REGISTRATION RIGHTS AGREEMENT
REGISTRATION
RIGHTS
AGREEMENT
This
Registration Rights Agreement (the “Agreement”) is made and entered into as of
this 9th
day
of
December, 2005
by
and
among SuperCom Ltd., an Israeli corporation (the “Company”), and the “Investors”
named in that certain Purchase Agreement by and among the Company and the
Investors (the “Purchase Agreement”).
The
parties hereby agree as follows:
1.
Certain
Definitions.
As
used
in this Agreement, the following terms shall have the following meanings:
“Affiliate”
means,
with respect to any person, any other person which directly or indirectly
controls, is controlled by, or is under common control with, such person.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Investors”
shall
mean the Investors identified in the Purchase Agreement and any Affiliate or
permitted transferee of any Investor who is a subsequent holder of any Warrants
or Registrable Securities.
“Ordinary
Shares”
shall
mean the Company’s Ordinary Shares, par value NIS0.01 per share, and any
securities into which such Ordinary Shares may hereinafter be reclassified.
“Other
Investors”
shall
mean the investors listed as “Additional Investors” in Schedule 4.3
to
the
Purchase Agreement.
“Other
Shares”
shall
mean up to 1,125,000
Ordinary
Shares issued or issuable to
the
Other
Investors pursuant to the several subscription agreements in the form delivered
to the Investors pursuant to the Purchase Agreement.
“Prospectus”
shall
mean (i) any preliminary or final prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus, and (ii) any “free
writing prospectus” as defined in Rule 163
under
the
1933
Act.
“Registered,”
“registered”
and
“registration”
refer
to a
registration
made by preparing and filing a Registration Statement or similar document in
compliance with the 1933 Act (as defined below), and the declaration or ordering
of effectiveness of such Registration Statement or document.
“Registrable
Securities”
shall
mean (i) the Shares, (ii)
the
Warrant Shares and (iii) any other securities issued or issuable with respect
to
or in exchange for Registrable Securities; provided, that, a
security
shall cease to be
a
Registrable Security upon (A) sale pursuant to a Registration Statement or
Rule
144
under
the
1933
Act,
or
(B) such security becoming eligible for sale by the Investors pursuant to Rule
144(k).
“Registration
Statement”
shall
mean any registration statement of the Company filed under the 1933 Act that
covers the resale of any of the Registrable Securities pursuant to the
provisions of this Agreement, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.
“Required
Investors”
means
the Investors holding a majority of the Registrable Securities.
“SEC”
means
the U.S. Securities and Exchange Commission.
“Shares”
means
the Ordinary Shares issued pursuant to
the
Purchase Agreement. ‘
“1933
Act”
means
the Securities Act of 1933,
as
amended, and the rules and regulations promulgated thereunder.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Warrants”
means,
the warrants to purchase Ordinary Shares issued to the Investors pursuant to
the
Purchase Agreement, the form of which is attached to the Purchase Agreement
as
Exhibit A.
“Warrant
Shares”
means
the Ordinary Shares issuable upon the exercise of the Warrants.
2.
Registration.
(a)
Registration
Statements.
(i)
Promptly
following the closing of the purchase and sale of the securities contemplated
by
the Purchase Agreement (the “Closing Date”) but no later than thirty (30) days
after the Closing Date (the “Filing Deadline”), the
Company
shall prepare and file with the SEC one Registration Statement on Form F-1
(or,
if Form F-1
is
not
then available to the Company, on such form of registration statement as is
then
available to effect a registration for resale of
the
Registrable Securities, subject to the Required Investors’ consent), covering
the resale of the Registrable Securities in an amount at least equal to the
Shares and the Warrant Shares. Such Registration Statement shall include a
plan
of distribution substantially in the form attached hereto as Exhibit
A
(subject
to any comments thereon by the SEC). Such Registration Statement also shall
cover, to the extent allowable under the 1933 Act and the rules promulgated
thereunder (including Rule 416), such indeterminate number of additional
Ordinary Shares resulting from stock splits, stock dividends or similar
transactions with respect to the Registrable Securities. Such Registration
Statement shall not include any Ordinary Shares or other securities for the
account of any other holder, other than the Other Shares, without the prior
written consent of the Required Investors. The Registration Statement (and
each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to
the
Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Registrable Securities is not filed with
the
SEC
on
or
prior to the Filing Deadline, the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to
1.5%
of the aggregate amount invested by such Investor for each 30-day period or
pro
rata for any portion thereof following the Filing Deadline for which no
Registration Statement is filed with respect to the Registrable Securities.
