EXHIBIT 4.2
SHAREHOLDERS RIGHTS AGREEMENT
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THIS SHAREHOLDERS RIGHTS AGREEMENT (this "Agreement") made as of the 22nd day of
June, 1999, by and among
ACCORD TELECOMMUNICATIONS LTD., a company organized under the laws of the State
of Israel, registered under number 00-000000-0, with offices at 00 Xxxxxx Xxxx
Xxxxxx, Xxxxxx Xxxx, Xxxxxx Xxxxx, Xxxxxx (the "Company"); and
the Ordinary Shareholders listed in Schedule 1A (the "Ordinary Shareholders");
and
the Preferred A Shareholders listed in Schedule 1B (the "Preferred A
Shareholders"); and
the Preferred B Shareholders listed in Schedule 1C (the "Preferred B
Shareholders"); and
each of the investors listed in Schedule 1D hereto (the "Preferred C
Shareholders"); and
WHEREAS: The Preferred C Shareholders are entering into a Subscription Agreement
with the Company, dated as of the date of this Agreement (the
"Subscription Agreement"), pursuant to which the Preferred C
Shareholders will be the holders of all of the issued and outstanding
Voting Series C Preferred Shares of the Company and the Non-Voting
Series C Preferred Shares of the Company (collectively, the "Series C
Preferred Shares"); and
WHEREAS: The Preferred A Shareholders are the holders of Series A Preferred
Shares of the Company (the "Series A Preferred Shares"), and the
Preferred B Shareholders are the holders of Series B Preferred Shares
of the Company (the "Series B Preferred Shares") (the Series A
Preferred Shares, the Series B Preferred and Series C Preferred Shares
are referred to hereinafter as the "Preferred Shares"), and the
Ordinary Shareholders are the holders of Ordinary Shares or rights to
acquire Ordinary Shares of the Company (the "Ordinary Shares"); and
WHEREAS: The Preferred A Shareholders have previously invested in, and
subscribed for shares of, the Company, as more fully described in that
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certain subscription agreement dated June 14, 1995 (the "Series A
Subscription Agreement"), in which the Company granted certain rights
to the Preferred A Shareholders and to certain Ordinary Shareholders;
and
WHEREAS: The Preferred B Shareholders, other than the Concord Entities, as
defined in Schedule 1C, have previously invested in, and subscribed
for shares of, the Company, as more fully described in that certain
subscription agreement dated February 28, 1996 (the "Series B
Subscription Agreement"), in which the Company granted certain rights
to the Preferred B Shareholders, the Preferred A Shareholders and to
certain Ordinary Shareholders; and
WHEREAS: The Concord Entities, as defined in Schedule 1C, have previously
invested in, and subscribed for shares of, the Company, as more fully
described in that certain subscription agreement dated March 10, 1998
(the "Concord Subscription Agreement"), in which the Company granted
certain rights to the Concord Entities; and
WHEREAS: The parties desire to set forth provisions governing the registration
of the Company's securities and certain other matters involving the
rights of the shareholders of the Company, and to terminate and
supersede the Series A Subscription Agreement, the Series B
Subscription Agreement and the Concord Subscription Agreement with
this Agreement;
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties hereby agree as follows:
1. DEFINITIONS
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The following terms shall have, for the purposes of this Agreement, the
meanings ascribed to them below:
1.1. "Holder" shall mean any holder of Registrable Shares (as defined
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herein) as of the date hereof or who will become a holder of
Registrable Shares pursuant to Sections 1.5(i) or 1.5(ii) below or as
otherwise set forth in this Agreement and any person to whom
Registrable Shares are transferred and to whom the rights pursuant
hereto have been assigned with the prior written consent of the
Company.
1.2. "Preferred Holder" shall mean a Holder who is a Preferred A
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Shareholder, a Preferred B Shareholder or a Preferred C Shareholder.
1.3. "Qualified Preferred Holder" shall mean a Preferred Holder who holds
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as of the date hereof at least 350,000 Preferred Shares and/or the
Ordinary Shares into which the Preferred Shares were converted.
1.4. "Initiating Preferred Holder" shall mean a Qualified Preferred
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Holder at such times that it holds at least 350,000 Preferred Shares
and/or Ordinary Shares into which Preferred Shares were converted.
1.5. "Registrable Shares" shall mean (i) all of the issued and
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outstanding Ordinary Shares of the Company as of the date hereof, and
all Ordinary Shares of the Company issuable upon the exercise of
outstanding options or undertakings, as specified in Appendix 4.3 of
the Subscription Agreement; (ii) all Ordinary Shares into which
Preferred Shares are converted pursuant to the New Articles (as
defined in the Subscription Agreement); and (iii) all Ordinary Shares
hereafter purchased by the Holders from the Company, or purchased by
one Holder from another.
1.6. The terms "register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration
statement in compliance with the United States Securities Act of 1933,
as amended (the "Securities Act") and applicable rules and regulations
thereunder and the declaration and ordering of the effectiveness of
such registration statement.
