REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November
26, 2003, by and among Commtouch Software Ltd., a corporation organized under
the laws of the State of Israel, with headquarters located at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ (the "Company"), and the
undersigned buyers (each, a "Buyer", and collectively, the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions set forth
in the Securities Purchase Agreement, to issue and sell to each Buyer (i) senior
secured convertible notes of the Company (the "Initial Notes"), which will be
convertible into the Company's ordinary shares, NIS 0.05 nominal value per share
(the "Ordinary Shares") (as converted, the "Initial Conversion Shares") in
accordance with the terms of the Initial Notes, and (ii) warrants (the "Initial
Warrants"), which will be exercisable to purchase Ordinary Shares (as exercised
collectively, the "Initial Warrant Shares").
B. In connection with the Securities Purchase Agreement, each Buyer has
the right, upon the terms and subject to the conditions set forth in the
Securities Purchase Agreement, to require the Company to issue and sell to such
Buyer (i) additional senior secured convertible notes of the Company (the
"Additional Notes", and collectively with the Initial Notes, the "Notes"), which
will be convertible into Ordinary Shares (as converted, the "Additional
Conversion Shares", and collectively with the Initial Conversion Shares, the
"Conversion Shares") in accordance with the terms of the Additional Notes, and
(ii) additional warrants (the "Additional Warrants", and collectively with the
Initial Warrants, the "Warrants"), which will be exercisable to purchase
Ordinary Shares (as exercised collectively, the "Additional Warrant Shares", and
collectively with the Initial Warrant Shares, the "Warrant Shares").
C. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Additional Registrable Securities" means (i) the
Additional Conversion Shares issued or issuable upon conversion of all of the
Additional Notes actually purchased, (ii) the Additional Warrant Shares issued
or issuable upon exercise of the Additional Warrants and (iii) any share capital
of the Company issued or issuable with respect to the Additional Conversion
Shares, the Additional Notes, the Additional Warrant Shares or the Additional
Warrants as a result of any share split, share dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversions of Additional Notes or exercise of the Additional Warrants.
b. "Additional Registration Statement" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering any Additional Registrable Securities.
c. "Business Day" means any day other than Saturday, Sunday or
any other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
d. "Effectiveness Deadline" means the Initial Effectiveness
Deadline (as defined below) and the Additional Effectiveness Deadline (as
defined below), as applicable.
e. "Filing Deadline" means the Initial Filing Deadline (as
defined below) and the Additional Filing Deadline (as defined below), as
applicable.
f. "Initial Registrable Securities" means (i) the Initial
Conversion Shares issued or issuable upon conversion of the Initial Notes, (ii)
the Initial Warrant Shares issued or issuable upon exercise of the Initial
Warrants and (iii) any share capital of the Company issued or issuable with
respect to the Initial Conversion Shares, the Initial Notes, the Initial Warrant
Shares or the Initial Warrants as a result of any share split, share dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitations on conversions of the Initial Notes or exercises of the Initial
Warrants.
g. "Initial Registration Statement" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering the Initial Registrable Securities.
h. "Investor" means a Buyer or any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section 9
and any transferee or assignee thereof to whom a transferee or assignee assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.
i. "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
j. "register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in
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compliance with the 1933 Act and pursuant to Rule 415 and the declaration or
ordering of effectiveness of such Registration Statement(s) by the SEC.
k. "Registrable Securities" means the Initial Registrable
Securities and the Additional Registrable Securities.
l. "Registration Statement" means the Initial Registration
Statement and the Additional Registration Statement(s).
m. "Rule 415" means Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous or delayed
basis.
n. "SEC" means the United States Securities and Exchange
Commission.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. Registration.
a. Initial Mandatory Registration. The Company shall prepare,
and, as soon as practicable but in no event later than 10 days after the Initial
Closing Date (as defined in the Securities Purchase Agreement) (the "Initial
Filing Deadline"), file with the SEC the Initial Registration Statement on Form
F-3 covering the resale of all of the Initial Registrable Securities. In the
event that Form F-3 is unavailable for such a registration, the Company shall
use such other form as is available for such a registration, subject to the
provisions of Section 2(e). The Initial Registration Statement prepared pursuant
hereto shall register for resale at least the number of Ordinary Shares equal to
the product of (x) 1.3 and (y) the number of Initial Registrable Securities as
of the trading day immediately preceding the date the Initial Registration
Statement is initially filed with the SEC, subject to adjustment as provided in
Section 2(f). The Initial Registration Statement shall contain (except if
otherwise directed by the holders of at least a majority of the Registrable
Securities) the "Selling Shareholders" section in substantially the form
attached hereto as Exhibit B and the "Plan of Distribution" attached hereto as
Exhibit B. The Company shall use its best efforts to have the Initial
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the date which is 90 days after the Initial Closing Date
(the "Initial Effectiveness Deadline").
