Exhibit 1.01
4,200,000 Shares
IDT Corporation
Common Stock
(Par Value $.01 Per Share)
UNDERWRITING AGREEMENT
January __, 1998
BT Alex. ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇▇▇▇▇▇ & Company, Inc.
As Representatives of the
Several Underwriters
c/o BT Alex. ▇▇▇▇▇ Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Ladies and Gentlemen:
IDT Corporation, a Delaware corporation (the "Company"), and certain
stockholders of the Company (the "Selling Stockholders") propose to sell to
the several underwriters (the "Underwriters") named in Schedule I hereto, for
whom you are acting as representatives (the "Representatives"), an aggregate
of 4,200,000 shares of the Company's Common Stock, $.01 par value (the "Firm
Shares"), of which 4,000,000 shares will be sold by the Company and 200,000
shares will be sold by the Selling Stockholders. The respective amounts of
the Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto, and the respective amounts to be
sold by the Selling Stockholders are set forth opposite their names in
Schedule II hereto. The Company and the Selling Stockholders are sometimes
referred to herein collectively as the "Sellers." The Company also proposes
to sell at the Underwriters' option an aggregate of up to 615,000 additional
shares of the Company's Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company and the Selling
Stockholders (a) that you are authorized to enter into this Agreement on
behalf of the several Underwriters, and
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(b) that the several Underwriters are willing, acting severally and not jointly,
to purchase the numbers of Firm Shares set forth opposite their respective names
in Schedule I, plus their pro rata portion of the Option Shares if you elect to
exercise the over-allotment option in whole or in part for the accounts of the
several Underwriters. The Firm Shares and the Option Shares (to the extent the
aforementioned option is exercised) are herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling
Stockholders.
(a) The Company represents and warrants to each of the
Underwriters as follows:
(i) A registration statement on Form S-3 (File No.
333-43501) with respect to the Shares has been carefully prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder and has been filed with the Commission. The Company has complied
with the conditions for the use of Form S-3 in connection with the
transactions contemplated by this Agreement. Copies of such registration
statement, including any amendments thereto, the preliminary prospectuses
(meeting the requirements of the Rules and Regulations) contained therein and
the exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration statement filed by the
Company pursuant to Rule 462 (b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the Prospectus
referred to below, has become effective under the Act and no post-effective
amendment to the Registration Statement has been filed as of the date of this
Agreement. "Prospectus" means (a) the form of prospectus first filed with
the Commission pursuant to Rule 424(b) or (b) the last preliminary prospectus
included in the Registration Statement filed prior to the time it becomes
effective or filed pursuant to Rule 424(a) under the Act that is delivered by
the Company to the Underwriters for delivery to purchasers of the Shares,
together with the term sheet or abbreviated term sheet, if any, filed with
the Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it
becomes effective is herein referred to as a "Preliminary Prospectus." Any
reference herein to the Registration Statement, any Preliminary Prospectus or
to the Prospectus shall be deemed to refer to and include any documents
incorporated by reference therein, and, in the case of any reference herein
to any Prospectus, also shall be deemed to include any documents incorporated
by reference therein, and any supplements or amendments thereto, filed with
the Commission after the date of filing of the Prospectus under Rules 424(b)
or 430A, and prior to the termination of the offering of the Shares by the
Underwriters (the "Offering").
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(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement. Each of
the subsidiaries of the Company listed in Exhibit A hereto (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. Other than the Subsidiaries, the Company does not have any
"significant subsidiaries" (as such term is defined in Regulation S-X under
the Securities Act). The Company and each of the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect upon the business,
financial condition or results of operations of the Company and the
Subsidiaries, taken as a whole. The outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and except to the extent set forth in Exhibit A
hereto, are owned by the Company or another Subsidiary free and clear of all
liens, encumbrances and equities and claims; and no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the
Company, including the shares to be sold by ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, have been duly
authorized and validly issued and are fully paid and non-assessable. The
shares to be sold by the remaining Selling Stockholders have been duly
authorized, and upon exercise of the related stock options on or prior to the
Closing Date in accordance with the relevant stock option agreements, will be
validly issued, fully paid and non-assessable. The Shares 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 rights of stockholders exist with respect to any of the
Shares or the issue and sale thereof. Neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated by this
Agreement gives rise to any rights, other than those which have been waived
or satisfied on or prior to the Closing Date referred to below, for or
relating to the registration of any shares of Common Stock.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the Shares
conform to the description thereof contained in the Registration Statement.
