EXHIBIT 4.2
XACCT TECHNOLOGIES (1997) LTD.
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
DATED MARCH 23, 2000
XACCT TECHNOLOGIES (1997) LTD.
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
This Second Amended and Restated Rights Agreement (the "AGREEMENT"), is
entered into as of March 23, 2000, by and among XACCT Technologies (1997) Ltd. a
company organized under the laws of the State of Israel (the "COMPANY"), Xxxx
Xxxxxx and Xxxxx Xxxxxxxxxx (the "FOUNDERS") and Xxxx Xxxxx ("XXXXX") (the
Founders and Xxxxx, collectively, the "KEY MANAGEMENT"), the holders of the
Company's Series A Preferred Shares, as defined below, (or the Ordinary Shares
issuable upon conversion or reclassification thereof) (the "SERIES A HOLDERS")
the holders of the Company's Series B-1 Preferred Shares as defined below, (or
the Ordinary Shares issuable upon conversion or reclassification thereof) (the
"SERIES B-1 HOLDERS"), the holders of the Company's Series B-2 Non-voting
Preferred Shares, as defined below (or the Ordinary Shares issuable upon
conversion or reclassification thereof) (the "SERIES B-2 HOLDERS") (the "SERIES
B-1 HOLDERS" and the "SERIES B-2 HOLDERS", collectively, the "SERIES B
HOLDERS"), the holders of the Company's Series C-1 Preferred Shares as defined
below, (or the Ordinary Shares issuable upon conversion or reclassification
thereof) (the "SERIES C-1 HOLDERS") holders of the Company's Series C-2
Non-voting Convertible Preferred Shares (the "SERIES C-2 HOLDERS") (the Series
C-1 Holders and the Series C-2 Holders, collectively, the "SERIES C HOLDERS"),
and the holders of the Company's Series D Preferred Shares as defined below (or
the Ordinary Shares issuable upon conversion or reclassification thereof) (the
"SERIES D Holders" or the "PURCHASERS"). The Series A Holders, the Series B
Holders, the Series C Holders and the Series D Holders are collectively referred
to as the "PREFERRED SHAREHOLDERS", and the "SHAREHOLDERS" shall mean,
collectively, the Preferred Shareholders and the Key Management as listed in
Schedule I). Capitalized terms that are not defined in this Agreement shall have
the meanings ascribed to them in the Revised Articles (as such term is defined
in the Series D Share Purchase Agreement (as defined below)). If any provision
of this Agreement shall conflict with a provision of the Revised Articles, the
construction of the Revised Articles shall control both the Revised Articles and
this Agreement.
RECITALS
WHEREAS, the Company, the Founders, and the Series A Holders entered
into a Share Purchase Agreement dated June 9, 1997 and November 17, 1997 as
modified by Letter Agreements dated as of March 2, 1998, from the Company to the
Series A Holders (collectively, the "SERIES A SHARE PURCHASE AGREEMENT"),
pursuant to which the Company entered into certain covenants and granted certain
rights and the Series A Holders purchased certain of the Company's Series A
Preferred Shares nominal value NIS 0.01 per share (the "SERIES A PREFERRED" or
the "SERIES A PREFERRED SHARES"), and warrants to purchase additional shares of
the Company's Series A Preferred Shares (the "SERIES A WARRANTS");
WHEREAS, the Company and the Series B Holders entered into a Share
Purchase Agreement dated October 29, 1998 (including a subsequent closing dated
January 21, 1999), (the "SERIES B SHARE PURCHASE AGREEMENT"), pursuant to which
the Company entered into certain covenants and granted certain rights, and the
Series B Holders purchased certain of the Company's Series B-1 Preferred Shares
nominal value NIS 0.01 per share, and the Company's Series B-2 Non-voting
Preferred Shares nominal value NIS 0.01 per share, (the "SERIES B-2 PREFERRED"
or the "SERIES B-2 PREFERRED SHARES") (the Series B-1 Preferred and the Series
B-2 Preferred collectively, the "SERIES B PREFERRED" or the "SERIES B PREFERRED
SHARES") and warrants to purchase additional shares of the Company's Series B
Preferred Shares (the "SERIES B WARRANTS");
WHEREAS, the Company, the Key Management, and the Series A Holders
agreed to supersede in the Series B Rights Agreement dated October 29, 1998 (the
"SERIES B RIGHTS AGREEMENT") the covenants and rights enumerated in sections 7
through 17, inclusive, of the Series A Share Purchase Agreement;
WHEREAS, the Company, certain Series A Holders, Series B Holders and
the Series C Holders are entering into a Series C Share Purchase Agreement dated
October 7, 1999 (including a subsequent closing dated December 21, 1999) (the
"SERIES C SHARE PURCHASE AGREEMENT") pursuant to which, INTER ALIA, the Series C
Holders purchased shares of Series C-1 Preferred Shares nominal value NIS 0.01
per share (the "SERIES C-1 PREFERRED" or the "SERIES C-1 PREFERRED SHARES") or
shares of the Company's Series C-2 Non-voting Preferred Shares nominal value NIS
0.01 per share (the "SERIES C-2 PREFERRED" or the "SERIES C-2 PREFERRED
SHARES"), (the Series C-1 Preferred and the Series C-2 Preferred, collectively
the "SERIES C PREFERRED" or the "SERIES C PREFERRED SHARES"), and warrants to
purchase additional shares of the Company's Series C Preferred Shares (the
"SERIES C WARRANTS");
WHEREAS, the Company, the Key Management, the Series A Holders and the
Series B Holders agreed to supersede in the Amended and Restated Rights
Agreement dated October 7, 1999 ("FIRST RIGHTS AGREEMENT") the covenants and
rights in the Series B Rights Agreement, and to amend, modify, restate and
supersede the Series B Rights Agreement;
WHEREAS, the Company and the Series D Holders are entering into a
Series D Share Purchase Agreement dated March 23, 2000 (the "SERIES D SHARE
PURCHASE AGREEMENT") pursuant to which, INTER ALIA, the Purchasers will purchase
shares of Series D Preferred Shares nominal value NIS 0.01 per share (the
"SERIES D PREFERRED", and together with the Series A Preferred, the Series B
Preferred and the Series C Preferred, the "PREFERRED SHARES", each of which is
convertible or reclassifiable into either Voting Ordinary Shares nominal value
NIS 0.01 per share (the "VOTING ORDINARY SHARES") or Non-voting Ordinary Shares
nominal value NIS 0.01 per share (the "NON-VOTING ORDINARY SHARES") (the Voting
Ordinary Shares and the Non-voting Ordinary Shares, collectively, the "ORDINARY
SHARES"));
WHEREAS, the Key Management, the Series A Holders, the Series B
Holders, the Series C Holders and the Series D Holders have agreed to amend,
modify, restate and supercede the First Rights Agreement in this Agreement;
WHEREAS, the Company desires to grant certain registration and other
rights as set forth herein;
NOW THEREFORE, in reliance on the foregoing recitals, and in and
for the mutual covenants and consideration set forth herein, the parties hereto
agree as follows:
1. INFORMATION RIGHTS
1.1 FINANCIAL INFORMATION
(a) Within ninety (90) days after the end of each fiscal year,
the Company shall deliver to each Shareholder consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of changes in the
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with Israeli generally accepted accounting principles
("GAAP") and in reasonable detail, audited by a firm of Independent Certified
Public Accountants in the State of Israel who are members of the Israeli
Institute of Certified Public Accountants, and accompanied by an opinion of such
firm which opinion shall state that such balance sheet and statements of income
and cash flow have been prepared in accordance with GAAP applied on a basis
consistent with that of the preceding fiscal year, and present fairly and
accurately the financial position of the Company as of their date, and that the
audit by such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards.
(b) Within forty-five (45) days after the end of the first,
second and third quarterly accounting periods in each fiscal year of the
Company, the Company shall deliver to each Shareholder a consolidated balance
sheet of the Company and its subsidiaries, if any, and consolidated statements
of income and consolidated statements of changes in the financial condition of
the Company and its subsidiaries for such period prepared in accordance with
GAAP (other than for accompanying notes), subject to changes resulting from
year-end audit adjustments, all in reasonable detail and signed by the
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principal financial or accounting officer of the Company and stating that
management believes that such statements reflect all adjustments necessary to a
fair presentation of the Company's financial position ("UNAUDITED FINANCIAL
STATEMENTS") as of the end of such quarterly period.
(c) Within thirty (30) days after the end of each month, the
Company shall deliver to (i) each Preferred Shareholder who is a holder of
shares of Registrable Securities (as defined in Section 2.2) having an aggregate
value of at least US$500,000, valued at the Conversion Price as that term is
defined in the Revised Articles, and (ii) each member of Key Management who
holds at least 50,000 shares of Registrable Securities (collectively, "MAJOR
HOLDERS"), Unaudited Financial Statements as of the end of such calendar month
and, to the Company's board of directors (the "BOARD"), consolidated sales
figures, backlog and new orders for each month, prepared in accordance with
GAAP, together with a comparison of such statements to the Company's operating
plans then in effect and approved by the Board, subject to changes resulting
from year-end audit adjustments, signed by the CFO and stating that management
believes that such statements reflect all adjustments necessary to a fair
presentation.
(d) The Company will permit the Major Holders and their
authorized representatives full and free access, at all reasonable times and
upon reasonable notice, to any of the properties of the Company, including its
books and records, and to discuss its affairs, finances and accounts with the
Company's officers and auditor. In addition, the Company shall provide written
notice to Major Holders upon the occurrence of any event that, in the judgment
of the Board, will likely have a material effect on the Company.
(e) The rights granted pursuant to sub-sections 1.1(b), (c) and
(d) may not be assigned or otherwise conveyed by the Shareholders, or by any
subsequent transferee of any such rights (other than transfers pursuant to
Section 7) without the prior written consent of the Company except as authorized
in this Section. After giving notice to the Company, the Shareholders, without
the Company's consent, may assign the rights granted pursuant to Section 1.1 to
any transferee, who qualifies as a Major Holder, other than a direct competitor
of the Company.
1.2 TERMINATION OF COVENANTS. The obligations of the Company set forth
in sub-sections 1.1(b), (c) and (d) shall terminate and be of no further force
or effect at such time as the Company is required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
2. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH
SECURITIES ACT; REGISTRATION RIGHTS
2.1 RESTRICTIONS ON TRANSFERABILITY. The Preferred Shares and the
Conversion Shares (as defined below) shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Section 2. The Shareholder
will cause any proposed purchaser, assignee, transferee, or pledgee of any such
shares held by the Shareholders to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Section 2.
2.2 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"CLOSING DATE" shall mean the date of the first purchase and
sale of Series B Preferred pursuant to the Series B Share Purchase Agreement.
"COMMISSION" shall mean the U.S. Securities and Exchange
Commission or any other federal agency at the time administering the U.S.
Securities Act.
"CONVERSION SHARES" means the Ordinary Shares issued or
issuable pursuant to conversion or reclassification of (i) the Preferred Shares,
or (ii) any preferred shares of the Company that any of the Preferred
Shareholders may hereinafter acquire (including without limitation, upon
exercise of
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the warrants) or receive upon a Recapitalization Event (as defined in this
Section 2.2) or otherwise. For purposes only of Section 2.6, 2.9 through 2.13,
2.15 and 2.16 hereof, "CONVERSION SHARES" shall also be deemed to mean any
Ordinary Shares held by a member of Key Management.
"HOLDER" shall mean (i) any Preferred Shareholder holding
Registrable Securities and (ii) any person holding Registrable Securities to
whom the rights under this Section 2 have been transferred in accordance with
Section 2.14 hereof. For purposes only of Sections 2.6, 2.9 through 2.13, 2.15
and 2.16 hereof, "HOLDER" shall also be deemed to mean any member of Key
Management. For purposes of Sections 2.5(b) and 2.6 Holders shall also include
Nissho Iwai American Corporation ("NIAC").
"INITIATING HOLDERS" shall mean any of the following: (i)
Holders in the aggregate of greater than 50% of the Series A Preferred (or
Ordinary Shares received upon conversion or reclassification thereof) (the
"SERIES A INITIATORS"), (ii) Holders in the aggregate of greater than 50% of the
Series B Preferred (or Ordinary Shares received upon conversion or
reclassification thereof) (the "SERIES B INITIATORS"), (iii) Holders in the
aggregate of greater than 50% of the Series C Preferred (or Ordinary Shares
received upon conversion or reclassification thereof) (the "SERIES C
INITIATORS") (iv) Holders in the aggregate of greater than 50% of the Series D
Preferred (or Ordinary Shares received upon conversion or reclassification
thereof) (the "SERIES D INITIATORS"), or (v) Holders in the aggregate of greater
than 50% of the Preferred Shares combined (or Ordinary Shares received upon
conversion or reclassification thereof) (the "PREFERRED INITIATORS").