Such
payments shall constitute the Investors’ exclusive monetary remedy for such
events, but shall not affect the right of the Investors to seek injunctive
relief. Such payments shall be made to each Investor in cash.
-2-
(ii)
Additional
Registrable Securities.
Upon
the written demand of any Investor and upon any
change
in
the Warrant Price (as defined in the Warrant) such that additional Ordinary
Shares become issuable upon the exercise of the Warrants, the Company shall
prepare and file with the SEC one or more Registration Statements on Form F-1
or
amend the Registration Statement filed pursuant to clause (i) above, if such
Registration Statement has not previously been declared effective (or, if Form
F-1 is not then available to the Company, on such form of registration statement
as is then available to effect a registration for resale of such additional
Ordinary Shares (the “Additional Shares”), subject to the Required Investors’
consent) covering the resale of the Additional Shares, but only to the extent
the Additional Shares are not at the time covered by an effective Registration
Statement. Such Registration Statement also shall cover, to the extent allowable
under the 1933 Act and the rules promulgated thereunder (including Rule 416),
such
indeterminate
number of additional Ordinary Shares resulting from stock splits, stock
dividends or similar transactions with respect to the Additional Shares. Such
Registration Statement shall not include any Ordinary Shares or other securities
for
the
account of any other holder, other than the Other Shares, without the prior
written consent of the Required Investors. The Registration Statement (and
each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to
the
Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Additional Shares is required to be filed
under this Section 2(a)(ii) and is not filed with the SEC within five Business
Days of the request of
any
Investor or upon the occurrence of any of the events specified in this Section
2(a)(ii), the Company will make pro rata payments to each Investor, as
liquidated damages and not as a penalty, in an amount equal to 1.5% of
the
aggregate amount invested by such Investor for each 30-day period or pro rata
for any portion thereof following the date by which such Registration Statement
should have been filed for which no Registration Statement is filed with respect
to the Additional Shares. Such payments shall constitute the Investors’
exclusive monetary remedy for such events, but shall not affect the right of
the
Investors to seek injunctive relief. Such payments shall be made to each
Investor in cash.
(iii)
F-3 Qualification. Promptly following the date (the “Qualification Date”)
upon which the Company becomes eligible to use a registration statement on
Form
F-3 to register the Registrable Securities or Additional Shares, as applicable,
for resale, but in no event more than thirty (30) days after the Qualification
Date (the “Qualification Deadline”), the Company shall file a registration
statement on Form F-3 covering the Registrable Securities or Additional Shares,
as applicable (or a post-effective amendment on Form F-3 to the registration
statement on Form F-1) (a “Shelf Registration Statement”) and shall use
commercially reasonable efforts to cause such Shelf Registration Statement
to be
declared effective as promptly as practicable thereafter. If a Shelf
Registration Statement covering the Registrable Securities is not filed with
the
SEC on or prior to the Qualification Deadline, the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.5% of the aggregate purchase price paid by such Investor
pursuant to the Purchase Agreement attributable to those Registrable Securities
that remain unsold at that time for each 30-day period or pro rata for any
portion thereof following the date by which such Shelf Registration
Statement should have been filed for which no such Shelf Registration Statement
is filed with respect to the Registrable Securities or Additional Shares, as
applicable. Such payments shall constitute the Investors' exclusive monetary
remedy for such events, but shall not affect the right of the Investors to
seek
injunctive relief. Such payments shall be made to each Investor in cash.