1.7. "Registration Expenses" shall mean all expenses incurred by the
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Company in compliance with subsections 2.1, 2.2.1 and 2.2.2 below,
including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company,
blue sky fees and expenses, reasonable fees and disbursements of one
counsel for all the selling Holders for legal services rendered in
connection with a registration, and the expense of any special audits
incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid
in any event by the Company).
1.8. "SEC" shall mean the United States Securities and Exchange
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Commission.
1.9. "Selling Expenses" shall mean all underwriting discounts, fees and
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selling commissions applicable to the sale of Registrable Shares and
all fees and disbursements of counsel for any Holder (other than fees
and disbursements of one counsel for all the selling Holders as
provided for in Section 1.7 above).
2. REGISTRATION RIGHTS
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2.1. Demand Registration
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2.1.1. If at any time after the 180th day following the date on which
the closing of an underwritten public offering of the
Company's shares for its own account occurs pursuant to which
shares of the Company are registered pursuant to the
Securities Act, the Company shall receive from any Initiating
Preferred Holder a written request that the Company effect a
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registration of Registrable Shares (other than on a Form S-3),
the Company will use its best efforts to effect expeditiously
the registration under the Securities Act of all Registrable
Shares requested to be registered; provided, however, that the
Company shall not be obligated to effect registration at any
one time of Registrable Shares (other than on a Form S-3)
pursuant to this Section 2.1.1 if the number of such
Registrable Shares requested to be registered in such written
request does not equal or exceed the lesser of (i) 40% of the
number of Registrable Shares then held by all Holders, or (ii)
U.S. $2,000,000 (two million United States dollars) in value;
and provided, further, that (i) the Company shall not be
required to effect more than one registration of Registrable
Shares pursuant to this Section 2.1.1 (other than on a Form S-
3) during the term hereof, as specified in Section 2.7
hereunder upon the demand of each Initiating Preferred Holder
and (ii) the Company shall not be obligated to file a
registration statement within 180 days of the effective date
of a prior registration statement.
In the event the Company is eligible to register securities
for the account of any person other than the Company on Form
S-3 (or any successor registration form which permits the
incorporation of substantial information regarding the Company
by reference), the Company shall, upon receiving a written
request from Preferred Holders who in the aggregate hold
Registrable Shares for which the reasonably anticipated
offering price would exceed $5,000,000, use its best efforts
to effect expeditiously the registration under the Securities
Act of all such Registrable Shares requested to be registered;
provided, however, the Company shall not be obligated to file
a registration statement within 180 days of the effective date
of a prior registration statement. There shall be no limit on
the number of occasions on which the Company shall be
obligated to effect a registration on Form S-3 pursuant to
this Section 2.1.1.
A request pursuant to this Section 2.1.1 shall state the
number of Registrable Shares requested to be registered and
the intended method of disposition thereof. If at the time of
receipt of any request for registration pursuant to this
Section 2.1.1 the Company shall have filed and not withdrawn a
registration statement under the Securities Act for a bona
fide underwritten public offering of its equity securities or
the Company represents to the requesting Holder that it plans
to file such a registration statement within 45 days
thereafter, then, upon receipt of such request, the Company
agrees to notify the requesting Holder of such registration
pursuant to Section 2.2, and such requesting Holder must
suspend such request and, if such requesting Holder so elects,
such requesting Holder may participate in
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such registration pursuant to Section 2.2 (and, whether or not
they so participate, such request shall not be counted as a
demand pursuant to this Section 2.1.1 unless reinstated as
provided below); provided that if at the end of such 45 day
period the Company shall not have filed a registration
statement, such request may be reinstated and such requesting
Holder cannot be required to further suspend such request
pursuant to this Section 2.1.1. Promptly upon receipt of any
request pursuant to this Section 2.1.1, the Company will send
a notice to all Holders not participating in such request (the
"Other Holders") of the proposed registration, together with a
copy of the request. Such Other Holders may elect to
participate in the registration by notice to the Company given
within 30 days following the date of the Company's notice of
request for registration.
2.1.2. If the requesting Holder intends to distribute the Registrable
Shares covered by its request made pursuant to Section 2.1.1
by means of an underwriting, it shall so advise the Company as
a part of its request made pursuant to Section 2.1.1 and the
Company shall include such information in the written notice
to all Holders referred to in Section 2.1.1 above. The right
of any Other Holder to registration pursuant to Section 2.1.1
shall be conditioned upon such Other Holder's participation in
such underwriting and the inclusion of such Other Holder's
Registrable Shares in the underwriting (unless otherwise
mutually agreed by the requesting Holder and such Other Holder
with respect to such participation and inclusion) to the
extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Shares it holds.