"QUALIFIED IPO" for each Series of Preferred Shares and
Ordinary Shares other than the Series D Preferred Shares a firmly underwritten
initial public offering of the Company's Ordinary Shares (the "IPO") at a price
per Ordinary Share (prior to underwriters' commissions and expenses)
representing a Company valuation immediately prior to the IPO of at least US$200
million (as determined by the underwriters) and with total gross offering
proceeds to the Company in excess of $20 million; and for the Series D Preferred
Shares an IPO either: (i) at a price per Ordinary Share (prior to underwriters'
commissions and expenses) representing a Company valuation immediately prior to
the IPO of at least US$360 million (as determined by the underwriters); or (ii)
with total gross offering proceeds to the Company in excess of $45 million;
"REGISTRABLE SECURITIES" means (i) the Conversion Shares (ii)
any Ordinary Shares of the Company issued or issuable in respect of the
Conversion Shares upon any stock split, share dividend, recapitalization, or
similar event (collectively, a "RECAPITALIZATION EVENT"), or any Ordinary Shares
otherwise issuable with respect to the Conversion Shares, (iii) Ordinary Shares
of the Company that any Preferred Shareholder may hereinafter acquire, (iv)
Ordinary Shares issued to a Preferred Shareholder pursuant to a Recapitalization
Event, and (v) Preferred Shares (unless otherwise required by law); provided,
however, that Ordinary Shares or other securities shall only be treated as
Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) in the case of any holder of less than 1% of the
outstanding Ordinary Shares, sold or are, in the opinion of counsel for the
Company, available for sale in a single transaction exempt from the registration
and prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale. Registrable Securities shall not include any
securities that upon resale would be non-voting securities of the Company.
Notwithstanding the foregoing, for the purposes of Sections 2.5(b) and 2.6
Registrable Securities shall include shares held by NIAC.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 2.5,
2.6 and 2.7 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company
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which shall be paid in any event by the Company) and the reasonable fees and
disbursements of counsel for the Holders.
"RESTRICTED SECURITIES" shall mean the securities of the
Company required to bear the legend set forth in Section 2.3 hereof.
"SECURITIES ACT" shall mean the U.S. Securities Act of 1933,
as amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SECURITIES LAWS" shall mean the Securities Act and applicable
Israeli securities laws.
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and share transfer taxes applicable to the securities
registered by the Holders.
2.3 RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred Shares, (ii) the Conversion Shares and (iii) any other securities
issued in respect of the Preferred Shares or the Conversion Shares upon any
share split, share dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 2.4 below)
be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws or
Israeli law):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 OR APPROVED BY THE ISRAELI SECURITIES
AUTHORITY. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT
SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT AND UNDER ISRAELI
LAW.
Each Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Preferred Shares or
the Ordinary Shares in order to implement the restrictions on transfer
established in this Section 2.
2.4 RESTRICTIONS ON TRANSFER. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.4. Subject to Section 7 hereof,
any sale, assignment or any other transfer of securities by a Seller (as defined
in Section 5 herein) shall be null and void and the transferee of such a sale
shall not be recognized by the Company as the holder or owner of the securities
sold, assigned or transferred for any purpose (including, without limitation,
voting or dividend rights);
(a) Unless and until the Seller has provided the Company with
written evidence that the requirements of Sections 5 and 6 hereof, if
applicable, have been met or waived; and
(b) If there is no registration statement under the United
States securities act(s) covering the proposed transfer, and, if reasonably
requested by the Company, unless and until the Seller provides, at Seller's
expense, a written opinion of legal counsel who shall be, and whose legal
opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the applicable securities laws; and
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(c) Unless such assignment or transfer does not subject the
Company to the prospectus requirements of the Israeli securities laws; and
(d) Unless and until the Seller provides to the Company
documents, in form and substance satisfactory to the Company evidencing the
agreement by the Permitted Transferee (as defined in Section 7.1 hereof) to be
bound by the provisions of this Agreement.
2.5 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall receive
from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to not less than that
number of shares of Registrable Securities which would result in an anticipated
aggregate offering price, net of underwriting discounts and commissions, greater
than five million dollars (US$5,000,000), the Company will:
(i) Promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) As soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including,
without limitation, appropriate qualification under applicable blue sky
or other state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within twenty
(20) days after receipt of such written notice from the Company;
Provided, however, that the Company shall not be
obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 2.5:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
(B) Prior to the earlier of (x) four years after the Closing
Date, or (y) six months after the closing of the IPO;
(C) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing
of, and ending on the date six (6) months immediately following the
effective date of, any registration statement pertaining to securities
of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that
the Company is actively employing in good faith all reasonable efforts
to cause such registration statement to become effective;
(D) (i) With respect to a registration initiated by
Series A Initiators, after the Company has effected one registration
initiated by Series A Initiators and such registration has been
declared or ordered effective; (ii) with respect to a registration
initiated by Series B Initiators, after the Company has effected one
registration initiated by Series B Initiators and such registration has
been declared or ordered effective; (iii) with respect to a
registration initiated by Series C Initiators, after the Company has
effected one registration initiated by Series C Initiators and such
registration has been declared or ordered effective; (iv) with respect
to a registration initiated by Series D Initiators, after the Company
has effected one registration initiated by Series D Initiators and such
registration has been declared or ordered effective; and (v) with
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respect to a registration initiated by Preferred Initiators, after that
number of registrations equal to five (5) less the number of
registrations effected pursuant to clause (i), (ii), (iii) and (iv) of
this sub-section (D) which have been previously declared or ordered
effective;
(E) If the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the
good faith judgment of the Board it would be seriously detrimental to
the Company or its shareholders for a registration statement to be
filed in the near future and it is therefore essential to defer the
filing of such registration statement, then the Company's obligation to
use its best efforts to register, qualify or comply under this Section
2.5 shall be deferred for a period not to exceed one hundred twenty
(120) days from the date of receipt of written request from the
Initiating Holders; provided that the Company may not exercise this
deferral right under this Section 2.5 or under Section 2.7 more than
once per twelve (12) month period.
Subject to the foregoing clauses (A) through (E), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders.
(b) UNDERWRITING. In the event that a registration pursuant to
Section 2.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 2.5(a)(i). In such event, the right of any Holder to registration
pursuant to Section 2.5 shall be conditioned upon such Holder's participation in
the underwriting arrangements required by this Section 2.5(b), and the inclusion
of such Holder's Registrable Securities in the underwriting to the extent
requested shall be limited to the extent provided herein. A Holder may elect to
include in such underwriting all or part of the Registrable Securities such
Holder owns.
The Company shall (together with all Holders proposing to distribute
their Registrable Securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by a majority in interest of the Initiating Holders, but
subject to the Company's reasonable approval. Notwithstanding any other
provision of this Section 2.5(b), if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities and there shall be excluded from such
registration and underwriting to the extent necessary to satisfy such
limitation, first shares held by shareholders other than the Holders, then
shares which the Company may wish to register for its own account, and
thereafter, to the extent necessary, shares held by the Holders (PRO-RATA to the
respective amounts of Registrable Securities held by such Holders at the time
the registration statement is filed), provided, however that in any event all
Registrable Securities must be included in such registration prior to any other
shares of the Company. To facilitate the allocation of shares in accordance with
the above provisions, the Company or the underwriters may round the number of
shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and, in connection with the IPO, such Registrable
Securities shall not be transferred in a public distribution prior to one
hundred eighty (180) days after the effective date of such IPO, or such other
shorter period of time as the underwriters may require.
If shares are so withdrawn from the registration and if the number of
shares to be included in such registration was previously reduced as a result of
factors pursuant to this sub-section (b), then the Company shall offer to all
Holders who have retained rights to include securities in the registration the
right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among such Holders requesting additional inclusion in accordance with
the preceding two paragraphs.
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2.6 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time
the Company shall determine to register any of its securities, either for its
own account or for the account of a security holder or holders, other than (x) a
registration relating solely to employee benefit plans, (y) a registration
relating solely to a Commission Rule 145 transaction, or (z) a registration
pursuant to Section 2.5 or Section 2.7 of this Agreement, the Company will;
(i) promptly give to each Holder a written notice
thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified
in a written request or requests, made within twenty (20) days after
receipt of such written notice from the Company, by any Holder. Such
request may specify all or part of a Holder's Registrable Securities.
(b) UNDERWRITING. 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 written notice given pursuant
to Section 2.6(a)(i). In such event the right of any Holder to registration
pursuant to Section 2.6 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 2.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, then there shall be excluded from such registration and
underwriting to the extent necessary to satisfy such limitation, (i) first
shares held by shareholders other than the Purchaser Holders (as defined below),
but only to the extent such shares exceed the Non-Purchaser Minimum Holders (as
defined below), PRO-RATA to the respective amounts of Registrable Securities
held by such non-Purchaser Holders at the time the registration statement is
filed (except in connection with the IPO, in which case all such shares may be
so excluded), and (ii) thereafter, shares held by the Purchaser Holders, but
only to the extent such shares exceed the Purchaser Minimum (as defined below)
PRO-RATA to the respective amounts of Registrable Securities held by such
Purchaser Holders (except in connection with the IPO, in which case all such
shares may be so excluded). The "PURCHASER HOLDERS" shall mean the Holders other
than Key Management. The "NON-PURCHASER MINIMUM" shall mean 8% of the total
amount of securities included in such offering. The "PURCHASER MINIMUM" shall
mean 25% of the total amount of the securities included in such offering. The
Company shall so advise all Holders and other holders distributing their
securities through such underwriting and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all the Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders at the time of
filing the Registration Statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of shares
allocated to any Holder or other holder to the nearest 100 shares. If any Holder
or other holder disapproves of the terms of any such underwriting, he may elect
to withdraw therefrom by a written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and, in connection with the IPO, shall not
be transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating to the IPO, or
such other shorter period of time as the underwriters may require.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw from any registration initiated by it under this
Section 2.6 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
8
2.7 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders who hold Registrable Securities
equal or convertible in the aggregate to not less than 1% of the then
outstanding Ordinary Shares request that the Company file a registration
statement on Form S-3 (or any successor or comparable form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed US$1,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as such
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
Section 2.7 in any twelve (12) month period pursuant to this Section 2.7. The
Company shall inform other Holders of the proposed registration and offer them
the opportunity to participate. The substantive provisions of Section 2.5(b)
shall be applicable to each registration initiated under this Section 2.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 2.7 (i) in any particular
jurisdiction (excluding Israel) in which the Company would be required to
execute a general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act; (ii)
prior to the Company's first registered public offering of its shares; (iii)
during the period starting with the date sixty (60) days prior to the Company's
good faith estimate of the date of filing of, and ending on the date six (6)
months immediately following, the effective date of any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective; or (iv) if the Company
shall furnish to such Holder a certificate signed by the President of the
Company stating that in the good faith judgment of the Board it would be
seriously detrimental to the Company or its shareholders for such registration
statements to be filed in the near future and it is therefore essential to defer
the filing of such registration statement, then the Company's obligation to use
its best efforts to file a registration statement shall be deferred for a period
not to exceed one hundred and twenty (120) days from the receipt of the request
to file such registration by such Holder; provided that the Company may not
exercise this deferral right under this Section 2.7 or under Section 2.5 more
than once per twelve (12) month period.
2.8 RIGHTS AGREEMENT. From and after the Closing Date, the Company,
except with the prior written consent of each of (i) the holders of at least 75%
of the shares of Series A Preferred, (ii) the holders of at least 75% of the
shares of Series B Preferred, (iii) the holders of at least 75% of the shares of
Series C Preferred then outstanding and (iv) the holders of at least 75% of the
shares of Series D Preferred then outstanding, shall not enter into any
agreement with any holder or group of holders or prospective holder or group of
prospective holders of any securities of the Company giving such holder or group
of holders or prospective holder or group of prospective holders the right (i)
to request registration of their securities, or (ii) to require the Company,
upon any registration of any of its securities, to include, among the securities
that the Company is then registering, securities owned by such holder, unless
under the terms of such agreement, such holder or group of holders or
prospective holder or group of prospective holders may include such securities
in any such registration only to the extent that the inclusion of its securities
will not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities.
2.9 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with (i) five (5) registrations pursuant to Section 2.5, (ii) all
registrations pursuant to Section 2.6, and (iii) all registrations pursuant to
Section 2.7 shall be borne by the Company. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders shall be
borne by the Holders of such securities PRO-RATA on the basis of the number of
shares so registered.
2.10 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 2,
the Company will keep each Holder advised in writing as to the
9
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least two hundred
seventy (270) days or until the distribution described in the Registration
Statement has been completed (the "EFFECTIVE PERIOD") including, without
limitation, the preparation and filing with the Commission of such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement; provided, however, that the Effective
Period shall be extended (i) for a period of time equal to the Standoff Period
(as defined in Section 2.15 below); and (ii) in the case of any registration on
Form S-3 intended to be offered on a continuous or delayed basis, until all such
Registrable Securities are sold; and
(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus including any amendment of or supplement to such prospectus and such
other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
(c) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The Holders
participating in such underwriting shall also enter into and perform their
obligations under such an agreement.
