EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made as of the 5th day
of ___ 2006, by and among ViryaNet Ltd., a company organized under the laws of
the State of Israel (the "COMPANY"), and X.X. Xxxxxxxxx, Towbin, LLC, Telvent
Investments SL, FBR Infinity II Ventures (Israel) LP, FBR Infinity II Ventures
LP and FBR Infinity II Ventures (Erisa) LP (each, a "SHAREHOLDER", and
collectively, the "SHAREHOLDERS")
W I T N E S S E T H:
WHEREAS, the Company and the Shareholders have entered into a Share
Purchase Agreement (the "PURCHASE AGREEMENT"), pursuant to which the
Shareholders will become a holder of an aggregate of 1,171,459 Ordinary Shares
par value NIS 1.0 of the Company; and
WHEREAS, a condition to the closing of the Purchase Agreement (the
"CLOSING") is that the parties hereto enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
1. Definitions
Terms used in this Agreement and not otherwise defined herein shall
have the meanings ascribed to them in the Agreement. As used in this
Agreement, the following terms have the following meanings:
1.1. The term "COMPANIES LAW" shall mean the Israeli Companies Law
of 1999, as amended.
1.2. The term "EXCHANGE ACT" shall mean the United States
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
1.3. The term "FORM F-3" shall mean such form under the Securities
Act, as in effect on the date hereof or any registration form
under the Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial information
by reference to other documents filed by the Company with the
SEC.
1.4. The term "HOLDERS" shall mean the holders of registration
rights under registration rights agreements to which the
Company is party to, except for the Shareholders.
1.5. The term "ISRAELI SECURITIES LAW" shall mean the Israeli
Securities Law - 1968, as amended.
1.6. The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration
statement or similar document in compliance with the
Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document or
the equivalent actions under the laws of another jurisdiction.
1.7. The term "REGISTRABLE SECURITIES" shall mean Ordinary Shares
issued to the Shareholders under the Purchase Agreement,
including any Ordinary Shares covered under warrants issued
under the Purchase Agreement. For the purpose of Sections 2.5
and 4.3, the Registrable Securities shall include in addition,
securities granted to other holders of registration rights
under other agreement with the Company.
1.8. The term "SEC" shall mean the U.S. Securities and Exchange
Commission.
1.9. The term "SECURITIES ACT" shall mean the United States
Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
2. Required Registration
2.1. The Company shall use best efforts to file a Registration
Statement on Form F-3 covering the resale of the Registrable
Securities within six months from the Closing.
2.2. In the case of any registration effected pursuant to this
Section 2, the Company shall have the right to designate the
managing underwriter(s), if any, in any underwritten offering,
subject to the reasonable prior approval of the Shareholders.
2.3. The Company, the Shareholders and all Holders participating in
such underwritten registration shall enter into an
underwriting agreement in customary form with the underwriter
or underwriters selected for such underwriting.
2.4. If the underwriter of a registration being made pursuant to
Section 2 advises the Shareholders or the Holders in writing
that marketing factors require a limitation of the number of
Registrable Securities to be included in such underwritten
registration, then the Shareholders and the Holders wishing to
participate in such underwritten registration shall be cut
back on a pro-rata basis.
2.5. The Company shall not be required to effect more than one (1)
registration pursuant to Section 2. If the Company shall be
eligible to use a registration statement on Form F-3 in
connection with the
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any registration under this Section 2, such registration may
be effected by the Company on Form F-3.
2.6. The Company may not cause any other registration of securities
for sale for its own account (other than a registration
effected solely to implement an employee benefit plan) to be
initiated after the registration requested pursuant to this
Section 2 and to become effective less than one hundred and
twenty (120) days after the effective date of a registration
made pursuant to this Section 2.
2.7. The Shareholders may request to withdraw the registration
under this Section 2, at any time and shall not be deemed to
have exhausted any rights to make a registration under this
Section 2 in the future, provided that he reimburses the
Company for all of its costs and expenses incurred in
connection with such withdrawn demand registration
(collectively, "COMPANY EXPENSES"), if such registration has
in fact been cancelled.