Notwithstanding any other provision of the above Section 2.1.1
or of this Section 2.1.2, if the underwriter of such offering
furnishes a written opinion to the effect that marketing
factors require a limitation on the number of shares to be
underwritten, the number of shares that may be included in the
registration and underwriting shall be allocated first, among
the Holders requesting registration of Registrable Shares
covered by Section 1.5(ii) above and with respect to such
Registrable Shares only (including any such Registrable Shares
covered by the last sentence of Section 2.1.1 above) in
proportion, as nearly as practicable, to the respective
amounts of such Registrable Shares (i.e. Registrable Shares
covered by Section 1.5(ii) above) which they had requested to
be included in such registration at the time of filing the
registration statement; and second, to any Holders requesting
registration of other Registrable Shares (including any such
Registrable Shares covered by the last sentence of Section
2.1.1 above) in proportion, as nearly as practicable, to the
respective amounts of such other Registrable Shares which they
had requested to be included in such registration at the
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time of filing the registration statement. No Registrable
Shares or any other securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be
included in such registration. If any Holder, who has
requested inclusion in such registration as provided above,
disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company,
the underwriter and the requesting Holder. The securities so
withdrawn shall also be withdrawn from registration. If the
underwriter has not limited the number of Registrable Shares
or other securities to be underwritten, or if the limit has
not been reached, the Company and all other holders of
securities having the right to include such securities in such
registration (if any) shall be entitled to participate in
accordance with the relative priorities, if any, as may exist
among them and the Company and include their securities for
their own account in such registration if the underwriter so
agrees and if the number of Registrable Shares which would
otherwise have been included in such registration and
underwriting will not thereby be limited.
2.2. Incidental Registration
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2.2.1. If the Company shall determine to register any of its equity
securities for its own account other than a registration of
securities issuable on Forms X-0, X-0 or any similar form
available for non-United States companies such as the Company,
or any successor form thereto pursuant to an employee stock
option, stock purchase or similar benefit plan, or pursuant to
a merger, exchange offer or a registration on any registration
form which does not permit registering Registrable Shares for
sale to the public, the Company will not less than 30 nor more
than 90 days prior to the proposed date of filing a
registration statement under the Securities Act, give written
notice to each Holder of its intention to do so; and upon the
written request, given within 15 days after receipt of the
written notice from the Company described above, of any Holder
to include Registrable Shares in such registration, the
Company will include in such registration and in any
underwriting involved therein, all the Registrable Shares
specified in the written request or requests, except as set
forth in Section 2.2.2 below. Such written request shall state
the number of such Holder's Registrable Shares requested to be
registered and the intended method of distribution.
2.2.2. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written
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notice given pursuant to Section 2.2.1 above. In such event,
the right of any Holder to registration pursuant hereto shall
be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
Shares in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an
underwriting agreement in customary form with the underwriter
or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of the above Section 2.2.1
or of this Section 2.2.2, if the underwriter furnishes a
written opinion to the effect that the total number of
securities to be included in such offering would exceed the
maximum number of securities which can be marketed at a price
not materially less than that agreed between the underwriter
and the Company and without materially and adversely affecting
such offering, then the Company shall so advise all Holders
requesting registration, and the number of shares that are
entitled to be included in the registration and underwriting
shall be allocated in the following manner:
First, the Company shall be entitled to participate in full.
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Thereafter, the number of shares that may be included in the
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registration and underwriting shall be allocated first among
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Holders requesting registration of Registrable Shares covered
by Section 1.5(ii) above, and with respect to such Registrable
Shares only, in proportion, as nearly as practicable, to the
respective amounts of such Registrable Shares (i.e.,
Registrable Shares covered by Section 1.5(ii) above) which
they had requested to be included in such registration at the
time of filing the registration statement, and second, among
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all Holders requesting registration of other Registrable
Shares in proportion, as nearly as practicable, to the
respective amounts of such other Registrable Shares which they
had requested to be included in such registration at the time
of filing the registration statement. If any Holder
disapproves of the terms of any such underwriting, such Holder
may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Shares or other
securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration. If the underwriter has
not limited the number of the Registrable Shares or other
securities to be underwritten, or if the limit has not been
reached, other holders of securities having the right to
include such securities in such registration (if any) shall be
entitled to participate in accordance with the number of such
securities held by each such other holder, such participation
to be in accordance with the relative priorities, if any, as
shall exist among such holders, and include their securities
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for their own account in such registration if the underwriter
so agrees and if the number of Registrable Shares which would
otherwise have been included in such registration and
underwriting will not thereby be limited.
2.2.3. All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to this
Section 2 shall be borne by the Company, and all Selling
Expenses shall be borne by the Holders of the securities so
registered pro rata on the basis of the number of their shares
so registered.
