EXHIBIT 1.1
NET2PHONE, INC.
_________ Shares/1/
Common Stock
UNDERWRITING AGREEMENT
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_____ __, 0000
XXXXXXXXX & XXXXX LLC
BT ALEX. XXXXX INCORPORATED
BEAR, XXXXXXX & CO. INC.
As Representatives of the Several Underwriters
x/x Xxxxxxxxx & Xxxxx LLC
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
Net2Phone, Inc., a Delaware corporation (herein called the Company),
proposes to issue and sell _________ shares of its authorized but unissued
Common Stock, $.01 par value (herein called the Common Stock) (said _________
shares of Common Stock being herein called the Underwritten Stock). The Company
proposes to grant to the Underwriters (as hereinafter defined) an option to
purchase up to _________ additional shares of Common Stock (herein called the
Option Stock and with the Underwritten Stock herein collectively called the
Stock). The Common Stock is more fully described in the Registration Statement
and the Prospectus hereinafter mentioned.
The Company hereby confirms the agreements made with respect to the
purchase of the Stock by the several underwriters, for whom you are acting,
named in Schedule I hereto (herein collectively called the Underwriters, which
term shall also include any underwriter purchasing Stock pursuant to Section
3(b) hereof). You represent and warrant that you have been authorized by each
of the other Underwriters to enter into this Agreement on its behalf and to act
for it in the manner herein provided.
1. Registration Statement. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-1 (No. 333-78713), including the related preliminary prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
Securities Act) of the Stock. Copies of such registration statement and of each
amendment thereto, if any, including the related preliminary prospectus (meeting
the requirements of Rule 430A of the rules and regulations of the Commission
(herein called the Rules and Regulations)) heretofore filed by the Company with
the Commission have been delivered to you.
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/1/ Plus an option to purchase from the Company up to __________ additional
shares to cover over-allotments.
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The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations with respect to the Stock (herein called a Rule 462(b) registration
statement), and, in the event of any amendment thereto after the effective date
of such registration statement (herein called the Effective Date), shall also
mean (from and after the effectiveness of such amendment) such registration
statement as so amended (including any Rule 462(b) registration statement). The
term Prospectus as used in this Agreement shall mean the prospectus relating to
the Stock first filed with the Commission pursuant to Rule 424(b) and Rule 430A
(or if no such filing is required, as included in the Registration Statement)
and, in the event of any supplement or amendment to such prospectus after the
Effective Date, shall also mean (from and after the filing with the Commission
of such supplement or the effectiveness of such amendment) such prospectus as so
supplemented or amended. The term Preliminary Prospectus as used in this
Agreement shall mean each preliminary prospectus included in such registration
statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.
2. Representations and Warranties of the Company and the Parent.
(a) Each of the Company and IDT Corporation, a Delaware corporation
(herein call the Parent), hereby jointly and severally represent and warrant as
follows:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement and the Prospectus and as being conducted, and is duly qualified
as a foreign corporation and in good standing in all jurisdictions in which
the character of the property owned or leased or the nature of the business
transacted by it makes qualification necessary except where the failure to
be so qualified would not have a material adverse effect on the condition
(financial or otherwise) earnings, operations or business of the Company
(herein called a Material Adverse Effect).
(ii) The outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-
assessable; the Stock to be issued and sold by the Company have been duly
authorized and, when issued and paid for as contemplated herein, will be
validly issued, fully paid and non-assessable; and no preemptive, co-sale,
registration right, right of first refusal or other similar rights of
stockholders exist with respect to any of the Stock or the issue and sale
thereof, except as set forth in the Registration Statement. No further
approval or authority of the
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stockholders or the Board of Directors of the Company will be required for
the issuance and sale of the Stock. Neither the filing of the Registration
Statement nor the offering or sale of the Stock as contemplated by this
Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any shares of capital
stock. Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant to
any other registration statement filed by the Company under the Securities
Act. Except as described in the Prospectus, there are no outstanding
subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale or liens related to or entitling any person to purchase
or otherwise to acquire any shares of the capital stock of, or other
ownership interest in, the Company.
(iii) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct in all material
respects. All of the Stock conforms in all material respects to the
description thereof contained in the Registration Statement. The form of
certificates for the Stock conforms to the legal requirements of the state
of Delaware.
