REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December
13, 2001, is entered into by and between DATA SYSTEMS & SOFTWARE INC., a
Delaware corporation (the "Company"), and each of the stockholders listed on
Exhibit A attached hereto (each a "Stockholder" and, collectively, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, pursuant to the Share Purchase Agreement, dated as of November 29,
2001, by and among the Company, Decision Systems Israel Ltd., Endan IT Solutions
Ltd., Xxxxx Xxxxxxxx (Noy), Xxxxxxxx Investment Ltd., and the Stockholders (the
"Purchase Agreement"), the Company has agreed to issue to each of the
Stockholders the number of DSSI Shares set forth opposite such Stockholder's
name on Exhibit A attached hereto; and
WHEREAS, to induce each of the Stockholders to execute and deliver the
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Act"), and applicable
state securities laws, subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Stockholders
hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement.
2. Restrictions on Transfer.
2.1. Except as provided in Section 2.3 hereof, commencing on the Closing
Date and ending on the sixth month anniversary thereof (the "Lock Up Period"),
no Stockholder shall, directly or indirectly, offer, transfer, sell, assign,
pledge, hypothecate or otherwise dispose of (each a "Transfer") any of such
Stockholder's DSSI Shares in any public sale. The foregoing restriction on
Transfer during the Lock Up Period shall apply notwithstanding the registration
of the DSSI Shares by the Company pursuant to Section 3 of this Agreement.
2.2. Except as provided in Section 2.3 hereof, commencing on the day
immediately after the Lock Up Period and ending on the ninth month anniversary
of the Closing Date, no Stockholder shall Transfer in a public sale more than
50% of the DSSI Shares received by such Stockholder at the Closing (which shall
include public sales of DSSI Shares by any transferee of such Stockholder),
except with the prior written consent of the Chairman of the Board of the
Company. After the ninth month anniversary of the Closing Date, each Stockholder
may Transfer his or its DSSI Shares in public sales without any limitation or
restriction other than as provided under the Act and Other Securities Laws (as
defined below).
2.3. Each Stockholder may at any time, and from time to time, Transfer his
or its DSSI Shares in a non-public transaction exempt from registration under
the Act and Other Securities Laws (as defined below), without the restrictions
set forth in Sections 2.1 and 2.2 of this Agreement, provided the following
conditions are met: (a) prior to such Transfer counsel for the Stockholder shall
have furnished the Company with an opinion, reasonably acceptable to the
Company, that an exemption is available under the Act and any applicable
securities laws of any U.S. state, Israel and/or any other country (the "Other
Securities Laws"), (b) such Transfer is made in compliance with such exemption
from registration and (c) the Stockholder shall have provided the Company with a
copy of the executed agreements for such Transfer. After the Lock Up Period, the
Company shall provide any reasonable assistance requested in writing by a
Stockholder to facilitate any sale of DSSI Shares permitted under this Section
2.3.
2.4. Any purported Transfer of DSSI Shares by any Stockholder or any
transferee of any Stockholder that violates any provision of this Agreement will
be invalid, and the Company and its transfer agent will be under no obligation
to record any such Transfer on the books of the Company. Until the ninth month
anniversary of the Closing Date, the Company will maintain instructions with its
transfer agents regarding the restrictions on Transfer as set forth in Section 2
of this Agreement.
2.5. The restrictions on the number of DSSI Shares that a Stockholder may
Transfer under this Section 2 shall include any Transfer of the DSSI Shares held
by a transferee of such Stockholder.