2.2.4. In the case of a registration effected by the Company with
respect to which a request by a Holder was received pursuant
and subject to this Section 2, the Company will:
(i) prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts
to cause such registration statement to become and
remain effective until the earlier of (i) the date the
distribution of the Registrable Shares registered
thereunder is complete or (ii) 180 days;
(ii) furnish to each Holder whose Registrable Shares are
included in such registration statement and to each duly
authorized underwriter such number of authorized copies
of a prospectus, including copies of a preliminary
prospectus, in conformity with the requirements of the
Securities Act and such other documents as such Holder
or underwriter may reasonably request in order to
facilitate the public sale or other disposition of the
securities owned by such Holder;
(iii) use every reasonable effort to register or qualify the
securities covered by such registration statement under
such securities or blue sky laws of such jurisdictions
within the United States as each Holder whose
Registrable Shares are included in such registration
statement shall request, and do any and all other acts
and things which may be necessary under such securities
or blue sky laws to enable such Holder to consummate the
public sale or other disposition in such jurisdictions
of the securities to be sold by such Holder, except that
the Company shall not for any such purpose be required
to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not qualified or consent
to general service of process in any jurisdiction where
it is not otherwise subject to such service;
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(iv) before filing the Registration Statement or prospectus or
amendments or supplements thereto, furnish to one counsel
selected by the Holders whose Registrable Shares are
included in such registration statement copies of all
such documents proposed to be filed, all of which shall
be subject to the reasonable approval of such counsel;
(v) notify each Holder whose Registrable Shares are included
in such registration statement:
(A) promptly after the Company shall receive notice
thereof, of the time when such registration
statement becomes effective or when any amendment or
supplement or any prospectus forming a part of such
registration statement has been filed;
(B) promptly of any request by the SEC for the amending
or supplementing of such registration statement or
prospectus or for additional information;
(C) 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
such registration statement would contain an untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein not
misleading.
(vi) (A) advise each Holder whose Registrable Shares are
included in such registration statement promptly
after the Company shall receive notice or otherwise
obtain knowledge of the issuance of any order by the
SEC suspending the effectiveness of such registration
statement or amendment thereto or of the initiation
or threatening of any proceeding for that purpose;
and
(B) promptly use its best efforts to prevent the issuance
of any stop order or to obtain its withdrawal
promptly if a stop order should be issued;
(vii) enter into such customary agreements (including an
underwriting agreement, if applicable, in customary form)
and take all such other action, if any, as Holders
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holding a majority of the Registrable Shares included in
such registration statement or the underwriters shall
reasonably request in order to expedite or facilitate
the registration and distribution of the Registrable
Shares;
(viii) provide the underwriters with an opinion of patent
counsel reasonably acceptable to the underwriters and
their counsel, if the underwriters shall so request; and
(ix) obtain a comfort letter from the Company's independent
public accountants in customary form and covering such
matters of the type customarily covered by comfort
letters;
provided, however, that, notwithstanding any other provision
hereof, the Company shall not be required to maintain the
effectiveness of any such registration statement for a period in
excess of 180 days.
2.3. In the event of any registration under the Securities Act of any
Registrable Shares pursuant to this Section 2, the Company hereby
agrees to execute an agreement with any underwriter participating in
the offering thereof containing such underwriter's standard form of
representations for issuers similar to the Company and
indemnification provisions and to indemnify and hold harmless each
Holder disposing of Registrable Shares, each person, if any, who
controls such Holder within the meaning of the Securities Act and
each other person (including each underwriter) who participates in
the offering of Registrable Shares, against any losses, claims,
damages or liabilities, joint or several, to which such Holder,
controlling person or participating person may become subject under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or proceedings in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under
which the Registrable Shares are registered under the Securities Act,
in any preliminary prospectus or final prospectus contained therein,
or in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such
Holder, controlling person and participating person for any legal or
other expenses reasoning connection with investigating or defending
any such loss, claim, damage, liability or proceeding; provided,
however, that the Company will not be liable in any case to any such
Holder, controlling person or participating person to the extent that
any loss, claim, damage or liability arises out of or is based upon
any untrue statement or alleged untrue statement or omission or
alleged omission made in a registration statement, preliminary or
final prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to
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the Company by an instrument duly executed by such Holder or
controlling or participating person, as the case may be, specifically
for inclusion in the registration statement; and provided further,
that to the extent such information relating to such Holder is
required to be contained in such registration statement, such Holder
shall provide such an instrument upon request by the Company.
2.4. Each Holder will, if Registrable Shares held by him are included in
the securities as to which registration is being effected, deliver to
the Company an agreement or agreements whereby such Holder agrees to
indemnify and hold harmless the Company and each other Holder whose
Registrable Shares are included in such registration, each person
referred to in clause (1), (2) or (3) of Section 11(a) of the
Securities Act in respect of the registration statement and each
other person, if any, who controls the Company or such other Holder,
as the case may be, within the meaning of the Securities Act against
any losses, claims, damages or liabilities joint or several, to which
the Company, such Holder, such person or such other controlling
person may become subject under the Securities Act or otherwise, but
only to the extent that the losses, claims, damages or liabilities
(or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the registration statement under which the Registrable
Shares are to be registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein or in
any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, which, in each case, is made in or
omitted from the registration statement, preliminary or final
prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by an
instrument duly executed by such Holder specifically for inclusion in
the registration statement; provided, however, that the
indemnification obligations of each such Holder shall be limited to
the total proceeds (less Selling Expenses) from the sale of the
Registrable Shares sold by such Holder pursuant to such registration.