-3-
(b)
Expenses. The Company will pay all expenses associated with each
registration, including filing and printing fees, the Company's counsel and
accounting fees and expenses, costs associated with clearing the Registrable
Securities for sale under applicable state securities laws, listing fees, fees
and expenses of one counsel to the Investors and the Investors' reasonable
expenses in connection with the registration, but excluding discounts,
commissions, fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals with respect to the Registrable Securities
being sold. Anything contained in this Section to the contrary notwithstanding,
the Company's obligation to pay expenses on behalf of Investors with respect
to
the registration of the Registrable Securities under the 1933 Act shall not
exceed an aggregate of $50,000 for any and all registration statements covering
the Registrable Securities, whether in one or more registration statements
covering the Registrable Securities.
(c)
Effectiveness.
(i)
The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective as soon as practicable. The Company
shall notify the Investors by facsimile or e-mail as promptly as practicable,
and in any event, within twenty-four (24) hours, after any Registration
Statement is declared effective and shall simultaneously provide the Investors
with copies of any related Prospectus to be used in connection with the sale
or
other disposition of the securities covered thereby. If (A)(x) a Registration
Statement covering the Registrable Securities is not declared effective by
the
SEC prior to the earlier of (i) five (5) Business Days after the SEC shall
have
informed the Company that no review of the Registration Statement will be made
or that the SEC has no further comments on the Registration Statement or (ii)
the 90th day after the Closing Date,
(y) a Registration Statement covering Additional Shares is
not declared effective by the SEC within ninety (90) days following the time
such Registration Statement was required to be filed pursuant to Section
2(a)(ii) or (z) a Shelf Registration Statement is not declared effective by
the
SEC within ninety (90) days after the Qualification Deadline, or (B) after
a
Registration Statement has been declared effective by the SEC, sales cannot
be
made pursuant to such Registration Statement for any reason (including without
limitation by reason of a stop order, or the Company's failure to update the
Registration Statement), but excluding the inability of any Investor to sell
the
Registrable Securities covered thereby due to market conditions and except
as
excused pursuant to subparagraph (ii) below, then the Company will make pro
rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.5% of the aggregate amount invested by such Investor for
each
30-day period or pro rata for any portion thereof following the date by which
such Registration Statement should have been effective (the "Blackout Period").
Such payments shall constitute the Investors' exclusive monetary remedy for
such
events, but shall not affect the right of the Investors to seek injunctive
relief. The amounts payable as liquidated damages pursuant to this paragraph
shall be paid monthly within three (3) Business Days of the last day of each
month following the commencement of the Blackout Period until the termination
of
the Blackout Period. Such payments shall be made to each Investor in cash.
-4-
(ii)
For
not more than twenty (20) consecutive days or for a
total
of
not more than forty-five (45) days in any twelve (12) month period, the Company
may delay the disclosure of material non-public information concerning the
Company, by suspending the use of any Prospectus included in any registration
contemplated by this Section containing such information, the disclosure of
which at the time is not, in the good faith opinion of the Company, in the
best
interests of the Company (an "Allowed Delay"); provided, that the Company shall
promptly (a) notify the Investors in writing of the existence of (but in no
event, without the prior written consent of an Investor, shall the Company
disclose to such Investor any of the facts or circumstances regarding) material
non-public information giving rise to an Allowed Delay, (b) advise the Investors
in writing to cease all sales under the Registration Statement until the end
of
the Allowed Delay and (c) use commercially reasonable efforts to terminate
an
Allowed Delay as promptly as practicable.
(d)
Notwithstanding anything herein to the contrary, the Company's obligations
hereunder shall be suspended with respect to the Registrable Securities of
an
Investor in the event that such Investor fails to provide promptly to the
Company such information as the Company may reasonably request at any time
to
enable the Company to comply with any applicable law or regulation or to
facilitate preparation of a Registration Statement.
3.