3. Shelf Registration
3.1. From such time as the Company becomes eligible to file
registration statements on Form F-3, at the request of the
holders following 6 month from the Closing to file a shelf
registration statement pursuant to Rule 415 under the
Securities Act with the SEC, the Company shall:
3.1.1. within twenty (20) days after receipt of any such request,
give written notice of the proposed registration to all other
holders; and
3.1.2. use its best efforts to effect as soon as practicable the
registration under the Securities Act of all Registrable
Securities which are specified in such written request
together with the registrable securities of other holders
joining in such request pursuant to written requests received
by the Company.
3.2. The Company undertakes that it will, once having qualified for
registration on Form F-3, use its best efforts to comply with
all necessary filings and other requirements so as to maintain
such qualification.
3.3. After a registration requested pursuant to Section 3, the
Company may not cause any other registration of securities for
sale for its own account (other than a registration effected
solely to implement an employee benefit plan) to be initiated
and to become effective less than one hundred and twenty (120)
days after the effective date of any registration requested
pursuant to Section 3.1.
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3.4. Notwithstanding the above, the Company shall not be required
to effect a registration pursuant to Section 3 if:
3.4.1. the reasonably-anticipated aggregate market price of the
Registrable Securities to be registered thereunder is less
than $750,000;
3.4.2. if the Company has, within the six (6) month period preceding
the date of such request, already effected one registration
under Section 3, or two registrations under Section 3 in the
previous twelve month period; or
3.4.3. if Form F-3 is not available for such offering by the
Shareholders;
3.4.4. if the Company shall furnish to the Shareholders a certificate
signed by the Chief Executive Officer or Chairman of the Board
of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form
F-3 registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the
Form F-3 registration statement for a period of not more than
one hundred and twenty (120) days after receipt of the request
of the Shareholders under this Section 3; provided, however,
that the Company shall not utilize this right more than once
in any twelve (12) month period.
4. Piggyback Registrations
4.1. Whenever the Company proposes to register for its own account
or for any other person other than in a registration pursuant
to Section 2 or 3 any of its securities under either the
Securities Act (other than a registration in connection with a
merger or acquisition on Form F-4 or S-4 or one relating
solely to employee benefit plans under Form S-8 or any similar
form) or the Israeli Securities Laws, it will promptly, and at
least thirty (30) days prior to the initial filing of a
registration statement with the SEC or Israeli equivalent,
give written notice to the Shareholders of its intention to
effect such a registration and will include in such
registration all the Registrable Securities not previously
registered held by the Shareholders (subject to the provisions
of Section 4.3 hereto) with respect to which the Company
receives written requests for inclusion therein within twenty
(20) days after receipt of such notice by the Shareholders (a
"PIGGYBACK REGISTRATION").
4.2. In the case of any registration initiated by the Company, the
Company shall have the right to designate the managing
underwriter in any underwritten offering and any Shareholders
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participating in such underwritten registration shall enter
into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting.
4.3. If a Piggyback Registration is an underwritten offering of the
Company's securities and the underwriter advises the Company
in writing that marketing factors require a limitation of the
number of Registrable Securities to be underwritten, the
Company will include its securities in such registration in
the following order:
(a) if the Piggyback Registration is initiated by the
Company:
(i) first, all Registrable Securities proposed
to be included by the Company.
(ii) second, the Registrable Securities held by
the Shareholders and the Holders on a pro
rata basis.
(b) if the Piggyback Registration is not initiated by the
Company:
(i) first, all Registrable Securities proposed
to be included by the Shareholders and the
Holders; provided that if such securities
cannot be included, the Company shall
include the Registrable Securities pro rata.
(ii) second, all other securities of the Company
or any other shareholders proposed to be
included in such registration.