2.5. Promptly after receipt by an indemnified party under this Section 2
of notice of commencement of any action, the indemnified party will,
if a claim in respect thereof is to be made against any indemnifying
party under this Section 2, notify the indemnifying party of the
commencement thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 2. In case any
such action is brought against any indemnified party and it notifies
an indemnifying party of the commencement thereof, the indemnifying
party will be entitled 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 satisfactory to
the indemnified party, and, after notice from the indemnifying party
to the
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indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to the indemnified
party under this Section 2 for any legal or other expenses
subsequently incurred by the indemnified party in connection with
the defense thereof other than reasonable costs of investigation.
Any indemnification required hereby 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
expense, loss, damage or liability is incurred.
2.6. Each Holder, holding securities included in any registration,
shall furnish to the Company such information regarding such
Holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 2.
2.7. The rights granted hereunder to the Holders with respect to any
Registrable Shares held by any Holder will terminate upon the
occurrence of one of the following:
2.7.1. on the seventh anniversary of the date of the closing of
the initial offering of the Company's shares or other
equity securities to the public; or
2.7.2. upon registration of such Registrable Shares under the
Securities Act (unless in an underwritten public offering
the underwriters thereof do not purchase such Registrable
Shares or the offering of Registrable Shares pursuant to
any such registration shall have been interfered with by
any stop order, injunction, or other order or requirement
of the SEC or any other governmental entity, unless such
stop order, injunction or other order or requirement
shall have been subsequently vacated or otherwise
removed); or
2.7.3. upon receipt by the Company of an opinion of counsel to
the Company reasonably acceptable to the Company and the
Holder that such Registrable Shares may be sold without
registration under the Securities Act pursuant to Rule
144 thereunder or otherwise without limitation with
respect to offerees or the size or timing of the
transaction; or
2.7.4. upon the sale or transfer of such Registrable Shares;
provided, that, the right to registration with respect to
such Registrable Shares may be assigned by such Holder
only in accordance with subsection 2.8 below.
2.8. Each Holder's rights to request inclusion of its Registrable
Shares in a registration pursuant to this Section 2 are personal
to such Holder and are non-assignable other than to a purchaser
or assignee of such Holder's Registrable Shares permitted
pursuant to the New Articles.
2.9. The provisions of this Section 2 shall also be for the benefit of
those
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Holders who are not a party to this Agreement, and they shall be
deemed third party beneficiaries for the purposes hereof.
2.10. Other Registration Rights
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2.10.1. Except as provided in Section 2.10.2 and Section
2.10.3, the Company may not grant any additional
registration rights with respect to its Ordinary Shares
or any other securities of the Company without the
written consent of Preferred Holders holding 75% of
Registrable Shares held by Preferred Holders at the
time such consent is given.
2.10.2. The Company may grant to subsequent investors in the
Company rights of incidental registration (such as
those provided in Section 2.2) provided that such
rights may only pertain to Ordinary Shares, including
Ordinary Shares into which other securities may be
converted; and provided further that such rights may be
granted with only with respect to:
(i) registrations actually requested by Qualified
Preferred Holders pursuant to Section 2.1, but
only in respect of the available portion of any
such registration as remains after inclusion of
all Registrable Shares requested by Preferred
Holders; and
(ii) registrations initiated by the Company, but only
in respect of the available portion of any such
registration as remains after inclusion of all
Registrable Shares requested to be included
therein by the Holders.
With respect to registrations which are for
underwritten public offerings, "available portion"
shall mean the portion of the underwritten shares that
is available as specified in Sub-sections (i) and (ii)
above. Shares not included in such underwriting shall
not be registered.
2.10.3. The Company may also grant other persons demand
registration rights provided that the following
conditions are each satisfied:
(i) such rights are limited to Ordinary Shares
(including Ordinary Shares into which other
securities may be converted);
(ii) all Preferred Holders are given enforceable
contractual rights to participate in registrations
requested by such subsequent investors, and the
number of shares that may be included in the
registration and any underwriting shall be
allocated first to Holders of Registrable Shares
covered by Section 1.5(ii) above;
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(iii) such rights shall not become effective prior to
90 days after the effective date of the first
registration pursuant to Section 2.1; and
(iv) such rights shall not be equal to nor more
favorable than those granted to the Preferred
Holders.
2.10.4 In connection with the Company's intial public
offering, all parties hereto agree that any sales of
Registrable Shares may be subject to a "lock-up" period
restricting such sales for one hundred and eighty (180)
days or such other period as may be required by the
underwriter in such registration, and all parties
hereto will agree to abide by such "lock-up" period;
provided that the directors and officers of the Company
abide by the same "lock-up" period unless the holders
of a majority in interest of the Registrable Securities
held by Preferred Holders at such time otherwise agree.
