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Exhibit 4.2
AMENDED AND RESTATED
SHAREHOLDERS RIGHTS AGREEMENT
dated February 8, 2000
by and among
▇▇▇▇▇▇▇▇.▇▇▇ LTD.
and
CERTAIN OF ITS SHAREHOLDERS
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TABLE OF CONTENTS
1. DEFINITIONS; REPRESENTATIONS; EFFECT OF AGREEMENT.........................
2. INCIDENTAL REGISTRATION...................................................
3. DEMAND REGISTRATION.......................................................
4. DESIGNATION OF UNDERWRITER................................................
5. EXPENSES..................................................................
6. INDEMNIFICATION AND CONTRIBUTION..........................................
7. OBLIGATIONS OF THE COMPANY................................................
8. CONDITIONS TO REGISTRATION OBLIGATIONS....................................
9. ASSIGNMENT OF REGISTRATION RIGHTS.........................................
10. LOCK-UP AND OTHER REQUIREMENTS OF THE HOLDERS.............................
11. RULE 144..................................................................
12. OTHER REGISTRATION RIGHTS; TERM...........................................
13. AFFIRMATIVE COVENANTS.....................................................
14. NEGATIVE COVENANTS........................................................
15. BOARD OF DIRECTORS........................................................
16. PRE-EMPTIVE RIGHT.........................................................
17. FOUNDER SALES.............................................................
18. RIGHT OF FIRST REFUSAL....................................................
19. INVESTOR TAG-ALONG RIGHTS.................................................
20. BRING-ALONG...............................................................
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21. INTENTIONALLY DELETED.....................................................
22. AMENDMENT.................................................................
23. MISCELLANEOUS.............................................................
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SHAREHOLDERS RIGHTS AGREEMENT
THIS AGREEMENT (this "AGREEMENT") made as of the 8th day of February, 2000, by
and among
▇▇▇▇▇▇▇▇.▇▇▇ LTD., a company organized under the laws of the State of Israel,
registered under number ▇▇-▇▇▇▇▇▇-▇, with offices at ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ (the "COMPANY"); and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Israel I.D. 005567110 ("▇▇▇▇▇▇▇▇") and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Israel
I.D. 027757806 ("ASHKENAZI") (▇▇▇▇▇▇▇▇ and Ashkenazi are each referred to as a
"FOUNDER" and are collectively referred to as the "FOUNDERS"); and
M.L. TRUST COMPANY LTD. , a company organized under the laws of the State of
Israel ("ML"); and
ISRAEL SEED II L.P., a limited partnership organized under the laws of Jersey,
by its general partner, Seed Venture Partners Limited, a company organized under
the laws of the British Virgin Islands, with offices at Lord ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇-▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, Channel Islands ("ISLP"); and
UNICYCLE TRADING COMPANY, L.P., a limited partnership organized under the laws
of the State of Nevada ("UNICYCLE"); and
ODEON CAPITAL PARTNERS, L.P., a limited partnership organized under the laws of
the State of Delaware ("ODEON"); and
NOMURA INTERNATIONAL PLC, a company registered under the laws of England and
Wales ("NOMURA"); and
HOLDERS OF THE COMPANY'S PREFERRED D SHARES (as defined below) purchased
pursuant to the Subscription Agreement by and between the Company and each such
Purchaser dated February 8, 2000 (the "Series D Investors")
THE COMPANIES, INDIVIDUALS AND/OR ENTITIES IDENTIFIED IN SCHEDULE A attached
hereto .
WITNESSETH:
WHEREAS, concurrently with the execution of this Agreement, the Company and
certain Investors (as defined therein) shall enter into a Subscription Agreement
(the "SA"), according to which such Investors shall purchase Preferred D Shares
of the Company; and
WHEREAS, in connection with the execution of the SA and the investment in the
Company contemplated therein, the parties desire to amend the existing
Shareholders' Rights Agreement,
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dated August 23, 1999, as amended by Amendment No. 1, dated December 16, 1999 to
(the "EXISTING SRA"), by replacing the Existing SRA with this Agreement (the
"SRA").
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties hereby agree as follows:
1. DEFINITIONS; REPRESENTATIONS; EFFECT OF AGREEMENT.
1.1. Definitions. As used herein, the following terms have the
following meanings:
"Control" means direct or indirect ownership of more than 50%
of the equity or voting capital of an entity, or possession of
the right and power to direct the policy and management of
such entity.
"Form S-3" means Form S-3 or Form F-3 under the Securities
Act, as in effect on the date hereof or any registration form
under the Securities Act subsequently adopted by the
Securities and Exchange Commission (the "SEC") which permits
inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the
SEC.
"Founder Registrable Shares" means all Ordinary Shares held by
the Founders and/or issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares the Founders may purchase pursuant to their
first refusal rights and preemptive rights.
"Holder" means any holder of outstanding Registrable Shares.
"Initiating Founders" means each of the Founders holding at
least 50% of the Founders Registrable Shares.
"Initiating Holders" means Investor Holders holding 20% of the
unregistered Investor Registrable Shares.
"IIF Investors" means Israel Infinity Venture Capital Fund
(Israel) LP, Israel Infinity Venture Capital Fund (Delaware)
LP, Israel Infinity Venture Capital Fund (Cayman I) LP and
Israel Infinity Venture Capital Fund (Cayman II) LP, and any
permitted transferee of any of the above.
"Investor" means a holder of either Preferred A Shares,
Preferred B Shares, Preferred C Shares or Preferred D Shares.
"Investor Holder" means any holder of outstanding Investor
Registrable Shares.
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"Investor Registrable Shares" shall mean the Series A Investor
Registrable Shares, the Series B Investor Registrable Shares,
the Series C Registrable Shares and the Series D Registrable
Shares, collectively.
"IPO" means the Company's initial underwritten public offering
of its Ordinary Shares pursuant to an effective registration
statement under the Securities Act or equivalent law of
another jurisdiction.
"Ordinary Registrable Shares" means all Ordinary Shares now
held by the Founders and the Ordinary Share Investors, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares that the Founders or Ordinary Share Investors
may hereafter purchase or acquire pursuant to their preemptive
rights or rights of first refusal or otherwise.
"Qualified IPO" means an IPO (i) that raises net proceeds for
the Company of a minimum of $30 million and (ii) if effective
by December 31, 2000, in which the Ordinary Shares offered
thereby are offered at a price per share equal to 500% or more
of the then effective Conversion Price for the Preferred C
Shares under the Company's Articles of Association, or if
effective after January 1, 2001, the Ordinary Shares offered
thereby are offered at a price per share equal to 750% or more
of the then effective Conversion Price for the Preferred C
Shares under the Company's Articles of Association.
"Permitted Transferee" shall mean a person or entity which
receives shares pursuant to one of the following permitted
transfers:
(a) the transfer of all or any of the shares held by
the shareholder (the "TRANSFEROR") to: (i) a company
Controlled by the transferor; or (ii) a company that
Controls the transferor; or (iii) an entity under
common Control with the transferor (which for these
purposes shall be deemed to include any transfer to
any company under the Control of UBS AG (a "UBS Group
Company") and/or any transfer to any partnership or
unincorporated association under the Control of any
UBS Group Company which includes, without prejudice
to the generality of the foregoing, any limited
partnership the general partner of which is a UBS
Group Company), or (iv) in the case of a transfer by
a partnership (including a limited partnership) or
limited liability company, to any partners or members
thereof, or any partnership (including a limited
partnership) or limited liability company managed by
the same management company or to the partners or
members thereof; or (v) in the case of a body
corporate, to its shareholders in the same proportion
as their ownership interest in the body corporate; or
(vi) in the case of a trustee, to the beneficiary or
beneficiaries for whom the trustee is holding shares;
provided that such Permitted Transferee has agreed in
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writing to assume all obligations of the transferor
(in its capacity as a shareholder) under all
agreements involving the Company; and
(b) the transfer by a shareholder who is an
individual to his spouse, children, or grandchildren,
other than to minors and persons incapacitated as a
matter of law, and provided that such Permitted
Transferee has agreed in writing to assume all
obligations of the transferor (in its capacity as a
shareholder) under all agreements involving the
Company.
"Preferred A Shares" means Series A Preferred Shares of the
Company par value NIS 0.01 each.
"Preferred B Shares" means Series B Preferred Shares of the
Company par value NIS 0.01 each.
"Preferred C Shares" means Series C Preferred Shares of the
Company par value NIS 0.01 each.
"Preferred D Shares" means Series D Preferred Shares of the
Company par value NIS 0.01 each.