b. Additional Mandatory Registration. The Company shall
prepare, and, as soon as practicable but in no event later than 30 days after
the earlier of (x) each Additional Closing Date (as defined in the Securities
Purchase Agreement) at which an aggregate of at least $750,000 in principal
amount of Additional Notes are purchased by one or more Buyers or their
successors or assigns or after which there is an aggregate of at least $750,000
in principal amount of Additional Notes that have purchased by one or more
Buyers or their successors or assigns that have not had their related Additional
Registrable Securities previously registered hereunder or (y) such time after
any Additional Notes are purchased that no additional Additional Notes are
available or are permitted to be purchased pursuant to the Securities Purchase
Agreement (each, an "Additional Filing Deadline"), file with the SEC an
Additional Registration Statement on Form F-3 covering the resale of all of the
Additional
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Registrable Securities not previously registered on an Additional Registration
Statement hereunder. In the event that Form F-3 is unavailable for such a
registration, the Company shall use such other form as is available for such a
registration, subject to the provisions of Section 2(e). Each Additional
Registration Statement prepared pursuant hereto shall register for resale at
least that number of Ordinary Shares equal to the product of (x) 1.3 and (y) the
number of Additional Registrable Securities as of the trading day immediately
preceding the date the Additional Registration Statement is initially filed with
the SEC, subject to adjustment as provided in Section 2(f). Each Additional
Registration Statement shall contain (except if otherwise directed by the
holders of at least a majority of the Registrable Securities) the "Selling
Shareholders" section in substantially the form attached hereto as Exhibit B and
the "Plan of Distribution" attached hereto as Exhibit B. The Company shall use
its best efforts to have each Additional Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the date
which is 90 days after the applicable Additional Closing Date (each, an
"Additional Effectiveness Deadline").
c. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and any increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any Ordinary Shares included in a
Registration Statement and which remain allocated to any Person which ceases to
hold any Registrable Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement. Other than shares issued in connection with the
conversion of the Old Notes (as defined in the Securities Purchase Agreement),
in no event shall the Company include any securities other than Registrable
Securities on any Registration Statement without the prior written consent of
Buyers holding at least a majority of the Registrable Securities.
d. Legal Counsel. Subject to Section 5 hereof, the Buyers
holding at least a majority of the Registrable Securities shall have the right
to select one legal counsel to review and oversee any registration pursuant to
this Section 2 ("Legal Counsel"), which shall be ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP or
such other counsel as thereafter designated by the holders of at least a
majority of the Registrable Securities. The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company's obligations
under this Agreement.
e. Ineligibility for Form F-3. In the event that Form F-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the holders of
at least a majority of the Registrable Securities and (ii) undertake to register
the Registrable Securities on Form F-3 as soon as such form is available,
provided that the Company shall maintain the effectiveness of the Registration
Statement then in effect until
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such time as a Registration Statement on Form F-3 covering the Registrable
Securities has been declared effective by the SEC.
f. Sufficient Number of Shares Registered. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) or 2(b) is insufficient to cover all of the Registrable Securities
required to be covered by such Registration Statement or an Investor's allocated
portion of the Registrable Securities pursuant to Section 2(c), the Company
shall amend the applicable Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or both, so as
to cover at least 130% of the number of such Registrable Securities as of the
trading day immediately preceding the date of the filing of such amendment or
new Registration Statement, in each case, as soon as practicable, but in any
event not later than fifteen (15) days after the necessity therefor arises. The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities issued or issuable upon conversion of the Notes and upon exercise of
the Warrants covered by such Registration Statement is greater than 110% of the
number of Ordinary Shares available for resale under such Registration
Statement. The calculation set forth in the foregoing sentence shall be made
without regard to any limitations on the conversion of the Notes or the exercise
of the Warrants and such calculation shall assume that the Notes and the
Warrants are then convertible into Ordinary Shares at the then prevailing
Conversion Rate (as defined in the Notes) or Warrant Exercise Price (as defined
in the Warrants), as applicable.
g. Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement. If (i) a Registration Statement
covering all of the Registrable Securities required to be covered thereby and
required to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the respective Filing Deadline or (B) not declared
effective by the SEC on or before the respective Effectiveness Deadline or (ii)
on any day after such Registration Statement has been declared effective by the
SEC sales of all of the Registrable Securities required to be included on such
Registration Statement cannot be made (other than during an Allowable Grace
Period (as defined in Section 3(r)) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register a sufficient
number of Ordinary Shares) then, as partial relief for the damages to any holder
by reason of any such delay in or reduction of its ability to sell the
underlying Ordinary Shares (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder of
Notes relating to such Registration Statement an amount in cash equal to the
product of (i) the aggregate Principal (as such term is defined in the Notes)
convertible into Conversion Shares included in such Registration Statement of
such Investor's Notes multiplied by (ii) the sum of (A) 0.02, if such
Registration Statement is not filed by the applicable Filing Deadline, plus (B)
0.02, if such Registration Statement is not declared effective by the applicable
Effectiveness Deadline, plus (C) the product of (I) 0.00067 multiplied by (II)
the sum of (x) the number of days after the applicable Filing Deadline that the
Registration Statement is not filed with the SEC, plus (y) the number of days
after the applicable Effectiveness Deadline that the
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Registration Statement is not declared effective by the SEC, plus (z) the number
of days, in each instance, after the Registration Statement has been declared
effective by the SEC that such Registration Statement is not available (other
than during an Allowable Grace Period) for the sale of all of the Registrable
Securities required to be included on such Registration Statement. The payments
to which a holder shall be entitled pursuant to this Section 2(g) are referred
to herein as "Registration Delay Payments." Registration Delay Payments shall be
paid on the earlier of (I) the last day of the calendar month during which such
Registration Delay Payments are incurred and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is cured. In
the event the Company fails to make Registration Delay Payments in a timely
manner, such Registration Delay Payments shall bear interest at the rate of 1.5%
per month (prorated for partial months) until paid in full.
3. Related Obligations.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f), the Company
will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall submit to the SEC, within two (2)
Business Days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on a particular Registration Statement, as the case may
be, a request for acceleration of effectiveness of such Registration Statement
to a time and date not later than 48 hours after the submission of such request.
The Company shall keep each Registration Statement effective pursuant to Rule
415 at all times until the earlier of (i) the date as of which the Investors may
sell all of the Registrable Securities covered by such Registration Statement
without restriction pursuant to Rule 144(k) (or any successor thereto)
promulgated under the 1933 Act or (ii) the date on which the Investors shall
have sold all of the Registrable Securities covered by such Registration
Statement (the "Registration Period"). The Company shall ensure that each
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein (in the case of prospectuses, in the
light of the circumstances in which they were made) not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 6-K, Form
20-F or any analogous report under the Securities
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Exchange Act of 1934, as amended (the "1934 Act"), the Company shall have
incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) a Registration Statement at least five (5) Business Days prior
to its filing with the SEC and (ii) all amendments and supplements to all
Registration Statements (except for Annual Reports on Form 20-F, and Reports on
Form 6-K and any similar or successor reports) within a reasonable number of
days prior to their filing with the SEC, and (B) not file any Registration
Statement or amendment or supplement thereto in a form to which Legal Counsel
reasonably objects. The Company shall not submit a request for acceleration of
the effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to Legal Counsel, without
charge, (i) copies of any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits and (iii) upon the effectiveness of
any Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel in performing the Company's
obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10)
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.
e. The Company shall use its best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection
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therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and, subject to Section
3(r), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Investor (or such other
number of copies as Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each Investor in writing
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel and each Investor by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
h. In connection with any due diligence required by an
Investor (in which case the Company shall not be subject to not providing any
material, non-public information to the extent any of the following is requested
by such Investor), the Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
retained by the Investors (collectively, the "Inspectors"), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree to hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of
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any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement of which the Inspector has knowledge. Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (or in any
other confidentiality agreement between the Company and any Investor) shall be
deemed to limit the Investors' ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and regulations.
i. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
j. The Company shall use its best efforts either to (i) cause
all of the Registrable Securities covered by a Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all of the Registrable Securities
covered by a Registration Statement on the Nasdaq National Market if securities
of the same class or series issued by the Company are then listed on the Nasdaq
National Market if the listing of such Registrable Securities is then permitted
under the rules of the Nasdaq National Market, or (iii) if the preceding clauses
(i) and (ii) are inapplicable, to secure the inclusion for quotation on The
Nasdaq SmallCap Market for such Registrable Securities and, without limiting the
generality of the foregoing, to use its best efforts to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(k) to the extent permitted by the rules of the exchange or
market involved.
k. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation
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and delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Registration Statement
and enable such certificates to be in such denominations or amounts, as the case
may be, as the Investors may reasonably request and registered in such names as
the Investors may request.
l. If requested by an Investor, the Company shall (i) as soon
as practicable incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering; (ii) as soon as practicable make all required filings of
such prospectus supplement or post-effective amendment after being notified of
the matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) as soon as practicable, supplement or make amendments to
any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.
m. The Company shall use its best efforts to cause the
Registrable Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
n. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with, and in the manner provided by, the provisions of Rule 158 under the ▇▇▇▇
▇▇▇) covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date of a Registration
Statement.
o. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
p. Within two (2) Business Days after a Registration Statement
which covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.
q. Notwithstanding anything to the contrary herein, at any
time after the Registration Statement has been declared effective by the SEC,
the Company may delay the disclosure of material, non-public information
concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company and its counsel, in the
best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a "Grace Period"); provided, that the Company shall promptly
(i) notify the Investors in writing of the existence of material, non-public
information giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material,
10
non-public information to the Investors) and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which the
Grace Period ends; and, provided further, that no Grace Period shall exceed five
(5) consecutive days and during any three hundred sixty five (365) day period
such Grace Periods shall not exceed an aggregate of twenty (20) days and the
first day of any Grace Period must be at least two (2) trading days after the
last day of any prior Grace Period (each, an "Allowable Grace Period"). For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Investors receive the notice referred to
in clause (i) and shall end on and include the later of the date the Investors
receive the notice referred to in clause (ii) and the date referred to in such
notice. The provisions of Section 3(g) hereof shall not be applicable during the
period of any Allowable Grace Period. Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material, non-public
information is no longer applicable. Notwithstanding anything to the contrary,
the Company shall cause its transfer agent to deliver unlegended Ordinary Shares
to a transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale, and delivered
a copy of the prospectus included as part of the applicable Registration
Statement, prior to the Investor's receipt of the notice of a Grace Period and
for which the Investor has not yet settled.
4. Obligations of the Investors.
a. At least five (5) Business Days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to
11
deliver unlegended Ordinary Shares to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreement in connection with any sale
of Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor's receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f) and for which the Investor has not yet settled, provided that
the Investor has confirmed in writing to the Company that it has delivered the
prospectus included in the Registration Statement, as the same may have been
supplemented by the Company, to any Person to whom such Buyer is transferring
any of the Conversion Shares or the Warrant Shares.
5. Expenses of Registration.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The Company shall also reimburse the Investors for the fees and disbursements of
Legal Counsel in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement which amount shall be limited to $10,000
for the Initial Registration Statement and $5,000 for each Additional
Registration Statement.
6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, members, partners, employees, agents, representatives of,
and each Person, if any, who controls any Investor within the meaning of the
1933 Act or the 1934 Act (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys' fees, amounts paid in settlement or expenses, joint or
several, (collectively, "Claims") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("Indemnified
Damages"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("Blue Sky Filing"), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in the
12
light of the circumstances under which the statements therein were made, not
misleading, (iii) any violation or alleged violation by the Company of the 1933
Act, the 1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities pursuant to a Registration Statement or (iv)
any material violation of this Agreement (the matters in the foregoing clauses
(i) through (iv) being, collectively, "Violations"). Subject to Section 6(c),
the Company shall reimburse the Indemnified Persons, promptly as such expenses
are incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(d); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such Person from
whom the Person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any Person controlling such
Person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(d), and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
violation and such Indemnified Person, notwithstanding such advice, used it or
failed to deliver the correct prospectus as required by the 1933 Act and such
correct prospectus was timely made available pursuant to Section 3(d); (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company, including a corrected prospectus, if such prospectus or corrected
prospectus was timely made available by the Company pursuant to Section 3(d);
and (iv) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement and each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each, an "Indemnified Party"), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(c), such
Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this
13
Section 6(b) and the agreement with respect to contribution contained in Section
7 shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld or delayed; provided, further, however, that
the Investor shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation. Following
indemnification as provided
14
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no Person involved in the sale of Registrable Securities which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the ▇▇▇▇ ▇▇▇) in connection with such sale shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.
