Document:

exhibit_4-19.htm

Exhibit 4.19

 

CONVERTIBLE LOAN AGREEMENT

 

THIS CONVERTIBLE LOAN AGREEMENT (this “Agreement”) made as of the 29th day of March, 2012, by and among Orckit Communications Ltd., a company governed by the laws of the State of Israel (the “Company”) and Eric Paneth (the “Lender”).

 

W I T N E S S E T H:

 

WHEREAS, on February 15, 2012, the Company agreed upon the terms of a proposed arrangement (the "Arrangement") between the Company and its Series A note holders and Series B note holders under Section 350 of the Israeli Companies Law, 5759-1999; and

 

WHEREAS, in connection with the Arrangement, the Lender undertook, inter alia, to make available a convertible loan to the Company in the amount of $200,000, on the terms and conditions set forth in this Agreement (the “Loan”).

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

1.             The Loan.

 

1.1           The Lender hereby agrees to loan $200,000 (the “Principal Loan Amount”) to the Company, under the terms and conditions provided herein.

 

1.2           The amounts outstanding under the Loan at any time shall bear interest at the rate to be agreed upon between the Lender and the Company, with the approval of the Company's Audit Committee and Board of Directors.  The interest accrued under the Loan, if any, shall be payable once, upon the repayment or conversion of the Loan, as applicable.

 

1.3           Subject to Section 5 below, the Principal Loan Amount, together with all accrued interest thereon, if any, shall mature and become immediately due and payable in cash upon the earlier to occur of the following, unless earlier converted pursuant to Section 3 below:

 

1.3.1            on the date on which all the principal and interest under the Company's Series A notes and Series B notes have been repaid (or converted) in full;

 

1.3.2            the Company files a petition in bankruptcy, files a petition seeking any reorganization, arrangement, composition, or similar relief under any law regarding insolvency or relief for debtors, or makes an assignment for the benefit of creditors;

 

1.3.3            a receiver, trustee, or similar officer is appointed for the business or a significant part of the property of the Company, and such appointments are not stayed, enjoined, or discharged within sixty (60) days from their commencement;

 

  

  

  

 

1.3.4            any involuntary petition or proceeding under bankruptcy or insolvency laws is instituted against the Company, and such actions are not stayed, enjoined, or discharged within sixty (60) days from their commencement;

 

1.3.5            the sale or transfer of all or substantially all of the Company’s intellectual property or technology;

 

1.3.6            the Company adopts a resolution for discontinuance of its business or for its liquidation, dissolution or winding-up; or

 

1.3.7            the Company is unable to pay its debts as they become due.

 

1.4           The Company may not prepay the Loan.

 

2.              Closing.  The closing will occur within two (2) business days following the effective date of the Arrangement (the “Closing”).  At the Closing, the Lender shall disburse to the Company the Principal Loan Amount by way of a personal check or bank transfer to the Company’s account.  If (i) the Tel Aviv District Court shall deny the Company's petition to approve the Arrangement or (ii) the Arrangement shall not have come into effect for any reason on or prior to May 16, 2012, then this Agreement shall terminate and be null and void.

 

3.             Conversion.

 

3.1           In the event of an equity financing of the Company in which the Lender is required to invest pursuant to Section 6.1 of the Arrangement, the Principal Loan Amount together with all accrued interest thereon, if any, will be converted into fully-paid and non-assessable shares of the Company on the same contractual terms as shall be issued in such financing, including the issuance of warrants or other securities, as applicable. Such conversion shall be conditional upon, and concurrent with, the closing of such financing. No fractional shares shall be issued upon conversion of the Loan amount and the number of shares to be issued shall be rounded to the nearest whole number.

 

3.2           The Company shall, immediately upon any conversion of the Lender’s Loan amount, issue and deliver to the Lender a certificate representing the number of the shares (and any other securities, as applicable) to which the Lender shall be entitled upon conversion of the Lender’s Loan amount (bearing such legends as are required under applicable law, in the opinion of counsel of the Company).