"Register", "registered" and "registration" refer to a
registration effected by filing a registration statement in
compliance with the Securities Act and the declation or
ordering by the SEC of effectiveness of such registration
statement, or the equivalent actions under the laws of another
jurisdiction.
"Registrable Shares" means all Investor Registrable Shares and
Ordinary Registrable Shares.
"Reserved Shares" means Ordinary Shares issuable upon
conversion of the Preferred Shares.
"Securities Act" means the United States Securities Act of
1933, as amended.
"Series A Investor Registrable Shares" means all Ordinary
Shares issuable upon conversion of the Preferred A Shares, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares that the holders of Preferred A Shares may
hereafter purchase or acquire, pursuant to their preemptive
rights or rights of first refusal or otherwise, or Ordinary
Shares issued on conversion of such other securities.
"Series B Investor Registrable Shares" means all Ordinary
Shares issuable upon conversion of the Preferred B Shares, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares that the holders of Preferred B Shares may
hereafter purchase or
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acquire, pursuant to their preemptive rights or rights of
first refusal or otherwise, or Ordinary Shares issued on
conversion of such other securities.
"Series C Investor Registrable Shares" means all Ordinary
Shares issuable upon conversion of the Preferred C Shares, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares or other securities convertible into Ordinary
Shares, that the holders of Preferred C Shares may hereafter
purchase or acquire, pursuant to their preemptive rights,
rights of first refusal, warrants or otherwise, or Ordinary
Shares issued on conversion of such other securities.
"Series A and B Registrable Shares" means the Series A
Investor Registrable Shares and the Series B Investor
Registrable Shares, collectively.
"Series D Investor Registrable Shares" means all Ordinary
Shares issuable upon conversion of the Preferred D Shares, all
Ordinary Shares issued by the Company in respect of such
shares, including bonus shares and share dividends, and all
Ordinary Shares or other securities convertible into Ordinary
Shares, that the holders of Preferred D Shares may hereafter
purchase or acquire, pursuant to their preemptive rights,
rights of first refusal, warrants or otherwise, or Ordinary
Shares issued on conversion of such other securities.
1.2. Representations
The Company and each of Sharfman, Ashkenazi, ML, ISLP,
Unicycle, Odeon, Nomura and the Series D Investors hereby
acknowledge that the amendment and restatement of the SRA as
set forth hereunder shall be binding upon all Shareholders,
including such Shareholders who are not a party to this
Agreement and that upon execution of this Agreement, its terms
shall be binding upon the Company and each and all of the
Shareholders, as if such parties would have been parties
hereto.
1.3. Effect of Agreement
By executing this Agreement, the Existing SRA is hereby
amended and replaced by this SRA. The provisions of this SRA
shall binding upon the shareholders of the Company, provided
however, that nothing herein contained shall derogate form the
rights and obligations of the shareholders of the Company
under the Existing SRA, insofar as same relates to the period
prior to the date hereof.
2. INCIDENTAL REGISTRATION.
2.1. If, at any time (i) the Company proposes to register any of
its securities (including in the event of the Company's IPO)
or (ii) the Company proposes to register any securities owned
by anyone other than the Investor Holders, other than (a) in a
registration under Section 3 of this Agreement or (b) a
registration on Form S-8 or Form F-4, the Company shall give
notice to the Holders of such
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intention, at least 45 days prior to the filing of the
registration statement in connection with such registration.
Upon the written request of any Holder given within twenty
(20) days after receipt of any such notice, the Company shall
include in such registration all of the Registrable Shares
indicated in such request(s) of the Investor Holders, so as to
permit the disposition of the shares so requested.
2.2. Notwithstanding any other provision of this Section 2, if the
managing underwriter advises the Company in writing that in
its opinion the number of securities requested to be included
in such registration exceeds the number that can be sold in
such offering without adversely affecting such underwriter's
ability to effect an orderly distribution of such securities,
the Company will include in such registration: (i) first, the
Company's Securities; (ii) second, the number of Investor
Registrable Shares requested to be included that, in the
opinion of such underwriters, can be sold, pro rata, among the
holders of such securities on the basis of the number of
Investor Registrable Shares requested to be included by such
holders in the registration; and (iii) third, the number of
Ordinary Registrable Shares requested to be included that, in
the opinion of such underwriters, can be sold, pro rata, among
the holders of such securities on the basis of the number of
Ordinary Registrable Shares requested to be included by such
holders in the registration; provided, however, that in any
event, all Investor Registrable Shares must be included in
such registration prior to the Ordinary Registrable Shares and
any other shares of the Company (with the exception of shares
to be issued by the Company to the public).
3. DEMAND REGISTRATION.
3.1. At any time following 120 days after the closing of the
Company's IPO, the Initiating Holders may request in writing
that all or part of their Investor Registrable Shares shall be
registered under the Securities Act. Within 20 days after
receipt of any such request, the Company shall give written
notice of such request to the other Holders, and shall include
in such registration all Registrable Shares held by all such
Holders who wish to participate in such demand registration
and provide the Company with written requests for inclusion
therein within 20 days after the receipt of the Company's
notice. Thereafter, the Company shall effect the registration
of all Registrable Shares as to which it has received requests
for registration (a "DEMAND") and in connection with the first
Demand after the Company's IPO (the "FIRST DEMAND"), use its
best efforts to have such First Demand effective by the 61st
day after the Initiating Holders make such First Demand.
Notwithstanding the foregoing, the Company shall have the
right, exercisable by the 31st day after such First Demand, to
nullify such Demand in order to file a registration statement
for the registration of its equity securities for its own
account. Subject to the provisions of this Section 3.1, no
Demand shall be binding on the Company if the Company has
filed any
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registration statement for the registration of its equity
securities for its own account within the previous one hundred
and eighty (180) days (other than a form S-8 or similar
registration for employee shares) or, if not for the Company's
account, within the previous ninety (90) days.
3.2. The Initiating Holders shall have the right to three (3)
Demands. Subsequent to the First Demand, no Demand shall be
effective unless Initiating Holders holding at least 10% of
the unregistered Series D Investor Registrable Shares (other
than any such Holders who are holding Preferred A, Preferred B
or Preferred C Shares or Investor Registrable Shares issued in
respect thereof) join in such Demand.
3.3. Any registration proceeding begun pursuant to Sections 3.1 or
3.2 that is subsequently withdrawn at the request of the
Initiating Holders (with respect to their Demand) shall count
toward the quota of registration statements which the Investor
Holders have the right to cause to effect pursuant to Section
3.2; provided further, however, that such withdrawn
registration shall not be so counted if such withdrawal is
based upon material adverse information relating to the
Company or its condition, business, prospects or general
securities market conditions which is different from that
generally known to the Initiating Holders at the time of their
request. In addition, in the event that the Company utilizes
its right under Section 3.1 to file a registration statement
for its own account by the 31st day subsequent to the making
of the First Demand, such Demand shall not count toward the
quota of registration statements which the Investor Holders
have the right to cause to effect pursuant to Section 3.2.
Only the Initiating Holders who make a Demand under Sections
3.1 and 3.2 shall have the right to withdraw registration
proceedings under Sections 3.1 and 3.2 (with respect to their
Demand).
3.4. Founder Demand. At any time at least 90 days following the
closing of the second of the Demand registrations to occur
under Section 3.1, the Initiating Founders may request in
writing that all or part of the Founder Registrable Shares
shall be registered under the Securities Act. Within 15 days
after receipt of any such request, the Company shall give
written notice of such request to the other Holders, and shall
include in such registration all Registrable Shares held by
all such Holders who wish to participate in such demand
registration (subject to the limitation below) and provide the
Company with written requests for inclusion therein within 20
days after the receipt of the Company's notice. Thereupon, the
Company shall effect the registration of all Registrable
Shares as to which it has received requests for registration
(subject to the limitation below). Notwithstanding the above,
the maximum number of Founder Registrable Shares that may be
included in a registration under this Section 3.4 shall be
three times the number of Founder Registrable Shares that the
two Founders would together be entitled under Rule 144 of the
Securities Act (as currently enacted) to sell during the three
month period beginning on the date of the request for
registration by the Initiating Founders, assuming that the
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Founders are "affiliates" at the time of the registration and
that the initial minimum holding period for restricted
securities under Rule 144 has passed.
3.5. The Company shall not be required to effect more than one (1)
registration under Section 3.4, provided, however, that any
registration proceeding begun pursuant to Section 3.4 that is
subsequently withdrawn at the request of the Initiating
Founders shall count toward the one registration statement
pursuant to Section 3.4; provided further, however, that such
withdrawn registration shall not be so counted if such
withdrawal is based upon material adverse information relating
to the Company or its condition, business, or prospects which
is different from that generally known to the Initiating
Founders at the time of their request. Only the Initiating
Founders shall have the right to withdraw a registration
proceeding under Section 3.4.