(iv) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of
the Stock, nor, to the best knowledge of the Company and the Parent,
instituted proceedings for that purpose.
(v) The financial statements of the Company, together with
related notes and schedules as set forth in the Registration Statement,
present fairly, the financial position and the results of operations and
cash flows of the Company at the indicated dates and for the indicated
periods. Such financial statements and related schedules have been prepared
in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of results for such periods have been
made. The summary and selected financial and statistical data included in
the Registration Statement present fairly the information shown therein and
such data has been compiled on a basis consistent with the financial
statements presented therein and the books and records of the Company.
(vi) Ernst & Young LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Securities
Act and the Rules and Regulations.
(vii) Except as disclosed in the Registration Statement,
there is no action, suit, claim or proceeding pending, or, to the knowledge
of the Company and the Parent, threatened against the Company or any of
their respective officers or properties, before any court or administrative
agency or otherwise, which if determined
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adversely to the Company could reasonably be expected to result in any
Material Adverse Effect or prevent the consummation of the transactions
contemplated hereby; and there are no agreements, contracts, leases or
documents of the Company of a character required to be described or
referred to in the Registration Statement or Prospectus or to be filed as
an exhibit to the Registration Statement by the Securities Act or the Rules
and Regulations which have not been accurately described in all material
respects or referred to in the Registration Statement or Prospectus or
filed as exhibits to the Registration Statement. The contracts so described
in the Registration Statement and Prospectus are in full force and effect
on the date hereof, and neither the Company nor, to the best of the
Company's or the Parent's knowledge, any other party, is in breach of or
default under any of such contracts where such breach or default would have
a Material Adverse Effect.
(viii) The Company has good and marketable title to all of the
properties and assets reflected in the financial statements (or as
described in the Registration Statement) filed with the Commission as part
of the Registration Statement, free and clear of any lien, mortgage,
pledge, charge or encumbrance of any kind except those reflected in such
financial statements (or as described in the Registration Statement). All
leases to which the Company is a party are valid and binding obligations of
the Company and no default by the Company has occurred or is continuing
thereunder which could reasonably be expected to result in a Material
Adverse Effect, and the Company enjoys peaceful and undisturbed possession
under all such leases to which it is a party as lessee.
(ix) The Company has timely filed all federal, state, local and
foreign income tax returns which have been required to be filed and have
paid all taxes indicted by said returns and all assessments received by
them or any of them to the extent that such taxes have become due and are
not being contested in good faith except where the failure to file such
returns and pay such taxes would not have a Material Adverse Effect. All
tax liabilities (including those being contested in good faith) for the
periods covered by the financial statements of the Company that are
included in the Registration Statement have been adequately provided for in
such financial statements.
(x) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not occurred
any Material Adverse Effect or any development involving a prospective
Material Adverse Effect whether or not occurring in the ordinary course of
business, and there has not been any material transaction entered into or
any material transaction that is probable of being entered into by the
Company, other than transactions in the ordinary course of business and
changes and transactions described in the Registration Statement and the
Prospectus, as each may be amended or supplemented. The Company has no
material contingent obligations which are not disclosed or provided for in
the Company's financial statements that are included in the Registration
Statement.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company and the Parent and is a valid and binding
agreement of the Company and the Parent, enforceable in accordance with its
terms except insofar as indemnification and contribution provisions may be
limited by applicable law or equitable principles and
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except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(xii) The Company is not, nor with the giving of notice or lapse
of time or both will be, in violation of or in default under its
Certificate of Incorporation or Bylaws or under any agreement, lease,
contract, indenture or other instrument or obligation to which it is a
party or by which it, or any of its properties, is bound and which default
would have a Material Adverse Effect. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or the Parent is a party, or of the respective
Certificate of Incorporation or Bylaws of the Company or the Parent or, to
the best knowledge of the Company and the Parent, any law, order, rule or
regulation, injunction, judgment, or decree applicable to the Company or
the Parent of any court or of any regulatory body or administrative agency
or other governmental body having jurisdiction over the Company or the
Parent, which conflict, breach or default could have a Material Adverse
Effect.
(xiii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body necessary in connection with the
execution and delivery by the Company and the Parent of this Agreement and
the consummation of the transactions herein contemplated (except such
additional steps as may be required by the National Association of
Securities Dealers, Inc. (herein called the NASD) or such additional steps
as may be necessary to qualify the Stock for public offering by the
Underwriters under state securities or blue sky laws) has been obtained or
made and is in full force and effect.