(d) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(e) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder with a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(f) Furnish, at the request of the Holders requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and (ii) a letter dated
as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any.
(g) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by
the Company are then listed.
2.11 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers, directors, partners, shareholders, employees, legal advisers,
accountants and agents and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or
10
compliance has been effected pursuant to this Section 2, and each underwriter,
if any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
or liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act, the Exchange Act, state securities law or any rule or regulation
promulgated under such laws applicable to the Company in connection with any
such registration, qualification or compliance, and within a reasonable period
the Company will reimburse each such Holder, each of its officers, directors,
partners, shareholders, employees, legal advisers, accountants and agents and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action; provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any 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 within a
reasonable period will reimburse the Company, such other Holders, such
directors, officers, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
Notwithstanding the foregoing, the liability of each indemnifying Holder under
this sub-section (b) shall be limited in an amount equal to the gross proceeds
before expenses and commissions to each Holder received for the shares sold by
such Holder in such registration, unless such liability arises out of or is
based on willful misconduct by such Holder.
(c) Each party entitled to indemnification under this Section
2.11 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such Party's expense, provided, however, that the Indemnified Party
(together with all other Indemnified Parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the Indemnifying Party, if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between such Indemnified Party and any other party represented by such
counsel in such proceedings. The failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party
11
of its obligations under this Section 2 unless the failure to give such notice
is materially prejudicial to an Indemnifying Party's ability to defend such
action. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall provide such information regarding
itself or the claim in question as an Indemnifying Party has reasonably
requested in writing and as shall be reasonably required in the defense of such
claim and the litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.11 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and on the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnified Party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this
Section 2.11 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise.
2.12 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 2.
2.13 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Ordinary Shares of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as a Holder owns any Restricted Securities to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably obtained
by the Company as the Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing the Holder to sell any such
securities without registration.
12
2.14 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted to (i) Holders under Sections 2.5, 2.6
and 2.7, or (ii) Key Management under Section 2.6, may be assigned to a
Permitted Transferee (as defined herein) other than a direct competitor of the
Company.
2.15 STANDOFF AGREEMENT. In connection with the IPO, the Holder
agrees, upon request of the Company or the underwriters managing the IPO, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time as may be requested by
the underwriters (the "STANDOFF PERIOD") not to exceed one hundred eighty (180)
days, provided that the officers and directors of the Company who own shares of
the Company also agree to such restrictions and that the Company uses all
reasonable requests to obtain a similar covenant from all holders of 1% or more
of the Company's outstanding securities.
2.16 TERMINATION OF REGISTRATION RIGHTS.
(a) Except as set forth in subparagraph (b) below, the right of
any Holder to request registration or inclusion in any registration pursuant to
Sections 2.5, 2.6, or 2.7 shall terminate at such time after the closing of the
IPO as all shares of Registrable Securities held or entitled to be held, upon
conversion by such Holder, may immediately be sold under Rule 144 during any
ninety (90) day period.
(b) The provisions of subparagraph (a) above shall not apply to
any Holder (other than NIAC) who owns 1% or more of the Company's outstanding
share capital until such time as such Holder (other than NIAC) owns less than 1%
of the outstanding share capital of the Company.
2.17 SHARE ALLOCATION TO SERIES C HOLDERS.
(a) Subject to any applicable legal and regulatory limitations,
the Company shall use best efforts to cause all underwriters that it shall
engage to offer in the Share Allocation (as defined in sub-section 2.17(b)
below) to each of the Series C Holders, out of the Ordinary Shares registered
with the Commission in connection with a Qualified IPO ("IPO SHARES") (i) such
Series C Holder's PRO-RATA Share (as defined in sub-section 2.17 (b) below) of
the IPO Shares included in the Share Allocation and (ii) the PRO-RATA Share of
any other Series C Holder to the extent such other Series C Holder elects not to
purchase its full PRO-RATA Share. Such offer shall be made to each such Series C
Holder at the gross public offering price set forth on the cover page of the
final Prospectus included as a part of the Company's Registration Statement. The
participation of any Series C Holder (or the holder of an equivalent number of
Ordinary Shares held upon the conversion or reclassification of Series C
Preferred) in the Share Allocation shall be conditioned in all cases on that
Series C Holder's compliance with all applicable federal and state securities
laws, in particular without limiting the generality of the foregoing on its
compliance with applicable disclosure requirements and Rule IM-2110-1 in the
Manual of the National Association of Securities Dealers, Inc.
(b) The "SHARE ALLOCATION" shall mean the offer to the Series C
Holders (or the holders of an equivalent number of Ordinary Shares held upon the
conversion or reclassification of Series C Preferred) in accordance with the
terms and upon the conditions of this Section 2.17, of such number of IPO Shares
calculated by dividing $3,000,000 by the mid-point of the first filing range the
Company sets forth in the Registration Statement for the Qualified IPO or an
amendment thereto. The number of shares included in the Share Allocation shall
be subject to reduction (or elimination) if the Board determines in good faith
that the issuance of such shares would be materially detrimental to the success
of the Qualified IPO. For the purposes of this Section 2.17, a Series C Holder's
"PRO-RATA SHARE" at any time shall mean a fraction the numerator of which is the
number of shares of Series C Preferred then held by such holder (including the
Ordinary Shares received upon conversion or reclassification thereof) and the
denominator of which is the total number of shares of Series C Preferred then
issued and outstanding (including the Ordinary Shares received upon conversion
or reclassification thereof).
(c) The Company shall transmit to each Series C Holder at its
address as set forth in the shareholders register of the Company (or of its
transfer agent, if any) within five business days after the
13
date of the preliminary prospectus with respect to the Qualified IPO (and within
five business days after the date of any later preliminary prospectus with
respect to the Qualified IPO if the Qualified IPO shall be abandoned for any
reason at any time or from time to time) a copy of such preliminary prospectus
together with the Company's calculation based on the number of shares held by
such Series C Holders as set forth in the Company's shareholder register (or the
shareholders register of its transfer agent, if any) of each such Series C
Holder's PRO-RATA Share. Each holder of Series C Preferred (including the
Ordinary Shares received upon conversion or reclassification thereof) that shall
desire to exercise its option to purchase IPO Shares in the Share Allocation
shall respond to the "Indication of Interest" form that it shall receive from or
on behalf of the underwriters of the Qualified IPO within a reasonable period as
shall be specified therein, for effecting a "Holder's Notification". A Series C
Holder may exercise its option as aforesaid with respect to all or some of the
IPO Shares offered to it in the Share Allocation. Any Series C Holder that shall
not have notified the Company of its exercise of such option within the
aforesaid period shall be deemed not to have exercised its option hereunder.
(d) Each Series C Holder shall notify the Company in its
Holder's Notification of such Series C Holder's intention to purchase (i) all or
any part of its PRO-RATA Share of the IPO Shares included in the Share
Allocation and (ii) all or any part of the PRO-RATA Share of any other Series C
Holder to the extent such other Series C Holder does not elect to purchase its
full PRO-RATA Share. The purchase and sale of the IPO Shares shall occur on the
same terms and conditions as shall be offered to the public in the Qualified
IPO.
3. INDEMNIFICATION AND REMEDIES
3.1 INDEMNIFICATION BY COMPANY.
(a) The Company agrees to protect, defend, indemnify, and hold
harmless the Purchasers against and in respect of any and all loss, liability,
deficiency, damage, cost, or expense, or actions in respect thereof (including
reasonable legal fees and expenses), as and when incurred, occasioned by any
breach, falsity, or failure of (i) any of the representations, warranties and
covenants of the Company contained in the Series D Share Purchase Agreement, or
(ii) any of the covenants of the Company herein contained, provided any claim is
brought within three years of the date of this Agreement.
(b) The Company agrees to protect, defend, indemnify, and hold
harmless the Series C Holders against and in respect of any and all loss,
liability, deficiency, damage, cost, or expense, or actions in respect thereof
(including reasonable legal fees and expenses), as and when incurred, occasioned
by any breach, falsity, or failure of (i) any of the representations, warranties
and covenants of the Company contained in the Series C Share Purchase Agreement,
or (ii) any of the covenants of the Company herein contained, provided any claim
is brought within three years of the date of the Series C Purchase Agreement.
(c) The Company further agrees to protect, defend, indemnify and
hold harmless the Series B Holders against and in respect of any and all loss,
liability, deficiency, damage, cost or expense, or actions in respect thereof
(including reasonable legal fees and expenses), as and when incurred, occasioned
by any breach, falsity or failure of (i) any of the representations, warranties
and covenants of the Company contained in the Series B Share Purchase Agreement,
or (ii) any of the covenants of the Company as per last round, provided any
claim is brought within three years of the date of the Closing Date.
3.2 INDEMNIFICATION BY SERIES B HOLDERS, SERIES C HOLDERS, AND
SERIES D HOLDERS.
(a) Each Purchaser, severally but not jointly, agrees to protect,
defend, indemnify, and hold harmless the Company, up to the respective sum of
each such Purchaser's investment, against and in respect of any and all loss,
liability, deficiency, damage, cost, or expense or action in respect thereof
(including reasonable legal fees and expenses), as and when incurred, occasioned
by any breach, falsity, or failure of the representations and warranties of such
Purchaser contained in the Series D Share Purchase Agreement, provided any such
claim is brought within three years of the date of this Agreement.
14
(b) Each Series C Holder, severally but not jointly, agrees to protect,
defend, indemnify, and hold harmless the Company, up to the respective sum of
each such Series C Holders' investment, against and in respect of any and all
loss, liability, deficiency, damage, cost, or expense or action in respect
thereof (including reasonable legal fees and expenses), as and when incurred,
occasioned by any breach, falsity, or failure of the representations and
warranties of such Purchaser contained in the Series C Share Purchase Agreement,
provided any such claim is brought within three years of the date of the Series
C Share Purchase Agreement.
(c) Each Series B Holder, severally but not jointly, agrees to
protect, defend, indemnify, and hold harmless the Company, up to the respective
sum of each such Series B Holder's investment, against and in respect of any and
all loss, liability, deficiency, damage, cost, or expense or action in respect
thereof (including reasonable legal fees and expenses), as and when incurred,
occasioned by any breach, falsity, or failure of the representations and
warranties of such Series B Holder contained in the Series B Share Purchase
Agreement, provided any such claim is brought within three years of the date of
the CLOSING DATE.
3.3 INDEMNIFICATION FROM THIRD PARTY CLAIMS. The Company hereby agrees
to indemnify, exonerate and hold each of the Series B Holders, the Series C
Holders and the Purchasers and their (if applicable) general and limited
partners and their respective shareholders, members, officers, directors,
employees and agents free and harmless from and against any and all actions,
causes of action, or suits brought against them by third parties (the "THIRD
PARTY CLAIMS"), losses, liabilities, damages and expenses, including, without
limitation, reasonable attorneys' fees and disbursements (collectively,
"DAMAGES") arising from any such Third Party Claim, incurred in their capacity
as Series B Holders, Series C Holders, Series D Holders or as purchasers of the
Company's securities, by any of the indemnitees as a result of or relating to
(i) any transaction by the Company financed or to be financed in whole or in
part, directly or indirectly, with proceeds from the sale of any of the Series B
Preferred, of any of the Series C Preferred, or of any of the Series D
Preferred, (ii) the execution, delivery, performance or enforcement of this
Agreement, the Series B Share Purchase Agreement, the Series C Share Purchase
Agreement and the Series D Share Purchase Agreement except for such Damages that
are caused by the actions of the Indemnitee in violation of its obligations
under such agreements.
3.4 INDEMNITY PROCEDURE. Promptly after receipt by Series B Holders,
the Series C Holders, the Purchasers or the Company of notice of the
commencement of any action, proceeding, or investigation in respect of which
indemnity may be sought as provided above, such party (the "INDEMNITEE") shall
notify the party from whom indemnification is claimed (the "INDEMNITOR"). The
Indemnitor shall promptly assume the defense of the Indemnitee with counsel
reasonably satisfactory to such Indemnitee, and the fees and expenses of such
counsel shall be at the sole cost and expense of the Indemnitor. The Indemnitee
will cooperate with the Indemnitor in the defense of any action, proceeding, or
investigation for which the Indemnitor assumes the defense, provided, however,
that if the defendants in any action include both the Indemnitee and the
Indemnitor and there is a conflict of interests which would prevent counsel for
the Indemnitor from also representing the Indemnitee, the Indemnitee shall have
the right to select one separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. The Indemnitor shall not
be liable for the settlement by the Indemnitee of any action, proceeding, or
investigation effected without its consent, which consent shall not be
unreasonably withheld. The Indemnitor shall not enter into any settlement in any
action, suit, or proceeding to which the Indemnitee is a party, unless such
settlement includes a general release of the Indemnitee with no payment by the
Indemnitee of consideration and without an admission of liability.