3. PRE-EMPTIVE RIGHTS
-- ------------------
Each of the Preferred C Shareholders, the Preferred A Shareholders, the
Preferred B Shareholders and the Ordinary Shareholders shall have a pre-
emptive right to purchase a pro-rata portion of any "New Securities" which
the Company may, from time to time, propose to issue and sell, all in
accordance with Article 7 of the New Articles. The parties agree that
Article 7 of the New Articles shall be binding on the parties hereto as if
included herein.
4. RIGHT OF FIRST REFUSAL
-- ------------------------
Each of the Preferred C Shareholders, the Preferred A Shareholders, the
Preferred B Shareholders and the Ordinary Shareholders shall have a Right
of First Refusal to purchase shares in the Company from any holder of
shares of the Company who desires to sell or transfer such shares to any
party, other than a transferee to whom a transfer is exempt from the Right
of First Refusal provided by Article 35 of the New Articles pursuant to
Article 35(h) of the New Articles (a "Permitted Transferee"). The parties
agree that Article 35 of the New Articles shall be binding on the parties
hereto as if included herein.
5. CANCELLATION OF CERTAIN PROVISIONS; CONSENT AND WAIVERS OF PRE-EMPTIVE
-- ----------------------------------------------------------------------
RIGHTS
------
5.1. The parties to this Agreement agree:
5.1.1. That Sections 10, 11, 12, 13, 15 and 16 and the last
paragraph of Section 7(a) of the Series A Subscription
Agreement are hereby canceled and are null and void;
5.1.2. That Sections 8, 9, 10, 11, 12, 13 and 14 of the Series B
Subscription Agreement are hereby canceled and are null and
void;
5.1.3. That Section 7 of the Concord Subscription Agreement is
-15-
hereby canceled and is null and void;
5.2. The Preferred A Shareholders, the Preferred B Shareholders and the
Ordinary Shareholders hereby consent to: (i) the Subscription
Agreement and the transactions contemplated therein; (ii) the
issuance of Series C Preferred Shares to the Preferred C Shareholders
pursuant to the Subscription Agreement; and (iii) the amendment of
the Articles of Association of the Company and the adoption of the
New Articles.
5.3. The Preferred A Shareholders, the Preferred B Shareholders and the
Ordinary Shareholders hereby waive any and all pre-emptive rights or
rights of first refusal with respect to the issuance and sale of the
Series C Preferred Shares to the Preferred C Shareholders as set
forth in the Subscription Agreement.
6. REPORTS
-- -------
6.1. The Company will furnish to each Qualified Preferred Holder, provided
that it is not a competitor or associated with a competitor of the
Company (as reasonably determined by the Company) and for so long as
it holds shares of the Company, within 120 days after the end of each
fiscal year, audited financial statements (including consolidated
balance sheets, income statements and cash flows) of the Company as
of and for the period ended December 31 of such year prepared in
accordance with accounting priciples generally accepted in Israel.
The Company will furnish to each Initiating Preferred Holder,
provided that it is not a competitor or associated with a competitor
of the Company, (i) as soon as practicable (and in any event within
40 days) after the end of each fiscal quarter, a reasonably detailed
income statement through the end of such quarter and a balance sheet
as at the end of such quarter (prepared on a consolidated basis, if
applicable), and related statements of retained earnings and changes
in financial position, together with a cash flow statement, all for
each such quarter and for that part of the fiscal year of the Company
then ended compared against the annual budget of the Company,
certified by the chief financial officer of the Company as having
been prepared under his supervision in accordance with accounting
principles generally accepted in Israel, consistently applied subject
to year-end adjustments. By way of clarification, it is hereby
specifically stipulated that such quarterly reports will not be
audited or reviewed by the Company's auditors; and (ii) within 30
days after the approval of the Board of Directors of the Company, a
copy of the annual budget.
All reports referred to above will be in the English language.
6.2. The Company's obligations to provide reports as aforesaid shall
expire from the date the Company becomes subject to the reporting
requirements of the Securities Act, or the Israeli Securities Law,
5728-1968, as amended, or of any other securities laws in other
jurisdictions requiring similar disclosures regarding the Company's
business and
-16-
financial condition.
7. CONFIDENTIALITY
-- ---------------
The parties hereto agree with and undertake to each other, that all
information concerning any other party hereto which comes into its
possession or to its attention, whether pursuant to this Agreement, as a
shareholder of the Company or otherwise, including, without limitation, the
reports referred to in Section 6 hereof, audited annual financial
statements of the Company, unaudited financial statements of the Company
and all other financial, technical and other information relating to the
Company, will be kept in the strictest confidence and will not, without the
prior written consent of the disclosing party, be used by them or be
disclosed to, or discussed with, any third party whatsoever.