3.6. Notwithstanding any other provision of this Section 3, if the
managing underwriter advises the Investor Holders in writing
that in the managing underwriter's opinion the number of
securities requested to be included in such registration
exceeds the number that can be sold in such offering without
adversely affecting such underwriter's ability to effect an
orderly distribution of such securities, the Company will
include in such registration:
1 first, the number of Investor Registrable
Shares requested to be included that, in the
opinion of such underwriters, can be sold,
provided that if, in the opinion of the
managing underwriter, less than all Investor
Registrable Shares requested to be included
can be included in such Demand registration,
then allocation among the Investor Holders
shall be made pro rata among the Investor
Holders participating in such Demand on the
basis of the number of Investor Registrable
Shares which each Investor Holder seeking to
participate in such Demand has requested be
included in such registration;
2 second, the number of Ordinary Registrable
Shares requested to be included that, in the
opinion of such underwriters, can be sold,
pro rata, among the holders of such
securities on the basis of the number of
Ordinary Registrable Shares which each
holder of Ordinary Registrable Shares
seeking to participate in such Demand has
requested to be included in such
registration; provided, however, that in any
event, all Investor Registrable Shares must
be included in such registration prior to
any other shares of the Company. The Company
shall not register securities for sale for
its own account in any registration
requested pursuant to this Section 3 unless
permitted to do so by the written consent of
Investor Holders who hold at least 75% of
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the Investor Registrable Shares as to which
registration has been requested.
3.7. Subject to the provisions of Section 3.1, the Company may not
cause any other registration of securities for sale for its
own account (other than a registration effected solely to
implement an employee benefit plan) to be initiated after a
registration requested pursuant to Section 3 and to become
effective less than 90 days after the effective date of any
registration requested pursuant to Section 3.
3.8. F-3 Registration. Commencing as soon as legally permissible
after the closing of the IPO, in any case that the Company
shall receive from any Holder or Holders a written request or
requests that the Company effect a registration on Form F-3,
and any related qualification or compliance, with respect to
Investor Registrable Shares where the aggregate net proceeds
from the sale of such Investor Registrable Shares equals to at
least five million United States Dollars ($5,000,000), the
Company will within twenty (20) days after receipt of any such
request give written notice of the proposed registration and
any related qualification or compliance, to all other Holders,
and include in such registration all Investor Registrable
Shares held by all such Holders who wish to participate in
such registration and provide the Company with written
requests for inclusion therein within 15 days after the
receipt of the Company's notice. Thereupon, the Company shall
effect such registration and all such qualifications and
compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of
such Holder's or Holders' Investor Registrable Shares as are
specified in such request, together with all or such portion
of the Investor Registrable Shares of any other Holder or
Holders joining such request as are specified in a written
request given within fifteen (15) days after receipt of such
written notice from the Company; provided, however, that the
Company shall not be obligated to effect any such
registration, qualification, or compliance, pursuant to this
Section 3.8 if the Company has, within the twelve (12) month
period preceding the date of such request, already effected
two (2) registrations for the Holders pursuant to this Section
3.8. The Company undertakes that it will, once having
qualified for registration on Form F-3, use its best efforts
to comply with all necessary filings and other requirements so
as to maintain such qualification.
3.9. Additional F-3. The provisions of this Section 3
notwithstanding, in the event that all three (3) Demands
available pursuant to Section 3.1 are utilized and Holders of
at least 75% of either the (i) unregistered Series A and B
Investor Registrable Shares (the "DISSENTING SERIES A AND B
INVESTORS"), (ii) unregistered Series C Investor Registrable
Shares (the "DISSENTING SERIES C INVESTORS") or (iii)
unregistered Series D Investor Registrable Shares (the
"DISSENTING SERIES D INVESTORS") elect not to participate in
any such Demand then the Dissenting Series A and B Investors,
the Dissenting Series C Investors and/or the Dissenting Series
D Investors, as the case may be, shall each be entitled to an
additional demand for an F-3 registration, which F-3
registration
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shall be effected in accordance with the terms of Section 3.8,
with such changes as the context may require.
3.10. The Company shall have the right, exercisable once in any 12
month period, to defer filing a registration statement (a
"REGISTRATION DEFERRAL") under the Securities Act pursuant to
this Section 3 for a period of up to 90 days if (i) the Board
of Directors of the Company shall determine that it would be
seriously detrimental to the Company to file such registration
statement at the date the filing would otherwise be required
under this Agreement, or (ii) the Board of Directors of the
Company determines in good faith that (A) the Company is in
possession of material, non-public information concerning an
acquisition, merger, recapitalization, consolidation,
reorganization or other material transaction by or of the
Company or concerning pending or threatened litigation and (B)
disclosure of such information would jeopardize any such
transaction or litigation or otherwise materially harm the
Company, or (iii) at the time of such request the Company is
engaged, or has formal plans to engage within 60 days of the
time of such request, in an underwritten public offering of
securities (including an offering contemplated by Section 3
hereof), provided that the Company's right to undertake a
registration for its own account contained in Section 3.1
shall not be deemed to be an exercise of the provisions of
this Section 3.10.
4. DESIGNATION OF UNDERWRITER.
4.1. In the case of any registration effected pursuant to Section
3, should the offering be underwritten, the Company and the
majority of the Initiating Holders that submitted the request
for the Demand registration shall confer as to the selection
of a managing underwriter. Should they fail to reach
agreement, the selection shall be made by the majority of the
Initiating Holders who submitted the Demand request.
4.2. In the case of any registration initiated by the Company, the
Company shall have the right to designate the managing
underwriter in any underwritten offering.
4.3. In an IPO, the Company shall use its best efforts to involve
Nomura and Nomura shall have the right to act as not less
than a co-manager in the underwriters' consortium, with a
right to distribute at least 10% of the shares which are
subject to the IPO.
5. EXPENSES.
All expenses incurred in connection with any registration under Sections 2 or 3,
including the reasonable fees of one legal counsel for the selling Holders,
shall be borne by the Company; provided, however, that each of the Holders
participating in such registration shall pay its pro rata portion of the
discounts or commissions payable to any underwriter.
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6. INDEMNIFICATION AND CONTRIBUTION.
In the event of any registered offering of Ordinary Shares pursuant to this
Agreement:
6.1. The Company will indemnify and hold harmless, to the fullest
extent permitted by law, any Holder and any underwriter for
such Holder, and each person, if any, who controls the Holder
or such underwriter, from and against any and all losses,
damages, claims, liabilities, joint or several, costs and
expenses (including any amounts paid in any settlement
effected with the Company's prior written consent) to which
the Holder or any such underwriter or controlling person may
become subject under applicable law or otherwise, insofar as
such losses, damages, claims, liabilities (or actions or
proceedings in respect thereof), costs or expenses arise out
of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or included in the prospectus, as
amended or supplemented, or (ii) the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances in which they are made, not
misleading, and the Company will reimburse the Holder, such
underwriter and each such controlling person of the Holder or
the underwriter, promptly upon demand, for any reasonable
legal or any other expenses incurred by them in connection
with investigating, preparing to defend or defending against
or appearing as a third-party witness in connection with such
loss, claim, damage, liability, action or proceeding;
provided, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue
statement or omission in such registration statement or
prospectus so made in conformity with information furnished to
the Company in writing by a Holder, such underwriter or such
controlling persons specifically for use in such registration
statement; provided, further, that this indemnity shall not be
deemed to relieve any underwriter of any of its due diligence
obligations; provided, further, that the indemnity agreement
contained in this Section 6.1 shall not apply to amounts paid
in settlement of any such claim, loss, damage, liability or
action if such settlement is effected without the consent of
the Company, which consent shall not be unreasonably withheld.
Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
selling Shareholder, the underwriter or any controlling person
of the selling Shareholder or the underwriter, and regardless
of any sale in connection with such offering by the selling
Shareholder. Such indemnity shall survive the transfer of
securities by a selling Shareholder; or (iii) indemnification
of shareholders against any violation or alleged violation by
the Company of the Securities Act of 1933, Securities Exchange
Act of 1934 or the state securities laws of individual U.S.
states.