(xiv) The Company is operating substantially in compliance with
all statutes, laws, regulations, ordinances or court decrees applicable to
its businesses and operations, except where any such non-compliance would
not have a Material Adverse Effect. The Company has not violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants or relating to
discrimination in the hiring, promotion or pay of, or to the wages and
hours of, employees, except for such violations as in the aggregate would
not result in any Material Adverse Effect. To the best of Company's and
Parent's knowledge, no labor disturbance by the employees of the Company
exists or is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its principal
suppliers, value added resellers, authorized dealers or distributors that
might be expected to result in a Material Adverse Effect. No collective
bargaining agreement exists with any of the Company's employees and, to the
best of the Company's and the Parent's knowledge, no such agreement is
imminent.
(xv) The Company is in compliance in all material respects with
all currently applicable provisions of the Employee Retirement Income
Security Act of
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1974, as amended, including the regulations and published interpretations
thereunder (herein called ERISA); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretation thereunder (herein
called the Code); and each "pension plan" for which the Company would have
any liability that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, that would cause the loss of such
qualification.
(xvi) The Company holds all material licenses, certificates and
permits from governmental authorities that are necessary to the conduct of
its businesses and as contemplated by the Prospectus.
(xvii) Except as set forth in the Registration Statement,
the Company owns or possesses adequate rights to use all inventions,
designs, computer programs, computer code, communications protocols,
security devices, trade secrets, know-how, trademarks, service marks, trade
names, copyright works or other information (herein collectively called
Intellectual Property) which are necessary to conduct its businesses as
described in the Registration Statement and the Prospectus; Except as set
forth in the Registration Statement, the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict with
any rights of the Company by others with respect to any Intellectual
Property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse
Effect; the Company and the Parent have not received any notice of, and
have no knowledge of, any infringement of or conflict with any rights of
others with respect to any Intellectual Property which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect; to the Company's and the Parent's
best knowledge, none of the Intellectual Property licensed to or by the
Company are unenforceable or invalid; and the Company is not aware of the
granting of any patent rights to third parties or the filing of any patent
applications by third parties or any other rights of third parties to any
Intellectual Property owned by the Company.
(xviii) The Company has not taken, directly or indirectly, any
action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the
sale or resale of the Stock.
(xix) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of such terms
under the Investment Company Act of 1940, as amended (herein called the
Investment Company Act), and the rules and regulations of the Commission
thereunder.
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(xx) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xxi) The Company carries, or is covered by, insurance
with insurers of nationally recognized reputability in such amounts and
covering such risks as it believes is customary for companies engaged in
similar industries.
(xxii) The Stock has been approved for listing on the Nasdaq
National Stock Market.
(xxiii) The Registration Statement and the Prospectus comply,
and on the Closing Date and the Option Closing Date (as such dates are
hereinafter defined) the Prospectus will comply, in all material respects,
with the provisions of the Securities Act and the Rules and Regulations; on
the Effective Date the Registration Statement did not, and on each of the
Closing Date and the Option Closing Date, will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date the Prospectus did not and, on each
of the Closing Date and the Option Closing Date, will not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that none of the representations and warranties in this Section
2(a)(xxiii) shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information herein or otherwise furnished in writing to the
Company by the Underwriters for use in the Registration Statement or the
Prospectus.
(xxiv) The statements in the Prospectus under the heading
"Certain Transactions" set forth all existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, on the one
hand, and any officer, director or stockholder of the Company, or with any
partner, affiliate or associate of any of the foregoing persons or
entities, on the other hand, required to be set forth or described
thereunder.
(xxv) There are no issues related to the Company's preparedness
for the Year 2000 that (i) are of a character required to be described or
referred to in the Registration Statement or Prospectus by the Securities
Act or the Rules and Regulations which have not been accurately described
in the Registration Statement or Prospectus or (ii) might reasonably be
expected to result in any Material Adverse Effect. All internal computer
systems and each Constituent Component (as defined below) of those systems
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and all computer-related products and each Constituent Component of those
products of the Company fully comply with the Year 2000 Qualification
Requirements. "Year 2000 Qualification Requirements" means that the
internal computer systems and each Constituent Component of those systems
and all computer-related products and each Constituent Component of those
products of the Company (i) have been reviewed to confirm that they store,
process (including sorting and performing mathematical operations,
calculations and computations), input and output data containing date and
information correctly regardless of whether the date contains dates and
times before, on or after January 1, 2000, (ii) have been designated to
ensure date and time entry recognition, calculations that accommodate same
century and multi-century formulas and date values, leap year recognition
and calculations, and date data interface values that reflect the century,
(iii) accurately manage and manipulate data involving dates and times,
including single century formulas and multi-century formulas, and will not
cause an abnormal ending scenario within the application or generate
incorrect values or invalid results involving such dates, (iv) accurately
process any date rollover and (v) accept and respond to two-digit year date
input in a manner that resolves any ambiguities as to the century.