3.5 REMEDIES. The provisions of this Section 3 shall not limit or
impair any right or remedy arising from any breach of this Agreement. In
addition to any other remedy provided by law or equity, injunctive relief may be
obtained to enjoin the breach, or threatened breach, of any provision of this
Agreement and each party shall be entitled to the specific performance by the
other of its obligations hereunder. All remedies, either under this Agreement,
or by law or as may otherwise be afforded to the Shareholders or the Company, as
the case may be, shall be cumulative.
15
4. AFFIRMATIVE COVENANTS.
The Company hereby covenants to the Preferred Shareholders as follows:
4.1 MAINTENANCE OF EXISTENCE AND PROPERTIES, ETC. The Company will (a)
maintain its corporate existence, rights, governmental approvals and franchises
necessary for the conduct of its business, (b) keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, (c) give
appropriate notice to the Preferred Shareholders of events of default pursuant
to any agreements of the Company, (d) enter into transactions with affiliates
only on fair and reasonable terms and subject to any applicable law, and (e)
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall at the time be contested in good faith by appropriate
proceedings and provided further that, unless otherwise approved by the Board,
the Company will pay all such taxes, assessments, charges or levies forthwith
upon the commencement of proceedings to foreclose any lien which may have
attached as security therefor.
4.2 SUFFICIENCY OF CONVERSION SHARES. The Shareholders agree that, in
the event at any time the number of authorized Ordinary Shares of the Company
shall be insufficient to permit the conversion or conversion by reclassification
of all Preferred into Ordinary Shares in accordance with the conversion
provisions of the Revised Articles, the Shareholders shall vote in favor of such
increase or reclassification in the Company's registered share capital as shall
be necessary and shall take all steps as are legally required to execute such
conversion or conversion by way of reclassification.
4.3 ACCOUNTING. The Company will maintain a system of accounting
established and administered in accordance with GAAP consistently applied, and
will set aside on its books all such proper reserves as shall be required by
GAAP.
4.4 INSURANCE. The Company maintains and will continue to maintain
third party liability, employers' liability, fire and casualty insurance
policies in effect from the date of this Agreement in amounts and on terms
substantially similar to other companies of the size and in the business of the
Company. The Company shall maintain from financially sound and reputable
insurers (and shall pay all premiums and maintain in full force and effect) term
life insurance (with the Company named as beneficiary) on the lives of each
member of Key Management, each in the amount of two million United States
dollars (US$2,000,000).
4.5 CONFIDENTIAL INFORMATION AND INVENTIONS AGREEMENTS. The Company
and its subsidiaries will not employ any person, or otherwise contract with any
consultant who will have access to confidential information with respect to the
Company and its operations unless such person or consultant (as applicable) has
executed and delivered the form of U.S. Information Agreement (as such term is
defined in the Series C Share Purchase Agreement) or Israeli Information
Agreement (as such term is defined in the Series C Share Purchase Agreement) or
standard form non-disclosure agreement applicable to third parties, as
applicable, in the forms previously provided to the Series C Holders pursuant to
the Series C Share Purchase Agreement or in such other form as is expressly
approved by the Board except as such forms may be so modified in consultation
with legal counsel from time to time.
4.6 ANNUAL PLAN; MONTHLY REPORT. The management of the Company shall
establish annually an operating plan and budget for the Company (the "ANNUAL
PLAN") in consultation with the Board. The Annual Plan for the following year
shall be submitted to the Board for its approval at least sixty (60) days prior
to the first day of the year covered by such Annual Plan.
4.7 COMPOSITION OF THE BOARD.
(a) The Board shall be composed of up to seven (7) directors,
out of whom: one (1) director (the "SERIES A PREFERRED SHARES DIRECTOR") shall
be designated by written notice to the Company by the
16
holders of the majority of the Series A Preferred Shares (including all Voting
Ordinary Shares received upon conversion or reclassification of Series A
Preferred Shares) except as set forth below, and shall be nominated in writing
by Ampal (as defined below); one (1) director (the "SERIES B-1 PREFERRED SHARES
DIRECTOR") shall be designated by written notice to the Company by the holders
of the majority of the Series B-1 Preferred Shares (including all Voting
Ordinary Shares received upon conversion or reclassification of the Series B
Preferred Shares and upon the conversion or reclassification of the Non-Voting
Ordinary Shares), and nominated in writing by Trident Capital Management-II,
L.L.C.; subject to the right of TCV III (Q), L.P. and entities affiliated
therewith ("TCV") set forth below, one (1) director (the "SERIES C-1 PREFERRED
SHARES DIRECTOR") shall be designated by written notice to the Company by the
holders of the majority of the Series C-1 Preferred Shares (including all Voting
Ordinary Shares received upon conversion or reclassification of the Series C
Preferred Shares and upon the conversion or reclassification of the Non-Voting
Ordinary Shares), and nominated in writing by TCV; and two (2) directors (the
"ORDINARY SHARES DIRECTORS") shall be designated by written notice to the
Company by the holders, from time to time, of a majority of the Voting Ordinary
Shares (but excluding Voting Ordinary Shares received upon conversion or
reclassification of the Preferred Shares and upon the conversion or
reclassification of the Non-voting Ordinary Shares); in addition, and subject to
the consent in writing by the holders of the majority of each class of shares
(excluding holders of Series B-2 Non-voting Preferred Shares, the Series C-2
Non-voting Preferred Shares and Non-voting Ordinary Shares), the Chief Executive
Officer of the Company (the "CEO"), shall serve as a director EX OFFICIO for so
long as he is CEO of the Company. The seventh director, who shall be an industry
expert (the "ADDITIONAL DIRECTOR") shall be appointed by the majority of the
members of the Board. Except as specifically stated in this Section 4.7, any
vacancy on the Board may only be filled by the holders of the class of shares or
member(s) that had the right to appoint the previous incumbent of such vacancy.
Notwithstanding the above said, for so long as the Company has not received
written notice to the contrary from Ampal-American Israel Corporation or its
representatives ("AMPAL"), Ampal shall be entitled to appoint one Series A
Preferred Shares Director for so long as it is a holder of Series A Preferred
Shares of the Company or holds, on an as converted basis 4 (four) per cent or
more of the issued and outstanding share capital of the Company. Notwithstanding
the above said, for so long as the Company has not received written notice to
the contrary from TCV or its representatives, TCV shall be entitled to appoint
and designate the Series C-1 Preferred Shares Director for so long as TCV holds
at least 1,315,832 Series C Preferred Shares of the Company (as may be adjusted
in the event of a Recapitalization Event).
(b) Notwithstanding the above said, the Founders shall be
entitled to appoint either Xxxx Xxxxxx or Xxxxx Xxxxxxxxx as one of the Ordinary
Shares Directors (the "FOUNDER APPOINTEE") for so long as (i) the Founders
collectively hold 5 (five) percent or more of the issued and outstanding share
capital of the Company, on an as converted basis, and not more than 50 (fifty)
percent of the issued and outstanding Ordinary Shares, and (ii) the Company has
not received written notice to the contrary from the Founders or their
representatives; provided that if neither Founder is employed by the Company,
then the holders of a majority of the Preferred Shares (excluding the Series B-2
Non-voting Preferred Shares and the Series C-2 Non-voting Preferred Shares) may,
by written notice, veto the appointment of one Founder, in which case the
Founder Appointee shall be the other Founder.
(c) In addition to the Series A Preferred Shares Director,
Series B-1 Preferred Shares Director and the Series C-1 Preferred Shares
Director, one authorized representative ("OBSERVER") of each of (i) Trident
Capital Management-II, L.L.C. and affiliated entities (collectively, "TRIDENT"),
(ii) Eucalyptus Venture Management L.L.C. and affiliated entities (collectively
"EUCALYPTUS"), (iii) Israel Seed Limited Partnership and affiliated entities
("ISRAEL SEED"), (iv) subject to the Management Rights Agreement, TCV, (v)
Deutsche Bank AG and/or affiliated entities ("DB") and (vi) Sun Microsystems,
Inc. shall be entitled to receive notice of and attend all meetings of the Board
in a non-voting observer capacity, at its own expense; provided that the Company
reserves the right to withhold any information from or to exclude any
Observer(s) if the Company in consultation with the Board, in its reasonable
discretion, determines that: (i) the sensitivity or confidentiality concerns
relating to the subject or matter specifically being discussed either in the
meeting or in writing makes it advisable to exclude such Observer(s) or exclude
the provision of information to such Observer(s) due to a risk of a conflict of
interest for such Observer(s) so excluded, (ii) the disclosure of such
information or attendance by such Observers on specifically designated issues or
matters could adversely affect the attorney-client privilege between the
17
Company and its counsel or (iii) the law would exclude an officer or director in
such circumstances. Each Observer shall have a duty to advise the Board in the
event of any issue with respect to which such Observer has or may have a
conflict of interest at the earliest possible time but not later than the
beginning of the first meeting of the Board in which such issue is discussed or
expected to be discussed. Trident, Eucalyptus, Israel Seed, TCV, DB and the
Observers shall maintain the confidentiality of all financial, confidential and
proprietary information obtained by them and shall not make available any
information provided by the Company to any competitor or customer of, or vendor
to the Company or any affiliate or associate of such entity. For the avoidance
of doubt the Observers shall not be liable toward a party hereto as to any
action or inaction of the Board.
Subject to the above said, each Observer shall be entitled to receive
all notices, written documents and materials provided to Directors and to attend
and participate in all meetings of the Board. The Observers shall not be
entitled to vote.
The rights to the Series A Preferred Shares Director (including the
Director appointed by Ampal), the Series B-1 Preferred Shares Director, the
Series C-1 Preferred Shares Director (including the Director appointed by TCV),
the Ordinary Shares Directors (including the Founder Appointee) and the
Observers shall each terminate upon a Qualified IPO.
(d) The rights to the Series A Preferred Shares Director
(including the Director appointed by Ampal), the Series B-1 Preferred Shares
Director, the Series C-1 Preferred Shares Director (including the Director
appointed by TCV), the Ordinary Shares Directors (including the Founder
Appointee), and the Observers shall each terminate upon a Qualified IPO.
4.8 BOARD COMMITTEES. The Board may delegate any of its powers to
committees consisting of not more than 4 (four) Directors, as long as the
committee is composed of at least two Preferred Shares Directors (as defined in
the Revised Articles) whose identity shall be determined by the Board. The Board
may, from time to time, revoke such delegation. Notwithstanding the aforesaid,
the Board shall establish and maintain an Audit Committee and a Compensation
Committee of the Board, each of which shall consist of not more than 4 (four)
members, provided that each such committee is composed of at least two Preferred
Shares Directors whose identity shall be determined by the Board. Any committee
so formed shall, in the exercise of the powers so delegated, conform to any
regulations that may be imposed on it by the Board and subject thereto shall be
governed by the provisions of the Revised Articles regulating the proceedings
and meetings of the Board.
4.9 VESTING. Subject to the discretion of the Board, all shares and
share equivalents issued after the Closing Date to the Company's employees,
directors, consultants and other service providers are and will be subject to
four (4) year vesting as provided in the Stock Option Plans, as such term is
defined in the Series C Share Purchase Agreement. The Company, or in case the
Company may not purchase its own shares, its assignees, shall have a repurchase
option that shall provide that upon termination of the employment of the
shareholder, with or without cause, the Company or its assignee (to the extent
permissible under applicable securities law qualification) shall have the option
to repurchase at cost any unvested shares held by such shareholder.
4.10 USE OF PROCEEDS. The Company will use the proceeds of the
issuance and sale of the Shares (as defined in the Series D Share Purchase
Agreement) as shall be determined by the Board from time to time.
4.11 TERMINATION OF COVENANTS. The obligations of the Company set
forth in sub-sections 4.6 through 4.8 shall terminate upon a Qualified IPO.
4.12 INDEMNITY AGREEMENTS; DIRECTORS AND OFFICERS INSURANCE.
(a) Effective upon the commencement of the Israeli Companies Law
(1999), the Company, subject to prior approval by and instruction from the Board
and the shareholders, shall enter into indemnity
18
agreements with each of the directors of the Company, which shall provide the
maximum scope and amount of indemnification permitted under Israeli law, as such
law may be reenacted or modified from time to time.
(b) The Company will maintain in full force and effect the
current director and officer liability insurance policy underwritten by the
Israeli Phoenix Insurance Company Ltd. (the "EXISTING D&O POLICY") until the
expiration of the current term thereof. Effective on or before such expiration,
the Company shall use its best efforts to obtain from a financially sound and
reputable United States or Israeli insurer replacement director and officer
liability insurance coverage, in an aggregate amount of not less than $2
million, on terms reasonably acceptable to and approved by the members of the
Audit Committee of the Board, the Board and the General Meeting, which terms
shall in no event be less favorable than the Existing D&O Policy (the "New D&O
Policy"). The Company shall maintain in effect the New D&O Policy, which shall
not be cancelable by the Company without prior recommendation by the Audit
Committee by the Board and the approval of the Board.