6.2. Each Holder participating in a registration hereunder will
indemnify and hold harmless the Company, any underwriter for
the Company, and each person, if any, who controls the Company
or such underwriter, from and against any and
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all losses, damages, claims, liabilities, costs or expenses
(including any amounts paid in any settlement effected with
the selling Shareholder's consent) to which the Company or any
such controlling person and/or any such underwriter may become
subject under applicable law or otherwise, insofar as such
losses, damages, claims, liabilities (or actions or
proceedings in respect thereof), costs or expenses arise out
of or are based on (i) any untrue statement or alleged untrue
statement of any material fact contained in the registration
statement or included in the prospectus, as amended or
supplemented, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, and
each such Holder will reimburse the Company, any underwriter
and each such controlling person of the Company or any
underwriter, promptly upon demand, for any reasonable legal or
other expenses incurred by them in connection with
investigating, preparing to defend or defending against or
appearing as a third-party witness in connection with such
loss, claim, damage, liability, action or proceeding;
provided, however, notwithstanding the foregoing terms of this
Section 6.2, that the Holder shall be liable in any such case
only to the extent that any such loss, damage, liability, cost
or expense arises out of or is based upon an untrue statement
or omission in such registration or prospectus made in strict
conformity with written information furnished to the Company
by such Holder specifically for use in such registration
statement; and provided further that the liability of such
Holder under this Section 6.2, excluding liability for costs
and expenses arising out of any action or proceeding, shall
not exceed the product of the number of shares registered by
the Holder and the per share purchase price of the shares as
set forth in the registration; provided, further, that this
indemnity shall not be deemed to relieve any underwriter of
any of its due diligence obligations; provided, further, that
the indemnity agreement contained in this Section 6.2 shall
not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if such settlement is
effected without the consent of the Holders, as the case may
be, which consent shall not be unreasonably withheld. In no
event shall the liability of a Holder exceed the gross
proceeds from the offering received by such Holder.
6.3. Promptly after receipt by an indemnified party pursuant to the
provisions of Sections 6.1 or 6.2 of notice of the
commencement of any action involving the subject matter of the
foregoing indemnity provisions, but in any event no fewer than
ten (10) days before the date designated in such notice as the
date by which an answer must be served (or such extension
thereof, provided that the extension has been granted in
writing by the plaintiff and that no admission or consent to
jurisdiction or other waiver has been granted or implied by
the request for such an extension), such indemnified party
will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said Sections
6.1 or 6.2, promptly notify the indemnifying party of the
commencement thereof In
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case such action is brought against any indemnified party and
it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however,
that if the defendants in any action include both the
indemnified party and the indemnifying party and there is a
conflict of interests which would prevent counsel for the
indemnifying party from also representing the indemnified
party, the indemnified party or parties shall have the right
to select one separate counsel to participate in the defense
of such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said Sections 6.1 or 6.2
for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed counsel
in accordance with the provision of the preceding sentence,
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the
notice of the commencement of the action and within 15 days
after written notice of the indemnified party's intention to
employ separate counsel pursuant to the previous sentence, or
(iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the
indemnifying party. No indemnifying party will consent to
entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
6.4. Contribution. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an
indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified
party as a result of such losses, claims, damages, liabilities
or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other
from the registration or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, or
provides a lesser sum to the indemnified party than the amount
hereinafter calculated, in such proportion as is appropriate
to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party
on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant
equitable considerations; provided that in no event shall any
contribution by a Holder hereunder exceed the gross proceeds
from the offering received from such Holder. 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.
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7. OBLIGATIONS OF THE COMPANY.
Whenever required under this Agreement to effect the registration of any
Registrable Shares, the Company shall, as expeditiously as possible:
7.1. (i) prepare and file with the SEC a registration statement with
respect to such Registrable Shares and use its best efforts to
cause such registration statement to become effective, (ii) upon
the request of the holders of a majority of the Registrable
Shares registered thereunder, keep a registration statement
filed pursuant to Section 2 effective for a period of up to two
hundred seventy (270) days or, if sooner, until the
distribution contemplated in the Registration Statement has been
completed, and (iii) upon the request of the holders of a
majority of the Investor Registrable Shares registered
thereunder, keep a registration statement filed pursuant to
Section 3 above effective for a period of up to two hundred
seventy (270) days or, if sooner, until the distribution
contemplated in the Registration Statement has been completed,
provided, that the in the case of the First Demand, the Company
shall not be obligated to keep the registration statement filed
pursuant thereto effective for more than one hundred and eighty
(180) days or, in the event such First Demand is underwritten,
for more than the period within which the distribution
contemplated in the registration statement has been completed,
and further provided, that in the event that the First Demand is
not underwritten, no Holder may sell shares pursuant to the
registration statement effective pursuant to the First Demand
without first inquiring of the Company in writing as to whether
such sale would be permissible at such time in light of the then
current form of such registration statement. Failure by the
Company to respond in writing to an address or fax number
provided by the inquiring shareholder in its inquiry within
three days of the request shall be deemed to be assent to such
proposed sale. In the event that the Company does inform the
inquiring shareholder that the proposed sale of securities under
the relevant registration statement would not be permissible at
such time, then the Company shall use its best efforts to amend
or supplement such registration statement or the prospectus
included therein so that such shareholder can sell its
securities thereunder unless (i) the Board of Directors of the
Company determines that it would be seriously detrimental to the
Company to so amend or supplement such registration statement or
prospectus, or (ii) the Board of Directors of the Company
determines in good faith that (A) the Company is in possession
of material, non-public information concerning an acquisition,
merger, recapitalization, consolidation, reorganization or other
material transaction by or of the Company or concerning pending
or threatened litigation and (B) disclosure of such information
would jeopardize any such transaction or litigation or otherwise
materially harm the Company. In any such event, the Company
shall promptly notify the inquiring holder when the use of the
relevant registration statement or prospectus may be resumed or
supply such holder with copies of any amendment or supplement
made pursuant
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to the preceding sentence and such inquiring holder shall not
dispose of its Registrable Shares under such registration statement
or prospectus until it is so advised in writing by the Company that
the use of the prospectus included in such registration statement
may be resumed or until such holder receives such copies of any
supplement or amendment to such registration statement or
prospectus, provided, however, that any such prohibition shall not
be in effect for more than 90 days in any 12 month period.
7.2. prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
with such registration statement as may be reasonably necessary to
comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Shares covered by such
registration statement.
7.3. furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as
they may reasonably request in order to facilitate the disposition
of Registrable Shares owned by them.
7.4. in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.
Each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement.
7.5. notify each holder of Registrable Shares covered by such
registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of
the circumstances then existing, in which event each such holder
of Registrable Shares shall forthwith discontinue disposition of
its Registrable Shares pursuant to such prospectus until it is
advised in writing by the Company that the use of such
prospectus may be resumed or until such holder receives copies
of any supplement or amendment to such prospectus, provided,
however, that such suspensions shall not be in effect for more
than 90 days in any 12 month period.
7.6. cause all Registrable Shares registered pursuant hereunder to be
listed on each securities exchange (or Nasdaq) on which similar
securities issued by the Company are then listed.
7.7. provide a transfer agent and registrar for all Registrable Shares
registered pursuant hereunder and a CUSIP number for all such
Registrable Shares, in each case not later than the effective date
of such registration.
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7.8. take such action under the securities laws of such states of the
United States as any participating Holder shall reasonably request;
provided, however, that the Company shall not be required to
qualify to do business as a foreign corporation, or to file any
general consent to service of process, in any state.
7.9. furnish, at the request of any Holder requesting registration of
Registrable Shares pursuant to this Agreement, on the date that
such Registrable Shares are delivered to the underwriters for
sale in connection with a registration pursuant to this
Agreement, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Shares and (ii) a
letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders requesting
registration of Registrable Shares.
8. CONDITIONS TO REGISTRATION OBLIGATIONS.
The Company shall not be obligated to effect the registration of Registrable
Shares pursuant to this Agreement unless the Holder consents to the following
conditions:
8.1. conditions requiring the Holder to comply with all applicable
provisions of the Securities Act and the Securities and Exchange
Act including, but not limited to, the prospectus delivery
requirements of the Securities Act, and to furnish to the Company
information about sales made in such public offering; and
8.2. conditions prohibiting the Holder upon receipt of telegraphic or
written notice from the Company that it is required by law to
correct or update the registration statement or prospectus from
effecting sales of the Registrable Shares until the Company has
completed the necessary correction or updating.
8.3. conditions prohibiting the sale of Registrable Shares by such
Holder, as the case may be, during the process of the registration
until the Registration Statement is effective.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
Any of the Holders may assign its rights to cause the Company to register
pursuant to this Agreement all or any part of its Registrable Shares. The
transferor shall, within twenty (20) days after such transfer, furnish the
Company with written notice of the name and address of such
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transferee and the securities with respect to which such registration rights are
being assigned, and the transferee's written agreement to be bound by this
Agreement.