Company
Obligations. The Company will use commercially reasonable efforts to effect
the registration of the Registrable Securities in accordance with the terms
hereof, and pursuant thereto the Company will, as expeditiously as possible:
(a)
use
commercially reasonable efforts to cause such Registration Statement to become
effective and to remain continuously effective for a period that will terminate
upon the earlier of (i) the date on which all Registrable Securities covered
by
such Registration Statement as amended from time to time, have been sold, and
(ii) the date on which all Registrable Securities covered by such Registration
Statement may be sold pursuant to Rule 144(k) (the "Effectiveness Period")
and
advise the Investors in writing when the Effectiveness Period has expired;
(b)
prepare and file with the SEC such amendments and post-effective amendments
to
the Registration Statement and the Prospectus as
may
be
necessary to keep the Registration Statement effective for the Effectiveness
Period and to comply with the provisions of the 1933
Act
and
the 1934 Act with respect to the distribution of all of the Registrable
Securities covered thereby;
(c)
provide copies to and permit counsel designated by the Investors to review
each
Registration Statement and all amendments and supplements thereto no fewer
than
seven (7) days prior to their filing with the SEC
and
not
file any document to which such counsel reasonably objects;
(d)
furnish to the Investors and their legal counsel (i) promptly after the same
is
prepared and publicly distributed, filed with the SEC, or received by the
Company (but
not
later than two (2) Business Days after the filing date, receipt date or sending
date, as the case may be) one (1)
copy
of
any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC,
and
each
item of correspondence from the SEC or the staff of the SEC,
in
each
case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a Prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as each lnvestor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor that are
covered by the related Registration Statement;
-5-
(e)
use
commercially reasonable efforts to (i) prevent
the issuance of any stop order or other suspension of effectiveness and, (ii)
if
such order is issued, obtain the withdrawal of any such order at the earliest
possible moment;
(f) prior
to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Investors and their counsel
in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions requested by the Investors and do any and all other commercially
reasonable acts or things necessary or advisable to enable the distribution
in
such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business
in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(f), (ii) subject itself to general taxation in any jurisdiction
where it would not otherwise be so subject but for this Section 3(f), or (iii)
file a general consent to service of process in any such jurisdiction;
(g)
use
commercially reasonable efforts to cause all Registrable Securities covered
by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed;
(h)
immediately notify the Investors, at any time prior to the end of the
Effectiveness Period, upon discovery that, or upon the happening of any event
as
a result of which, the Prospectus includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly prepare, file with the SEC and furnish
to such holder a reasonable number of copies of a supplement to or an amendment
of such Prospectus as may be necessary so that such Prospectus shall not include
an untrue statement of a
material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
then
existing; and
(i)
otherwise
use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934
Act,
including, without limitation, Rule 172
under
the
1933 Act, file any final Prospectus, including any supplement or amendment
thereof, with the SEC pursuant to Rule 424 under the 1933 Act, promptly inform
the Investors in writing if, at any time during the Effectiveness Period, the
Company does not satisfy the conditions specified in Rule 172 and, as a result
thereof, the Investors are required to deliver a Prospectus in connection with
any disposition of Registrable Securities and take such other actions as may
be
reasonably necessary to facilitate the registration of the Registrable
Securities hereunder; and make available to its security holders, as soon as
reasonably practicable, but not later than the Availability Date (as defined
below), an earnings statement covering a period of at least twelve (12) months,
beginning after the effective date of each Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the 1933
Act, including Rule 158 promulgated thereunder (for the purpose of this
subsection 3(i), "Availability Date" means the 45th day following the end of
the
fourth fiscal quarter that includes the effective date of such Registration
Statement, except that, if such fourth fiscal quarter is the last quarter of
the
Company's fiscal year, "Availability Date" means the 90th day after the end
of
such fourth fiscal quarter).
-6-
(j)
With
a view to making available to the Investors the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any
time
permit the Investors to sell Ordinary Shares to the public without registration,
the Company covenants and agrees to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144, until the
earlier of (A) six months after such date as all of the Registrable Securities
may be resold pursuant to Rule 144(k) or any other rule of similar effect or
(B)
such date as all of the Registrable Securities shall have been resold; (ii)
file
with the SEC in a timely manner all reports and other documents required of
the
Company under the 1934 Act; and (iii) furnish to each Investor upon request,
as
long as such Investor owns any Registrable Securities, (A) a written statement
by the Company that it has complied with the reporting requirements of the
1934
Act, (B) a copy of the Company's most recent Annual Report on Form 20-F or
Statement of a Foreign Private Issuer on Form 6-K, and (C) such other
information as may be reasonably requested in order to avail such Investor
of
any rule or regulation of the SEC that permits the selling of any such
Registrable Securities without registration.