5. RIGHT OF FIRST REFUSAL
5.1 PRIMARY RIGHT. At any time a shareholder (a "SELLER") proposes to
sell or otherwise dispose of any share capital of the Company held by such
Seller (the "OFFERED SECURITIES") to a third party (the "PROPOSED TRANSFEREE"),
Seller shall first notify the Company in writing of the price, terms and
identity of the Proposed Transferee (the "OFFER TERMS"). The Company shall give
notice of the Offer Terms in writing (i) if the Seller is a member of Key
Management, to the other members of Key Management, (ii) if the Seller is an
Ordinary Shareholder who is selling Ordinary Shares to the members of Key
Management, (iii) if the Offered Securities are Series A Preferred Shares, to
the other Series A Holders, (iv) if the Offered Securities are Series B
Preferred Shares, to the other Series B Holders, (v) if the Offered Securities
are Series C Preferred Shares, to the other Series C Holders or (vi) if the
Offered Securities are Series D Preferred Shares, to the other Series D Holders
(such respective offerees shall be referred to as the "PRIMARY OFFEREES"). Each
Primary Offeree shall have the right (the "PRIMARY RIGHT") to purchase from the
Seller at the same price and on the same terms (x) that portion of the Offered
Securities as the aggregate number of shares of Ordinary Shares and Conversion
Shares held by such Primary Offeree bears to the total number of shares of
Ordinary Shares and Conversion Shares held by all the Primary Offerees for such
class of securities (the "PRIMARY BASIC AMOUNT") and (y) such additional portion
of the remaining Offered Securities as any Primary Offeree indicates it will
purchase should any of the other Primary Offerees subscribe for less than their
Primary Basic Amounts (the "PRIMARY UNDERSUBSCRIPTION AMOUNT") and to which such
Primary Offeree is entitled under Section 5.2 for a period of five (5) business
days after delivery (the "PRIMARY RIGHT PERIOD").
5.2 NOTICE OF PRIMARY EXERCISE. Notice of a Primary Offeree's election
to exercise, in whole or in part, a Primary Right shall be made by a writing
signed by such Primary Offeree specifying the portion of the Offered Securities
that such Primary Offeree elects to purchase (and, if such Primary Offeree
elects to purchase more than its Primary Basic Amount, the Primary
Undersubscription Amount that such Primary Offeree elects to purchase, if any),
delivered to the Company prior to the expiration of the Primary Right Period
(the "PRIMARY EXERCISE NOTICE"). If the Primary Basic Amounts subscribed for by
the Primary Offerees are less than the total amount of the Offered Securities,
then each Primary Offeree specifying a Primary Undersubscription Amount in its
Primary Exercise Notice shall be entitled to purchase the Primary
Undersubscription Amount specified; provided, however, that should the Primary
Undersubscription Amounts subscribed for exceed the difference between the total
amount of Offered Securities the Primary Offerees are entitled to purchase and
the Primary Basic Amounts subscribed for (the "AVAILABLE PRIMARY
UNDERSUBSCRIPTION AMOUNT"), each Primary Offeree who has subscribed for any
Primary Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as is determined by multiplying such
Available Primary Undersubscription Amount by a fraction, the numerator of which
is the aggregate number of shares of Ordinary Shares and Conversion Shares held
by such Primary Offeree and the denominator of which is the aggregate number of
shares of Ordinary Shares and Conversion Shares held by the Primary Offerees who
have subscribed for a Primary Undersubscription Amount; provided further,
however, that if, as a result of the allocation of the Available Primary
Undersubscription Amount, any Primary Offeree shall be allocated a number of
shares
19
greater than the number of shares it has indicated it is willing to purchase, it
shall not be required to purchase such shares; rather such additional shares
shall be reallocated in accordance with the above formula among the other
Primary Offerees who have subscribed for a Primary Undersubscription Amount. All
amounts determined by the formula set forth in this Section 5.2 shall be subject
to rounding by the Board to the extent it reasonably deems necessary.
5.3 SECONDARY RIGHT. If the Primary Offerees do not elect to purchase
all of the Offered Securities, the Company shall give notice in writing of the
Offer Terms to the Preferred Shareholders and Key Management (as applicable)
other than the Primary Offerees (the "SECONDARY OFFEREES"). Each Secondary
Offeree shall have the right (the "SECONDARY RIGHT") to purchase from the Seller
(i) that portion of the remaining Offered Securities, if any, after the Primary
Offerees' election to purchase, as the aggregate number of shares of Ordinary
Shares and Conversion Shares held by such Secondary Offeree bears to the total
number of shares of Ordinary Shares and Conversion Shares held by all the
Secondary Offerees (the "SECONDARY BASIC AMOUNT") and (ii) such additional
portion of the remaining Offered Securities as any Secondary Offeree indicates
it will purchase should any of the Secondary Offerees subscribe for less than
their Basic Amounts (the "SECONDARY UNDERSUBSCRIPTION AMOUNT") and to which such
Secondary Offeree is entitled under Section 5.4, at the same price and on the
same terms as those set forth in the Primary Right, which Secondary Right shall
remain open for a period of five (5) business days (the "SECONDARY RIGHT
PERIOD").
5.4 NOTICE OF SECONDARY EXERCISE. Notice of a Secondary Offeree's
election to exercise the Secondary Right, in whole or in part, shall be
evidenced by a writing signed by such Secondary Offeree, setting forth the
amount that the Secondary Offeree elects to purchase (and, if such Secondary
Offeree elects to purchase more than its Secondary Basic Amount, the Secondary
Undersubscription Amount that such Secondary Offeree elects to purchase, if
any), and delivered to the Seller prior to the end of the Secondary Right Period
(the "SECONDARY EXERCISE NOTICE"). If the Secondary Basic Amounts subscribed for
by the Secondary Offerees are less than the total amount of Offered Securities
the Secondary Offerees are entitled to purchase pursuant to Section 5.3, then
each Secondary Offeree specifying a Secondary Undersubscription Amount in its
Secondary Exercise Notice shall be entitled to purchase the Secondary
Undersubscription Amount specified; provided, however, that should the Secondary
Undersubscription Amounts subscribed for exceed the difference between the total
amount of Offered Securities the Secondary Offerees are entitled to purchase and
the Secondary Basic Amounts subscribed for (the "SECONDARY AVAILABLE
UNDERSUBSCRIPTION AMOUNT"), each Secondary Offeree who has subscribed for any
Secondary Undersubscription Amount shall be entitled to purchase only the
portion of the Secondary Available Undersubscription Amount as is determined by
multiplying such Secondary Available Undersubscription Amount by a fraction, the
numerator of which is the aggregate number of shares of Ordinary Shares and
Conversion Shares held by such Secondary Offeree and the denominator of which is
the aggregate number of shares of Ordinary Shares and Conversion Shares held by
the Secondary Offerees who have subscribed for a Secondary Undersubscription
Amount; provided further, however, that if, as a result of the allocation of the
Secondary Available Undersubscription Amount, any Secondary Offeree shall be
allocated a number of shares greater than the number of shares it has indicated
it is willing to purchase, it shall not be required to purchase such shares;
rather such additional shares shall be reallocated in accordance with the above
formula among the other Secondary Offerees who have subscribed for a Secondary
Undersubscription Amount. All amounts determined by the formula set forth in
this Section 5.4 shall be subject to rounding by the Board to the extent it
reasonably deems necessary.
5.5 PERMITTED SALES OF REFUSED SECURITIES. In the event that the amount
of the Offered Securities the Primary Offerees and the Secondary Offerees elect
to purchase does not equal or exceed the total amount of the Offered Securities,
Seller shall have one hundred twenty (120) days from the expiration of the
Secondary Right Period to sell, subject to Section 6, all or any part of the
Offered Securities for which a Primary Exercise Notice or a Secondary Exercise
Notice has not been given (the "REFUSED SECURITIES") to the Proposed Transferee
at the same price and on the same terms as those set forth in the Primary Right.
5.6 CLOSING. The Primary and Secondary Offerees shall purchase the
amount of Offered Securities specified in each respective Exercise Notice, upon
the terms and conditions specified in the Primary Right, promptly following
delivery of the Secondary Exercise Notice, provided, however, that the
20
consummation of such purchase shall be subject to the preparation, execution and
delivery of the share purchase agreement reasonably satisfactory to the Primary
and Secondary Offerees, as the case may be, and their respective counsel. The
term "ACCEPTING SHAREHOLDERS" shall refer to the Primary and Secondary Offerees
who deliver an Exercise Notice. In addition, Seller shall promptly remit to each
Accepting Shareholder that portion of the sale proceeds to which Accepting
Shareholder is entitled by reason of its participation in the sale to the
Proposed Transferee pursuant to Section 6.
5.7 FURTHER SALE. Any Offered Securities not purchased by the Primary
or Secondary Offerees or the Proposed Transferee in accordance with this Section
5 may not be sold or otherwise disposed of until they are again offered in
accordance with this Section 5.
5.8 Subject to the Revised Articles, nothing in this Section 5
shall be construed as limiting the right of a shareholder to transfer any of its
shares separately from its Warrants.
6. CO-SALE RIGHTS ON SHARE CAPITAL SALES.
6.1 RIGHT TO PARTICIPATE. In the event that a member of Key Management
proposes to sell his shares and there remain Refused Securities, each Primary
and Secondary Offeree desiring to participate in the sale (collectively,
"CO-SELLERS") shall have the right to participate in the sale to the Proposed
Transferee upon the same terms and conditions as set forth in the Primary Right,
subject to the terms and conditions set forth in this Section 6.1. A Co-Seller
shall exercise its right by delivering to the Seller, within fifteen (15) days
after the expiration of the Secondary Right Period (i) a written notice of its
intention to participate, specifying the amount of shares Co-Seller desires to
sell to the Proposed Transferee, and (ii) one or more certificates representing
the number of Ordinary Shares or Preferred Shares which Co-Seller elects to sell
hereunder, duly endorsed for transfer to the Proposed Transferee.
6.2 QUALIFIED PARTICIPATION. Each Co-Seller shall have the right to
sell up to that number of Ordinary Shares or Preferred Shares equal to the
product of (i) the amount of Refused Securities multiplied by (ii) a fraction,
the numerator of which is the number of shares of Ordinary Shares and Conversion
Shares held by such Co-Seller, and the denominator of which is the total number
of shares of Ordinary Shares and Conversion Shares owned by the Seller and the
Co-Sellers as a group. In the event of Co-Seller participation, the amount of
Offered Securities which Seller is entitled to sell on Seller's own behalf
pursuant to this Section 6.2 shall be reduced accordingly, and Seller shall
include such Co-Seller shares in the sale of the Offered Securities.
6.3 CONTINUING RIGHTS. The exercise or non-exercise of the right to
participate hereunder with respect to a particular sale by a Seller shall not
adversely affect a Co-Seller's right to participate in subsequent sales by the
same or other sellers.
7. PERMITTED TRANSFERS.
7.1 PERMITTED TRANSFERS. Seller may transfer its Ordinary Shares or
Preferred Shares to the following transferees (each a "PERMITTED TRANSFEREE")
without having to comply with Sections 5 and 6 hereof to: (i) Seller's spouse,
lineal descendant or antecedent, brother or sister, (ii) an entity controlled by
or controlling the Seller, or controlled by the shareholders of the Seller
(provided that if such entity does not remain so controlled or controlling, such
shares shall be transferred back to the original shareholder, or to another such
entity), (iii) as to any Seller which is a partnership, in addition to (ii)
above, the Seller may transfer to the Seller's partners and to affiliated
partnerships managed by the` same management company or to the same managing
general partner as the Seller. No subsequent transfer of any of such shares may
be made except in conformity with the provisions of Sections 5 and 6, as
applicable, provided, however, that no such transfer shall be made to any
transferee, unless such transferee agrees in writing to be bound by all
agreements binding upon the Shareholders immediately prior to such transfer.
7.2 SALES BY KEY MANAGEMENT. No member of Key Management shall sell,
assign, transfer, pledge, hypothecate, mortgage or dispose of, by gift or
otherwise, or in any way encumber the Restricted
21
Shares (as defined below) prior to the earlier of (i) the closing of a Qualified
IPO, (ii) the termination by the Company of the employment of such member of Key
Management (the "EMPLOYEE") other than for (x) Employee's gross negligence in
the performance of his duties under his employment relationship, intentional
non-performance or misperformance of such duties, (y) the Employee's conviction
of a felony or other crime involving moral turpitude; or (z) the Employee's
abuse of alcohol or drugs (legal or illegal) that materially impairs the
Employee's ability to perform his duties, (iii) any material reduction of the
Employee's duties or responsibilities or any reduction whether material or not,
in the Employee's title relative to the Employee's duties, responsibilities of
title as in effect immediately prior to such reduction except if such Employee
agrees in writing or (iv) June 9, 2000. The "RESTRICTED SHARES" shall mean (i)
with respect to the Founders, shares in the share capital of the Company of any
class or series now owned or hereafter acquired by the Founders (excluding
Series C Preferred Shares, Series B Preferred Shares and Conversion Shares),
that constitute more than 20% of each of the Founder's respective shareholding
in the Company as of September 30, 1998; (ii) with respect to Xxxx Xxxxx, shares
that constitute more than 20% of the shares issuable upon exercise of the vested
portion (excluding Series C-1 Preferred Shares, Series B-1 Preferred Shares and
Conversion Shares) of the options granted to Xxxx Xxxxx as of September 30,
1998. The provisions of Sections 5 and 6, if applicable, shall apply only to the
sale of Restricted Shares under this Section 7.2.