5. Obligations of the Company. Whenever required hereunder to effect the
registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
5.1. Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable
efforts to cause such registration statement to become
effective in accordance with the time periods indicated above,
and, upon the request of the Shareholders, registered
thereunder, keep such registration statement effective for a
period of up to nine months or
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until the distribution contemplated in the registration
statement has been completed;
5.2. Prepare and file with the SEC 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 Securities Act
with respect to the disposition of all securities covered by
such registration statement;
5.3. Furnish to the Shareholders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by
him;
5.4. Register and qualify the securities covered by such
registration statement under such other securities laws of
such jurisdictions as shall be reasonably requested by the
Shareholders, as the case may be; provided, however, that in
no event shall the Company be required to qualify to do
business in any state or other jurisdiction or to take any
action which would subject it to general or unlimited service
of process in any jurisdiction where it is not now so subject;
5.5. In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement,
in usual and customary form, with terms generally satisfactory
to the managing underwriter of such offering. The Shareholders
or other shareholders participating in such underwriting shall
also enter into and perform its obligations under such an
agreement;
5.6. Notify the Shareholders 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
the light of the circumstances then existing;
5.7. Cause all Registrable Securities registered pursuant hereto to
be listed on each securities exchange on which similar
securities issued by the Company are then listed;
5.8. Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereto and a CUSIP number for
all such
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Registrable Securities not later than the effective date of
such registration; and
5.9. Furnish, at the request of Shareholders requesting
registration of Registrable Securities pursuant to Section 2
hereof, on the date that such Registrable Securities are
delivered to the underwriters for sale, 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, (a) an opinion, dated 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 to the Shareholders requesting
registration of Registrable Securities, and (b) a letter dated
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, and to the Shareholders requesting
registration of Registrable Securities.
6. Expenses of Registration. The Company shall bear and pay the expenses
incurred in connection with any registration, filing or qualification
of Registrable Securities for the Shareholders, including (without
limitation) all registration, filing, and qualification fees, printers
and accounting fees and the reasonable fees and disbursements of one
counsel (plus local counsel, if appropriate) for the Shareholders,
excluding underwriting discounts and commissions relating to the sale
of Registrable Securities.
7. Furnishing of Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this
Agreement with respect to the securities of the Shareholders that the
Shareholders shall furnish to the Company such information as may be
required to be included in the registration statement under the
Securities Act regarding the Shareholders, the Registrable Securities
held by him and the intended method of disposition of such securities
as shall be required to effect the registration of such Registrable
Securities.
8. Indemnification and Contribution
8.1. The Company shall indemnify and hold harmless, to the fullest
extent permitted by law, the Shareholders, any underwriter for
the Shareholders, each person, if any, who controls the
Shareholders or such underwriter, and each of the
Shareholders' partners, shareholders, officers, directors,
employees, legal counsel and accountants, from and against any
and all losses, claims, damages,
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liabilities, and charges, joint or several ("CLAIMS"), to
which any of them may be subject under the Securities Act, the
Exchange Act, the Israeli Securities Law, the Companies Law,
or any other statute (whether U.S. or Israeli) or at common
law, insofar as such Claims arise out of, are based upon, or
are in connection with (a) any untrue statement of any
material fact contained in any registration statement or
prospectus, in each case, as amended or supplemented, under
which such securities were sold, or (b) 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, or (c) any other violation by the Company of
the Securities Act, the Exchange Act, the Israeli Securities
Law, the Companies Law or any state or foreign jurisdiction
securities laws in connection with each such registration, and
shall reimburse each such person entitled to indemnification
for any legal or other expenses reasonably incurred by such
person in connection with investigating or defending any such
Claim, as and when such expenses are incurred; provided,
however, that the Company shall not be liable to any such
person in any such case to the extent that any such claim
arises out of or is based upon any untrue statement or
omission made in such registration statement or prospectus in
reliance upon and in conformity with written information
furnished to the Company by such person and/or any person
acting on its behalf specifically for use in such registration
statement or prospectus and provided further, that this
indemnity shall not apply to amounts paid pursuant to any
settlement effected without the consent of the party entitled
to indemnification hereunder, which consent shall not be
unreasonably withheld.