4.
Due
Diligence Review; Information.
Upon
reasonable notice and without undue interference of the Company's business
or
operations, the Company shall make available, during normal business hours,
for
inspection and review by the Investors, advisors to and representatives of
the
Investors (who may or may not be affiliated with the Investors and who are
reasonably acceptable to the Company), all financial and other records, all
SEC
Filings (as defined in the Purchase Agreement) and other filings with the SEC,
and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees, within a reasonable time period, to supply
all such information reasonably requested by the Investors or any such
representative, advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all questions and
other
inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement for
the
sole purpose of enabling the Investors and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct initial
and ongoing due diligence with respect to the Company and the accuracy of such
Registration Statement.
-7-
The
Company shall not disclose material nonpublic information to the Investors,
or
to advisors to or representatives of the Investors, unless prior to disclosure
of such information the Company identifies such information as being material
nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.
5.
Obligations
of the Investors.
(a)
Each
Investor shall furnish in writing to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company
may
reasonably request. At least five (5) Business Days prior to the first
anticipated filing date of any Registration Statement, the Company shall notify
each Investor of the information the Company requires from such Investor if
such
Investor elects to have any of the Registrable Securities included in the
Registration Statement. An Investor shall provide such information to the
Company at least two (2) Business Days prior to the first anticipated filing
date of such Registration Statement if such Investor elects to have any of
the
Registrable Securities included in the Registration Statement.
(b)
Each
Investor, by its acceptance of the Registrable Securities agrees to cooperate
with the Company as reasonably requested by the Company in connection with
the
preparation and filing of a Registration Statement hereunder, unless such
Investor has notified the Company in writing of its election to exclude all
of
its Registrable Securities from such Registration Statement.
(c)
Each
Investor agrees that, upon receipt of any notice from the Company of either
(i)
the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
happening of an event pursuant to Section 3(h) hereof, such Investor will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the Investor
is advised by the Company that such dispositions may again be made.
6.
Indemnification.
(a)
Indemnification
by the Company.
The
Company will indemnify and hold harmless each Investor and its officers,
directors, members, employees and agents, successors and assigns, and each
other
person, if any, who controls such Investor within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
they may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (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 any Registration Statement, any preliminary
Prospectus or final Prospectus, or any amendment or supplement thereof; (ii)
any
blue sky application or other document executed by the Company specifically
for
that purpose or based upon written information furnished by the Company filed
in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information herein called a "Blue Sky Application"); (iii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
(iv)
any violation by the Company or its agents of any rule or regulation promulgated
under the 1933 Act applicable to the Company or its agents and relating to
action or inaction required of the Company in connection with such registration;
or (v) any failure to register or qualify the Registrable Securities included
in
any such Registration in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company will undertake
such registration or qualification on an Investor's behalf and will reimburse
such Investor, and each such officer, director or member and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action: provided,
however,
that
the Company will not be liable in any such case if and to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made
in
conformity with information furnished by such Investor or any such controlling
person in writing specifically for use in such Registration Statement or
Prospectus.
-8-
(b)
Indemnification
by the Investors.
Each
Investor agrees, severally but not jointly, to indemnify and hold harmless,
to
the fullest extent permitted by law, the Company, its directors, officers,
employees, stockholders and each person who controls the Company (within the
meaning of the 0000 Xxx) against any losses, claims, damages, liabilities and
expense (including reasonable attorney fees) resulting from any untrue statement
of a material fact or any omission of a material fact required to be stated
in
the Registration Statement or Prospectus or preliminary Prospectus or amendment
or supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent that such untrue statement
or
omission is contained in any information furnished in writing by such Investor
to the Company specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto. In no event shall the liability
of an Investor be greater in amount than the dollar amount of the proceeds
(net
of all expense paid by such Investor in connection with any claim relating
to
this Section 6 and the amount of any damages such Investor has otherwise been
required to pay by reason of such untrue statement or omission) received by
such
Investor upon the sale of the Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation.