7.3 TERMINATION. The rights set forth in Sections 5, 6 and 7 shall
terminate upon the earlier of: (i) with respect to each of the Shareholders,
such time as such Shareholder no longer owns any securities; (ii) the closing of
a Qualified IPO; (iii) such time as the Company becomes subject to the reporting
obligations of Section 13 or 15(d) of the Exchange Act; or (iv) the occurrence
of the merger or consolidation of the Company into or the sale of all or
substantially all of the Company's assets to another corporation, unless the
shareholders of the Company shall retain effective control over such other
corporation immediately after such merger, consolidation or sale.
8. CERTAIN TRANSFERS.
Subject to Section 9, in the event that any person or entity makes an
offer to purchase all of the issued and outstanding share capital of the Company
or to merge the Company into another entity, and all the shareholders holding
more than 75% of the Ordinary Shares and the Preferred Shares, voting together
on an as-converted basis (excluding the classes of non-voting shares), indicate
their acceptance of such offer, and such offer is approved by a majority of the
Board, then, at the closing of such offered purchase of all the issued and
outstanding share capital of the Company or merger, all of the holders of
Ordinary Shares and Preferred Shares in the Company will transfer such Ordinary
Shares or Preferred Shares to such person or entity; provided, however, that the
consideration for all of the Company's shares shall in any event be allocated
among the members in accordance with Section 10.
9. PROTECTIVE PROVISIONS.
9.1 Notwithstanding anything herein to the contrary, prior to a
Qualified IPO, for so long as at least 50% of the Series D Preferred Shares, or
50% of the Series C-1 Preferred Shares, or 50% of the Series B-1 Preferred
Shares or 50% of the Series A Preferred Shares remain issued and outstanding,
all of the following decisions of the Company, except for the conversion or
reclassification detailed in Section 10.2, will be brought to the shareholders
of the Company, for approval by (subject in each event to the minimum class
approval requirements of the Companies Law (5759-1999) (the "COMPANIES LAW")):
(x) for sub-section 9.1(i) the holders of at-least 51% of each series of
Preferred Shares, affected by the amendment, voting as a separate class; or (y)
for sub-section 9.1 (ii) through (ix), the holders of at-least 51% of each of
the Series A Preferred Shares, the Series B-1 Preferred Shares and the Series
C-1 Preferred Shares with each series voting as a separate class, and (z) for
sub -section 9.1 (ii), (iii), (iv) and (viii), in addition to the approvals
required pursuant to sub Section 9.1.(y)- the approval of the holders of at
least 51% of Series D Preferred Shares.
(i) adopt any amendment to the Memorandum or
Revised Articles or any other action which would have the effect of amending the
specific rights, preferences or privileges of the Preferred Shares; (other than
an action taken pursuant to the provisions of Section 10.2);
22
(ii) increase the authorized number of Preferred
Shares or of any class or series thereof;
(iii) create any new class or series of shares
(including rights, options or warrants) having rights, preferences or privileges
on a parity with the Series A Preferred Shares or the Series B-1 Preferred
Shares or the Series C-1 Preferred Shares, or enter into any contract or grant
any option for the issue of any such securities, except for issuance of
securities (i) issued in consideration for at least ten million U.S. Dollars
($10,000,000) at a pre-money valuation of the Company of at least one hundred
sixty million U.S. Dollars ($160,000,000) on terms not more favorable than those
of the Preferred Shares; (ii) to employees, consultants and service providers of
the Company pursuant to share options plans approved by the Board from time to
time (provided that any such grants in excess of 91,300 shares shall require
Board approval which includes the approval of at least one (1) of the Preferred
Shares Director);
(iv) create any new class or series of shares
(including rights, options or warrants) having rights, preferences or privileges
senior to the Series A Preferred Shares or the Series B-1 Preferred Shares or
the Series C-1 Preferred Shares, or enter into any contract or grant any option
for the issuance of any such securities;
(v) liquidate the Company, or sell a majority
of the outstanding share capital, or merge with or consolidate into any
corporation, firm or entity, reorganize, or sell, assign, lease or otherwise
dispose of (whether in one transaction or a series of transactions) all or
substantially all of the Company's assets;
(vi) declare or pay any dividend (other than a
dividend payable only in Ordinary Shares) to any holder of any class or series
of share capital declare or pay any dividend or other distribution of cash,
shares or other assets;
(vii) issue or sell shares of the Company in a
public offering other than in a Qualified IPO;
(viii) purchase, redeem or otherwise acquire any
Company share capital including without limitation any redemptions under Article
49 of the Revised Articles;
(ix) approve the constitution of the board of
directors of any subsidiary of the Company the composition of which does not
reflect the representation of each class of the Preferred Shareholders on the
Board;
(x) accept any capital or tax benefits from the
State of Israel which includes restrictions on transferring the assets of the
Company or is otherwise detrimental to the Preferred Shareholders; or
(xi) issue, sell, transfer or any other
disposition relating to any capital stock of the Subsidiary.
10. RIGHTS ATTACHED TO PREFERRED SHARES.
The Series A Preferred Shares, the Series B-1 Preferred Shares, the
Series C-1 Preferred Shares and the Series D Preferred Shares will have all the
rights and privileges of the Voting Ordinary Shares. The Series B-2 Non-voting
Preferred Shares and the Series C-2 Non-voting Preferred Shares will have all
the rights and privileges of the Non-voting Ordinary Shares. In addition, each
Preferred Share shall entitle its holder to the powers, preferences and rights
as follows:
10.1 LIQUIDATION RIGHTS. In the event of any liquidation, winding
up or Deemed Liquidation (as defined below) of the Company ("LIQUIDATION"):
23
(a) the Series D Holders shall be entitled to receive, prior and
in preference to any payment to any other class or series of share capital, an
amount per Series D Preferred Share (the "SERIES D LIQUIDATION PREFERENCE")
equal to the original purchase price in US dollars per Series D Preferred Share
(as adjusted for any Recapitalization Event (as defined in the Revised Articles)
with respect to such shares).
If the assets and funds thus distributed among the Series D Preferred
Shareholders shall be insufficient to permit the payment in full of the Series D
Liquidation Preference to the Series D Holders, then the entire assets and funds
of the Company legally available for distribution shall be distributed PRO RATA
among the Series D Holders in proportion to the Series D Liquidation Preference
each such holder is otherwise entitled to receive.
(b) After the payment in full of the Series D Liquidation
Preference to the Series D Holders, but prior and in preference to any payment
to the Series B Holders, Series A Holders and to the holders of the Ordinary
Shares, the Series C Holders shall be entitled to an amount per Series C
Preferred Share (the "SERIES C LIQUIDATION PREFERENCE") equal to the original
purchase price in US dollars per Series C Preferred Share (as adjusted for any
Recapitalization Event (as defined in the Revised Articles) with respect to such
shares). If the assets and funds thus distributed among the Series C Holders
shall be insufficient to permit the payment in full of the Series C Liquidation
Preference to the Series C Holders, then the entire assets and funds of the
Company legally available for distribution after giving effect of the Series D
Liquidation Preference to the Series D Holders shall be distributed PRO-RATA
among the Series C Holders in proportion to the Series C Liquidation Preference
each such holder is otherwise entitled to receive.
(c) After payment in full of the Series D Liquidation Preference
and the Series C Liquidation Preference, but prior and in preference to any
distribution of any of the assets or surplus funds of the Company to the Series
A Holders and to the holders of the Ordinary Shares, the Series B Holders shall
be entitled to receive an amount per Series B Preferred Share (the "SERIES B
LIQUIDATION PREFERENCE") equal to the purchase price in US dollars per Series B
Preferred Share (as adjusted for any Recapitalization Event with respect to such
shares). If the assets and funds thus distributed among the Series B Holders
shall be insufficient to permit the payment in full of the Series B Liquidation
Preference to the Series B Holders, then the entire assets and funds of the
Company legally available for distribution after giving effect to the Series D
Liquidation Preference and the Series C Liquidation Preference, shall be
distributed PRO-RATA among the Series B Holders in proportion to the Series B
Liquidation Preference each such holder is otherwise entitled to receive.
(d) After payment in full of the Series D Liquidation
Preference, the Series C Liquidation Preference and the Series B Liquidation
Preference but prior and in preference to any distribution of any of the assets
or surplus funds of the Company to the holders of Ordinary Shares, the Series A
Holders shall be entitled to receive an amount per Series A Preferred Share (the
"SERIES A LIQUIDATION PREFERENCE") equal to the original purchase price in US
dollars per Series A Preferred Share (as adjusted for any Recapitalization Event
with respect to such shares). If the assets and funds thus distributed among the
Series A Holders shall be insufficient to permit the payment of the Series A
Liquidation Preference in full, then the entire assets and funds of the Company
legally available for distribution after giving effect to the Series D
Liquidation Preference, the Series C Liquidation Preference and the Series B
Liquidation Preference, shall be distributed PRO-RATA among the Series A Holders
in proportion to the Series A Liquidation Preference such holder is otherwise
entitled to receive.
(e) Thereafter the remaining assets and surplus assets of the
Company legally available for distribution, if any, shall be distributed
PRO-RATA to all of the shareholders of the Company, in proportion to the their
respective shareholdings in the Company, as if all of the Preferred Shares had
been converted into Ordinary Shares of the Company.
(f) Whenever the distribution provided for in this sub-section
shall be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or property as
determined in good faith by the Board, or by the liquidator in the case of
winding up. The NIS equivalent of the U.S. dollar value of any distribution
under this sub-section shall be determined in
24
accordance with the Representative Rate of Exchange last published by the Bank
of Israel prior to the date of the making of the distribution.
(g) Notwithstanding the distribution detailed in sub-articles
(a)-(e) above, if as a result of a Deemed Liquidation the Series D Holders would
receive the Series D Conversion Price (as determined by Section 10.2 below) or
more, then the entire assets and surplus funds of the Company legally available
for distribution, if any, shall be distributed PRO-RATA to all shareholders of
the Company, in proportion to their respective shareholdings in the Company, as
if all of the Preferred Shares had been converted into Ordinary Shares, subject
to the prior payment of the Series D Liquidation Preference in the event that,
as a result of a Deemed Liquidation the PRO RATA amount that the Series D
Holders would receive from such distribution on a PRO RATA as converted basis is
less than the Series D Liquidation Preference.
(h) Notwithstanding the distribution detailed in sub-articles
(a)-(e) above, if as a result of a Deemed Liquidation the Series C Holders would
receive 2 (two) times the Series C Conversion Price (as determined by Section
10.2 below) or more, then the entire assets and surplus funds of the Company
legally available for distribution, if any, after giving effect to the
preferential rights of the Series D Holders, shall be distributed PRO-RATA to
all shareholders of the Company, in proportion to their respective shareholdings
in the Company, as if all of the Preferred Shares had been converted into
Ordinary Shares, subject to the prior payment of the Series D Liquidation
Preference in the event that, as a result of a Deemed Liquidation the PRO RATA
amount that the Series D Holders would receive from such distribution on a PRO
RATA as converted basis is less than the Series D Liquidation Preference.
(i) Notwithstanding the distribution detailed above, if as a
result of a Deemed Liquidation the Series B Holders would receive 2.5 (two and
one-half) times the Series B Conversion Price (as determined by Section 10.2
below) or more, then the entire assets and surplus funds of the Company legally
available for distribution, if any, after giving effect to the preferential
rights of the Series D Holders and the Series C Holders set forth above, shall
be distributed PRO RATA to all shareholders of the Company, in proportion to
their respective shareholdings in the Company, as if all of the Preferred Shares
had been converted into Ordinary Shares.