 

4.             Discharge of the Loan Amount.  Upon conversion of the Loan pursuant to Section 3 above, the obligation represented by the Loan shall be deemed fully discharged.

 

5.             Subordination. The Loan shall be unsecured.  All amounts due under the Loan shall be subordinate to all obligations of the Company pursuant to the Series A notes and Series B notes.

 

6.             Miscellaneous.

 

6.1           Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the parties as reflected thereby.

 

  

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6.2           This Agreement shall be governed by, and construed exclusively in accordance with the laws of the State of Israel, without regard to its conflict of law rules.  Any dispute arising under or in relation to this Agreement shall be resolved exclusively in the competent court of Tel Aviv - Jaffa, and each of the parties hereby submits irrevocably to the jurisdiction of such court.

 

6.3           Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto.

 

6.4           None of the rights, privileges, or obligations set forth in, arising under, or created by this Agreement may be assigned or transferred by the either party without the prior consent in writing of the other party, except that the rights, privileges, or obligations set forth in, arising under, or created by this Agreement may be assigned or transferred by the Lender to any entity in which the Lender owns directly or indirectly or has the right and power to direct the policy and management of such company, or is controlled by, controlling or under common control with the Lender.

 

6.5           This Agreement hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof.  The preamble hereto constitutes an integral part hereof.

 

6.6           Any term of this Agreement may be amended and the observance of any term hereof may be waived (either prospectively or retroactively and either generally or in a particular instance) only with the written consent of the party that is the intended beneficiary of such term.

 

6.7           All notices and other communications required or permitted hereunder to be given to a party to this Agreement shall be in writing and shall be telecopied or mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, as set forth below, or such other address with respect to a party as such party shall notify each other party in writing as above provided.

 

	To the Company:	
Orckit Communications Ltd. 

126 Yigal Allon Street

Tel Aviv 67443 Israel

Facsimile: +972-3-695-233

Attention: Uri Shalom, CFO

E-mail: uris@orckit.com

	 	 
	To the Lender: 	
Eric Paneth 

c/o Orckit Communications Ltd.

126 Yigal Allon Street

Tel Aviv 67443 Israel

Facsimile: +972-3-609-4754

E-mail: eric@orckit.com

 

Any notice sent in accordance with this Section 6.8 shall be effective (i) if mailed, seven (7) business days after mailing with registered mail, (ii) if sent by messenger, upon receipt, and (iii) if sent via telecopier, upon transmission and electronic confirmation of receipt or (if transmitted and received on a non-business day) on the first business day following transmission and electronic confirmation of receipt.

 

  

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6.8           No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Agreement, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring.

 

6.9           All remedies, either under this Agreement or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative.

 

6.10         If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

 

[Remainder of this Page Intentionally Left Blank]

 

  

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above

 

	
ORCKIT COMMUNICATIONS LTD.

 

By: _______________________

       Uri Shalom

       Chief Financial Officer

	  

 

__________________________

Eric Paneth

 

5exhibit_4-20.htm

Exhibit 4.20

 

Orckit Communications Ltd.

 

Summary Terms and Conditions of

Series A Convertible Notes Issued March 28, 2007,

As proposed to be amended pursuant to the Arrangement

 

1.           Type of Offering

 

On March 27, 2007, Orckit Communications Ltd. (the “Company “) issued Series A convertible notes (the “Notes”) in a private placement pursuant to a Trust Deed, dated March 28, 2007, with Hermetic Trust (1975) Ltd., as trustee for the holders of Notes. The Trust Deed is proposed to be amended pursuant to an arrangement with the holders of the Notes and the holders of the Company's Series B convertible notes (together referred to as "notes" and "note holders", as the case may be) under Section 350 of the Israeli Companies Law, 5759-1999 (the "Arrangement"), provided that all conditions precedent are satisfied or waived and the Arrangement comes into effect by June 30, 2012.

 

Pursuant to Regulation S under the Securities Act of 1933, as amended, the Notes offering was made solely to non-“U.S. persons” outside the United States and the Company implemented “offering restrictions” in respect of a period of 40 days following the closing. The Notes were subsequently listed for trade on the Tel Aviv Stock Exchange.