3. Registration.
3.1. As soon as practicable, but in any event no later than 30 days after
the Closing, the Company shall file a registration statement on a Form S-3 under
the Act with respect to all DSSI Shares held by each of the Stockholders
(collectively, the "Registerable Shares"), and the Company shall use its best
efforts to cause such registration statement to become effective within 120 days
following the Closing, all at its sole cost and expense. Each of the
Stockholders undertakes in connection therewith to provide in a timely manner
all such information and materials pertaining to it as may be required in order
to permit the Company to comply with all applicable requirements of the
Securities and Exchange Commission ("SEC") and to obtain the acceleration of the
effective date of the registration statement. In connection with such
registration, the Company shall:
(a) use its best efforts to keep the registration statement effective until the
earlier of (i) when all of the Stockholders have sold their respective
Registerable Shares or (ii) when the Registerable Shares may be sold by the
Stockholders (or the respective transferees) under Rule 144(k) of the Act;
(b) as expeditiously as possible furnish to each of the Stockholders such
reasonable numbers of copies of the prospectus contained in the registration
statement covering the Registerable Shares as any such Stockholder may
reasonably request in order to facilitate the public sale or other Transfer of
the Registerable Shares;
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(c) as expeditiously as possible use its best efforts to register or qualify the
Registerable Shares under the securities or Blue Sky laws of such U.S. states as
the undersigned shall reasonably request, provided, however, that the Company
shall not be required in connection with this paragraph (c) to qualify as a
foreign corporation or execute a general consent to service of process in any
jurisdiction or register or qualify the Registerable Shares in any country other
than the United States;
(d) cause all such Registerable Shares registered pursuant hereto to be listed
on each securities exchange on which the Common Stock is then listed; and
(e) pay all costs and expenses incident to registration, filings or
qualifications pursuant to this Agreement, such as registration, listing, and
qualification fees, printing and accounting fees, and the fees and disbursements
of counsel to the Company and the reasonable legal fees and expenses (not to
exceed $3,500) of one counsel designated by the Stockholders;
3.2. Each of the Stockholders shall pay any and all of their respective
underwriters' discounts, brokerage fees and transfer taxes incident to the sale
of the Registerable Shares sold by such Stockholder pursuant to this Agreement.
4. Indemnification.
4.1. Subject to Section 4.4, the Company shall indemnify and hold harmless
each Stockholder, and each other person, if any, who controls a Stockholder
within the meaning of the Act or the Securities Exchange Act of 1934 (the
"Exchange Act") against any losses, claims, damages, or liabilities, joint or
several (the "Losses"), to which such Stockholder, or controlling person may
become subject under the Act, the Exchange Act or any state securities laws, or
otherwise, insofar as such Losses (or actions in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registerable Shares were registered pursuant to this Agreement (the
"Registration Statement"), any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to the
Registration Statement, or (ii) any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company will not be liable
to a Stockholder in any such case to the extent that any such Loss arises out of
or is based upon any untrue statement or omission made in the Registration
Statement, preliminary prospectus, or final prospectus, or any such amendment or
supplement, in reliance upon and in conformity with information furnished to the
Company, in writing, by or on behalf of such Stockholder or controlling person
specifically for use in the preparation thereof.
4.2. Subject to Section 4.4, each of the Stockholders, severally with
respect to itself, shall indemnify and hold harmless the Company, and each other
person, if any, who controls the Company within the meaning of the Act or the
Exchange Act against any Losses to which the Company, or controlling person may
become subject under the Act, the Exchange Act, state
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securities laws, or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged any
untrue statement of any material fact contained in the Registration Statement,
any preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, to the
extent that any such statement was made in reliance upon and in conformity with
the information furnished to the Company, in writing, by or on behalf of such
Stockholder or controlling person specifically for use in the preparation
thereof, or (ii) the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading which omission was made in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf of such
Stockholder or controlling person specifically for use in the preparation
thereof.
4.3. If any action is brought against a person entitled to indemnification
pursuant to this Section 4 (an "indemnified party") in respect of which
indemnity may be sought against a person granting indemnification (an
"indemnifying party") pursuant to such Section, such indemnified party shall
promptly notify such indemnifying party in writing of the commencement thereof
(provided the omission to so notify the indemnifying party of any such action
shall not release the indemnifying party from any liability it may have to such
indemnified party except to the extent such failure shall have actually and
materially prejudiced the indemnifying party as a result thereof). In case any
such action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party against
which a claim is to be made will be entitled to participate in the defense
thereof and, to the extent that it may wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall reasonably conclude based
upon advice of counsel that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party shall have the right
to select separate counsel to assume such legal defenses and otherwise to
participate in the defense of such action on behalf of such indemnified party or
parties (the "Separate Counsel Proviso"). Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by that indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 4 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the Separate Counsel Proviso (it
being understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel), (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. An indemnifying party shall not be liable for any settlement
of any action or proceeding effected without its written consent.
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4.4. No claim may be made against an indemnifying party for indemnification
by any indemnified party pursuant to this Section 4 unless the aggregate
liability of the indemnifying party to the indemnified parties hereunder exceeds
$75,000 ("Minimum Liability").
5. Assignment of Registration Rights. The rights of a Stockholder pursuant
to this Agreement shall be automatically assigned by any Stockholder to any
transferee of all or any portion of the Registerable Shares held by such
Stockholder if: (a) the Transfer of Registerable Shares to such transferee was
made in accordance with Section 2.3 hereof, (b) such Stockholder provides a copy
of the written agreement with the transferee within a reasonable time after such
Transfer and (c) the transferee agrees in writing with the Company to be bound
by all of the provisions contained in this Agreement, including, without
limitation, the restrictions on Transfer set forth in Section 2 of this
Agreement and the inclusion on Exhibit A hereto of such transferee's name and
number of DSSI Shares owned thereby).