Notwithstanding the above, the undertaking of confidentiality will not
apply to:
7.1. Information which is in the public domain at the time of disclosure
or subsequently becomes part of the public domain, except by breach
by the receiving party of its obligations hereunder; or
7.2. Information which is received from a third party, provided that such
information was not obtained by said third party directly or
indirectly from the disclosing party pursuant to obligations of
confidentiality; or
7.3. Information which must be disclosed under applicable laws or
regulations, but only to the extent so required; provided,
however, that in the event any party feels that circumstances exist
which require such disclosure, it shall notify the disclosing party
thereof, and provide the disclosing party with a copy of such
proposed disclosure or notice, promptly and in a manner which will
enable the disclosing party to oppose such disclosure within the
period of time allotted under such laws or regulations for submission
of the disclosure or notice; or
7.4. General statements (not containing technical information relating to
the Company's products or research and development activities)
regarding the general nature and progress of the Company's business,
and summary information regarding the Company's financial
information, in the Preferred C Shareholders', the Preferred A
Shareholders' and the Preferred B Shareholders' reports to their
respective investors, copies of which will be provided concurrently
to the Company.
In addition, the Preferred C Shareholders, the Preferred A
Shareholders and the Preferred B Shareholders will be able to
disclose information concerning the Company to their accountants /
auditors and legal advisors provided that such persons will be under
an obligation not to, and will not, disclose or disseminate such
information further.
8. NOTICES
-- -------
8.1. All notices hereunder will be in writing mailed registered airmail,
postage prepaid, addressed to the parties at their respective
addresses as
-17-
set out in this Agreement, or transmitted by courier, cable, telex or
facsimile or other reliable method of transmission.
8.2. Notices will be deemed received by the receiving party within 7
(seven) days of mailing, if mailed, within 5 (five) days of sending
if sent by courier, when actually delivered by hand, if so delivered,
and on the first business day (at the receiving end) following
transmission if transmitted by cable, telex or facsimile.
9. ASSIGNMENT
-- ----------
Except as otherwise expressly provided herein, the provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, provided that the
parties hereto may not, without the prior written consent of the Company,
pledge, assign, delegate or otherwise transfer any of their rights or
obligations under this Agreement, other than to a Permitted Transferee.
10. GOVERNING LAW
--- -------------
This Agreement will be construed in accordance with and governed by the
laws (but not the choice-of-law rules) of the State of Israel, except for
clauses regarding registration rights, which will be interpreted in
accordance with the U.S. Federal law. Any disputes arising hereunder shall
be referred for arbitration to be conducted in Israel, in accordance with
the International Chamber of Commerce Rules of Conciliation and
Arbitration. The parties agree that the arbitration proceedings shall be
conducted in the English language.
11. COUNTERPARTS
--- ------------
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signature thereto and
hereto were upon the same instrument.
12. HEADINGS
--- --------
Section headings herein are for convenience and ease of reference only,
and shall in no way affect or be deemed to affect the construction or
interpretation of any provision hereof.
-18-
13. ENTIRE AGREEMENT AND AMENDMENT
--- ------------------------------
This Agreement and the Schedules hereto constitute the entire agreement
between the parties with respect to the subject matter hereof and contains
all of the promises, undertakings, and other representations made by the
parties to each other prior to its execution, all of which are merged
herein.
This Agreement and the Schedules hereto shall prevail over any prior
agreement, understanding, promise or undertaking of the parties with
respect to the subject matter hereof, all of which are merged herein. No
subsequent amendment to this Agreement will be of any effect unless
executed in writing and signed by the parties hereto.
-19-
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
first hereinabove set forth.
ACCORD TELECOMMUNICATIONS LTD. GILDE IT FUND B.V.
/s/ Siga Gavish /s/ Xxxxx Xxxx /s/ [ILLEGIBLE]
By: ------------------------------- By: -----------------------
Siga Gavish / Xxxxx Xxxx
Name: ----------------------------- Name: ---------------------
[ILLEGIBLE]
Title:----------------------------- Title:---------------------
ONE LIBERTY FUND III LIMITED NITZANIM FUND (1993) LTD.
PARTNERSHIP
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
By: ----------------------- By: -----------------------
Name: --------------------- Name: ---------------------
Title: -------------------- Title: --------------------
ADVANCED TECHNOLOGY VENTURES IV, L.P. SVE STAR VENTURES
ENTERPRISES NO. II GbR
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
By: ------------------------ By: -----------------------
[ILLEGIBLE] SVM Star Ventures
Name: ---------------------- Managementgesellschaft
General Partner GmbH Nr.
Title: --------------------- Name: ---------------------
Xx. Xxxx Xxxxx
Title: --------------------
SVE STAR VENTURES ENTERPRISES NO. III GbR SVE STAR VENTURES
ENTERPRISES NO. IIIA GbR
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
By: ------------------------ By: -----------------------
Name: ---------------------- Name: ----------------------
Xx. Xxxx Xxxxx Xx. Xxxx Xxxxx
Title: --------------------- Title: ---------------------
STAR MANAGEMENT OF INVESTMENTS (1993) SVM STAR VENTURES
LIMITED PARTNERSHIP MANAGEMENT GmbH NR. 3
& CO. BETEILIGUNGS KG
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
By: ----------------------- By: -----------------------
Name: --------------------- Name: ---------------------
Xx. Xxxx Xxxxx
Title: -------------------- Title: --------------------
UNICYCLE TRADING COMPANY L.P. MANAKIN INVESTMENTS LTD.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
By: ----------------------- By: -----------------------
[ILLEGIBLE] Gideon Tolkowsky
Name: --------------------- Name: ---------------------
President
Title: -------------------- Title: --------------------
VTEL CORPORATION COURSES INVESTMENTS
IN TECHNOLOGY L.P.