8. Reports Under the 1934 Act.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act so long as the Company
remains subject to such requirements and the filing of such reports and other
documents is required for compliance with the public information provisions of
Rule 144(c); and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company, if true, that it has
15
complied with the public information requirements of Rule 144(c) and the 1934
Act, (ii) a copy of the most recent annual report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. Assignment of Registration Rights.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such Investor's
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.
10. Amendment of Registration Rights.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least a majority of the Registrable Securities.
Any amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company. No such amendment shall be effective
to the extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. Miscellaneous.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the such record owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a
16
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Commtouch Software Ltd.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇-▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇-▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
Copy to:
Commtouch Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to Legal Counsel:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such
17
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a courier or overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
The Company hereby irrevocably appoints ▇▇▇▇ ▇▇▇▇▇, Esq., at Commtouch
Inc, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, as its agent for the
receipt of service of process in connection with any action pursuant to any
Transaction Document in the United States. The Company agrees that any document
may be effectively served on it in connection with any action, suit or
proceeding in the United States by service on its agents.
Any document shall be deemed to have been duly served if marked for the
attention of the agent at its address (as set out above) or such other address
in the United States as may be notified to the party wishing to serve the
document and delivered in accordance with the notice provisions set forth in
this Section 11(b).
If the Company's agent at any time ceases for any reason to act as
such, the Company shall appoint a replacement agent having an address for
service in the United States and shall notify each Buyer in writing of the name
and address of the replacement agent. Failing such appointment and notification,
each Buyer shall be entitled by notice to the Company to appoint a replacement
agent to act on the Company's behalf. The provisions of this Section 11(b)
applying to service on an agent apply equally to service on a replacement agent.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or
18
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, the other Transaction Documents (as defined
in the Securities Purchase Agreement) and the instruments referenced herein and
therein constitute the entire agreement among the parties hereto with respect to
the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations required to be made
by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding at least a majority of the
Registrable Securities, determined as if all of the Notes held by Investors then
outstanding have been converted into Registrable Securities and all Warrants
then outstanding have been exercised for Registrable Securities without regard
to any limitations on conversion of the Notes or on exercises of the Warrants.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
19
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
20
IN WITNESS WHEREOF, each Buyer and the Company have caused this
Registration Rights Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
COMMTOUCH SOFTWARE LTD. SMITHFIELD FIDUCIARY LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. Chill
------------------------------ ------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. Chill
Title: Chief Executive Officer Title: Authorized Signatory
OMICRON MASTER TRUST
By: /s/ ▇▇▇▇ ▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President and Chief Title: Managing Partner
Technology Officer
CRANSHIRE CAPITAL L.P.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President-Downsview Capital
The General Partner
VERTICAL VENTURES INVESTMENTS, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Partner
Israel Seed IV, L.P.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
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Signature
▇▇▇▇ ▇▇▇▇▇, Director
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Name and Title of Signatory
SCHEDULE OF BUYERS
Buyer's Address Buyer's Representative's Address
Buyer and Facsimile Number and Facsimile Number
----- -------------------- --------------------
Smithfield Fiduciary LLC c/o Highbridge Capital Management, LLC ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇ ▇. Chill Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Omicron Master Trust c/o Omicron Capital
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Cranshire Capital L.P. c/o Downsview Capital, Inc.
The General Partner
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Vertical Ventures, LLC c/o Vertical Ventures, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Israel Seed IV, L.P. ▇/▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇ G.T.,
▇▇▇▇▇▇ House, South
Church Street, Grand Cayman, Cayman Islands
Telephone: (▇▇▇) ▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇)
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
▇▇▇▇▇ Fargo Shareholder Services
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Account Manager, Shareowner Services
Re: Commtouch Software Ltd.