8.2. The Shareholders shall indemnify and hold harmless, to the
fullest extent permitted by law the Company, any underwriter
for the Company, and each person, if any, who controls the
Company or such underwriter and each of the Company's or
underwriter's officers, directors, employees, legal counsel
and accountants, from and against any and all Claims to which
any of them may be subject under the Securities Act, the
Exchange Act, the Israeli Securities Law, the Companies Law,
or any other statute (whether U.S. or Israeli) or at common
law, insofar as such Claims arise out of, are based upon, or
are in connection with (a) any untrue statement made by the
Shareholders of any material fact contained in any
registration statement or prospectus, in each case, as amended
or supplemented, under which such securities were sold, or (b)
any omission or alleged omission made by the Shareholders to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
shall reimburse the Company or each such person entitled to
indemnification for any legal or other expenses reasonably
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incurred by the Company or such person in connection with
investigating or defending any such Claim, as and when such
expenses are incurred; provided, however, that the
Shareholders shall be liable to the Company or any such person
in any such case only to the extent that any such claim arises
out of or is based upon any untrue statement or omission made
in such registration statement or prospectus in reliance upon
and in conformity with written information furnished to the
Company by the Shareholders and/or any person acting on the
Shareholders' behalf specifically for use in such registration
statement or prospectus and provided further, that this
indemnity shall not apply to amounts paid pursuant to any
settlement effected without the consent of the party entitled
to indemnification hereunder, which consent shall not be
unreasonably withheld. The indemnification provided by the
Shareholders shall be limited to the amount of the net
proceeds received by the Shareholders from the sale of the
Registrable Securities registered in such registration.
8.3. Promptly after receipt by any person entitled to
indemnification under Section 8.1 or Section 8.2, as the case
may be, 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.
8.4. The parties agree to notify promptly each other of the
commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with
the
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sale of any Registrable Securities held by the Shareholders,
or any preliminary prospectus or registration statement
relating to any sale of any Registrable Securities, or of any
other litigation or proceedings to which this Section 8 is
applicable of which they became aware.
8.5. Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in
the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting
agreement shall prevail.
8.6. The obligations of the Company and the Shareholders under this
Section 8 shall survive the completion of any offering of
Registrable Securities in a registration statement under this
Agreement.
8.7. If for any reason the foregoing indemnity is unavailable, or
is insufficient to hold harmless an Indemnitee (except as
specifically provided therein), then the Indemnitor shall
contribute to the amount paid or payable by the Indemnitee as
a result of such losses, claims, damages, liabilities or
expenses (a) in such proportion as is appropriate to reflect
the relative benefits received by the Indemnitor on the one
hand and the Indemnitee on the other from the registration, or
(b) if the allocation provided by clause (a) above is not
permitted by applicable law, or provides a lesser sum to the
Indemnitee than the amount hereinafter calculated, in such
proportion as is appropriate to reflect the relative fault of
the Indemnitor and the Indemnitee as well as any other
relevant equitable considerations; provided that in no event
shall any contribution by the Shareholders hereunder exceed
the net proceeds from the offering received from the
Shareholders. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
9. Reports Under the Exchange Act
With a view to making available to the Shareholders the benefits of
Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit the Shareholders to
sell securities of the Company to the public without registration or
pursuant to a registration on Form F-3, the Company agrees to:
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9.1. make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
9.2. take such action as is necessary to enable the Shareholders to
utilize Form F-3 for the sale of his Registrable Securities;
9.3. file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and
the Exchange Act;
9.4. furnish to the Shareholders, so long as the Shareholders owns
any Registrable Securities, forthwith upon being so requested
(a) a written statement by the Company that it has complied
with the reporting requirements of Rule 144, the Securities
Act and the Exchange Act, or that it qualifies as a registrant
whose securities may be resold pursuant to Form F-3 (at any
time after it so qualifies), (b) a copy of the most recent
annual or, to the extent applicable, quarterly report of the
Company and such other reports and documents so filed by the
Company, and (c) such other information as may be reasonably
requested in availing the Shareholders of any rule or
regulation of the SEC which permits the selling of any
Registrable Securities without registration or pursuant to
such form;
9.5. comply with all other necessary filings and other requirements
so as to enable the Shareholders and any transferee thereof to
sell Registrable Securities under Rule 144 under the
Securities Act (or any similar rule then in effect); and
9.6. use its best efforts to maintain the listing of its Ordinary
Shares on the Nasdaq SmallCap Market ("Nasdaq"), and should
its Ordinary Shares be delisted from Nasdaq, to cause the
reinstatement of the Ordinary Shares to listing on Nasdaq,
including through the pursuit of the formal appeal process
established by Nasdaq.
10. Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Agreement may be
assigned (but only with all related obligations) by the Shareholders to
a transferee or assignee of such securities and such transferee or
assignee shall be deemed the "Shareholder" hereunder; provided,
however, (a) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee the securities with respect to which such
registration rights are being assigned; and (b) such transferee or
assignee agrees in writing to be bound by and subject to all the terms
and conditions of this Agreement.
11. Additional Registration Rights. Following the first anniversary of the
Closing Date, the Company shall use reasonable efforts to negotiate
additional registration
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rights for the Shareholder if he is not then entitled to sell its
shares under Rule 144.
12. Expiration of Registration Rights. The registration rights contained
herein shall expire five (5) years after the Closing Date
13. Miscellaneous.
13.1. Each of the parties hereto shall perform such further acts and
execute such further documents as may reasonably be necessary
to carry out and give full effect to the provisions of this
Agreement and the intentions of the parties as reflected
thereby.
13.2. This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of
New York (without giving effect to principles of conflicts of
laws). Each party to this Agreement consents to the exclusive
jurisdiction and venue of the courts of the State of New York.
13.3. Except as otherwise expressly limited herein and subject to
the provisions of Section 10 above, the provisions hereof
shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of
the parties hereto.
13.4. This Agreement constitutes the full and entire understanding
and agreement between the parties with regard to the subject
matters hereof and thereof. Any term of this Agreement may be
amended and the observance of any term hereof may be waived
(either prospectively or retroactively and either generally or
in a particular instance) only with the written consent of the
Shareholders. For the avoidance of doubt, the Company may
execute any other registration rights agreement and such
agreement, if and when executed, shall not be deemed to be an
amendment of this Agreement or require the consent of the
Shareholders.
13.5. All article and section headings are inserted for convenience
only and shall not modify or affect the construction or
interpretation of any provision of this Agreement.
13.6. All notices and other communications required or permitted
hereunder are to be given pursuant to the provisions of the
Agreement.
13.7. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable under applicable
law, then such provision shall be excluded from this Agreement
and the remainder of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in
accordance
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with its terms; provided, however, that in such event this
Agreement shall be interpreted so as to give effect, to the
greatest extent consistent with and permitted by applicable
law, to the meaning and intention of the excluded provision as
determined by such court of competent jurisdiction.
13.8. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and enforceable
against the parties actually executing such counterpart, and
all of which together shall constitute one and the same
instrument.
13.9. In no event shall either the Company or the Shareholders be
liable to the other party for any consequential, indirect,
special or incidental costs, damages or loss (including,
without limitation, lost profits, loss of business),
regardless of the nature, arising out of or relating in any
way to this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date set forth above.
VIRYANET LIMITED TELVENT INVESTMENTS SL
By: /s/ Xxxxxx XxXxxxx By: /s/ Xxxxxx Xxxxxxx Xxxxxx
By: /s/ Xxxx Xxxxxxx del Barrio Xxxxx
FBR INFINITY II VENTURES (ISRAEL) LP X.X. XXXXXXXXX, TOWBIN, LLC
By: /s/ Awishai Silvershatz By: /s/ Xxxxxx Xxxx
By: /s/ Xxxx Xxxxx
FBR INFINITY II VENTURES LP FBR INFINITY II VENTURES (ERISA) LP
By: /s/ Awishai Silvershatz By: /s/ Awishai Silvershatz
By: /s/ Xxxx Xxxxx By: /s/ Xxxx Xxxxx
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
