
| |
The
Closing Price of the Company’s Ordinary Shares on the Nasdaq SmallCap Market a day
before the Board of Director’s resolution and the filing of this report, i.e. on July
6, 2004, was $ 0.97 per share. The Closing Price of the Company’s Ordinary Shares on
TASE or the same date was NIS 4.45. |
| |
The
payments to be received from the Sales are intended to fund the activities of the Company
and its subsidiaries as will be decided by the Company’s board of directors from time
to time. |
| |
The
Private Offering is subject to the following approvals: |
| |
10.1 |
Approval
of the General Meeting of Shareholders, according to the Companies Law 1999 (the “Companies
Law”), as the Offeree may become an interested party in the Company, as defined in
Section 270(5) of the Companies Law. The General Meeting of the Company’s
Shareholders is scheduled to take place on August 11, 2004. |
| |
10.2 |
The
declaration of effectiveness of the Company’s registration statement to be filed
with the SEC. It is the Company’s intention to file the Registration Statement soon
after the filing of this report. |
| |
10.3 |
The
approval of the TASE for the registration of the Offered Shares for trade on the TASE. It
is the Company’s intention to file with the TASE a request to approve the
registration of the Offered Shares for trade on the TASE as soon as approval is received
from the Company’s shareholders at the General Meeting. |
| 11. |
Agreements
Between the Offeree and Shareholders |
| |
To
the best of the Company’s knowledge and after verification with the Offeree and with
the Company’s interested parties, no agreements exist between the Offeree and any
shareholder of the Company, or between the Offeree and others regarding the purchase or
sale of the Company’s securities or regarding its voting rights. |
| 12. |
Trade
Limitations of the Offered Securities |
| |
The
Offered Shares will be subject to the trade limitation under Sec. 15c of the Israeli
Securities Act, 1968 and the regulations thereof: |
| |
12.1 |
During
three months following the issuance date (the “Term”) the shares may not be
offered for sale on the TASE. |
| |
12.2 |
During
four quarters following the end of the Term, the shares may not be offered for sale
on the TASE, except as follows: |
| |
12.2.1 |
The
amount of shares to be offered each trading day will be the daily average of the trade
turnover on the TASE of the Company’s shares from the class offered in the period of
eight weeks prior to the offering date. |
| |
12.2.2 |
The
rate of the offered shares out of the issued and paid capital of the company on the
offering date, may not exceed one percent of the issued and paid capital of the company
during each quarter. Under this section “issued and paid capital” excludes:
shares which will result from the exercise of securities that where issued before the
offering date and weren’t exercised |
| 13. |
Board
of Directors Reasons for the Approval of the Private Offering |
| |
The
authorization for the Board of Directors to issue shares to the Offeree will enable the
Company to obtain, according to the Company’s discretion and its needs at relevant
times, at short notice, significant amounts of money, and will create an additional source
of funding for the Company’s activities. The short notice preceding each sale will
reduce the uncertainty of the price at which the sale will be made. The Offeree’s
commitment to purchase the Offered Shares as they are offered will prevent the uncertainty
involved in a public offering. |
| |
The
directors who participated in the board of directors discussion on this matter were:
Messers Rafael Aravot, Haim Schleifer, Noam Kra-Oz, Gideon Missulawin, Menachem Zenziper,
Arie Kraus, Alex Tal, Amiram Dagan (an outside director) and Ms. Tami Gottlieb (an outside
director). |
| 14. |
Time
of Securities Issuance |
| |
The
Offered Shares will be issued to the Offeree from time to time, at times that will be
decided by the board of directors in accordance with the conditions of the Agreement. |
| |
A
General Meeting of the Company Shareholders, at which a proposal to authorize the Board of
Directors to issue to the Offeree, from time to time, shares having value of up to
$5,500,000, in accordance with the conditions of the Agreement, is scheduled to take place
on August 11, 2004, at 10:00 a.m. at the Daniel Hotel, 10 Ramot Yam Street, Herzlia
Pituach. |
| |
The
record date for eligibility to participate in and vote at the General Meeting, in
accordance with section 182 of the Companies Law is July 9, 2004. |
| |
Any
instruction given by the Israeli Securities Authority or one of its authorized employees
may delay the General Meeting of Shareholders |
| 16. |
Company
Representative Handling the Report |
| |
Ophra Levy-Mildworth, Adv.
13 Hamelach st. Rosh Ha'ayin
Tel. +972-3-9004113
Fax. +972-3-9030994 |
