TEFRON LTD (The “Company”)
An Immediate Report in accordance with the Securities Regulations (a Transaction between a Company and a Controlling Shareholder Therein), 2001, and in accordance with the Securities Regulations (Private Offering of Securities in a Listed Company), 2000, concerning the convening of an Extraordinary General Meeting of the shareholders of the Company
Name of the offeree and a concise description of the transaction and its principal terms:
On February 17, 2015, the Company signed an agreement with Litef Holdings Inc., a private company incorporated in Canada, who is among the controlling shareholders of the Company (hereinafter: "Litef" "theOfferee"), according to which, Litef will invest a total of US 5 million dollars in the Company against an extraordinary private allocation of 4,672,897 ordinary shares of the Company of NIS 10 par value each (hereinafter: "Ordinary Shares") (hereinafter: the "Agreement"). The Company reported on the signing of the Agreement in an immediate report, on February 18, 2015, Reference No.: 2015-01-033661.
On February 18, 2015, the Company's Board decided, pursuant to the approval of the Company's Audit Committee as at that day, to approve the engagement of the Company in the Agreement, which includes a transaction between the Company and Litef, as well as an allocation of shares to Litef, and all as detailed as follows.
The transaction is brought to the approval of General Meeting of the shareholders of the Company, for the following reasons:
a. The transaction is a transaction concerning an extraordinary private offering, between the Company and Litef, who is among the controlling shareholders of the Company, and therefore it is brought for approval as an extraordinary transaction with a controlling shareholder in accordance with Section 270(4) and 275 of the Companies Law, 1999 (hereinafter: the "Companies Law ")[1].
b. As at the date of the report, Litef and Nouvelle Intimes Seamless Inc., a private company incorporated in Canada (hereinafter: "Nouvelle") (Litef and Nouvelle shall be called hereinafter: "Nouvelle Group") jointly hold approximately 32.47% of the issued and paid up share capital of the Company and the voting rights therein and approximately 28.16% of the issued and paid up share capital of the Company and the voting rights therein on a fully diluted basis[2]. In the framework of the transaction, 4,672,897 Ordinary Shares of the Company shall be allocated to Litef, so that upon the closing of the transaction, the Nouvelle Group shall jointly hold approximately 60.2% of the issued and paid up share capital of the Company and the voting rights therein and approximately 55.22% of the issued and paid up share capital of the Company and the voting rights therein on a fully diluted basis. Since as at the date of this report, there is no other person who holds more than 45% of the issued and paid up share capital of the Company (regarding this matter, see the following paragraph entitled "Name of the controlling shareholder who has a personal interest and the nature of this matter"), the transaction is brought to the approval of the shareholders’ meetingof the Company also in accordance with Section 328(b)(1) of the Companies Law, as a private offering whose aim is to grant the shareholders of the Nouvelle Group more than 45% of the voting rights in the Company.
The principals of the Agreement:
As noted above, on February 17, 2015, the Company signed the Agreement. The principals of the Agreement are detailed as follows:
1. Litef shall invest a total of US 5 million dollars in the Company (hereinafter: the "Investment Amount") on the closing date (as this term is defined s follows), against the allocation of 4,672,897 Ordinary Shares of the Company, at a price of US 1.07 dollars per share. It is noted that the payment for each share is lower than its nominal value (NIS 10). Therefore, in accordance with Section 304(a) of the Companies Law, the Company shall convert part of its profits from premium on shares included in its equity as presented in the recent financial statements of the Company, into share capital, in an amount equal to the difference between the par value of each share issued (NIS 10), and the amount to be paid for it (US 1.07 dollars). The calculation of the conversion of 10 NIS intoUS dollar will be carried out in accordance to the exchange rate of the US dollar, as listed at the time of the payment of the consideration.
2. Nouvelle and Messrs. Ben and Martin Lieberman, who are amongst the controlling shareholders of the Company, signed on 30 December 2010, a commitment not to compete with the Company in the field of seamless products for a limited period of 5 years as of the date of signing such non-competition letter of commitment, and all as detailed in the letter of commitment (hereinafter: the “Letter of Commitment”). In the framework of the Agreement it was agreed upon that Litef would join as a party to the Letter of Commitment and it will remain in force as long as Nouvelle, Messrs. Ben and Martin Lieberman, and Litef, each on its own, will be amongst the controlling shareholders of the Company.
The closing of the transaction has been set to five business days after the fulfillment of all the conditions precedent as specified in the Agreement, including:
- An approval, in accordance with the provisions of the law, of the Company’s engaging in the Agreement including an approval to allocate the shares in accordance to the Agreement by the Company’s Audit Committee and Board of Directors (who have granted their approval during their meeting on February 18, 2015), as well as by the meeting of the Company’s shareholders, that is convened according to this report, by a special majority pursuant toSection 275 of the Companies Law. It shall be noted that for the purpose of accompanying the negotiations with the controlling shareholder, the Company's Board has established a special and independent committee whose members are the members of the Audit Committee of the Company, and it has accompanied the negotiations with the controlling shareholder and approved the terms of the Agreement on February 12, 2015.