(c)
Conduct
of Indemnification Proceedings.
Any
person entitled to indemnification hereunder shall (i) give prompt notice to
the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim
with
counsel reasonably satisfactory to the indemnified party; provided
that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless
(a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party
with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided,
further,
that
the failure of any indemnified party to give notice as provided herein shall
not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation. It is
understood that the indemnifying party shall not, in connection with any
proceeding in the same jurisdiction, be liable for fees or expenses of more
than
one separate firm of attorneys at any time for all such indemnified parties.
No
indemnifying party will, except with the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement that 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 of such
claim or litigation.
-9-
(d)
Contribution.
If for
any reason the indemnification provided for in the preceding paragraphs (a)
and
(b) is unavailable to an indemnified party or insufficient to hold it harmless,
other than as expressly specified therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result
of
such loss, claim, damage or liability in such proportion as is appropriate
to
reflect the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
Act
shall be entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder
of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of
the
Registrable Securities giving rise to such contribution obligation.
7.
Miscellaneous.
(a)
Amendments
and Waivers.
This
Agreement may be amended only by a writing signed by the Company and the
Required Investors. The Company may take any action herein prohibited, or omit
to perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission
to
act, of the Required Investors.
(b)
Notices.
All
notices and other communications provided for or permitted hereunder shall
be
made as set forth in Section 9.4 of the Purchase Agreement.
(c)
Assignments
and Transfers by Investors.
The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the Investors and their respective successors and assigns. An Investor may
transfer or assign, in whole or from time to time in part, to one or more
persons its rights hereunder in connection with the transfer of Registrable
Securities by such Investor to such person, provided that such Investor complies
with all laws applicable thereto and provides written notice of assignment
to
the Company promptly after such assignment is effected.
-10-
(d)
Assignments
and Transfers by the Company.
This
Agreement may not be assigned by the Company (whether by operation of law or
otherwise) without the prior written consent of the Required Investors,
provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with
a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company's
assets to another corporation, without the prior written consent of the Required
Investors, after notice duly given by the Company to each Investor.
(e)
Benefits
of the Agreement.
The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(f)
Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed via facsimile, which shall
be
deemed an original.
(g)
Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this Agreement.
(h)
Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provisions hereof prohibited or unenforceable in any respect.
(i)
Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
(j)
Entire
Agreement.
This
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
-11-
(k)
Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law
principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in
New
York County and the United States District Court for the Southern District
of
New York for the purpose of any suit, action, proceeding or judgment relating
to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or
proceeding
may be served on each party hereto anywhere in the world by the same methods
as
are specified for the giving of notices under this Agreement. Each of
the
parties hereto irrevocably consents to the jurisdiction of any such court
in any
such suit, action or proceeding and to the laying of venue in
such
court. Each party
hereto
irrevocably waives any objection to the laying of
venue
of
any such suit, action or proceeding brought in such courts and irrevocably
waives any claim that any such suit, action or proceeding brought in any
such
court has been brought in
an
inconvenient forum.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL
BY JURY IN ANY
LITIGATION
WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS
THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
-12-
IN
WITNESS
WHEREOF,
the
parties have
executed this Agreement or caused their duly authorized officers to execute
this
Agreement as of the date first above written.
The
Company:
|
SUPERCOM
LTD.
|
||
By: | By: | ||
Name:
Avi Xxxxxxxxx
|
Name:
Xxxx Xxxxxxx
|
||
Title:
C.E.O
|
Title:
C.F.O
|
-13-
The
Investors:
|
SPECIAL
SITUATIONS FUND III, L.P.
|
|
|
|
|
By: | ||
Name:
Xxxxx M Greenhouse
|
||
Title:
General Partner
|
SPECIAL
SITUATIONS CAYMAN FUND, L.P.
|
||
|
|
|
By: | ||
Name:
Xxxxx M Greenhouse
|
||
Title:
General Partner
|
-14-
Exhibit
A
Plan
of Distribution
The
selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling Ordinary Shares or interests
in Ordinary Shares received after the date of this prospectus from a selling
stockholder as a gift, pledge, partnership distribution or other transfer,
may,
from time to time, sell, transfer or otherwise dispose of any or all of their
Ordinary Shares or interests in Ordinary Shares on any stock exchange, market
or
trading facility on which the Ordinary Shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market
prices at the time of sale, at prices related to the prevailing market price,
at
varying prices determined at the time of sale, or at negotiated prices.