Ladies and Gentlemen:
[We are][I am] counsel to Commtouch Software Ltd., a corporation
organized under the laws of the State of Israel (the "Company"), and have
represented the Company in connection with that certain Securities Purchase
Agreement (the "Securities Purchase Agreement") entered into by and among the
Company and the buyers named therein (collectively, the "Holders") pursuant to
which the Company issued to the Holders senior secured convertible notes (the
"Notes") convertible into the Company's ordinary shares, NIS 0.05 nominal value
per share (the "Ordinary Shares") and warrants exercisable for Ordinary Shares
(the "Warrants"). Pursuant to the Securities Purchase Agreement, the Company
also has entered into a Registration Rights Agreement with the Holders (the
"Registration Rights Agreement") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the Ordinary Shares issuable upon
conversion of the Notes and the Ordinary Shares issuable upon exercise of the
Warrants, under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
on Form F-3 (File No. 333-_____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling shareholder thereunder.
In connection with the foregoing, [we][I] advise you that a member of
the SEC's staff has advised [us][me] by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933 Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have
no knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
This letter shall serve as our standing opinion to you that the
Ordinary Shares are freely transferable by the Holders pursuant to the
Registration Statement. Provided you receive a written representation from each
of the Holders in the form attached hereto as Annex I, you need not require
further letters from us to effect any future legend-free issuance or reissuance
of
Ordinary Shares to the Holders as contemplated by the Company's Irrevocable
Transfer Agent Instructions dated December __, 2003. This letter shall serve as
our standing instructions to you with regard to this matter.
Very truly yours,
[ISSUER'S COUNSEL]
By:
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CC: [LIST NAMES OF HOLDERS]
Annex I
SHAREHOLDER REPRESENTATION
The undersigned hereby represents to Commtouch Software Ltd. and to its
transfer agent ▇▇▇▇▇ Fargo Shareholder Services that the Prospectus of Commtouch
Software Ltd. dated ________, 200_____, as supplemented, covering the resale of
up to __________ Ordinary Shares of Commtouch Software Ltd. by selling
securityholders named therein, has been delivered to the purchaser of shares to
be sold by the undersigned, who is one of the selling securityholders named
therein.
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Signature
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Date
EXHIBIT B
SELLING SHAREHOLDERS
The ordinary shares being offered by the selling shareholders are
issuable upon conversion of the convertible notes and upon exercise of the
warrants. For additional information regarding the convertible notes and
warrants, see "Private Placement of Convertible Notes and Warrants" above. We
are registering the ordinary shares in order to permit the selling shareholders
to offer the shares for resale from time to time. Except for the ownership of
the convertible notes and the warrants, the selling shareholders have not had
any material relationship with us within the past three years.
The table below lists the selling shareholders and other information
regarding the beneficial ownership of the ordinary shares by each of the selling
shareholders. The second column lists the number of ordinary shares beneficially
owned by each selling shareholder, based on its ownership of the convertible
notes and the warrants, as of ________, 200_, assuming conversion of all
convertible notes and exercise of the warrants held by the selling shareholders
on that date, without regard to any limitations on conversions or exercise.
The third column lists the ordinary shares being offered by this
prospectus by the selling shareholders.
In accordance with the terms of registration rights agreements with the
holders of the convertible notes and the warrants, this prospectus generally
covers the resale of at least 130% of that number of ordinary shares equal to
the number of ordinary shares issuable upon conversion of the convertible notes
and upon exercise of the related warrants, determined as if the outstanding
convertible notes and warrants were converted or exercised, as applicable, in
full, in each case, as of the trading day immediately preceding the date this
registration statement was initially filed with the SEC. Because the conversion
price of the convertible notes and the exercise price of the warrants may be
adjusted, the number of shares that will actually be issued may be more or less
than the number of shares being offered by this prospectus. The fourth column
assumes the sale of all of the shares offered by the selling shareholders
pursuant to this prospectus.
Under the terms of the convertible notes and the warrants, a selling
shareholder may not convert the convertible notes, or exercise the warrants, to
the extent such conversion or exercise would cause such selling shareholder,
together with its affiliates, to beneficially own a number of ordinary shares
which would exceed 4.99% of our then outstanding ordinary shares following such
conversion or exercise, excluding for purposes of such determination ordinary
shares issuable upon conversion of the convertible notes which have not been
converted and upon exercise of the warrants which have not been exercised. The
number of shares in the second column does not reflect this limitation. The
selling shareholders may sell all, some or none of their shares in this
offering. See "Plan of Distribution."
