EXHIBIT 10.2


 


PREEMPTIVE
RIGHTS AGREEMENT 


 


This
Preemptive Rights Agreement (the “Agreement”) is entered into as of December 1, 2014 by and among (a)
BluePhoenix Solutions Ltd., an Israeli corporation (the “Acquiror”), and (b) Mindus Holdings, LTD (the
“Shareholder”).


 


RECITALS



 


The
Acquiror, Modern Systems Corporation (f/k/a BluePhoenix Solutions, Inc.), a Delaware corporation and an indirect, wholly owned
subsidiary of Acquirer (“Parent”), BP-AT Acquisition LLC, a Delaware limited liability company and a
direct, wholly owned subsidiary of Parent (“Merger Sub”); Sophisticated Business Systems, Inc., a Texas
corporation doing business as Ateras (“Target”) and the Shareholders have entered into an Agreement
and Plan of Merger dated as of August 13, 2014, as amended (the “Merger Agreement”), which provides
for the acquisition of Target by the Acquiror through a merger (the “Merger”) of Sub with and into Target
and the issuance by the Acquiror of Acquiror’s Ordinary Shares, par value NIS 0.04 per share (“Acquiror Stock”),
to the shareholder of Target, including the Shareholder, in consideration of the shares of Target (the “Target Shares”)
exchanged by the shareholders of Target in the Merger. As a condition to the closing of the Merger, and subject to consent of
the Foreign Parent's shareholders to this Agreement and to the amendment of the Acquiror’s Articles of Association enabling
the rights granted herein in accordance with applicable law, the Shareholder desires to obtain and the Acquiror has agreed to
grant certain preemptive rights to Shareholder with respect to any shares of Acquiror Stock held by Shareholder.


 


AGREEMENT



 


The
parties hereby agree as follows:


 


1.Preemptive
Rights.


 


1.1Subject
to applicable securities laws, Shareholder shall have a right to purchase its pro rata share of all Equity Securities,
as defined below, that Acquiror may, from time to time, propose to sell and issue after the date of this Agreement, other than
the Equity Securities excluded by Section 1.6 hereof. Shareholder’s pro rata share is equal to the ratio of (a) the
number of shares of Acquiror Stock of which Shareholder is deemed to be a holder immediately prior to the issuance of such Equity
Securities to (b) the total number of outstanding shares of Acquiror Stock (including all shares of Acquiror Stock issuable upon
exercise or conversion or otherwise pursuant to any Vested Foreign Parent Option that is outstanding or otherwise in effect at
such time) immediately prior to the issuance of the Equity Securities. The term “Equity Securities”
shall mean (a) any shares of Acquiror Stock, (b) any other shares of stock issued by the Acquiror, (c) any other securities of
the Acquiror or any of its subsidiaries convertible into, or exchangeable or exercisable for, such shares, or (d) options, warrants
or other rights to acquire any such shares and the term “Vested Foreign Parent Option” shall mean any
options, restricted stock units, securities convertible into or exchangeable for Acquiror Stock outstanding on August 5, 2014,
and which remain outstanding, for which the rights of the holders to exercise were fully vested on August 5, 2014, but expressly
excluding any warrants or anti-dilution rights (and Acquiror Stock issued pursuant to or upon the exercise thereof) held by or
for the benefit of Prescott Group Aggressive Small Cap Master Fund G.P., Prescott Group Capital Management LLC or any affiliate,
assignee or successor thereof.


 






    	 



    	 



    

 


1.2Exercise
of Rights. Until termination of the rights hereunder, as set forth in Section 1.4 below, if Acquiror proposes to issue any
Equity Securities, it shall give Shareholder written notice of its intention, describing the Equity Securities, the price, the
proposed issuance date and the terms and conditions upon which Acquiror proposes to issue the same and the number of Equity Securities
that the Shareholder has the right to purchase under this Agreement. Shareholder shall have fifteen (15) days from the
giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms
and conditions specified in the notice by giving written notice to Acquiror and stating therein the quantity of Equity Securities
to be purchased. Notwithstanding the foregoing, Acquiror shall not be required to offer or sell such Equity Securities to Shareholder
if such offer or sale would cause Acquiror to be in violation of applicable federal securities laws and/or of the Israeli Companies
law and/or any other applicable law and/or the Acquiror’s Articles of Association, by virtue of such offer or sale. Notwithstanding
anything herein to the contrary, Shareholder’s rights under this Agreement shall be exercisable only with respect to all
(and not a portion of) of Shareholder’s pro rata share.


 


1.3Sale
Without Notice. In lieu of giving notice to the Shareholder prior to the issuance of Equity Securities as provided in Section
1.2, Acquiror may elect to give notice to each Shareholder within ten (10) days after the issuance of Equity Securities. Such
notice shall describe the type, price and terms of the Equity Securities issued thereby and the number of Equity Securities that
the Shareholder has the right to purchase under this Agreement. Subject to all applicable law and required consents, Shareholder
shall have twenty (20) days from the date of receipt of such notice to elect, by written notice to the Acquiror, to purchase up
to the number of shares that would, if purchased by Shareholder, maintain Shareholder’s pro rata share (as set forth
in Section 1.1) of Acquiror Stock. The closing of such sale shall occur within sixty (60) days of the date of notice to the Shareholder
or at such later date if so required subject to applicable law.