The form of certificates for the Shares conforms to the corporate laws of
the State of Delaware.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed Offering of the
Shares nor instituted proceedings for that purpose. The Registration
Statement contains, and the Prospectus and any amendments or supplements
thereto will contain, all statements which are required to be stated therein
by, and will conform in all material respects, to the requirements of the Act
and the Rules and Regulations. The documents incorporated by reference in the
Prospectus, at the time filed
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with the Commission conformed, in all material respects to the requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), or the
Securities Act, as applicable, and the rules and regulations of the
Commission thereunder. The Registration Statement and any amendment thereto
do not contain, and will not contain, any untrue statement of a material fact
and do not omit, and will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Prospectus and
any amendments and supplements thereto do not contain, and will not contain,
any untrue statement of material fact; and do not omit, and will not omit, to
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from
the Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of any Underwriter through the
Representatives, specifically for use in the preparation thereof, including
the information set forth in the last paragraph on the cover page of the
Prospectus, the information set forth in the last two paragraphs on page 2 of
the Prospectus, and the information set forth in the Prospectus under the
caption "Underwriting."
(vi) The consolidated financial statements of the Company
and the Subsidiaries, together with the related notes and schedules as set
forth or incorporated by reference in the Registration Statement, present
fairly the financial position and the results of operations and cash flows of
the Company and its consolidated subsidiaries, 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, except as disclosed
therein, and all adjustments necessary for a fair presentation of results for
such periods have been made. The summary financial and statistical data
included or incorporated by reference in the Registration Statement presents
fairly the information shown therein and such data has been compiled on a
basis consistent with the financial statements presented therein and/or the
books and records of the Company, as the case may be.
(vii) Ernst & Young LLP, who have certified certain of the
financial statements filed with the Commission as part of, or incorporated by
reference in, the Registration Statement, are independent public accountants
as required by the Act and the Rules and Regulations.
(viii) Except as set forth in the Registration Statement,
there is no action, suit, claim or proceeding pending or, to the knowledge of
the Company, threatened against the Company or any of the Subsidiaries before
any court or administrative agency or otherwise (a) which if determined
adversely to the Company or any of its Subsidiaries might result in any
material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects
of the Company and of the Subsidiaries taken as a whole or (b) which
challenges or seeks to enjoin or to prevent the consummation of the
transactions contemplated hereby.
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(ix) The Company and the Subsidiaries have good and
marketable title to all of the properties and assets reflected in the
financial statements (or as described in the Registration Statement)
hereinabove described, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those reflected in such financial statements
(or as described in the Registration Statement) or which are not material in
amount. The Company and the Subsidiaries occupy their leased properties
under valid and binding leases.
(x) The Company and the Subsidiaries have filed all
federal, state, local and foreign income tax returns which have been required
to be filed and have paid all taxes indicated by said returns and all
assessments received by them or any of them to the extent that such taxes
have become due. All tax liabilities, if any, have been adequately provided
in all material respects for in the financial statements of the Company.
(xi) Since the respective dates as of which information
is given in the Registration Statement, as it may be amended or supplemented,
there has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries taken as a
whole, 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 expected to be entered into by the Company or the
Subsidiaries, other than transactions in the ordinary course of business and
changes and transactions described in the Registration Statement, as it may
be amended or supplemented. The Company and the Subsidiaries have no
material contingent obligations which are not disclosed in the Company's
financial statements which are included in the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is
or with the giving of notice or lapse of time or both, will be, in violation
of or in default under its Restated Certificate of Incorporation or By-Laws
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 is of material significance in respect of the
business, management properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the Subsidiaries,
taken as a whole. 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 material agreement or instrument to which
the Company or any Subsidiary is a party, or of the Charter or By-Laws of the
Company or any order, rule or regulation applicable to the Company or any
Subsidiary of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.
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(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 of this Agreement and the consummation of the
transactions herein contemplated (except such additional steps as may be
required by the Commission, the National Association of Securities Dealers,
Inc. (the "NASD"), if any, or such additional steps as may be necessary to
qualify the Shares 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, except where the failure to obtain such approval, consent, order,
authorization, designation, declaration or filing would not have a material
adverse effect upon the business, properties, assets, rights, operations or
condition (financial or otherwise) of the Company and the Subsidiaries, taken
as a whole.