Maximum Number of Shares
Number of Shares Owned to be Sold Pursuant to Number of Shares
Name of Selling Shareholder Prior to Offering this Prospectus Owned After Offering
--------------------------- ----------------- --------------- --------------------
Smithfield Fiduciary LLC (1) [___] [___] [0]
Omicron Master Trust (2) [___] [___] [0]
Cranshire Capital L.P. (3)
Vertical Ventures, LLC (4)
Israel Seed IV, L.P. (5)
(1) Highbridge Capital Management, LLC ("Highbridge"), is the trading
manager of Smithfield Fiduciary LLC ("Smithfield") and consequently has voting
control and investment discretion over the ordinary shares held by Smithfield.
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ control Highbridge. Each of Highbridge and Messrs.
▇▇▇▇▇ and ▇▇▇▇▇▇ disclaims beneficial ownership of the shares held by
Smithfield.
(2)
(3)
(4)
(5)
PLAN OF DISTRIBUTION
We are registering the ordinary shares issuable upon conversion of the
convertible notes and upon exercise of the warrants to permit the resale of
these ordinary shares by the holders of the convertible notes and the warrants
from time to time after the date of this prospectus. We will not receive any of
the proceeds from the sale by the selling shareholders of the ordinary shares.
We will bear all fees and expenses incident to our obligation to register the
ordinary shares.
The selling shareholders may sell all or a portion of the ordinary
shares beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents. If the ordinary
shares are sold through underwriters or broker-dealers, the selling shareholders
will be responsible for underwriting discounts or commissions or agent's
commissions. The ordinary shares may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may
be effected in transactions, which may involve crosses or block transactions,
o on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of
sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems
or in the over-the-counter market;
o through the writing of options, whether such options are
listed on an options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling securityholders to
sell a specified number of such shares at a stipulated price
per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling shareholders effect such transactions by selling
ordinary shares to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling shareholders or
commissions from purchasers of the ordinary shares for whom they may act as
agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the ordinary shares or otherwise, the selling shareholders may
enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the ordinary shares in the course of hedging in positions they
assume. The selling shareholders may also sell ordinary shares short and deliver
ordinary shares covered by this prospectus to close out short positions. The
selling shareholders may also loan or pledge ordinary shares to broker-dealers
that in turn may sell such shares.
The selling shareholders may pledge or grant a security interest in
some or all of the convertible notes, warrants or ordinary shares owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the ordinary shares from time to
time pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling shareholders to include the
pledgee, transferee or other successors in interest as selling shareholders
under this prospectus. The selling shareholders also may transfer and donate the
ordinary shares in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.
The selling shareholders and any broker-dealer participating in the
distribution of the ordinary shares may be deemed to be "underwriters" within
the meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the ordinary shares is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of ordinary shares
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the ordinary shares may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the ordinary shares may not be sold unless such shares
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There can be no assurance that any selling shareholder will sell any or
all of the ordinary shares registered pursuant to the shelf registration
statement, of which this prospectus forms a part.
The selling shareholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the ordinary shares by the selling shareholders
and any other participating person. Regulation M may also restrict the ability
of any person engaged in the distribution of the ordinary shares to engage in
market-making activities with respect to the ordinary shares. All of the
foregoing may affect the marketability of the ordinary shares and the ability of
any person or entity to engage in market-making activities with respect to the
ordinary shares.
We will pay all expenses of the registration of the ordinary shares
pursuant to the registration rights agreement, estimated to be $[ ] in total,
including, without limitation, Securities and Exchange Commission filing fees
and expenses of compliance with state securities or "blue sky" laws; provided,
however, that a selling shareholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling shareholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling shareholders will be
entitled to contribution. We may be indemnified by the selling shareholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
shareholder specifically for use in this prospectus, in accordance with the
related registration rights agreements, or we may be entitled to contribution.
Once sold under the shelf registration statement, of which this
prospectus forms a part, the ordinary shares will be freely tradable in the
hands of persons other than our affiliates.