 


1.4Termination
of Preemptive Rights. The preemptive rights established by this Section 1 shall not apply to, and shall terminate upon the
earlier to occur of (a) three years following the date of this Agreement or (b) an Acquisition. “Acquisition”
shall mean any consolidation or merger of the Acquiror with or into any other corporation or other entity or person, or any other
corporate reorganization, other than any such consolidation, merger or reorganization in which the shares of capital stock of
the Acquiror immediately prior to such consolidation, merger or reorganization, continue to represent a majority of the voting
power of the surviving entity (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation,
merger or reorganization. The preemptive rights established by this Section 1 may be amended, or any provision waived with and
only with the written consent of Acquiror and the Shareholder.


 


1.5No
Assignment of Preemptive rights. The preemptive rights of Shareholder may be not be assigned by the Shareholder.


 






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1.6Excluded
Securities. The preemptive rights established by this Section 1 shall have no application to any of the following:


 


(a)Ordinary
shares and/or options, warrants or other ordinary share purchase rights and the Common Stock issued pursuant to such options,
warrants or other rights issued or to be issued after the date hereof to employees, officers or directors of, or consultants or
advisors to Acquiror or any subsidiary, pursuant to stock purchase or stock option plans, RSU award plans or other arrangements
and incentive plans adopted by the Acquiror;


 


(b)Shares
of Acquiror Stock issued or issuable pursuant to any rights or agreements, options, warrants, restricted share units, or convertible
securities outstanding and vested as of August 5, 2014; and shares of Acquiror Stock issued pursuant to any such rights or agreements
granted after the date of this Agreement, so long as the preemptive rights established by this Section 1 were complied with, waived,
or were inapplicable pursuant to any provision of this Section 1.6 with respect to the initial sale or grant by Acquiror of such
rights or agreements;


 


(c)any
Equity Securities issued pursuant to a merger, consolidation, acquisition or similar business combination;


 


(d)any
Equity Securities issued in connection with any stock split, stock dividend or recapitalization by Acquiror;


 


(e)any
Equity Securities issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement, or debt financing
from a bank or similar financial or lending institution;


 


(f)any
Equity Securities issued in connection with strategic transactions involving Acquiror and other entities, including, without limitation,
(i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements,
provided such transaction is approved by Acquiror’s Board of Directors, including Scott Miller, so long as he is serving
on the Board of Directors; and


 


(g)
any Equity Securities issued in connection with the Merger Agreement.


 


2.Miscellaneous.


 


2.1Amendments
and Waivers. Subject to applicable law and any consent required thereunder, any term of this Agreement may be amended
or waived with the written consent of the Acquiror and the Shareholder. Any amendment or waiver effected in accordance with this
Section 2.1 shall be binding upon the parties and their respective successors and assigns.


 


2.2Successors
and Assigns. Subject to the provisions of Section 1.5, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective 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.


 






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2.3Governing
Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto
shall be governed, construed and interpreted in accordance with the laws of the State of Israel, without giving effect to principles
of conflicts of law.


 


2.4Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together
shall constitute one instrument.


 


2.5Titles
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.


 


2.6Notices.
Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the regular
mail as certified or registered mail (airmail if sent internationally) with postage prepaid, if such notice is addressed to the
party to be notified at such party’s address or facsimile number as set forth below, or as subsequently modified by written
notice.


 


2.7Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under
the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement
for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with
its terms.


 


2.8Entire
Agreement. This Agreement is the product of all of the parties hereto, and constitutes the entire agreement between such
parties pertaining to the subject matter hereof, and merges all prior negotiations and drafts of the parties with regard to the
transactions contemplated herein. Any and all other written or oral agreements existing between the parties hereto regarding such
transactions are expressly canceled. Notwithstanding, in the event of any contradiction between the terms of this Agreement and
the Acquiror’s Articles of Association, the terms of the Acquiror’s Articles of Association shall prevail.


 


2.9Advice
of Legal Counsel. Each party acknowledges and represents that, in executing this Agreement, it has had the opportunity
to seek advice as to its legal rights from legal counsel and that the person signing on its behalf has read and understood all
of the terms and provisions of this Agreement. This Agreement shall not be construed against any party by reason of the drafting
or preparation thereof.


 






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2.10Delays
or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party to this Agreement, upon
any breach or default of the other party, shall impair any such right, power or remedy of such non-breaching party nor shall it
be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach
or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must
be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to a Shareholder, shall be cumulative and not alternative.


 


2.11Third
Parties. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.


 


[Signature
Page Follows]


 






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The
parties have executed this Agreement as of the date first above written.


 





	 	ACQUIROR:
	 	 	 
	 	BluePhoenix
    Solutions Ltd.,
	 	 	 
	 	By:	/s/
    Matt Bell
	 	Title:	CEO



 


	 	Address:	    601
    E Union Street
	 	 	    Suite
    4616
	 	 	    Seattle,
    Washington 98101




 





	 	SHAREHOLDER:
	 	 	 
	 	Mindus
    Holdings, LTD
	 	 	 
	 	By:	/s/
    Scott D. Miller
	 	Name:	Scott
    D. Miller
	 	Title:	 


 




 


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