(xiv) The Company and each of the Subsidiaries holds all
material licenses, certificates and permits from governmental authorities
which are necessary to the conduct of their businesses as presently
conducted; and neither the Company nor any of the Subsidiaries has infringed
any patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company and the Subsidiaries
taken as a whole. The Company is not aware of any material infringement by
others of patents, patent rights, trade names, trademarks or copyrights owned
by or licensed to the Company.
(xv) Neither the Company, nor to the Company's best
knowledge, any of its affiliates, has taken or may take, 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 Shares. The Company acknowledges that
the Underwriters may engage in passive market making transactions in the
Shares on The Nasdaq Stock Market in accordance with Rule 103 under
Regulation M of the Exchange Act.
(xvi) Neither the Company nor any Subsidiary is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940, as amended (the "1940 Act") and the rules and
regulations of the Commission thereunder.
(xvii) 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.
(xviii) The Company and each of its Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as is
commercially reasonable for the conduct of their respective businesses and
the value of their respective properties.
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(xix) The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("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 interpretations thereunder (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, which would cause the loss of such qualification.
(xx) The Company is in compliance in all material
respects with the provisions of Section S17.075 of the laws of the State of
Florida relating to the disclosure of business with Cuba.
(b) Each of the Selling Stockholders severally represents and
warrants as follows:
(i) ▇▇. ▇▇▇▇▇▇ now has, and upon exercise of the option
agreements at the Closing Date (as such date is hereinafter defined) all of
the Selling Stockholders will have, good and marketable title to the Firm
Shares to be sold by such Selling Stockholder, free and clear of any liens,
encumbrances, equities and claims, and full right, power and authority to
effect the sale and delivery of such Firm Shares; and upon the delivery of,
against payment for, such Firm Shares pursuant to this Agreement, the
Underwriters will acquire good and marketable title thereto, free and clear
of any liens, encumbrances, equities and claims.
(ii) Such Selling Stockholder has full right, power and
authority to execute and deliver this Agreement, the Power of Attorney and
the Custodian Agreement referred to below and to perform its obligations
under such agreements. The execution and delivery of this Agreement and the
consummation by such Selling Stockholder of the transactions herein
contemplated and the fulfillment by such Selling Stockholder of the terms
hereof will not require any consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental
body (except as may be required under the Securities Act, state securities
laws or Blue Sky laws or by the NASD) and will not result in a breach of any
indenture, mortgage, deed of trust or other agreement or instrument to which
such Selling Stockholder is a party, or of any order, rule or regulation
applicable to such Selling Stockholder of any court or of any regulatory body
or administrative agency or other governmental body having jurisdiction over
such Selling Stockholder.
(iii) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock
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of the Company and, other than as permitted by the Act, the Selling Stockholder
will not distribute any prospectus or other offering material in connection with
the offering of the Shares.
(iv) Without having undertaken to determine independently
the accuracy or completeness of either the representations and warranties of
the Company contained herein or the information contained in the Registration
Statement, such Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1 are
not true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in the
Registration Statement which has adversely affected or may adversely affect
the business of the Company or any of the Subsidiaries (with the exception of
▇▇. ▇▇▇▇▇▇ and ▇▇ ▇▇▇▇▇, as to which no such representation or warranty is
made); and the sale of the Firm Shares by such Selling Stockholder pursuant
hereto is not prompted by any information concerning the Company or any of
the Subsidiaries which is not set forth in the Registration Statement or the
documents incorporated by reference therein. The information pertaining to
such Selling Stockholder under the caption "Principal and Selling
Stockholders" in the Prospectus is complete and accurate in all material
respects.
2. Purchase, Sale and Delivery of the Firm Shares and the Option Shares.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Sellers
agree to sell to the Underwriters and each Underwriter agrees, severally and not
jointly, to purchase, at a price of $_____ per share, the number of Firm Shares
set forth opposite the name of each Underwriter in Schedule I hereof, subject to
adjustments in accordance with Section 9 hereof. The number of Firm Shares to
be purchased by each Underwriter from each Seller shall be as nearly as
practicable in the same proportion to the total number of Firm Shares being sold
by each Seller as the number of Firm Shares being purchased by each Underwriter
bears to the total number of Firm Shares to be sold hereunder. The obligations
of the Company and of each of the Selling Stockholders shall be several and not
joint.