"Constituent Component" means all software (including operating systems,
programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration.
(xxvi) The Company has not at any time since its inception (i)
made any unlawful contribution to any candidate for foreign office or
failed to disclose fully any contribution in violation of law, or (ii) made
any payment to any U.S. federal or state governmental officer or official,
or other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(xxvii) Neither the Company nor the Parent has distributed and
neither will distribute prior to the later of (i) the Closing Date, or any
date on which Option Stock is to be purchased, as the case may be, and (ii)
completion of the distribution of the Stock, any offering material in
connection with the offering and sale of the Stock other than any
Preliminary Prospectuses, the Prospectus, the Registration Statement and
other materials, if any, permitted by the Securities Act.
(xxviii) The Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions
contemplated hereby.
3. Purchase of the Stock by the Underwriters.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
_________ shares of the Underwritten Stock to the several Underwriters and each
of the Underwriters agrees to purchase from the Company the respective aggregate
number of shares of Underwritten Stock set forth opposite its name in Schedule
I. The price at which such shares of Underwritten Stock shall be sold by the
Company and purchased by the several Underwriters shall be $___ per share. In
making this Agreement, each Underwriter is contracting severally and not
jointly; except as
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provided in paragraphs (b) and (c) of this Section 3, the agreement of each
Underwriter is to purchase only the respective number of shares of the
Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company shall immediately give notice thereof
to you, and the non-defaulting Underwriters shall have the right within 24 hours
after the receipt by you of such notice to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between you and such purchasing Underwriter or Underwriters and upon the terms
herein set forth, all or any part of the shares of the Stock which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-
defaulting Underwriters fail so to make such arrangements with respect to all
such shares and portion, the number of shares of the Stock which each non-
defaulting Underwriter is otherwise obligated to purchase under this Agreement
shall be automatically increased on a pro rata basis to absorb the remaining
shares and portion which the defaulting Underwriter or Underwriters agreed to
purchase; provided, however, that the non-defaulting Underwriters shall not be
obligated to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within the 24 hours next succeeding the 24-hour
period above referred to, to make arrangements with other underwriters or
purchasers satisfactory to you for purchase of such shares and portion on the
terms herein set forth. In any such case, either you or the Company shall have
the right to postpone the Closing Date determined as provided in Section 5
hereof for not more than seven business days after the date originally fixed as
the Closing Date pursuant to said Section 5 in order that any necessary changes
in the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters nor the
Company shall make arrangements within the 24-hour periods stated above for the
purchase of all the shares of the Stock which the defaulting Underwriter or
Underwriters agreed to purchase hereunder, this Agreement shall be terminated
without further act or deed and without any liability on the part of the Company
to any non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company. Nothing in this paragraph (b), and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company grants an option to the several Underwriters to purchase, severally and
not jointly, up to _________ shares in the aggregate of the Option Stock from
the Company at the same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-allotments
in the sale of the Underwritten Stock by the Underwriters and may be exercised
in whole or in part at any time (but not more than once) on or before the
thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of shares of the
Option Stock as to which the several Underwriters are
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exercising the option. Delivery of certificates for the shares of Option Stock,
and payment therefor, shall be made as provided in Section 5 hereof. The number
of shares of the Option Stock to be purchased by each Underwriter shall be the
same percentage of the total number of shares of the Option Stock to be
purchased by the several Underwriters as such Underwriter is purchasing of the
Underwritten Stock, as adjusted by you in such manner as you deem advisable to
avoid fractional shares.