 

2.           Amount of Issuance, Denomination and Issuance Price

 

The Company issued Notes with an aggregate nominal value of 107,000,000 New Israeli Shekels (“NIS”) (approximately $25.8 million at that time). The Notes were issued at a purchase price equal to 100% of their nominal value.

 

3.           Repayment of Principal

 

The principal of the Notes is repayable in one installment on March 29, 2017, provided that each holder is entitled to request earlier repayment on March 14, 2012. To allow the approval process of the Arrangement to be completed prior to the right of redemption coming into effect, the Note holders postponed the early redemption date to June 15, 2012. If the Arrangement comes into effect, this dates will be further adjusted so that each Note holder that requests early redemption of its Notes would be entitled to its pro rata portion of the payments with respect to the Notes listed below (includes CPI linkage and, unless otherwise specified below, accrued interest except for interest accrued over the previous five-and-a-half months):

 

	
Payment Date

	
Payment Amount

	
July/August 2012*

	
$9.8 million (or $9.7 million)**

	
October 2, 2012

	
$2.6 million (or $2.4 million)**

	
March 29, 2013

	
$1.4 million

	
July 1, 2014

	
$11.7 million (or $12.0 million)** plus accrued interest

 

	
________________

	
*

	
This is an estimated date.  The payment date will be between seven and 60 days following the first conversion period set forth in paragraph 7 below.

 

	
**

	
The amount in parentheses would be due if, by the applicable payment date, less than an aggregate of approximately $3 million of the outstanding principal amount of the notes was converted into Ordinary Shares (not including conversions by the Company's founders, Messrs. Izhak Tamir and Eric Paneth).

 

  

  

  

 

Note holders that do not elect early redemption of their Notes will be entitled to repayment on the original maturity date of their Notes in March 2017.

 

4.           Interest

 

The Notes bear interest at an annual rate of six percent (6%). The interest is payable semi-annually on September 29 and March 29 of each of the years 2007 through 2017 (inclusive). To allow the approval process of the Arrangement to be completed prior to the right of redemption coming into effect, the Note holders postponed the semi-annual interest payment date that was due on March 29, 2012 to June 10, 2012. If the Arrangement comes into effect, this date will be further adjusted.

 

5.           Linkage

 

The principal of the Notes, and the interest that shall accrue thereon, are linked to the Israeli Consumer Price Index.

 

6.           Security

 

The Notes are secured, as set forth below:

 

	
·

	
The Company deposited cash and/or securities equal to an aggregate amount of approximately $10.3 million in a trust account held jointly by the respective trustees of the notes, which is required to be secured by a first ranking fixed charge, to ensure the first payment scheduled to be made to the note holders pursuant to the Arrangement. If the Arrangement does not come into effect by June 30, 2012, the charge is required to be removed and the account released to the Company.

 

	
·

	
The deposit of $8.2 million principal amount of Notes held by one of the Company's subsidiaries in a trust account held by the trustee of the Notes, which is required to be secured by a first ranking fixed charge. The Company's subsidiary is prohibited under the terms of the Arrangement from selling such Notes or from requesting the early redemption thereof.

 

7.           Conversion at the Option of each Note Holder

 

During the period from the effective date of the Arrangement until the later of 20 days following the effective date of the Arrangement and June 25, 2012, the Notes will be convertible into Ordinary Shares of the Company, at the option of the holder thereof, at a conversion price of approximately $0.37 per share, after which time the conversion price will be approximately $2.04 per share. The Ordinary Shares issued upon conversion of the Notes will be listed on the Tel Aviv Stock Exchange and the Nasdaq Stock Market, to extent that the Company's Ordinary Shares are generally listed thereon at the time of conversion.

 

The conversion price is subject to adjustment in the event that the Company effects a share split or reverse share split, a distribution of bonus shares or cash dividend, or performs a rights offering.