The
selling stockholders may use any one or more of the following methods when
disposing of Ordinary Shares or interests therein:
-
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
-
block
trades in which the broker-dealer will attempt to sell the Ordinary Shares
as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
-
purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
-
an
exchange distribution in accordance with the rules of the applicable exchange;
-
privately negotiated transactions;
-
short
sales effected after the date the registration statement of which this
Prospectus is a part is declared effective by the SEC;
-
through
the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
-
broker-dealers may agree with the selling stockholders to sell a specified
number of such Ordinary Shares at a stipulated price per share; and
-
a
combination of any such methods of sale.
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the Ordinary Shares owned by them and, if they default in
the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the Ordinary Shares, from time to time, under this prospectus,
or
under an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus. The selling stockholders also may transfer
the Ordinary Shares in other circumstances, in which case the transferees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.
In
connection with the sale of our Ordinary Shares or interests therein, the
selling stockholders may enter into hedging transactions with broker-dealers
or
other financial institutions, which may in turn engage in short sales of the
Ordinary Shares in the course of hedging the positions they assume. The selling
stockholders may also sell Ordinary Shares short and deliver these securities
to
close out their short positions, or loan or pledge the Ordinary Shares to
broker-dealers that in turn may sell these securities. The selling stockholders
may also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution
of Ordinary Shares offered by this prospectus, which Ordinary Shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The
aggregate proceeds to the selling stockholders from the sale of the Ordinary
Shares offered by them will be the purchase price of the Ordinary Shares less
discounts or commissions, if any. Each of the selling stockholders reserves
the
right to accept and, together with their agents from time to time, to reject,
in
whole or in part, any proposed purchase of Ordinary Shares to be made directly
or through agents. We will not receive any of the proceeds from this offering.
Upon any exercise of the warrants by payment of cash, however, we will receive
the exercise price of the warrants.
The
selling stockholders also may resell all or a portion of the Ordinary Shares
in
open market transactions in reliance upon Rule 144 under the Securities Act
of
1933, provided that they meet the criteria and conform to the requirements
of
that rule.
The
selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the Ordinary Shares or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
Ordinary Shares may be underwriting discounts and commissions under the
Securities Act. Selling stockholders who are "underwriters" within the meaning
of Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act.
To
the
extent required, the Ordinary Shares to be sold, the names of the selling
stockholders, the respective purchase prices and public offering prices, the
names of any agents, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In
order
to comply with the securities laws of some states, if applicable, the Ordinary
Shares may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the Ordinary Shares may not
be
sold unless they have been registered or qualified for sale or an exemption
from
registration or qualification requirements is available and is complied with.
-
16
-
We
have
advised the selling stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of Ordinary Shares in the market
and
to the activities of the selling stockholders and their affiliates. In addition,
to the extent applicable, we will make copies of this prospectus (as it may
be
supplemented or amended from time to time) available to the selling stockholders
for the purpose of satisfying the prospectus delivery requirements of the
Securities Act. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the Ordinary Shares against
certain liabilities, including liabilities arising under the Securities
Act.
We
have
agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to
the
registration of the Ordinary Shares offered by this prospectus.
We
have
agreed with the selling stockholders to keep the registration statement of
which
this prospectus constitutes a part effective until the earlier of (1) such
time
as all of the Ordinary Shares covered by this prospectus have been disposed
of
pursuant to and in accordance with the registration statement or (2) the date
on
which the Ordinary Shares may be sold pursuant to Rule 144(k) of the Securities
Act.
-
17
-