(b) Certificates in negotiable form or stock option agreements,
as the case may be, for the total number of the Shares to be sold hereunder by
the Selling Stockholders have been placed in custody with Shlomit Oz, the
Company's Assistant General Counsel, as custodian (the "Custodian") pursuant to
the Custodian Agreement executed by each Selling Stockholder for delivery of all
Firm Shares to be sold hereunder by the Selling Stockholders. Each of the
Selling Stockholders specifically agrees that the Firm Shares represented by the
certificates or option agreements held in custody for the Selling Stockholders
under the Custodian Agreement are subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Stockholders for such
custody are to that extent irrevocable, and that the obligations of the Selling
Stockholders hereunder shall not be terminable by any act or deed of the Selling
Stockholders (or by any other person, firm or corporation including the Company,
the Custodian or the Underwriters) or by operation of law (including the death
of an individual Selling Stockholder) or by the occurrence of any other event or
events, except as
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set forth in the Custodian Agreement. If any such event should occur prior to
the delivery to the Underwriters of the Firm Shares hereunder, certificates for
the Firm Shares shall be delivered by the Custodian in accordance with the terms
and conditions of this Agreement as if such event has not occurred. The
Custodian is authorized to receive and acknowledge receipt of the proceeds of
sale of the Shares held by it against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in
same day funds via wire transfer of same-day funds to an account of the Company
for the shares to be sold by it and to the order of Shlomit Oz, "as Custodian"
for the shares to be sold by the Selling Stockholders, in each case against
delivery of certificates therefor to the Representatives for the several
accounts of the Underwriters. Such payment and delivery are to be made at the
offices of BT Alex. ▇▇▇▇▇ Incorporated, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at
10:00 a.m., Baltimore time, on the third business day after the date of this
Agreement or at such other time and date not later than five business days
thereafter as you and the Company shall agree upon, such time and date being
herein referred to as the "Closing Date." (As used herein, "business day" means
a day on which the New York Stock Exchange is open for trading and on which
banks in New York are open for business and not permitted by law or executive
order to be closed.) The certificates for the Firm Shares will be delivered in
such names and denominations as the Representatives request in writing not later
than the second full business day prior to the Closing Date, and will be made
available for inspection by the Representatives at least one business day prior
to the Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company, setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives, but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is three
or more days before the Closing Date, the notice of exercise shall set the
Closing Date as the Option Closing Date. The number of Option Shares to be
purchased by each Underwriter shall be in the same proportion to the total
number of Option Shares being purchased as the number of Firm Shares being
purchased by such Underwriter bears to the total number of Firm Shares, adjusted
by you in such manner as to avoid fractional shares. The option with respect to
the Option Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters. You, as
Representatives of the several Underwriters, may cancel such option at any time
prior to its expiration by giving written notice of such cancellation to the
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Company. To the extent, if any, that the option is exercised, payment for the
Option Shares shall be made on the Option Closing Date in same day funds via
wire transfer to an account of the Company against delivery of certificates
therefor at the offices of BT Alex. ▇▇▇▇▇ Incorporated, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
(e) If on the Closing Date any Selling Stockholder fails to sell the
Firm Shares which such Selling Stockholder has agreed to sell on such date as
set forth in Schedule II hereto, the Company agrees that it will sell or arrange
for the issuance and sale of that number of shares of Common Stock to the
Underwriters which represents Firm Shares which such Selling Stockholder has
failed to so sell, as set forth in Schedule II hereto, or such lesser number as
may be requested in writing by the Representatives.
3. Offering by the Underwriters.
It is understood that the several Underwriters intend to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters, a copy of which shall be furnished to the Company on or prior to
the Closing Date.
4. Covenants of the Company and the Selling Stockholders.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause
the Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Representatives (which such approval
shall not be unreasonably withheld) containing information previously omitted
at the time that the Registration Statement became effective in reliance on
Rule 430A of the Rules and Regulations and (B) not file any amendment to the
Registration Statement or supplement to the Prospectus or document
incorporated by reference therein of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations and (C) file on a timely basis all
reports and any definitive proxy or information statements required to be
filed by the Company with the Commission subsequent to the date of the
Prospectus and prior to the termination of the offering of the Shares by the
Underwriters.
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(ii) The Company will advise the Representatives promptly (A)
when the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration Statement or
for any supplement to the Prospectus or for any additional information, and (D)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of the institution
of any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction in which it is not now so
qualified or required to file such a consent. 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 the Representatives may reasonably request in connection with the
distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Securities Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto, including all exhibits filed
therewith, and will deliver to the Representatives such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), including documents incorporated by
reference therein, and of all amendments thereto, as the Representative may
reasonably request.