10. LOCK-UP AND OTHER REQUIREMENTS OF THE HOLDERS.
In connection with the Company's IPO all Holders agree, and in connection with
any underwritten registration of the Company's shares pursuant to Sections 2 or
3 above, all Holders participating in such underwritten offering agree that any
sales of Registrable Shares may be subject to a "lock-up" period restricting
such sales for up to one hundred and eighty (180) days, and all such Holders
will agree to abide by such customary "lock-up" period of up to one hundred and
eighty (180) days as is required by the underwriter in such a registration and
further agree to execute such further documents as may be required by the
underwriters to effectuate such "lock-up". In addition, no Holder may
participate in any underwritten registration hereunder unless such person (i)
agrees to sell such person's securities on the basis provided in any customary
underwriting arrangements and (ii) provides any relevant information and
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents required under the terms of such
underwriting arrangements; provided that such underwriting arrangements shall
not provide for indemnification or contribution obligations on the part of the
holders greater than the obligations set forth in Article 6 above.
11. RULE 144.
At any time and from time to time after the earlier of the close of business on
such date as (a) a registration statement filed by the Company under the
Securities Act becomes effective, or (b) the Company registers a class of
securities under Section 12 of the United States Securities Exchange Act of
1934, as amended, or any federal statute or code which is a successor thereto
(the "Exchange Act") the Company shall:
11.1. Make and keep available adequate current public information with
respect to the Company within the meaning of Rule 144(c) under the
Securities Act (or similar rule then in effect);
11.2. Furnish to any holder of Registrable Shares forthwith upon request
(i) a written statement by the Company as to its compliance with
the informational requirements of Rule 144(c) (or similar rule then
in effect) or (ii) a copy of the most recent annual or quarterly
report of the Company; and
11.3. Use its best efforts to comply with all other necessary filings and
other requirements so as to enable the Investors and any transferee
thereof to sell Registrable Shares under Rule 144 under the
Securities Act (or similar rule then in effect).
12. OTHER REGISTRATION RIGHTS; TERM
12.1. The Company shall not grant registration rights with respect to any
securities of the Company to any person that are equal to or
superior to the registration rights granted to the Investor Holders
pursuant to this Agreement, except with the
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written consent of a majority of each of the Series A, Series B,
Series C and Series D Investor Registrable Shares.
1.2. The registration rights contained herein shall expire three (3)
years following the date of the Company's IPO, except that the
rights set forth in Section 6 shall not expire.
13. AFFIRMATIVE COVENANTS.
The Company covenants and agrees with the Investors that until the
consummation of a Qualified IPO (as such term is defined in the Company's
Articles of Association):
13.1. Financial Reporting. The Company shall maintain a system of
accounting established and administered in accordance with the
United States generally accepted accounting principles consistently
applied ("GAAP"), will keep full and complete financial records,
and will furnish to the Investors the following reports in English:
13.1.1. As soon as practicable after the end of each fiscal
year, and in any event within 90 days thereafter, the
audited consolidated balance sheet of the Company as at
the end of such fiscal year, and audited consolidated
statements of operations and retained earnings and cash
flow of the Company for such fiscal year, all in
reasonable detail, accompanied by consolidating
schedules, and prepared in accordance with GAAP in
adjusted NIS and in U.S. Dollars, and audited by the
Israeli affiliate of one the "Big 5" U.S. accounting
firms (the "Auditors").
13.1.2. As soon as practicable after the end of the first,
second, and third quarter in each fiscal year and in
any event within 45 days thereafter, the unaudited
consolidated balance sheet and statements of operations
and retained earnings and cash flow of the Company for
such quarter, all in reasonable detail, prepared in
accordance with GAAP, and certified to be complete and
correct (subject to year-end adjustments) by the chief
financial officer of the Company, in adjusted NIS and
in U.S. Dollars, and reviewed by the Auditors.
13.2. Other Information. The Company shall furnish to the Investors
holding (including any unexercised warrants) not less than 1.0% of
the Company's outstanding share capital (on a fully diluted, as
converted, basis) the following reports and information in English:
13.2.1. Within 20 days after the period to which they relate,
brief monthly financial reports in such form as shall be
agreed from time to time between the Company and the
Investors.
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13.2.2. An annual operating plan and budget, at least 30 days
prior to the first day of the year covered by such plan,
to be provided only to the Directors appointed pursuant to
Section 15.1 (as defined below).
13.2.3. promptly after receipt, all reports delivered to the
Company by its accountants;
13.2.4. promptly after the commencement or threatened
commencement thereof, notice of all material actions,
suits, investigations, and proceedings before any court
or governmental department, arbitration panel,
commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting the Company or any of
its subsidiaries other than ordinary and routine
litigation covered under the limits of existing
insurance policies;
13.2.5. promptly, copies of any press releases issued by the
Company;
13.2.6. promptly after an Investor's request therefor, copies
of minutes of meetings of the Board of Directors of the
Company;
13.2.7. promptly, copies of all amendments to the Articles of
Association or Memorandum of Association of the
Company; and
13.2.8. such other information regarding the business, affairs and
condition of the Company as the Investors may from time to
time reasonably request.
13.3. Legal Existence, Compliance, Etc.
13.3.1. The Company will maintain its existence as a limited
company duly organized and validly existing under the laws
of the State of Israel.
13.3.2. The Company will conduct its business in compliance in
all material respects with all permits and licenses
issued by, and all statutes, rules, regulations and
orders of, and all restrictions imposed by, all
governmental authorities, domestic or foreign, federal
or state, applicable to the conduct of its business and
the ownership of its property (including, without
limitation, applicable statutes, rules, regulations,
orders and restrictions relating to environmental,
safety and other similar standards or controls).
13.3.3. The Company will conduct its business in compliance in all
material respects with all licenses, agreements and
contracts to which it is a party.
13.3.4. The Company will maintain, keep, and preserve all of its
material properties (tangible and intangible) necessary in
the proper conduct of
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its business in good working order and condition, ordinary
wear and tear excepted.
13.3.5. The Company will maintain or cause to be maintained,
with financially sound and reputable insurers,
insurance with respect to its assets and businesses
against loss or damage of the kinds customarily insured
against by corporations of established reputation
engaged in the same or similar businesses and similarly
situated, of such types and in such amounts and with
such deductibles as are customarily carried by such
other corporations.
13.4. Preferred Shares
The Company shall comply with the terms and conditions of the
Preferred Shares as set forth in the Articles of Association.
13.5. Right of Inspection
At any reasonable time and from time to time, upon reasonable
notice, the Company shall permit a Director approved by the
Investors to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the
Company and to discuss the affairs, finances and accounts of the
Company with any of its officers and directors and furnish to each
such person, promptly upon the request of such person, copies of
such financial and operating data (such as patents, issued or
filed, licensing agreements, research and development contracts,
joint venture agreements, etc.) and other information as reasonably
requested by such person. The Company will permit such persons to
inspect, audit and make copies of the books and records of the
Company, to discuss the business and affairs of the Company with
the officers of the Company, and to inspect any of the properties
or assets of the Company upon reasonable notice to the Company and
at such reasonable times as such persons may from time to time
request. Upon three business days' prior notice to the Company,
such persons shall have the right to confer in their discretion
with the independent certified public accountants of the Company at
any time during normal business hours upon any matter involving the
financial condition of the Company and such accountants are hereby
irrevocably authorized to fully discuss with and disclose to the
Investors all such matters. Each such person shall bear its own
expenses in connection with the exercise of its rights under this
Section. Each such person severally and not jointly agrees to
maintain the confidentiality of any information received by it
pursuant to this Section, until such information becomes public or
is otherwise no longer confidential or as otherwise required by
law, provided, however, that each such person may share the
information received by it pursuant to this Section with its
partners, if any, and with its legal, accounting, financial and
other advisors and representatives.
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13.6. Transfer Pursuant to Rule 144A
The Company agrees to provide to any holder of Preferred Shares
and, upon such holder's request, to any prospective purchaser
designated by such holder the financial and other information
specified in Rule 144A(d)(4) under the Securities Act and to take
any other action reasonably requested by such holder or to execute
any certificates necessary to permit a transfer by any such holder
to qualify for the exemption set forth in Rule 144A.