-20-
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
----------------------- -----------------------
Name: [ILLEGIBLE] Name: [ILLEGIBLE]
---------------------- ---------------------
Title: Vice President Title: CEO - Courses
--------------------- --------------------
K.T. CONCORD VENTURE K.T. CONCORD VENTURE
FUND (ISRAEL), L.P. FUND (CAYMAN) L.P.
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
----------------------- -----------------------
Name: Name:
--------------------- ---------------------
Title: Title:
-------------------- ---------------------
/s/ Xxxx Xxxxxx /s/ Xxx Xxxxxxxxx
--------------------------- ---------------------------
XXXX XXXXXX XXX XXXXXXXXX
/s/ Xxxxx Xxxxxx /s/ Xxxxxx Xxxxxxxxx
--------------------------- ---------------------------
XXXXX XXXXXX XXXXXX XXXXXXXXX
/s/ [ILLEGIBLE]
___________________________ ---------------------------
EFI GILDOR XXXXXXX XXXXXX/VAMOS LTD.
NORWEST EQUITY CAPITAL L.L.C. XXXXX X. XXXX FAMILY TRUST
By: By: /s/ Xxxxx X. Xxxx
------------------------------------ ------------------------
Itasca NEC, L.L.C., Managing Member Xxxxx X. Xxxx, Trustee
/s/ Xxxxx X. Xxxx
------------------------------------
Xxxxx X. Xxxx, Member
-21-
Schedule 1A
-----------
List of Ordinary Shareholders
-----------------------------
1. Xxxx Xxxxxx
2. Xxxxxx Xxxxxxxxx
3. Xxx Xxxxxxxxx
4. Vamos Ltd./Xxxxxxx Xxxxxx*
* Currently hold options to purchase Ordinary Shares only. For the purposes
of Sections 3 and 4 of this Agreement, these options shall be deemed as
fully exercised into Ordinary Shares of the Company.
-22-
Schedule 1B
-----------
Preferred A Shareholders
------------------------
1. Xxxx Xxxxxx
2. Xxxxxx Xxxxxxxxx
3. Xxx Xxxxxxxxx
4. Nitzanim Fund (1993) Ltd.
5. SVE STAR Ventures Enterprises No. II GbR
6. SVE STAR Ventures Enterprises No. III GbR
7. SVE STAR Ventures Enterprises No. IIIA GbR
8. STAR Management of Investments (1993), L.P.
9. SVM STAR Ventures Management GmbH Nr. 3 & Co. Beteiligungs KG
10. Xxxxx Xxxxxx
11. Unicycle Trading Company, L.P.
12. Manakin Investments B.V.
13. VTEL Corporation
For the purposes of Section 6.1 of this Agreement each of entities Nos. 5 -
9 shall be deemed a Qualified Preferred Holder or an Initiating Preferred
Holder, as relevant, for as long as all such entities collectively hold at
least 350,000 Preferred Shares and/or Ordinary Shares into which Preferred
Shares were converted.
-23-
Schedule 1C
-----------
Preferred B Shareholders
------------------------
1. Gilde IT Fund
2. One Liberty Fund III, L.P.
3. Nitzanim Fund (1993) Ltd.
4. Advanced Technology Ventures IV, L.P.
5. SVE STAR Ventures Enterprises No. II GbR
6. SVE STAR Ventures Enterprises No. III GbR
7. SVE STAR Ventures Enterprises No. IIIA GbR
8. STAR Management of Investments (1993), L.P.
9. SVM STAR Ventures Management GmbH Nr. 3 & Co. Beteiligungs KG
10. Xxxxx Xxxxxx
11. Unicycle Trading Company, L.P.
12. Courses Investments in Technology, L.P.
13. K.T. Concord Venture Fund (Cayman), L.P.
14. K.T. Concord Venture Fund (Israel), L.P.
For the purposes of Section 6.1 of this Agreement: (a) each of entities
Nos. 5 -9 shall be deemed a Qualified Preferred Holder or an Initiating
Preferred Holder, as relevant, for as long as all such entities
collectively hold at least 350,000 Preferred Shares and/or Ordinary Shares
into which Preferred Shares were converted; and (b) each of entities Nos.
13 and 14 (the "Concord Entities") shall be deemed a Qualified Preferred
Holder or an Initiating Preferred Holder, as relevant, as long as all such
entities collectively hold at least 350,000 Preferred Shares and/or
Ordinary Shares into which Preferred Shares were converted.
-24-
Schedule 1D
-----------
List of Preferred C Shareholders
--------------------------------
1. Norwest Equity Capital, L.L.C.
2. Xxxxx X. Xxxx Family Trust