6. Amendment of Registration Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the Company and the holders of all Registerable Shares which
are not then saleable pursuant to Rule 144 within the coming 90 days. Any
amendment or waiver made in accordance with this Section 6 shall be binding upon
all the Stockholders, all transferees of each Stockholder and the Company.
7. Legend. The Stockholders agree that all stock certificates evidencing
DSSI Shares held by them or any of their respective transferees, in addition to
any notice thereon required by the applicable law, shall bear conspicuously on
the face or back thereof, a legend reading substantially as follows:
"Until September 13, 2002, this certificate and the shares represented
hereby are subject to restrictions on transfer, and may not be sold, assigned,
transferred or otherwise disposed of, nor may a security interest be created
herein or therein, except in accordance with the terms of a certain Registration
Rights Agreement, dated as of December 13, 2001, by and among the Corporation
and certain of its stockholders listed therein, a copy of which may be examined
at the offices of the Corporation."
8. Miscellaneous.
8.1. Subject to the requirements of Section 6 of this Agreement, neither
this agreement nor any provisions hereof shall be modified, discharged or
terminated except by an instrument in writing signed by the party against whom
any such waiver, change, discharge or termination is sought to be enforced.
8.2. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile, by registered
or certified airmail (postage prepaid, return receipt requested) or sent by
internationally-recognized courier to each other party as set forth below or to
such other address as the party to whom notice is to be given may have furnished
to
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the other parties hereto in writing in accordance herewith. Any such notice or
communication shall be deemed to have been delivered and received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
facsimile, on the date sent if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified airmail (return
receipt requested) or by internationally-recognized courier, (c) in the case of
a internationally-recognized courier, on the second business day after the date
when sent and (d) in the case of mailing, on the fifth business day following
that date on which the piece of mail containing such communication is posted:
if to the Company:
Data Systems & Software Inc.
000 Xxxxx 00
Xxxxxx, Xxx Xxxxxx 00000
Xxxxxx Xxxxxx
Attention: Xxxxxx Xxxxxxxxxxx
Facsimile: 000-000-0000
With a copy to:
Xxxxxxxxxx Xxxxxxxxx & Xxxxxx, LLP
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Facsimile: 212-986-2399
If to a Stockholder:
To the address set forth opposite
Such Stockholder's name on Exhibit A
8.3. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such validity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
8.4. This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.
8.5. This agreement shall be governed by and construed in accordance with
the law of the State of New York applicable to agreements made and to be
performed in that State. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the County of New York,
State of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
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and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.
8.6. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
8.7. This agreement may be executed through the use of separate signature
pages or in any number of counterparts, and each of such counterparts shall, for
all purposes, constitute one agreement binding on all the parties,
notwithstanding that all parties are not signatories to the same counterpart.
[Signatures appear on next page]
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IN WITNESS WHEREOF, the undersigned has caused to be executed this
agreement as of the date indicated and agrees to be bound by this agreement.
DATA SYSTEMS AND SOFTWARE INC.
By: s/Xxxxx Xxxxxxx
----------------------------
Name:
Title:
KARDAN COMMUNICATIONS LTD.
By: s/Xxxxxxx Xxxxxxxx
----------------------------
Name:
Title:
By: s/Xxxxxx Xxxxxxx
----------------------------
Name:
Title:
s/Xxxxx Xxxxxxx
--------------------------------
ADV. XXXXX XXXXXXX AS TRUSTEE
FOR XXXX XXXXX
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EXHIBIT A - STOCKHOLDERS
--------------------------------------------------------------------------------
Name and Address of Stockholder Number of DSSI Shares Owned
--------------------------------------------------------------------------------
Kardan Communications Ltd. 354,218
000 Xxxxxx Xxxxx Xx.Xxx Xxxx 00000, Xxxxxx
Facsimile: x000-0-000-0000
With a copy to:
Shem-tov, Ickovics, Xxxxxx & Co.
0 Xxxxxxxxxx Xx., Xxx Xxxx 00000, Xxxxxx
Attention: Xxx Xxxxxxxxxx, Adv.
Facsimile: x000-0-0000000
--------------------------------------------------------------------------------
Adv. Xxxxx Xxxxxxx, as Trustee for Xxxx Xxxxx 10,993
00 Xxxxxxx Xx., Xxxxx 00000, Xxxxxx
Facsimile: x000-0-0000000
--------------------------------------------------------------------------------
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