14. NEGATIVE COVENANTS.
Until the consummation of an IPO, and in addition to the provisions of any
applicable law, consent of:
14.1. the holders of the majority of the then outstanding Preferred A
Shares shall be required for any of the following acts:
14.1.1. Modification of rights of the Preferred A Shares;
14.1.2. Increase in the number of authorized Preferred A Shares;
14.1.3. Creation or issuance of any class or series of shares on a
parity with or having preference over the Preferred A
Shares; or
14.1.4. Amendments to the Articles (including, without limitation,
modification of rights of the rights of the Series B,
Series C or Series D Preferred Shares) that would
adversely affect the holders of the Series A Preferred
Shares or the relative rights and preferences of the
Series A Preferred Shares.
14.2. the holders of the majority of the then outstanding Preferred B
Shares shall be required for any of the following acts:
14.2.1. Modification of rights of the Preferred B Shares;
14.2.2. Increase in the number of authorized Preferred B Shares;
14.2.3. Creation or issuance of any class or series of shares on a
parity with or having preference over the Preferred B
Shares; or
14.2.4. Amendments to the Articles (including, without limitation,
modification of rights of the rights of the Series A,
Series C or Series D Preferred Shares) that would
adversely affect the holders of the Series B Preferred
Shares or the relative rights and preferences of the
Series B Preferred Shares.
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14.3. the holders of the majority of the then outstanding Preferred C
Shares shall be required for any of the following acts:
14.3.1. Modification of rights of the Preferred C Shares;
14.3.2. Increase in the number of authorized Preferred C Shares;
14.3.3. Creation or issuance of any class or series of shares on a
parity with or having preference over the Preferred C
Shares; or
14.3.4. Amendments to the Articles (including, without limitation,
modification of rights of the rights of the Series A,
Series B or Series D Preferred Shares) that would
adversely affect the holders of the Series C Preferred
Shares or the relative rights and preferences of the
Series C Preferred Shares.
14.4. the holders of the majority of the then outstanding Series D
Preferred Shares shall be required for any of the following acts:
14.4.1. Modification of rights of the Series D Preferred Shares;
14.4.2. Increase in the number of authorized Series D Preferred
Shares;
14.4.3. Creation or issuance of any class or series of shares on a
parity with or having preference over the Series D
Preferred Shares; or
14.4.4. Amendments to the Articles (including, without limitation,
modification of rights of the rights of the Series A,
Series B or Series C Preferred Shares) that would
adversely affect the holders of the Series D Preferred
Shares or the relative rights and preferences of the
Series D Preferred Shares.
14.5. each of (i) the holders of the majority of the then outstanding
Preferred A Shares, (ii) the holders of the majority of the then
outstanding Preferred B Shares, (iii) the holders of the majority
of the then outstanding Preferred C Shares and (iv) the holders of
the majority of the then outstanding Preferred D Shares shall be
required for any of the following acts:
14.5.1. effecting a merger, consolidation or reorganization of or
acquisition by the Company or the sale, lease or other
disposal of all or substantially all of the Company's
assets, including the sale, lease, license, transfer or
other disposition of any of the Company's material
technology, except as effected under the Company's
ordinary course of business;
14.5.2. reclassification of outstanding capital shares of the
Company; modification of the Company's Memorandum or
Association or
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Articles of Association (other than modifications governed
by sections 14.1.1, 14.2.1 and 14.3.1);
14.5.3. a material change in the business of the Company;
14.5.4. an IPO which is not a Qualified IPO.
14.6. The consent of the Series A Director, the Series B Director, the
Series C Directors and the Series D Director (each as defined
below) shall be required for the authorization or issuance of
shares of the Company (or options to purchase shares) to
officers, directors, employees or affiliates of (or consultants
to) the Company or any of its subsidiaries pursuant to option
plans, share or option purchase plans or other employee
incentive programs other than issuances of Ordinary Shares or
options to purchase Ordinary Shares which in the aggregate would
not exceed 8,000,000 Ordinary Shares (including for purposes of
such calculation the maximum number of shares issuable upon
exercise or conversion of options to purchase Ordinary Shares
and options to purchase Ordinary Shares outstanding as of the
date of this Agreement).
14.7. Except as provided hereinabove, any and all veto rights previously
granted to any of the shareholders of the Company under any
instrument whatsoever (other than the Company's Articles of
Association as currently effective), including in any agreement,
meetings of the Company's shareholders and/or Board of Directors,
are hereby cancelled and terminated.
15. BOARD OF DIRECTORS.
15.1. Until the consummation of an IPO, the Board of Directors shall be
composed of up to nine (9) members, as set forth below:
15.1.1. The holders of the Ordinary Shares, voting as a separate
class, shall have the right to nominate two (2) directors;
15.1.2. The holders of the Preferred A Shares shall be entitled to
designate one (1) director, (the "Series A Director")
provided however, that so long as ISLP II and its
Permitted Transferees own 8% or more of the issued and
outstanding shares of the Company on an as-converted
basis, ISLP II shall have the right to appoint the Series
A Director;
15.1.3. the holders of Preferred B Shares shall be entitled to
designate one (1) director (the "Series B Director");
15.1.4. the holders of Series C Preferred Shares shall be
entitled to designate two (2) directors (the "Series C
Directors"), provided however, that, so long as Nomura
or its Permitted Transferees shall hold any Series C
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Preferred Shares, Nomura alone and at its sole
discretion shall be entitled to designate one Series C
Director, and so long as WaterView Partners L.P.
("WaterView") and its Permitted Transferees shall hold
any Series C Preferred Shares, WaterView alone and at
its sole discretion shall be entitled to designate one
Series C Director;
15.1.5. one (1) director shall be an independent director, who
shall be elected by a majority of the board of
directors;
15.1.6. one (1) director shall be the CEO of the Company
(currently, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇); and
15.1.7. ▇▇▇▇ Capital Integral Investors LLC ("▇▇▇▇"), for so
long as it or its affiliates own not less than 10% of
the outstanding Series D Preferred Shares issued to
▇▇▇▇ pursuant to the Subscription Agreement dated
February 8, 2000 and Ordinary Shares issued pursuant to
the conversion of such Series D Preferred Shares, and
thereafter the Series D Preferred Shares as a class,
shall be entitled to designate one (1) director (the
"Series D Director").
15.2. Observer Rights. Until the consummation of an IPO, the Company
shall afford to one (1) representative of Axiom Venture Partners
II L.P., for as long as it shall hold not less than 2% of the
issued and outstanding capital of the Company, to one (1)
representative of the IIF Investors, for as long as it shall
hold not less than 2% of the issued and outstanding capital of
the Company, and to one (1) representative of ▇▇▇▇▇▇▇▇▇ Capital
LLC ("▇▇▇▇▇▇▇▇▇), for as long as it shall hold not less than 3%
of the issued and outstanding capital of the Company, reasonable
Board of Directors' visitation rights by one observer. Such
visitation rights shall include (i) the right to receive
reasonable notice in advance of all Board of Directors meetings
(ii) the right to receive, concurrently with receipt by members
of the Board of Directors, all materials, reports and other
written communications received by members of the Board of
Directors (which right the Company shall also afford to one (1)
representative of UBS AG (the "UBS Representative"), for as long
as it or any UBS Group Company or any limited partnership, the
general partner of which is a UBS Group Company, shall hold not
less than 2% of the issued and outstanding capital of the
Company) and (iii) the right to attend all Board of Directors
meetings as an observer; provided, however, that the
Company may require as a condition precedent to the rights under
this Section 15.2 that such observer attending any meeting of
the Board of Directors and having access to any of the
information provided by the Company to the Board of Directors
(including the UBS representative) agrees in writing to hold in
confidence and trust and to act in a fiduciary manner with
respect to all information so received during such meetings or
otherwise. No inadvertent failure of the Company to notify
Axiom Venture Partners II L.P., the IIF Investors or ▇▇▇▇▇▇▇▇▇
of any meetings of the Board of Directors shall operate
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to invalidate any action of the Board of Directors taken at any
such meeting. For purpose of this Section 15.2, the term "Board of
Directors" shall also refer to any committees thereof excepting the
compensation committee and the audit committee.
15.3. The appointment, dismissal or replacement of any director so
designated, shall be by written notice given to the Company by the
designating party or class of shareholders.
15.4. The Company shall not change or expand the signatory rights for the
Company currently in effect without the consent of a majority vote
of the members of the Board of Directors.
15.5. The Company will reimburse the Investors and the Directors for all
reasonable expenses incurred by them in all activities done on
behalf of the Company, including but not limited to, travel to and
lodging incidental to meetings of the Board of Directors and
committees thereof and expenses incurred when interviewing
potential candidates.