10.2 OPTIONAL CONVERSION. Subject to adjustment as specified below,
(i) the Series D Holders shall have the right at any time to have their Series D
Preferred Shares converted and reclassified into Voting Ordinary Shares, (ii)
the Series C-1 Holders shall have the right at any time to have their Series C-1
Preferred Shares converted or reclassified into Voting Ordinary Shares or
Non-voting Ordinary Shares, (iii) the Series C-2 Holders shall have the right at
any time to have their Series C-2 Preferred Shares converted or reclassified
into Series C-1 Preferred Shares or into Non-voting Ordinary shares, (iv) the
Series A Holders and Series B-1 Holders have the right at any time to have their
Series A Preferred Shares and Series B-1 Preferred Shares converted or
reclassified into Voting Ordinary Shares, (v) the Series B-2 Holders shall have
at any time the right to have their Series B-2 Preferred Shares converted or
reclassified into Series B-1 Preferred Shares or into Non-voting Ordinary
Shares; and (vi) the Non-voting Ordinary Shareholders have the right at any time
to have their Non-voting Ordinary Shares converted or reclassified into Voting
Ordinary Shares. Any conversion or reclassification of (i) Non-voting Ordinary
Shares into Voting Ordinary Shares; and (ii) Non-voting Preferred Shares into
Voting Preferred Shares (as defined in the Revised Articles) of the same class,
will be made on a one to one basis. Any conversion or reclassification of
Preferred Shares into Ordinary Shares will be made pursuant to the Conversion
Rate (subject to adjustment as provided under this Agreement or the Revised
Articles) at the time in effect for such share. The "CONVERSION RATE" shall be
the Original Issue Price divided by the Conversion Price (subject to any
adjustment as may be set forth in this Agreement or the Revised Articles) at the
time in effect for such share. The "ORIGINAL ISSUE PRICE" of each Preferred
Share is the amount in US Dollars originally paid to the Company for that share.
The "CONVERSION PRICE" for each Preferred Share shall initially be the Original
Issue Price of that Preferred Share and shall be adjusted as provided in
sub-section 10.3.
MANDATORY CONVERSION. The Voting Preferred Shares shall be
automatically converted or reclassified into Voting Ordinary Shares as aforesaid
and the Series B-2 Preferred and the Series C-2 Preferred shall be automatically
converted or reclassified into Non-voting Ordinary Shares, each upon the
25
closing of a Qualified IPO. Conversion of the Preferred Shares may be effected
by way of reclassification of the Preferred Shares into Ordinary Shares at the
then existing Conversion Rate.
10.3 The Conversion Rate shall be subject toadjustment in the
following cases:
(a) In the event the Company shall at any time change as a
whole, by subdivision or combination in any manner or by the making of a share
dividend (i.e. bonus shares), the number of Ordinary Shares then outstanding
into a different number of shares, then thereafter the number of Ordinary
Shares issuable upon the conversion or reclassification of Preferred Shares
shall be increased or decreased, as the case may be, in direct proportion to
the increase or decrease in the number of Ordinary Shares by reason of such
change; provided, however, that no adjustment in the Conversion Rate shall be
made hereunder in either of the following cases: (i) a share dividend on the
Ordinary Shares where an identical share dividend in Ordinary Shares was paid
also on the Preferred Shares, or (ii) a subdivision or combination of the
Ordinary Shares where an identical subdivision or combination was made PRO
RATA also in respect of the Preferred Shares.
(b) In the event of any capital reorganization, or of any
reclassification of the share capital of the Company or in case of the
consolidation or merger of the Company with or into any other corporation,
each Preferred Share shall after such capital reorganization, reclassification
of share capital, consolidation, merger or sale entitle the holder to obtain
the kind and number of Ordinary Shares or other securities or property of the
Company, or of the corporation resulting from such consolidation or surviving
such merger or to which such sale shall be made, as the case may be, to which
such holder would have been entitled if he had held the Ordinary Shares
issuable upon conversion or reclassification of such Preferred Shares
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger or sale.
10.4 ANTI-DILUTION. Upon each bona fide issuance or deemed issuance by
the Company of any New Shares (as defined below) at a price per share less than
the existing Conversion Price of a Share of a certain class of Preferred Shares,
the Conversion Price of each Share of that class of Preferred Shares will be
reduced to an amount equal to the existing Conversion Price multiplied by a
fraction (i) the numerator of which is the sum of (A) the total number of shares
of Preferred Shares outstanding plus (B) the number of New Shares that can be
purchased at the existing Conversion Price for the total consideration received
from the issuance of New Shares and (ii) the denominator of which is the number
of outstanding Preferred Shares, plus the number of New Shares issued in the new
issuance.
The formula can be expressed algebraically as follows:
P' = P * N + np/P
---------------
N + n
Where:
N = Number of Preferred Shares outstanding prior to
the dilutive issuance of shares
P = Conversion Price of the Preferred Shares prior to
the dilutive issuance
P' = New Conversion Price of the Preferred Shares after
the dilutive issuance
n = Number of New Shares issued in the dilutive
issuance
p = Price per share in the dilutive issuance
No adjustments of the Conversion Price for a
Preferred Share shall be made in an amount less than one U.S.
cent per share. No adjustment of such Conversion Price
26
pursuant to this sub-section shall be made if it has the
effect of increasing the Conversion Price above the Conversion
Price in effect immediately prior to such adjustment.
(b) In the case of the issuance of options to purchase or rights
to subscribe for Ordinary Shares, or securities by their terms convertible into
or exchangeable for Ordinary Shares or options to purchase or rights to
subscribe for such convertible or exchangeable securities (other than shares to
be issued to bona fide employees, consultants and service providers of the
Company or of the Company's subsidiaries pursuant to any share option plan or
share incentive plan approved by the Board), the aggregate maximum number of
Ordinary Shares deliverable upon exercise (assuming the satisfaction of any
conditions to exerciseability, including without limitation, the passage of
time, but without taking into account potential antidilution adjustments) of
such options to purchase or rights to subscribe for Ordinary Shares, or upon the
exchange or conversion of such security, shall be deemed to have been issued at
the time of the issuance of such options, rights, or securities, at a
consideration equal to the consideration received by the Company upon the
issuance of such options, rights, or securities plus any additional
consideration payable to the Company pursuant to the term of such options,
rights or securities (without taking into account potential anti-dilution
adjustments) for the Ordinary Shares covered thereby.
(c) In the case of the issuance of shares or other securities
for a consideration in whole or in part other than cash, the price per share
shall be deemed to be the fair market value thereof as determined in good faith
by the Board.
(d) For the purpose of this Section, the consideration of any
New Shares shall be calculated at the U.S. dollar equivalent thereof, on the day
such New Shares are issued or deemed to be issued pursuant to this Section. "NEW
SHARES" shall mean shares of whatever class issued or deemed to be issued
pursuant to Section 12 by the Company other than the Excepted Securities as
defined below.
10.5 The Company shall at all times reserve and keep available out
of its authorized Ordinary Shares, solely for the purpose of issuance upon
conversion or reclassification of Preferred Shares as herein provided, such
number of Ordinary Shares as shall then be issuable upon the conversion or
reclassification of all outstanding Preferred Shares and the Non-voting Ordinary
Shares. All Ordinary Shares which shall be so issued shall be duly and validly
issued and fully paid and non-assessable.
10.6 The Series A Holders and the Series B-1 Holders and the Series
C-1 Holders shall have the right to appoint Directors as described in Section
4.7.
10.7 Each Preferred Shareholder shall have one vote for each Ordinary
Share into which the Preferred Shares held by him of record could be converted
(as provided in Article 6 to the Articles), on every resolution (other than
class meeting or resolution), without regard to whether the vote thereon is
conducted by a show of hands, by written ballot or by any other means.
Notwithstanding the foregoing, in any class meeting or resolution, each
Preferred Shareholder shall have one vote for each Preferred Shares held by him
of record.
10.8 For the purposes of this Agreement "DEEMED LIQUIDATION" shall
mean a merger, reorganization, acquisition or sale of all or substantially all
of the assets of the Company, following which the holders of the Company's share
capital hold less than 50% of the voting power of the surviving or acquiring
entity and less than 50% of the issued and outstanding share capital of the
surviving or acquiring entity, unless the majority of the Series C Preferred
Shareholders and a majority of the Series D Preferred Shareholders agree
otherwise;
11. DIVIDENDS.
Prior to a Qualified IPO, in the event that the Company declares a
distribution of dividends, the Preferred Shareholders shall be entitled to
receive, prior and in preference to any distribution to be made to
27
the Ordinary Shareholders, forty percent (40%) of the amount of dividends
declared to be allocated in proportion to their respective shareholding in the
Company (on an as converted basis). Thereafter, the remaining amounts of
dividend legally available for distribution, shall be distributed PRO RATA to
all the shareholders of the Company in proportion to their respective
shareholding in the Company (on an as converted basis). Notwithstanding the
foregoing, any dividends paid as a result of or in connection with a Liquidation
will be distributed in the manner provided in Section 10.1 hereof.
12. PREEMPTIVE RIGHTS.
Until a Qualified IPO, each Shareholder (the "PREEMPTIVE PURCHASERS")
shall have a right of first refusal (a "PREEMPTIVE RIGHT") to purchase its
PRO-RATA share (or any portion thereof) of New Securities (as defined below)
that the Company may, from time to time, propose to sell and issue. Each
Preemptive Purchaser's PRO-RATA share shall be the ratio of the number of shares
of the Company's Ordinary Shares (assuming for purposes of this Section that all
Preferred Shares have been converted into Ordinary Shares) then held by such
Preemptive Purchaser as for the date of the Rights Notice (as defined in the
subsection 12(b)), to the sum of the total number of Ordinary Shares outstanding
as of such date (calculated on an as converted basis).
This Preemptive Right shall be subject to the following provisions:
(a) "NEW SECURITIES" shall mean any Ordinary Shares or Preferred
Shares of any kind of the Company, whether now or hereafter authorized, and
rights, options, or warrants to purchase said Ordinary Shares or Preferred
Shares, and securities of any type whatsoever that are, or may become,
convertible into said Ordinary Shares or Preferred Shares excluding the
"EXCEPTED Securities". The "EXCEPTED SECURITIES" shall include (i) securities
issuable upon conversion or reclassification of Preferred Shares; (ii)
securities offered to the public in a Qualified IPO; (iii) the Company's
Ordinary Shares or Preferred Shares issued in connection with any
Recapitalization Event; (iv) Voting Ordinary Shares to be distributed to
employees, directors, service providers, advisors or consultants of the Company
pursuant to any share option plan or any share incentive plan approved by the
Board; (v) Voting Ordinary Shares issued upon conversion or reclassification of
the Non-voting Ordinary Shares; (vi) securities issued in connection with
equipment financing, sponsored research, collaboration, technology licensing,
development agreements or any other strategic partnerships approved by the
Board; (vii) shares issued in connection with the acquisition by the Company of
another business entity or the merger of any business entity with or into the
Company or subsidiary of the Company or a merger of a subsidiary of the Company
with or into another entity; (viii) securities issuable upon exercise of the
Warrants (as such term is defined in the Revised Articles); and (ix) securities
issued in connection with a rights offering.
(b) If the Company proposes to issue New Securities, it shall
give each Preemptive Purchaser a written notice (the "RIGHTS NOTICE") of its
intention, describing the New Securities, the price, the general terms upon
which the Company proposes to issue them, and the number of shares that each
Preemptive Purchaser has the right to purchase under this Section 12. Each
Preemptive Purchaser shall have thirty (30) days from delivery of the Rights
Notice to agree to purchase (i) all or any part of its PRO-RATA share of such
New Securities and (ii) all or any part of the PRO-RATA share of any other
Preemptive Purchaser (including for this purpose any permitted transferee of
such Preemptive Purchaser) entitled to such rights to the extent that such other
Preemptive Purchaser does not elect to purchase its full PRO-RATA share, in each
case for the price and upon the general terms specified in the Rights Notice, by
giving written notice to the Company setting forth the quantity of New
Securities to be purchased. If a Preemptive Purchaser that has elected to
purchase its full PRO-RATA SHARE also elects to purchase in the aggregate the
New Securities that other Preemptive Purchasers have not elected to purchase,
such New Securities shall be sold to such Preemptive Purchaser in accordance
with its respective PRO-RATA share which PRO-RATA share shall be the ratio of
the number of shares of the Company then held by such Preemptive Purchaser (on
an as converted basis), divided by the total number of the Company's shares then
outstanding (on an as converted basis), then held by all Preemptive Purchasers
who have elected to purchase New Securities in excess of their full PRO rata
share multiplied by the sum of the total number of New Securities not purchased
at such time;
28
(c) If the Preemptive Purchasers fail to exercise in full the
right of first refusal within the period or periods specified in sub-section
12(b), the Company shall have ninety (90) days after delivery of the Rights
Notice to sell the unsold New Securities at a price and upon general terms no
more favorable than specified in the Company's notice. If the Company has not
sold the New Securities within said ninety (90) days period the Company shall
not thereafter issue or sell any New Securities without first offering such
securities to the Preemptive Purchasers in the manner provided above.
13. MISCELLANEOUS.
13.1 AGGREGATION OF SHARES. For purposes of any provision of this
Agreement requiring a person or entity to hold a minimum number of Ordinary
Shares or Preferred Shares (or Ordinary Shares issued upon conversion thereof)
or Registrable Securities in order to gain the benefit of such provision, all
shares beneficially owned by affiliated entities or persons (including partners
and members and former partners and former members) shall be aggregated together
for the purposes of determining such person's or entity's status or rights under
such provision.
13.2 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Israel (without regard to the principles of conflict of laws
thereof); provided, however, that Section 2 shall be governed exclusively by the
laws of the State of Delaware (without regard to the principles of conflict of
laws thereof).
13.3 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby.