- The approval of the Stock Exchange regarding the registration for trading of the shares to be allocated under the Agreement.
- The Company's engagement with its financing banks, Bank Leumi Le-Israel Ltd., Bank Hapoalim Ltd. and Israel Discount Bank Ltd. (hereinafter: the "Banks") in an agreement to amend the existing financing agreement of the Company (hereinafter: the "Financing Agreement") regarding the following topics:
(1)Refinancing of the Company's long-term loans in the amount of sixteen million US dollars into long term loans with a repayment term of 10 years, which will be repaid in equal annual principal repayments.
(2)Increasing the Banks' short-term credit lines (a credit line of 9.75 million US dollars) and increasing the agreed-upon amount of the factoring limits (a factoring limit of 2.5 million US dollars), in an amount equal to 150% of the Investment Amount (i.e. US 7.5 million dollars), when the ratio between the amount of the increase of the credit line and the amount of increase in the factoring limits, and out of the amount stated above, the amount of the immediate increase in the aforementioned limits and the increase that will depend on the Company's sales growth, will be subject to an agreement between the Company and Litef.
(3)Cancellation of the mechanisms for the early repayment of the long-term loans set out in the Financing Agreement.
(4)The investments that will be carried out by the Company as of January 1, 2015, shall not exceed, each year during the period of long-term loans, an amount equal to the Investment Amount plus the free EBITDA (the annual EBITDA less payments of principal and interest and financing costs for the Banks and tax payments) on an accumulated basis, less the investments carried out by the Company since the beginning of 2015 on an accumulated basis.
(5)No change in the financial covenants currently existing in the Financing Agreement despite the increase in the equity resulting from the investment, except, as the change may be required in the framework of increasing the credit lines limits as specified in clause (2) above. Regarding the financial covenants currently existing in the Financing Agreement with the Banks, see the Company's immediate report dated March 27, 2014 (Reference No.: 2014-01-027357).
The Company is in discussions with the Banks in order to reach an agreement with them which will allow the existence of all the conditions precedent described in the previous clauses (1) - (5) however at this stage it has not yet been completed. If the Company reaches an agreement with the Banks, it shall return and report on such matter.
d.In the event that, for whatever reason, all of the aforementioned conditions precedent will not be completed until April 21, 2015, then the Agreement will be cancelled, and neither of the parties to the Agreement shall have any complaint and/or claim of any kind whatsoever, against the other.
Name of the controlling shareholder who has a personal interest and the nature of that interest
To the best knowledge of the Company, as at the date of this report, Nouvelle Group and Mivtach Shamir Holdings Ltd. (hereinafter: "Mivtach Shamir"), are a party to a shareholders' agreement under which the parties will use their power as shareholders in certain matters, including the appointment of directors of the Company, in a manner according to which each party obligates to support a specified number of candidates proposed by the other party to fill the position of director of the Company (hereinafter: the "Shareholders Agreement").
As at March 2, 2015, Mivtach Shamir and Nouvelle Group , jointly hold approximately 43.92% of the issued and paid up share capital of the Company and voting rights therein and approximately 38.09% of the issued and paid up share capital of the Company and the voting rights therein on a fully diluted basis[3]. For more details, see Clause 3 of Part A of this immediate report.
Litef has a personal interest in the said engagement since it is a party to the Agreement.
Nouvelle has a personal interest in the said engagement since Litef and Nouvelle jointly hold shares of the Company.
Upon the execution of the allocation to the Nouvelle Group, in accordance with the Agreement, Mivtach Shamir's holdings in the Company will be diluted and it shall hold approximately 6.75%and the Shareholders Agreement described above, according to its terms will be terminated and Mivtach Shamir will cease to be a controlling shareholder of the Company.Currently, the Company views Mivtach Shamir as having a personal interest in engaging in the Agreement. Nevertheless, due to the fact that, following the allocation according to the private offering, Mivtach Shamir shall no longer be a controlling shareholder of the Company as aforementioned, the Company examines the question of whether Mivtach Shamir has a personal interest in engaging in the Agreement and the Company will formulate its position regarding this matter until the date of the General Meeting whose convening is carried out through in this report.
Name of the directors who may be considered as having a personal interest and the nature of that interest
Director Barham Gelfand may have a personal interest due to his business connections with the Nouvelle Group.
Director Guy Shamir, the son of Meir Shamir who is the controlling shareholder of Mivtach Shamir, may have a personal interest due to the personal interest Mivtach Shamir might have (regarding this matter see the aforementioned paragraph entitled “name of the controlling shareholder who has a personal interest and the nature of that interest”).
Director Avi Ziegelman has asked to handle the approval of the matter of engaging in the Agreement, as if he has a personal interest in the engagement.