16. PRE-EMPTIVE RIGHT.
16.1. Prior to the consummation of a Qualified IPO, if the Company
proposes to issue or sell any New Securities (as defined in
Section 16.2.1), the Company shall, before such issuance, offer
to all shareholders (collectively the "Offered Shareholders")
the right to purchase a pro-rata share of the New Securities. A
shareholder's pro-rata share, for purposes of this Section, is
the ratio of the number of issued shares owned by such
Shareholder immediately prior to the issuance of New Securities
(treating all Preferred Shares as if fully converted), to the
total number of shares outstanding immediately prior to the
issuance of New Securities (treating all of the Preferred Shares
as if fully converted).
Each holder of Preferred Shares shall have a right of
over-allotment such that if any of the holders of Preferred Shares
fails to exercise its right hereunder to purchase its pro-rata
share of New Securities, the other Investors holding Preferred
Shares may purchase the portion of the non-purchasing shareholder
pro-rata according to the shareholding ratio between such other
shareholders of Preferred Shares, within five (5) days from the
date such non-purchasing holder of Preferred Shares fails to
exercise its rights hereunder to purchase its pro-rata share of New
Securities.
Each one of the Founders shall have a right of over-allotment such
that if any of the holders of Ordinary Shares fails to exercise its
right hereunder to purchase its pro-rata share of New Securities,
each Founder may purchase the portion of the non-purchasing
shareholder pro-rata according to the shareholding ratio between
the Founders within five (5) days from the date such non-purchasing
holder of
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Ordinary Shares fails to exercise its rights hereunder to purchase
its pro-rata share of New Securities.
16.2. This pre-emptive right shall be subject to the following
provisions:
16.2.1. "NEW SECURITIES" shall mean any equity interest
(including Ordinary and Preferred Shares) in the
Company, whether now authorized or not, and rights,
options or warrants to purchase such equity interests,
and securities of any type whatsoever that are
convertible into equity interests; provided that the
term "New Securities" does not include: (i) securities
issued upon the conversion of the Preferred Shares or
conversion of the Option Shares and (ii) securities
issued, pursuant to a resolution of the Board of
Directors, to employees, directors or consultants of
the Company, subsidiary or parent of the Company, who
hold less than 5% of the Company's issued and
outstanding share capital; and (iii) securities issued
in a Qualified IPO; and (iv) securities issued in
connection with stock split, stock dividend or other
recapitalization events in the Company; (v) Preferred C
Shares issuable upon the exercise of the Warrants (as
defined, and under the terms set forth, in the SPA) or
any other shares issuable pursuant to other warrants
outstanding as of February 8, 2000and (vi) securities,
in an amount not exceeding, in the aggregate, 10% of
the issued and outstanding share capital of the
Company, issued to a Strategic Investor on or after
January 1, 2000. "Strategic Investor" shall mean an
entity which, in the determination of the majority of
the Board of Directors (including the approval of all
of the Directors appointed pursuant to Section 15.1.2,
15.1.3 and 15.1.4) is capable of materially
contributing directly or indirectly to the Company's
business other than by investing capital in the Company.
16.2.2. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Offered
Shareholder written notice of its intention, describing
the type of New Securities, and their price and the
terms upon which the Company proposes to issue the
same. Each Offered Shareholder shall have seven (7)
days after any such notice is delivered to agree to
purchase such Offered Shareholder's 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 stating therein the quantity of New
Securities to be purchased.
16.2.3. In the event the Offered Shareholders fail to exercise
fully the pre-emptive right within the said seven (7)
day period the Company shall have one hundred twenty
(120) days thereafter to sell or enter into an
agreement to sell the New Securities respecting which
the Offered Shareholders' pre-emptive right set forth
in this Section is not
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exercised, at a price and upon terms no more favorable to
the purchasers thereof than specified in the Company's
notice to the Offered Shareholders pursuant to this
Section 16.2. In the event the Company has not sold or
entered into an agreement to sell the New Securities in
accordance with the foregoing within one hundred twenty
(120) days, the Company shall not thereafter issue or sell
any New Securities, without first again offering such
securities to the Offered Shareholders in the manner
provided in this Section 16.
17. FOUNDER SALES.
1.1. Notwithstanding anything to the contrary in this Agreement, each
of the Founders and/or their Permitted Transferees shall be
entitled to sell, transfer, assign, encumber or otherwise
dispose of shares in the Company held by him, with no limitation
under Section 17.2 and free of the rights in favor of the
Investors under Section 19 (Investor Tag-Along Rights) up to 5%
of the shares in the Company held by each of the Founders as of
August 24, 1998 ("Transferable Shares").
17.2. Except as set forth in Section 17.1, until the consummation of a
Qualified IPO, no Founder nor any of their Permitted Transferees
shall sell, transfer, assign, encumber or otherwise dispose of
the shares in the Company held by the Founder as of the date
hereof, without the prior written consent of the holders of 75%
or more of each of (i) the Preferred A Shares, (ii) the
Preferred B Shares, (iii) the Preferred C Shares and (iv) the
Preferred D Shares.
17.3. The Founders shall be entitled to transfer or sell shares to their
Permitted Transferees, provided that the Permitted Transferee
agrees to be bound to the provisions of this Agreement and the
Company's Articles of Association.
17.4. In the event that a Founder or any of his Permitted Transferees
should sell any shares in contravention of this Agreement, such
transfer shall be deemed null and void and the Investors may
proceed to protect and enforce their rights by suit in equity or
by action at law, whether for the specific performance of any
term contained in this Agreement or for an injunction against
the breach of any such term or in furtherance of the exercise of
any power granted in this Agreement, or to enforce any other
legal or equitable right of the Investors or to take one or more
of such actions.
18. RIGHT OF FIRST REFUSAL.
18.1. In the event that any shareholder(s) of the Company (the "Selling
Shareholder") desires to sell or transfer any or all of its shares
to any party other than a Permitted Transferee (the "Offered
Shares"), it shall first give written notice
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thereof ("Notice of Sale") to all other shareholders (collectively
the "Option Holders").
18.2. The Notice of Sale shall state the number of Offered Shares,
whether the Offered Shares will, upon the sale, be free of all
liens, charges and encumbrances, that a bona fide offer has been
received from a third party, the identity of the third party,
and the price and terms of payment for the Offered Shares. Upon
receipt of the Notice of Sale, the Option Holders shall have the
right to exercise the option (the "Option") contained in
Sections 18.3 and 18.4.
18.3. For a period of 20 days after receipt of the Notice of Sale, the
Option Holders collectively may elect to purchase all (but not
part) of the Offered Shares (those Option Holders which exercise
the Option are referred to as the "Buying Shareholders"). The
Option shall be exercised by delivery of a notice by one or more
of the Buying Shareholders to the Selling Shareholder within the
aforesaid 20-day period stating (i) that the Buying Shareholder
intends to acquire its pro rata share of the Offered Shares,
according to the shareholding ratio between the Option Holders
as of the date immediately prior to sending such notice; and
(ii) in the event that the Selling Shareholder receives notices
from Buying Shareholders to buy some, but not all, of the
Offered Shares, how many additional Offered Shares the Buying
Shareholder intends to acquire of the Offered Shares remaining
as a result of the failure of all Buying Shareholders to offer
to buy their pro rata share (the "Remaining Offered Shares").
18.4. If the Selling Shareholder receives notices from all Option
Holders that they wish to exercise the Option, then the Buying
Shareholders shall acquire the Offered Shares pro rata,
according to the shareholding ratio between the Option Holders
as of the date immediately prior to sending their notices. If
the Selling Shareholder receives notices from Buying
Shareholders to buy some, but not all, of the Offered Shares and
the notices of the Buying Shareholders indicate that the Buying
Shareholders intend to buy a number of additional Offered Shares
equal to or greater than the number of the Remaining Offered
Shares, then (i) the Buying Shareholders shall each acquire that
percentage of the Offered Shares which corresponds to its
percentage ownership of the shares held by the Option Holders as
of the date immediately prior to sending their notices and (ii)
the Buying Shareholders shall acquire the Remaining Offered
Shares pro rata according to the number of additional Offered
Shares that each Buying Shareholder offered to acquire in its
notice. The purchase of the Offered Shares shall be on the same
terms and conditions as stated in the Notice of Sale.
18.5. If the notices of the Buying Shareholders indicate that the
Buying Shareholders have not elected to purchase all of the
Offered Shares, then the Selling Shareholder shall be free,
within 90 days of the date of expiration of the Option, to sell
such shares at the price and on the terms contained in the
Notice of Sale. If there is no sale within such 90 day period,
the Selling Shareholder shall not
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sell or transfer the Offered Shares, or any other shares acquired
before or after the date hereof, without again complying with the
provisions of this section.