4. Offering by Underwriters.
(a) The terms of the initial public offering by the Underwriters of
the Stock to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) The information set forth under "Underwriting" in the Registration
Statement, any Preliminary Prospectus and the Prospectus relating to the Stock
filed by the Company (insofar as such information relates to the Underwriters
and their affiliates) constitutes the only information furnished by the
Underwriters to the Company for inclusion in the Registration Statement, any
Preliminary Prospectus, and the Prospectus, and you on behalf of the respective
Underwriters represent and warrant to the Company that the statements made
therein are correct.
5. Delivery of and Payment for the Stock.
(a) Delivery of certificates for the shares of the Underwritten Stock
and the Option Stock (if the option granted by Section 3(c) hereof shall have
been exercised not later than 10:00 a.m., New York time, on the date two
business days preceding the Closing Date), and payment therefor, shall be made
at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 1633 Broadway, 47th Floor,
New York, New York, at 10:00 a.m., New York time, on the fourth business day
after the date of this Agreement, or at such time on such other day, not later
than seven full business days after such fourth business day, as shall be agreed
upon in writing by the Company and you. The date and hour of such delivery and
payment (which may be postponed as provided in Section 3(b) hereof) are herein
called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised
after 10:00 a.m., New York time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the offices of Xxxxxxx, Phleger & Xxxxxxxx
LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m., New York time, on the
third business day after the exercise of such option. The date and hour of such
delivery and payment (which may be postponed as provided in Section 3(b) hereof)
are herein called the Option Closing Date.
(c) Payment for the Stock purchased from the Company shall be made to
the Company or its order by one or more certified or official bank check or
checks in same day funds. Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the Stock
to be delivered to you shall be registered in such name or names and
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shall be in such denominations as you may request at least one business day
before the Closing Date, in the case of Underwritten Stock, and at least one
business day prior to the purchase thereof, in the case of the Option Stock.
Such certificates will be made available to the Underwriters for inspection,
checking and packaging at the offices of Lewco Securities Corporation, 0
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on the business day prior to the Closing Date
or, in the case of the Option Stock, by 3:00 p.m., New York time, on the
business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date or any later date on which Option Stock is
purchased for the account of such Underwriter. Any such payment by you shall
not relieve such Underwriter from any of its obligations hereunder.
6. Further Agreements of the Company. The Company covenants and agrees as
follows:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A and
(ii) not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the Rules and Regulations.
(b) The Company will promptly notify each Underwriter in the event of
(i) the request by the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company will
make every reasonable effort to prevent the issuance of such a stop order and,
if such an order shall at any time be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you
a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each post-
effective amendment, if any, to the Registration Statement (together with, in
each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement
11
to the Prospectus and of any amended prospectus, filed by the Company with the
Commission, as you may reasonably request for the purposes contemplated by the
Securities Act.
(d) If at any time during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer, any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Stock,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so
supplemented or amended will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the initial public
offering of the Stock by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the several
Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the Rules and Regulations for
such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will, from time
to time, prepare and file such statements, reports, and other documents as are
or may be required to continue such qualifications in effect for so long a
period as you may reasonably request for distribution of the Stock.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(h) Not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the Effective Date, the
Company will make generally
12
available to its security holders an earnings statement in accordance with
Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the NASD of the Registration Statement, any Preliminary
Prospectus and the Prospectus, (ii) the furnishing to the Underwriters of copies
of any Preliminary Prospectus and of the several documents required by paragraph
(c) of this Section 6 to be so furnished, (iii) the printing of this Agreement
and related documents delivered to the Underwriters, (iv) the preparation,
printing and filing of all supplements and amendments to the Prospectus referred
to in paragraph (d) of this Section 6, (v) the furnishing to you and the
Underwriters of the reports and information referred to in paragraph (g) of this
Section 6 and (vi) the printing and issuance of stock certificates, including
the transfer agent's fees.
(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements (including
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel in
qualifying the Stock under state securities or blue sky laws and in the review
of the offering by the NASD.
(k) The Company hereby agrees and shall use its best efforts to cause
all directors, officers and stockholders to agree that, without the prior
written consent of Xxxxxxxxx & Xxxxx LLC on behalf of the Underwriters, the
Company will not, and such person or entity will not, for a period of 180 days
following the commencement of the public offering of the Stock by the
Underwriters, directly or indirectly, (i) sell, offer, contract to sell, make
any short sale, pledge, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any shares of capital stock or any securities
convertible into or exchangeable or exercisable for or any rights to purchase or
acquire capital stock or (ii) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences or ownership of
capital stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of capital stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (I) the Stock to
be sold to the Underwriters pursuant to this Agreement, and (ii) the granting of
options to purchase Common Stock under the Company's stock option plan.