(v) The Company will comply with the Securities Act and the
Rules and Regulations, and the 1934 Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Shares as contemplated in this Agreement and the Prospectus. If during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Underwriters, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will either (i) prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus or (ii) prepare and file
-11-
with the Commission an appropriate filing under the 1934 Act which shall be
incorporated by reference in the Prospectus so that the Prospectus as so amended
or supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the
requirements of the Securities Act.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(vii) The Company will, for a period of five years from the
Closing Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Securities Act or the
1934 Act, as amended. The Company will deliver to the Representatives similar
reports with respect to the Company's significant subsidiaries, as that term is
defined in the Rules and Regulations, which are not consolidated in the
Company's financial statements.
(viii) No offering, sale, contract to sell or other
disposition of any shares of Common Stock of the Company or other securities
convertible into or exchangeable or exercisable for shares of Common Stock (or
agreement for such) will be made for a period of 90 days after the date of this
Agreement, directly or indirectly, by the Company otherwise than hereunder or
with the prior written consent of BT Alex. ▇▇▇▇▇ Incorporated, except that the
Company (a) may issue shares of Common Stock upon the exercise or conversion of
other currently outstanding options, warrants and other convertible securities;
(b) may issue options to purchase shares of Common Stock to its directors,
officers and employees in connection with its existing stock option plans; and
(c) may issue shares of Common Stock or securities convertible into, or
exercisable for, shares of Common Stock pursuant to an acquisition transaction.
(ix) The Company will use its best efforts to effect the listing
of the Shares on The Nasdaq Stock Market ("Nasdaq").
-12-
(x) Each officer and director and certain Stockholders of the
Company has furnished to you, on or prior to the date of this agreement, a
letter or letters, in form and substance satisfactory to the Underwriters,
pursuant to which each such person shall agree not to offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock of the Company or other
capital stock of the Company, or any other securities convertible, exchangeable
or exercisable for Common Shares or derivative of Common Shares owned by such
person or request the registration for the offer or sale of any of the foregoing
(or as to which such person has the right to direct the disposition of) for a
period of 90 days after the date of this Agreement, directly or indirectly,
except with the prior written consent of BT Alex. ▇▇▇▇▇ Incorporated and except
that the foregoing restrictions shall not apply to a disposition (a) as a bona
fide gift; (b) pursuant to the laws of testamentary or interstate descent; or
(c) pursuant to a final nonappealable order of a court or other body of
competent jurisdiction ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus .
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the 1940 Act.
(xiii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock.
(xiv) 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 any securities of the Company; provided, however, that the Company
shall not be deemed to have taken any action under this Section that is taken by
any of the Underwriters.
(b) Each of the Selling Stockholders covenants and agrees with the
several Underwriters that:
(i) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other capital stock of the Company or
other securities convertible, exchangeable or exercisable for Common Stock or
derivative of Common Stock owned by the Selling Stockholder or request the
registration for the offer or sale of any of the foregoing (or as to which the
Selling Stockholder has the right to direct the disposition of) will be made for
a period of 90 days after the date of this Agreement, directly or indirectly, by
such Selling Stockholder otherwise than hereunder or with the prior written
consent of BT Alex. ▇▇▇▇▇ Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions
-13-
herein contemplated, each of the Selling Stockholders agrees to deliver to you
prior to or at the Closing Date a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
(iii) Such Selling Stockholder 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 any securities of the Company.
5. Costs and Expenses.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company and
the Selling Stockholders; the cost of printing and delivering to, or as
requested by, the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus, this Agreement, the Underwriters' Selling
Memorandum and the Underwriters' Invitation Letter; the filing fees of the
Commission; the filing fee of the NASD terms of the sale of the Shares; the
Listing Fee of the Nasdaq Stock Market. To the extent, if at all, that any of
the Selling Stockholders engage special legal counsel to represent them in
connection with this offering, the fees and expenses of such counsel shall be
borne by such Selling Stockholder. Any transfer taxes imposed on the sale of
the Shares to the several Underwriters will be paid by the Sellers pro rata.