 

8.           Conversion at the Option of the Company

 

The Company is entitled to force the conversion of all or a portion of the Notes at any time ,  at the price of $3.00 per share, by notice to the Note holders if, out of 30 consecutive trading days (prior to the date of the Company’s notice of forced conversion), there were 20 trading days in which the price of the Company’s Ordinary Shares on the Tel Aviv Stock Exchange is at least $3.00 per share.

 

Notice of such forced conversion is required to be provided between 21 and 45 days prior the forced conversion.

 

  

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9.           Repurchase Right of the Company

 

Until January 1, 2014, the Company will not be permitted, directly or indirectly, to repurchase any Notes, unless the price per NIS 1.00 principal amount of the Notes is not more than NIS 0.60.  Subject to the foregoing, the Company is entitled to repurchase any Notes, at any time and from time to time, in private transactions or in transactions on the Tel Aviv Stock Exchange. Any Notes repurchased by the Company will be canceled and may not be reissued. Notes purchased by a subsidiary of the Company will continue to be deemed outstanding and subject to transfer.

 

10.           Undertakings in Connection with the Arrangement

 

The Company is required to use its best efforts to raise an aggregate amount of $10 million of equity by September 30, 2012.

 

Each of Mr. Tamir and Mr. Paneth undertook to invest in the Company's equity financings that take place by April 2, 2013 at least 10% of each such financing, up to an aggregate amount of $1.0 million each, if the aggregate amount raised from other investors in such offerings is not less than $7.0 million.

 

Messrs. Tamir and Paneth undertook to provide a subordinated loan to the Company in the amount of $200,000, which would be converted into Ordinary Shares in an equity offering as part of the satisfaction of their commitments described in the immediately preceding paragraph.

 

The monthly salary of each of Mr. Tamir and Mr. Paneth will be reduced by 33% for the period between January 1, 2012 and October 2, 2013.

 

The Company will be permitted to incur debt that is senior to the Notes, subject to the following principal conditions: (i) the amount of our senior debt outstanding may not exceed $5 million; (ii) senior debt may be incurred no earlier than August 1, 2012 and only after the Company has used its best efforts to effect an equity financing; and (iii) the Company must ensure that its early redemption payments to the note holders that would be due on October 2, 2012 in accordance with the Arrangement will be timely made.

 

The Company will not be permitted to distribute dividends or to engage in transactions with controlling shareholders (if any), in each case until the fourth early redemption payment date of July 1, 2014.

 

The note holders, the Company and its office holders undertook to waive any claims against each other related to the period ending on the effective date of the Arrangement. However, such waiver (except with respect to vice presidents of the Company or of any of its subsidiaries) would retroactively expire on October 15, 2012 unless at least one of the following events has occurred by that date: (i) the payments to the note holders of the amounts payable to them on October 2, 2012 pursuant to the Arrangement and no incurrence of any senior debt or other debt or credit in excess of $134,000 having a maturity date earlier than April 15, 2013; (ii) an investment in the Company of at least $2 million in consideration for the Company's securities or in the form of subordinated loans; or (iii) an investment in the Company of at least $1.75 million in consideration for the Company's Ordinary Shares or options or subordinated loans, and the conversion by Mr. Tamir and Mr. Paneth of the Series B notes held by each of them in the principal amount of approximately $1.8 million and $146,000, respectively. If the waiver expires, then the period from February 15, 2012 until the date the waiver expires would not be counted for purpose of the statute of limitations on claims.

 

The parties to the waiver also agreed that no claim or demand would be made against the Company or its officers and directors in connection with the Arrangement or the approval thereof, to the extent it becomes effective.

 

During the period from the effective date of the Arrangement until November 1, 2012, subject to the Company  making the payments required of the Company pursuant to the Arrangement, the note holders will not be permitted to demand the acceleration of their notes out of a foreseeable concern that the Company will not be able to meet its payment obligations towards them, unless the Company enters into insolvency proceedings that were not initiated by its note holders or the respective trustees thereof and such proceedings are not cancelled within 45 days.

 

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