(l) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
13
(m) The Company is familiar with the Investment Company Act and has in
the past conducted its affairs, and will in the future conduct its affairs, in
such a manner to ensure that the Company was not and will not be an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act and the rules and regulations thereunder.
(n) The Company will comply with the Securities Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (herein called the Exchange
Act) and the Rules and Regulations, so as to permit the completion of the
distribution of the Stock as contemplated in this Agreement and the Prospectus.
(o) The Company shall apply the net proceeds of its sale of the Stock
as set forth in the Prospectus under the heading "Use of Proceeds."
(p) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
Common Stock of the Company.
(q) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock.
7. Indemnification and Contribution.
(a) The Company and the Parent agree to indemnify and hold harmless
each Underwriter and each person (including each partner or officer thereof) who
controls any Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or the common law or otherwise, and
the Company agrees to reimburse each such Underwriter and controlling person for
any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement), or 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, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that (1) the indemnity agreements of the Company and the Parent contained in
this paragraph (a) shall not apply to any such losses, claims, damages,
liabilities or expenses if such statement or omission was made in reliance upon
and in conformity
14
with information furnished as herein stated or otherwise furnished in writing to
the Company by or on behalf of any Underwriter for use in any Preliminary
Prospectus or the Registration Statement or the Prospectus or any such amendment
thereof or supplement thereto and (2) the indemnity agreement contained in this
paragraph (a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased the Stock which is the
subject thereof (or to the benefit of any person controlling such Underwriter)
if at or prior to the written confirmation of the sale of such Stock a copy of
the Prospectus (or the Prospectus as amended or supplemented) was not sent or
delivered to such person and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented) unless the failure is the result of
noncompliance by the Company with paragraph (c) of Section 6 hereof. The
indemnity agreements of the Company and the Parent contained in this paragraph
(a) and the representations and warranties of the Company and the Parent
contained in Section 2 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its officers who signs the Registration Statement on his
own behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, from and against any and all losses, claims, damages
or liabilities, joint or several, to which such indemnified parties or any of
them may become subject under the Securities Act, the Exchange Act, or the
common law or otherwise and to reimburse each of them for any legal or other
expenses (including, except as otherwise hereinafter provided, reasonable fees
and disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement) or 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 or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, if such statement
or omission was made in reliance upon and in conformity with information
furnished as herein stated or otherwise furnished in writing to the Company by
such indemnifying Underwriter expressly for use in the Registration Statement or
the Prospectus or any such amendment thereof or supplement thereto. The
indemnity agreement of each Underwriter contained in this paragraph (b) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the delivery of
and payment for the Stock.
15
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall not
relieve such indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise on account of
such indemnity agreement. Any indemnifying party shall be entitled at its own
expense to participate in the defense of any action, suit or proceeding against,
or investigation or inquiry of, an indemnified party. Any indemnifying party
shall be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (herein called the Notice of Defense) to the
indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties to
participate in, but not conduct, the defense. If, within a reasonable time
after receipt of the Notice, an indemnifying party gives a Notice of Defense and
the counsel chosen by the indemnifying party or parties is reasonably
satisfactory to the indemnified party or parties, the indemnifying party or
parties will not be liable under paragraphs (a) through (c) of this Section 7
for any legal or other expenses subsequently incurred by the indemnified party
or parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding, except that (A) the indemnifying party or parties shall
bear the legal and other expenses incurred in connection with the conduct of the
defense as referred to in clause (i) of the proviso to the preceding sentence
and (B) the indemnifying party or parties shall bear such other expenses as it
or they have authorized to be incurred by the indemnified party or parties. If,
within a reasonable time after receipt of the Notice, no Notice of Defense has
been given, the indemnifying party or parties shall be responsible for any legal
or other expenses incurred by the indemnified party or parties in connection
with the defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to
16
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in paragraph (a) or (b) of this
Section 7 (i) in such proportion as is appropriate to reflect the relative
benefits received by each indemnifying party from the offering of the Stock or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each indemnifying party in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, or actions in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriters shall be deemed to be in
the same respective proportions as the total net proceeds from the offering of
the Stock received by the Company and the total underwriting discount received
by the Underwriters, as set forth in the table on the cover page of the
Prospectus, bear to the aggregate public offering price of the Stock. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by each
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Stock purchased by such Underwriter. 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. The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes
17
an unconditional release of such Underwriter and each such controlling person
from all liability arising out of such claim, action, suit or proceeding.