Conditions of the securities offered, their quantity and the percentage they constituteof the issued and paid up share capital of the Company
As part of the private offering Litef is offered, 4,672,897 Ordinary Shares of the Company that will be allocated on the closing date (hereinafter: the "Allocated Shares"). The Allocated Shares will be equal in their rights to the existing ordinary shares in the issued and paid up capital of the Company. The Allocated Shares shall constitute, immediately after the allocation, approximately 41.06% of the issued and paid up share capital of the Company and voting rights therein.
The consideration for the offered securities
The consideration for the Allocated Shares allocated to Litef amounts to US 5 million dollars (US 1.07 dollars per share), and it will be paid in cash against an allocation of 4,672,897 Ordinary Shares of the Company on the closing date.
The closing price of one share in dollars on the Stock Exchange as at March 2, 2015, was US 1.14 dollarscompared to the price per share in the private offering which is US 1.07 dollars, a price lower by approximately 6.1% compared to the price on the Stock Exchange as aforementioned.
Convening of an Extraordinary General Meeting of the shareholders of the Company
A notice is hereby given concerning the convening of an Extraordinary General Meeting of the shareholders of the Company, which will be held on Thursday, April 16, 2015, at 11:00 a.m. Israel time) at the offices of Zahavi, Blau & Co., Law Offices & Notary, located at 96 Yigal Alon St., Tel Aviv. For inquiries call: 04-9900881.
The topic on the General Meeting’s agenda:
Approval of engaging in the Agreement.
The required majority
The required majority at the General Meeting for the purpose of approving the resolution on the agenda, is an ordinary majority which is greater than half of the shareholders’ votes attending the vote, except for abstaining votes, and as long as one of the following is fulfilled: (a) counting the votes of the majority at the General Meeting shall include at least a majority of all the votes of the shareholders who do not have a personal interest in the approval of the transaction, who are participating in the vote; in counting all of the votes of the aforesaid shareholders, abstaining votes would not be taken into consideration; (b) The total opposing votes from among the shareholders referred to in sub-clause (a) above, shall not be greater than two percent of the total voting rights in the Company.
Prior to the vote regarding the resolutions on the agenda, every shareholder who wishes to participate in the vote shall be required to give notice to the Company whether or not he has a personal interest in the resolution as aforesaid, or if not. If the shareholder did not give notice as aforesaid, he shall not vote in regards with the aforesaid resolution and his vote shall not be counted.
The record date for the purpose of determining the eligibility of the shareholders to participate and vote at the General Meeting
The record date for determining the eligibility of a shareholder of the Company to participate and vote at the General Meeting, is the end of trade day on Monday, March 16, 2015 (hereinafter: the “Record Date”).
In accordance with the Companies Regulations (Proof of Ownership of a Share for the purpose of Voting at a General Meeting) 2000, (hereinafter: “Proof of Ownership Regulations”), a shareholder in whose favor a share is registered with a member of the Tel Aviv Stock Exchange Ltd., and that share is included amongst the shares of the Company registered in the Register of Shareholders in the name of a nominee company and he wishes to vote at the General Meeting, shall submit to the Company a confirmation from the said member of the Stock Exchange with whom his title to the share is registered, with respect to his ownership of the share, on the Record Date, in accordance with Form 1 in the Addendum to the Proof of Ownership Regulations.
If you are an owner of an “American Share”, meaning: a Company’s share that is not an “Israeli Share”, as defined as follows, in order to vote at the Meeting, please see the voting instructions detailed on the voting card which can be found on the Company’s internet site whose address is:
“An Israeli Share”- A Company’s share that fulfills one of the following: (a) The share is registered in the Company’s Israeli shareholder register (for the purpose of clarity, a Company’s share which is registered in the Company’s American shareholder register, that is managed by the American Stock Transfer & Trust Company, is not “an Israeli Share”); or (b) the share is registered with a member of the Stock Exchange ( of Tel Aviv Stock Exchange Ltd.) in the shareholder’s favor, and the aforesaid share is included in the shares registered on the Company’s Israeli shareholder register in the name of the Registration Company of Bank Hapoalim Ltd.
The quorum for opening the deliberation at the General Meeting is two (2) shareholders or more (whose shares have been fully paid) attending the Meeting in person or via a proxy or via a voting card, per item, and holding at least twenty five (25%) of the voting rights in the Company. If half an hour has passed from the time that was scheduled for the meeting and a quorum hasn’t been established, the meeting shall be deferred for the exact same day of the week and hour in the forthcoming week, or to a different day, hour and place as determined by the chairman of the meeting, with the agreement of the majority of the shareholders with voting rights attending themselves or via a proxy or via a voting card, and voting in the matter of the date of the postponed meeting. The quorum in the postponed meeting shall be two (2) shareholders attending the meeting in person or via a proxy or via a voting card, per item, and holding at least twenty five (25%) of the voting rights in the Company.