18.6. In the event that there is a situation in which fractional shares
will need to be transferred, the number of shares will be rounded
up so that only full shares will be transferred.
18.7. The provisions of this Section shall terminate on and not apply to
a Qualified IPO.
18.8. Any provision of this Section to the contrary notwithstanding,
any offering of Preferred C Shares shall first be made to the
other holders of such shares, and the provisions of this
Section shall apply to such offering, mutatis mutandis. In the
event that there shall be any remaining Preferred C Shares which
will not be purchased as aforesaid, such shares shall be offered
to the other Shareholders of the Company, as set forth in this
Section.
18.9. Any provision of this Section to the contrary notwithstanding,
any offering of Preferred D Shares shall first be made to the
other holders of such shares, and the provisions of this
Section shall apply to such offering, mutatis mutandis. In the
event that there shall be any remaining Preferred D Shares which
will not be purchased as aforesaid, such shares shall be offered
to the other Shareholders of the Company, as set forth in this
Section.
18.10. Any provision of this Section to the contrary notwithstanding, in
no event shall any transfer of shares of the Company be effected if
the third party transferee (which is not a shareholder who
exercised its right of first refusal as set forth herein) is in
competition, directly or indirectly, with the Company, as
determined by the Board of Directors of the Company.
Any transfer of shares of the Company or of any rights associated
herewith or granted hereunder shall be effective only if such
transfer is effected in accordance with the provisions of the then
current Articles of Association of the Company, which relate to the
transfer of shares of the Company (including the granting of a right
of first refusal to holders of shares in the Company).
19. INVESTOR TAG-ALONG RIGHTS.
19.1. If (i) any of the Founders or their Permitted Transferees is the
Selling Shareholder (the "Selling Insider"), (ii) the sale is not
to a Permitted Transferee of the Founder, and (iii) all of the
Offered Shares are not sold to the Buying Shareholders pursuant to
Section 18 above, then the provisions of this Section 19 shall
apply.
19.2. The Selling Insider shall so notify the other Option Holders,
describing in such notification the material terms of such proposed
sale. Upon receipt of such
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notice, each of the other Option Holders shall have the right to
exercise the option contained in Section 19.3 below.
19.3. Each of the other Option Holders shall have the option,
exercisable by written notice to the Selling Insider, within 10
business days after receipt of the notice described in Section
above, to require the Selling Insider to provide as part of his
proposed sale that each of the other Option Holders be given the
right to participate, on the same terms and conditions as the
Selling Insider, in the sale pro rata in proportion to the
respective numbers of Shares owned at such time by the Selling
Insider and all Option Holders who participate in the proposed
sale.
19.4. Notwithstanding the aforesaid, if any of the Founders or their
Permitted Transferees shall sell shares of the Company in a
transaction or series of transactions which result in a change in
control of the Company, the Investors shall have the right to
participate in such transaction and to sell all of their shares in
the Company in that transaction.
19.5. Notwithstanding Sections 19.1 through 19.3, each Founder shall be
permitted to sell, free of the limitations of Sections through
19.3, the number of shares which represents 5% of the shares in the
Company held by the Founder as of August 24, 1998.
19.6. The provisions of this Section 19 shall terminate on a Qualified
IPO.
20. BRING-ALONG.
Notwithstanding anything to the contrary in this Agreement including in Section
18 and 19 herein above, at any time prior to the Company's Qualified IPO, in the
event that (i) one or more bona fide offers from any third party person or
entity (the "Offeror") is made to purchase shares and, (ii) such sale is
conditioned upon the sale of all of the remaining issued shares of the Company
to the Offeror, and (iii) shareholders holding 85% (eighty-five percent) of the
Company's outstanding share capital (the "Proposing Shareholders") propose to
sell all of their shares to such Offeror, then all remaining shareholders (the
"Non-Proposing Shareholders") will be required, if so demanded by the Proposing
Shareholders, to sell their Shares to such Offeror at the same price and upon
the same terms and conditions as in the offer made to the Proposing
Shareholders. In such event, any sale, assignment, transfer, pledge,
hypothecation, mortgage, disposal or encumbrance of shares by the Non-Proposing
Shareholders other than in connection with the proposed acquisition shall be
absolutely prohibited.
21. INTENTIONALLY DELETED
22. AMENDMENT
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) with
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the written consent of the Founders and the holders of 75% of each of the issued
and outstanding (i) Preferred A Shares, (ii) Preferred B Shares, (iii) Preferred
C Shares and (iv) Preferred D Shares, of the Company.
23. MISCELLANEOUS
23.1. Further Assurances. 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.
23.2. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed according to the laws of the State of Israel, without
regard to the conflict of laws provisions thereof, and the parties
hereto irrevocably submit to the jurisdiction of the Courts of
Israel in respect of any dispute or matter arising out of or
connected with this Agreement.
23.3. Successors and Assigns; Assignment. Except as otherwise
expressly limited herein and as set forth in Section 9 above,
the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto. None of the rights,
privileges, or obligations set forth in, arising under, or
created by this Agreement may be assigned or transferred without
the prior consent in writing of each party to this Agreement,
except as set forth in Section 9 above and except that, upon the
consummation of a transfer of shares to a Permitted Transferee
and such Permitted Transferee's agreement in writing to be bound
by and assume all obligations of the transferor (as a
Shareholder) under all agreements with the Company, such
Permitted Transferee shall succeed to all rights and privileges
of the transferor (as a Shareholder) under this Agreement and
all other agreements with the Company.
Without derogating from the provisions of the previous paragraph,
no assignment or transfer under this Section 23.3 shall be made
unless the transferee agrees to be bound by all agreements binding
upon the Shareholders immediately prior to such transfer.
23.4. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the
subject matter hereof. This Agreement amends and replaces the SRA.
23.5. Section Headings; Preamble. All article and section headings are
inserted for convenience only and shall not modify or affect the
construction or interpretation of any provision of this Agreement.
The preamble to this Agreement is incorporated herein and forms an
integral part of this Agreement.
23.6. Notices, etc. All notices and other communications required or
permitted hereunder are to be given pursuant to the provisions of,
and to the addresses set
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forth in the members' registry of the Company, as may be amended by
time to time by notice from any Shareholder.
23.7. Delays or Omissions. 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. Any
waiver, permit, consent, or approval of any kind or character on
the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by
law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.
23.8. Severability. 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.
23.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and
enforceable against the parties actually executing such
counterpart, and all of which together shall constitute one and the
same instrument.
23.10. Waiver of Veto Rights. Except as expressly provided herein, each
Investor executing this Agreement expressly waives any veto right
or negative covenant which it possesses in any organ of the Company
as to any of the matters covered by this Agreement.
23.11. For purposes of determining the availability of any right or the
applicability of any limitation under this Agreement, all Preferred
C Shares, or any other securities, held or acquired by any IIF
Investor shall be aggregated, and the IIF Investors and any such
transferees be viewed as a single Investor or shareholder, as
applicable.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first
hereinabove set forth.
▇▇▇▇▇▇▇▇.▇▇▇ LTD. ISRAEL SEED II L.P.,
By its general partner, SEED
VENTURE PARTNERS LTD.
By:________________________
Name: By:________________________
Title: Name:
Title:
___________________________ ___________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
UNICYCLE TRADING COMPANY, L.P. ODEON CAPITAL PARTNERS, L.P.
By: Odeon Capital, L.L.C
By:________________________
Name: By:________________________
Title: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Member
M.L. TRUST COMPANY LTD.
By:________________________
Name:
Title:
NOMURA INTERNATIONAL PLC
By:________________________
Name:
Title:
SIGNATURE ON SCHEDULE A OF THIS AGREEMENT BY CERTAIN PARTIES CONSTITUTES
EXECUTION IN FULL OF THIS AGREEMENT
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SCHEDULE A TO SHAREHOLDERS RIGHTS AGREEMENT The signature of
each Investor on this Schedule shall constitute execution of
this Shareholders Rights Agreement
NAME SIGNATURE
WaterView Partners, L.P.
By _________________________
Odeon Capital Partners, L.P.
By _________________________
Israel Infinity Venture Capital Fund
(Israel) LP By _________________________
Israel Infinity Venture Capital Fund
(Delaware) LP By _________________________
Israel Infinity Venture Capital Fund
(Cayman I) LP By _________________________
Israel Infinity Venture Capital Fund
(Cayman II) LP By _________________________
Levitin Charitable Trust
By _________________________
By _________________________
By _________________________
By _________________________
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