8. Termination. This Agreement may be terminated by you at any time prior
to the Closing Date by giving written notice to the Company if after the date of
this Agreement trading in the Common Stock shall have been suspended, or if
there shall have occurred (i) the engagement in hostilities or an escalation of
major hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change in economic or political conditions in the financial markets of
the United States would, in the Underwriters' reasonable judgment, make the
offering or delivery of the Stock impracticable, (iii) suspension of trading in
securities generally or a material adverse decline in value of securities
generally on the New York Stock Exchange, the American Stock Exchange, The
Nasdaq Stock Market, or limitations on prices (other than limitations on hours
or numbers of days of trading) for securities on either such exchange or system,
(iv) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of, or commencement of any proceeding
or investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
the Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company to the
Underwriters and no liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof.
9. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company of all its obligations to be performed hereunder at
or prior to the Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder
and the validity and form of the certificates representing the Stock, all
corporate proceedings and other legal matters incident to the foregoing, and the
form of the Registration Statement and of the Prospectus (except as to the
financial statements contained therein), shall have been approved at or prior to
the Closing Date by Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the
Underwriters.
18
(c) You shall have received from Xxxxxxxx & Xxxxxxxx LLP, counsel for
the Company, an opinion, addressed to the Underwriters and dated the Closing
Date, covering the matters set forth in Annex A hereto, and from Oblon, Spivak,
McClelland, Xxxxx & Neustadt, P.C., patent counsel for the Company, an opinion
addressed to the Underwriters, dated the closing date and covering the matters
set forth in Annex B hereto, and if Option Stock is purchased at any date after
the Closing Date, an additional opinions from such counsel, addressed to the
Underwriters and dated the Option Closing Date, confirming that the statements
expressed as of the Closing Date in such opinions remain valid as of such later
date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any Material Adverse Effect or any development involving a prospective
Material Adverse Effect, whether or not arising from transactions in the
ordinary course of business, and, since such dates, except in the ordinary
course of business, the Company has not entered into any material transaction
not referred to in the Registration Statement in the form in which it originally
became effective and the Prospectus contained therein, (iv) the Company does not
have any material contingent obligations which are not disclosed in the
Registration Statement and the Prospectus, (v) there are not any pending or
known threatened legal proceedings to which the Company is a party or of which
property of the Company is the subject which are material and which are not
disclosed in the Registration Statement and the Prospectus, (vi) there are not
any franchises, contracts, leases or other documents which are required to be
filed as exhibits to the Registration Statement which have not been filed as
required, (vii) the representations and warranties of the Company and the Parent
herein are true and correct in all material respects as of the Closing Date or
any later date on which Option Stock is to be purchased, as the case may be, and
(viii) there has not been any material change in the market for securities in
general or in political, financial or economic conditions from those reasonably
foreseeable as to render it impracticable in your reasonable judgment to make a
public offering of the Stock, or a Material Adverse Effect in market levels for
securities in general (or those of companies in particular) or financial or
economic conditions which render it inadvisable to proceed.
(e) You shall have received on the Closing Date and the Option Closing
Date, dated the Closing Date or the Option Closing Date, as the case may be, and
signed by the President and the Chief Financial Officer of the Company, a
certificate stating that the respective signers of said certificate have
carefully examined the Registration Statement in the form in which it originally
became effective and the Prospectus contained therein and any supplements or
amendments thereto, and that the statements included in clauses (i) through
(vii) of paragraph (d) of this Section 9 are true and correct.