13.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and provisions hereof shall inure to the benefit of, and be binding upon,
the successors, permitted assigns, heirs, executors and administrators of the
parties hereto. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
13.5 TERMINATION OF PRIOR AGREEMENTS. This Agreement restates,
supersedes and terminates the First Rights Agreement and the covenants and
rights contained therein, and inclusive of the Series B Rights Agreement and the
covenants and rights enumerated in sections 7 through 17 of the Series A Share
Purchase Agreement.
13.6 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof, and supersede in their entirety all prior agreements among the parties
with respect to the subject matter hereof. No party shall be liable or bound to
any other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than with the written consent of (i) the Company,
and (ii) the holders of at least seventy-five percent (75%) of each of the (a)
Series A Preferred (including Ordinary Shares received upon conversion thereof)
(b) the Series B Preferred (including Ordinary Shares received upon conversion
thereof), (c) the Series C Preferred (including Ordinary Shares received upon
conversion thereof) and (d) the Series D Preferred (including Ordinary Shares
received upon conversion thereof) and (iii) in the case of any amendment that
would affect adversely the rights of any member of Key Management, the consents
of two members of Key Management.
13.7 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) business days after the business day of deposit with the U.S. Postal Service
or other applicable postal service, if delivered by first class mail, postage
prepaid if addressed to a party in the same country or ten (10) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid if addressed to a party in a
different country, (b) upon
29
delivery, if delivered by hand, (c) three (3) business days after the business
day of deposit with Federal Express or similar overnight courier, freight
prepaid or (d) one (1) business day after the business day of facsimile
transmission, if delivered by facsimile transmission with copy by first class
mail, postage prepaid, and shall be addressed (i) if to a Purchaser or any
Preferred Shareholder, at such Purchaser's or Preferred Shareholder's address as
set forth in the this Agreement, and (ii) if to the Company, at the address of
its principal corporate offices (attention: President), or at such other address
as a party may designate by ten (10) days' advance written notice to the other
party pursuant to the provisions above. Notices to Trident Capital
Management-II, L.L.C. shall be deemed notice for each of the entities affiliated
with Trident. Notices to Eucalyptus Venture Management L.L.C. shall be deemed
notice for each of the entities affiliated with Eucalyptus. Notices to Ampal
Industries (Israel) Ltd. shall be deemed notice to each of the entities
affiliated therewith or for whom it may hold proxies from time to time. Notices
to TCV III, L.P. shall be deemed notice for each of the entities affiliated or
parallel therewith. Notices to Ampal Industries (Israel) Ltd. shall be deemed
notices for each of the entities affiliated or related thereto for which it may
hold proxies.
13.8 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any Holder
of any Registrable Securities, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such Holder nor
shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the party of any
Holder of any breach or default under this Agreement, or any waiver on the part
of any Holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Holder, shall be cumulative and not alternative.
13.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
13.10 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or compromised thereby.
13.11 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
13.12 FURTHER ASSURANCES. The parties to this Agreement hereby
represent that they collectively hold, as of the date hereof, the requisite
number of shares required by law and by the Revised Article of the Company to
amend the Revised Articles. Accordingly, as a material part of the Series D
financing each party hereby undertakes by its execution hereof, to cause a
shareholders meeting for the purposes of amending the Revised Articles to
reflect the rights granted to the Series D Holders pursuant to this Agreement in
the analogous provisions of the Revised Articles within twenty one days of the
Closing of the Series D Share Purchase Agreement (such amendment may also be
effected by the written resolution of the shareholders in accordance with the
Revised Articles). At such time as the amended Revised Articles are duly adopted
the Company shall take all necessary actions to file the amended Revised
Articles with the Israeli Registrar of Companies within the statutory period.
13.13 CONSENTS. By executing this Agreement each of the Series A
Preferred Shareholders, the Series B Preferred Shareholders, the Series C
Preferred Shareholders and each Member of Key Management hereby consents to the
issuance of the Series D Preferred Shares in accordance with this Agreement and
the Revised Articles.
30
IN WITNESS WHEREOF, the parties have signed this Agreement on the dates
as indicated below.
INFORMATION ASSOCIATES-II, L.P., by its General Partner EUCALYPTUS VENTURES L.P., by its General Partner
EUCALYPTUS VENTURES (ISRAEL) L.P. , by its General
IA-II AFFILIATES, L.L.C., Partner
by its Manager EUCALYPTUS VENTURES (CAYMAN) L.P. , by its General
Partner
By: EUCALYPTUS VENTURES AFFILIATED FUND L.P., by its
General Partner
Name:
of TRIDENT CAPITAL MANAGEMENT-II, L.L.C. By:
Name:
of EUCALYPTUS VENTURE MANAGEMENT L.L.C.
ISRAEL SEED LIMITED PARTNERSHIP, By its General Partner, ISRAEL SEED II L.P., By its General Partner, SEED
SEED VENTURE PARTNERS LIMITED VENTURE PARTNERS LIMITED
By:
By:
Name:
Name:
WSG CAPITAL L.P. BY ITS GENERAL PARTNER AMPAL INDUSTRIES (ISRAEL) LTD.
By: By:
Name: Name:
TECHNOROV HOLDINGS (1993) LTD. MARINERA LTD.
By: By:
Name: Name:
of AMPAL INDUSTRIES (ISRAEL) LTD. VIA PROXY
AMPAL AMERICAN ISRAEL CORPORATION INVECO INTERNATIONAL INC.
By: By:
Name: Name:
of AMPAL INDUSTRIES (ISRAEL) LTD. VIA PROXY
XACCT TECHNOLOGIES (1997) LTD. DEUTSCHE BANK AG
By: By:
Name: Name:
TCV III (GP) TCV III (Q), L.P.
A DELWARE GENERAL PARTNERSHIP A DELAWARE LIMITED PARTNERSHIP
By: Technology Crossover Management III By: Technology Crossover Management III,
L.L.C., its General Partner L.L.C., its General Partner
By: By:
Name: Xxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer Title: Chief Financial Officer
TCV III, L.P. TCV III STRATEGIC PARTNERS, L.P.
A DELWARE LIMITED PARTNERSHIP A DELAWARE LIMITED PARTNERSHIP
By: Technology Crossover Management III By: Technology Crossover Management III,
L.L.C., its General Partner L.L.C., its General Partner
By: By:
Name: Xxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer Title: Chief Financial Officer
GLOBELINQ INTERNATIONAL FUND I, LLC WSG CAPITAL II L.P. BY ITS GENERAL PARTNER
By: By:
WSG Mangement, L.L.C., General Partner
Name: By Xxxx Xxxxxx, General Manager
XXXXX XXXXXXXXXX XXXX XXXXX
By: By:
XXXX XXXXXX SUN MICROSYSTEMS, INC.
By By:
Name:
H&Q EMPLOYEE VENTURE FUND 2000, L.P CREDIT SUISSE FIRST BOSTON VENTURE FUND I, LP
By: By:
Name: Name:
XXXX XXXXXXXXXX XXXXXX & XXXXX XXXXXXX
By: By:
By:
XXX X. XXXXX XXXX XXXXXX
By: By:
XXXX XXXX XXXX XXXXXX
By: By:
XXX XXXXXXXX XXXX XXXX
By: By:
XXXXXXXXX & XXXXX CALIFORNIA
By
SCHEDULE I
SERIES A HOLDERS
Ampal-American Israel Corporation (1)
Israel Seed Limited Partnership (8)
Israel Seed II L.P. (8)
Technorov Holdings (1993) Ltd. (7)
SERIES B HOLDERS
Ampal-American Israel Corporation (1)
Ampal Industries (Israel) Ltd. (1)
Marinera Ltd. (1)
Inveco International Inc. (1)
Israel Seed Limited Partnership (8)
Israel Seed II L.P. (8)
Technorov Holdings (1993) Ltd. (7)
Information Associates-II, L.P. (3)
IA-II Affiliates, L.L.C. (3)
Eucalyptus Ventures L.P. (4)
Eucalyptus Ventures (Israel) L.P. (4)
Eucalyptus Ventures (Cayman) L.P. (4)
Eucalyptus Ventures Affiliated Fund L.P. (4)
WSG Capital L.P. (9)
SERIES C HOLDERS
TCV III, L.P. (2)
TCV III (GP) (2)
TCV III (Q), L.P. (2)
TCV III Strategic Partners, L.P. (2)
Marinera Ltd. (1)
Ampal Industries (Israel) Ltd. (1)
Deutsche Bank AG (6)
Globe LinQ International Fund I, LLC (5)
Information Associates-II, L.P. (3)
IA-II Affiliates, L.L.C. (3)
Eucalyptus Ventures L.P. (4)
Eucalyptus Ventures (Israel) L.P. (4)
Eucalyptus Ventures (Cayman) L.P. (4)
Eucalyptus Ventures Affiliated Fund L.P. (4)
Technorov Holdings (1993) Ltd. (7)
Israel Seed Limited Partnership (8)
Israel Seed II L.P. (8)
WSG Capital II L.P. (9)
SERIES D HOLDERS
Sun Microsystems, Inc.
Credit Suisse First Boston Venture Fund I, LP
H&Q Employee Venture Fund 2000, X.X
Xxxxxxxxx & Xxxxx California
Xxxx Xxxxxxxxxx
Xxxxxx & Xxxxx Xxxxxxx
Xxx X. Xxxxx
Xxxx Xxxxxx
Xxxx Xxxx
Xxxx Xxxxxx
Xxx Xxxxxxxx
Xxxx Xxxx
KEY MANAGEMENT
Xxxx Xxxxxx
Xxxxx Xxxxxxxxxx
Xxxx Xxxxx
(1) IF TO AMPAL AMERICAN ISRAEL CORPORATION, AMPAL INDUSTRIES (ISRAEL) LTD.,
MARINERA LTD. AND INVECO INTERNATIONAL INC.:
Ampal Industries (Israel) Ltd.
000 Xxxxxxxxx Xx.
Xxx-Xxxx, Xxxxxx 00000
(2) IF TO TCV:
Technology Crossover Ventures III, L.P. With a copy to:
00 Xxxx Xx., Xxxxx 000 Technology Crossover Ventures III, L.P.
Xxxxxxxx, XX 00000 000 Xxxx Xx., Xxxxx 000
XXX Xxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx USA
Attn: Xxx X. Xxxxxxxx, Jr.
(3) IF TO TRIDENT:
Trident Capital Management-II, L.L.C. With a copy to:
0000 Xxxxx Xxxxxx Xxxx., Xxxxx 000 Trident Capital Management-II, L.L.C
Xxx Xxxxxxx, XX 00000, XXX 0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xx 00000, XXX
Attn: CFO
-2-
(4) IF TO EUCALYPTUS:
Eucalyptus Venture Management L.L.C.
Xxxxxxxxx & Xxxxx
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX, XXX
Attn: Xxxxx Xxxxxxx
(5) IF TO NISSHO IWAI AMERICAN CORPORATION:
Nissho Iwai American Corporation
1211 Ave. of the Xxxxxxxx
Xxx-Xxxx, XX 00000
(6) IF TO DEUTSCHE BANK AG:
Deutsche Bank With a copy to:
Winchester House Sharir, Shiv, Law Offices
0 Xxxxx Xxxxxxxxxx Xx. 72 Xxxxxx Xxxxx Xxxxxx
Xxxxxx XX0X 0XX Xxx Xxxx 00000, Xxxxxx
England Attn: Yoram Shiv
Attn: Xxx Xxxxxxxx
Xxxxxx Xxxxx
-3-
(7) IF TO TECHNOROV HOLDINGS (1993) LTD.:
Technorov Holdings (1993) Ltd.
00 Xxxxxxxxxx Xxxx.
Xxxxx Xxxxx, Xxx-Xxxx 00000
Israel
(8) IF TO ISRAEL SEED:
Israel Seed Limited Partnership With a copy to:
(with affiliated entities) Israel Seed
64 Xxxx Refaim Lord Xxxxxxxxx Xxxxx
Xxxxxxxxx, 00000 00-00 Xxxxxxxxx
Xxxxxx St. Helier, Jersey JE4 8SZ
Channel Islands
(9) IF TO WSG CAPITAL L.P. AND WSG CAPITAL X.X. XX:
WSG Capital L.P. and WSG Capital II, L.P.
c/o Xxxx Xxxxxx at XACCT Technologies Inc.
0000 Xxxxx Xx., Xxxxx 000
Xxxxx Xxxxx, XX, 00000, XXX
IF TO XACCT TECHNOLOGIES:
XACCT Technologies (1997) Ltd. With a copy to:
00 Xxxxxxx Xx. XACCT Technologies Inc.
Xxxx-Xxxx 00000, Xxxxxx 0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxx Xxxxx, XX 00000, XXX
With a copy to:
X. Xxxxxxxx & Co. Advocates
3 Xxxxxx Xxxxxx Xx.
Xxx-Xxxx 00000, Xxxxxx
Attn: Xxxxxxx X. Xxxxxxxx, Adv.
SERIES D ADDRESSES TO BE INSERTED
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