FORM 6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2003
Commtouch Software Ltd.
(Translation of registrant's name into English)
6 Hazoran Street
Poleg Industrial Park, P.O. Box 8511
Netanya 42504, Israel
011-972-9-863-6888
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F _X_ Form 40-F ___
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes ___ No _X_
COMMTOUCH SOFTWARE LTD.
FORM 6-K
The followings discussion contains forward-looking statements based upon current
expectations that involve risks and uncertainties. Any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. For example, the words "expects," "anticipates,"
"believes," "intends," "plans," "seeks" and "estimates" and similar expressions
are intended to identify forward-looking statements. Commtouch's actual results
and the timing of certain events may differ significantly from those projected
in the forward-looking statements. Factors that might cause future results to
differ materially from those projected in the forward-looking statements
include, but are not limited to, those discussed in "Risk Factors" in the
Company's Annual Report on Form 20-F for the year ended December 31, 2002, as
amended.
Recent Developments
The following discussion is qualified in its entirety by reference to the text
of the documents described, which are attached as exhibits to this report.
On November 26, 2003, Commtouch entered into a securities purchase agreement and
related agreements with certain investors identified in a schedule to the
Securities Purchase Agreement, which provides for the following terms:
o Commtouch will issue senior convertible notes to the investors in the
aggregate principal amount of $3,000,000. The notes will carry interest
at the rate of 8.0% per annum, payable quarterly in cash and maturing
in 36 months.
o the notes will rank senior to all outstanding and future indebtedness
of the Company and will be secured by a first priority, perfected
security interest in the assets of the Company and the stock and assets
of the Company's subsidiaries.
o the investors, at their discretion, may cause the Company to issue up
to an additional $3,000,000 of notes from time to time for a period of
six months following the effectiveness of the first resale registration
statement filed by the Company, as discussed below.
o the investors may convert the notes at any time into ordinary shares of
the Company at a conversion price of 102% of the average closing prices
of the Company's ordinary shares for the five trading days prior to
closing, but not greater than 105% of the closing price on the trading
day prior to closing. The notes provide for certain anti-dilution
adjustments.
o the Company may prepay the notes at any time after the twelve month
anniversary of the effectiveness of the applicable registration
statement if, among other things, (i) the daily
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volume weighted average price of the ordinary shares for 20 trading
days in any 30 consecutive trading day period was at least 200% of the
conversion price of the notes and (ii) the trading volume on 15 of the
20 trading days is greater than 250,000, excluding block trades of
20,000 shares or more.
o the investors also will receive warrants to purchase up to 200 ordinary
shares for every $1,000 principal amount of notes purchased. The
warrants will be three year warrants exercisable at an exercise price
equal to the conversion price. The warrants provide for certain
anti-dilution adjustments.
The initial closing and funding of the transaction is subject to the conversion
of all amounts outstanding under the $1,250,000 in promissory notes issued
pursuant to the Convertible Loan Agreement dated January 29, 2003 between the
Company and the lenders party thereto, which the Company previously reported.
The Company is required to use its best efforts to file a Registration Statement
on Form F-3 covering the ordinary shares underlying the notes and the warrants
within 10 days from the initial closing and within 30 days from the closing of
any additional sale of notes, and use its best efforts to cause the registration
statement to become effective within 90 days from those dates. If the Company
fails to do so, then the Company will be required to pay to each noteholder cash
in the amount of 0.02 of the aggregate principal amount of the notes whose
underlying shares were includable in the registration statement if the
registration statement was filed late, plus an additional 0.02, if the
registration statement is not declared effective by the applicable deadline,
plus 0.00067 of the principal amount for each day of the delay. These payments
will bear interest at the rate of 1.5% per month until paid in full.
The Company has also agreed that:
o while the notes are outstanding, it will not redeem, or declare or pay
any cash dividend or distribution on, its ordinary shares without the
prior express written consent of holders representing a majority of the
aggregate principal amount of the notes then outstanding.
o while the notes are outstanding, it will not permit certain liens to
exist on its property or assets.
o it may not offer, sell, grant any option to purchase, or otherwise
dispose of any of its or its subsidiaries' equity or equity equivalent
securities, including any debt, preferred stock or other instrument or
security convertible into or exchangeable or exercisable for ordinary
shares or ordinary share equivalents, until 90 trading days following
the effectiveness of the first resale registration statement the
Company files. After the 90 day period has expired and for the
succeeding 18 months, the investors will have a right of first refusal
to purchase up to 1/3 of any such securities.
o it will indemnify the investors as to certain liabilities arising in
connection with the registration statements.
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The Company will use the proceeds of the notes and warrants for general
corporate purposes.
The closing of the transaction is subject to the fulfillment of the following
closing conditions, among others:
o approval of the shareholders of the Company of (i) an increase in the
authorized share capital of the Company to allow the issuance of shares
on conversion of the notes and exercise of the warrants and (ii) the
Company's issuance of ordinary shares upon conversion of the
outstanding promissory notes of the Company issued pursuant to the
Convertible Loan Agreement. The Company's principal shareholders have
agreed to vote in favor of these proposals.
o all security interests pursuant to the Convertible Loan Agreement must
have been released and terminated.
o receipt of all required approvals, including the approval of the Office
of Chief Scientist in the Israeli Ministry of Industry and Trade and
the Israeli Investment Center.
The transaction is currently expected to close in January 2004.
Information Incorporated by Reference
The information in this Report on Form 6-K is incorporated by reference into all
Registration Statements which we have filed or which we will file in the future
under the Securities Act of 1933, as amended, which permit such reports to be so
incorporated.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMTOUCH SOFTWARE LTD.
(Registrant)
Date December 1, 2003 By /s/ Devyani Patel
----------------------------------
Devyani Patel
Vice President, Finance
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Exhibit Index
Exhibit Number Description of Exhibit
1. Securities Purchase Agreement, dated as of November 26, 2003,
by and among Commtouch Software Ltd., and the investors listed
on the Schedule of Buyers attached thereto
2. Registration Rights Agreement, dated as of November 26, 2003,
by and among Commtouch Software Ltd. and the undersigned
buyers
3. Form of Commtouch Software Ltd. Senior Secured Convertible
Note to be issued to Buyers under Securities Purchase
Agreement dated as of November 26, 2003
4. Form of Warrant to be issued to Buyers under Securities
Purchase Agreement dated as of November 26, 2003
5. Voting Agreement, dated as of November 26, 2003 by and among
Commtouch Software Ltd., and the shareholders of the Company
listed on the signature pages thereto
6. Pledge and Security Agreement
7. Guarantee of Commtouch Inc.
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