19
(f) You shall have received from Ernst & Young LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and the Option
Closing Date, as the case may be, confirming that they are independent public
accountants with respect to the Company within the meaning of the Securities Act
and the Rules and Regulations and based upon the procedures described in their
letter delivered to you concurrently with the execution of this Agreement
(herein called the Original Letter), but carried out to a date not more than
three business days prior to the Closing Date or such later date on which Option
Stock is purchased (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing Date
or the Option Closing Date, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of the Original Letter or to
reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company which, in your sole judgment, makes it impractical or inadvisable to
proceed with the public offering of the Stock or the purchase of the Option
Stock as contemplated by the Prospectus. The Original Letter from Ernst & Young
LLP shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Securities Act and the applicable
published Rules and Regulations, (ii) set forth their opinion with respect to
their examination of the consolidated balance sheet of the Company as of July
31, 1998 and related consolidated statements of operations, stockholders'
equity, and cash flows for the twelve (12) months ended July 31, 1998, (iii)
state that Ernst & Young LLP has performed the procedures set out in Statement
on Auditing Standards No. 71 (herein called SAS 71) for a review of interim
financial information and providing the report of Ernst & Young LLP as described
in SAS 71 on the financial statements for each of the quarters in the period
ended July 31, 1998 and each of the two quarters in the period ended January 31,
1999 (herein called the Quarterly Financial Statements), (iv) state that in the
course of such review, nothing came to their attention that leads them to
believe that any material modifications need to be made to any of the Quarterly
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, (v) state that the underlying information, determinations, estimates
and assumptions contained in the section of the Prospectus entitled Management
Discussion and Analysis and Results of Operations provide a reasonable basis for
the statements contained therein, and (vi) address other matters agreed upon by
Ernst & Young LLP and you. In addition, you shall have received from Ernst &
Young LLP a letter addressed to the Company and made available to you for the
use of the Underwriters stating that their review of the Company's system of
internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's consolidated
financial statements as of January 31, 1999, did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
(g) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.
20
(h) Prior to the Closing Date, the Stock to be issued and sold by the
Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.
(i) On or prior to the Closing Date, you shall have received from all
directors, officers and beneficial holders of the outstanding capital stock
agreements, in form reasonably satisfactory to Xxxxxxxxx & Xxxxx LLC, stating
that without the prior written consent of Xxxxxxxxx & Xxxxx LLC on behalf of the
Underwriters, such person or entity will not, for a period of 180 days following
the commencement of the public offering of the Stock by the Underwriters,
directly or indirectly, (i) sell, offer, contract to sell, make any short sale,
pledge, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any shares of capital stock or any securities convertible into or
exchangeable or exercisable for or any rights to purchase or acquire capital
stock or (ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences or ownership of capital stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of capital stock or such other securities, in cash or otherwise.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the
Underwriters, shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all out-
of-pocket expenses (including reasonable fees and disbursements of counsel) that
shall have been incurred by them in connection with the transactions
contemplated hereby.
10. Conditions of the Obligation of the Company. The obligation of the
Company to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company by giving notice to
you. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses
21
incident to the performance of the obligations of the Company under this
Agreement, including all costs and expenses referred to in paragraphs (i) and
(j) of Section 6 hereof.
11. Reimbursement of Certain Expenses. In addition to its other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of the Company and the several Underwriters and, with respect to
the provisions of Section 7 hereof, the several parties (in addition to the
Company and the several Underwriters) indemnified under the provisions of said
Section 7, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Stock from any of the several Underwriters.
13. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Xxxxxxxxx & Xxxxx LLC, Xxx Xxxx Xxxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, with a copy to Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP,
0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxxx X.
Xxxxx, Esq.; and if to the Company, shall be mailed, telegraphed or delivered to
it at its office, 000 Xxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000, Attention:
Xxxxxx X. Xxxxxx, with a copy to Xxxxxxxx & Xxxxxxxx LLP, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxx X. Xxxxxxxxxx, Esq. All
notices given by telegraph shall be promptly confirmed by letter.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of paragraphs
(k) and (l) of Section 6 hereof shall be of no further force or effect.
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.
22
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of New York.
Please sign and return to the Company the enclosed duplicates of this
letter, whereupon this letter will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
IDT CORPORATION NET2PHONE, INC.
By By
--------------------- --------------------
Name: Name:
Title: Title:
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
XXXXXXXXX & XXXXX LLC
BT ALEX. XXXXX INCORPORATED
BEAR, XXXXXXX & CO. INC.
By: Xxxxxxxxx & Xxxxx LLC
By
----------------------
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
23
SCHEDULE I
UNDERWRITERS
Underwriters Number of Shares to be
Purchased
------------------------------------------- ----------------------
Xxxxxxxxx & Xxxxx LLC......................
BT Alex. Xxxxx Incorporated................
Bear, Xxxxxxx & Co. Inc....................
----------------------
Total.................................
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