The Sellers shall not, however, be required to pay for any of the Underwriter's
expenses (other than those related to qualification under NASD regulation which
shall be borne by the Company) except that, if this Agreement shall not be
consummated because the conditions in Section 6 hereof are not satisfied by the
Company or by the Selling Stockholders, or because this Agreement is terminated
by the Representatives pursuant to Section 11 hereof, or by reason of any
failure, refusal or inability on the part of the Company or the Selling
Stockholders to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company and the
Selling Stockholders shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares.
6. Conditions of Obligations of the Underwriters.
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company and the
Selling Stockholders contained herein, and to the
-14-
performance by the Company and the Selling Stockholders of their covenants and
obligations hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or
threatened by the Commission and no injunction, restraining order, or order of
any nature by a federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date
or the Option Closing Date, as the case may be, the opinion of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, counsel for the Company and the Selling Stockholders, dated the
Closing Date or the Option Closing Date, as the case may be, addressed to the
Underwriters (and stating that it may be relied upon by counsel to the
Underwriters) to the effect that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
full corporate power and authority to conduct its business as described in the
Registration Statement; each of the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has full corporate power and authority to
conduct its business as described in the Registration Statement; the Company and
each of the Subsidiaries are duly qualified to transact business in all
jurisdictions in which the conduct of their business requires such
qualification, or in which the failure to qualify would have a materially
adverse effect upon the business of the Company and the Subsidiaries taken as a
whole; and the outstanding shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued and are fully paid and
non-assessable and (with the exception of the shares of common stock of
Net2Phone, Inc. that are owned by ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇) are owned by the
Company or a Subsidiary; and, to the best of such counsel's knowledge, the
outstanding shares of capital stock of each of the Subsidiaries is owned free
and clear of all liens, encumbrances, equities and claims, and (with the
exception of the rights set forth in the Employment Agreement between the
Company and ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇) no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to convert
any obligations into any shares of capital stock or of ownership interests in
the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Company's Common Stock have been duly authorized; the outstanding
shares of the Company's Common Stock, including the Shares to be sold by the
Selling Stockholders, have been duly authorized and validly issued and are fully
paid and non-assessable. The form of certificate used
-15-
to evidence the Shares complies in all material respects with all applicable
requirements of the Delaware General Corporation Law. The shares of Common
Stock, including the Option Shares, if any, to be sold by the Company pursuant
to this Agreement have been duly authorized and, upon delivery to the
Underwriters against payment therefor in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and non-assessable;
and the issuance of the Shares by the Company is not subject to any preemptive
rights.
(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no outstanding
securities of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Shares or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) The Registration Statement has become effective under the
Act, and such counsel is not aware of the issuance of any stop order suspending
the effectiveness thereof or the institution of any proceedings for that
purpose, pending or threatened under the Act.
(v) The Registration Statement and each amendment or supplement
thereto and each document incorporated by reference therein, as of the effective
date of the Registration Statement, complied as to form in all material respects
with the requirements of the Act or the Securities Exchange Act of 1934, as
applicable and the applicable rules and regulations thereunder (except that such
counsel need express no opinion as to the financial statements, supporting
schedules, footnotes and other financial and statistical information included or
incorporated by reference therein). The Company satisfied all of the conditions
for the use of Form S-3, set forth in the General Instructions thereto.
(vi) The statements under the caption "Description of Capital
Stock" in the Prospectus, insofar as such statements constitute a summary of the
Company's Restated Certificate of Incorporation or matters of law, fairly
summarize in all material respects the information called for with respect to
such documents and matters.
-16-
(vii) Such counsel does not know of any contracts or other
documents required to be filed as exhibits to or incorporated by reference in
the Registration Statement or described in the Registration Statement or the
Prospectus which are no so filed, incorporated by reference or described as
required, and such contracts and documents as are summarized in the Registration
Statement or the Prospectus are fairly summarized in all material respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.
(ix) The execution and delivery of this Agreement and the
performance by the Company of its terms do not and will not violate or result in
a violation of the Company's Restated Certificate of Incorporation or By-Laws,
and, to our knowledge, will not constitute a material breach of the terms,
conditions or provisions of or constitute a default under any material contract,
undertaking, indenture or other agreement by which the Company or any of the
Subsidiaries is now bound or to which it is now a party.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental authority is necessary in connection with the execution and
delivery of this Agreement, except such as have been obtained under the Act and
such as may be required by the NASD or as required by state securities and Blue
Sky laws as to which such counsel need express no opinion) except such as have
been obtained or made, specifying the same.
(xii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus, an
"investment company" within the meaning of the 1940 Act.
(xiii) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholders.
(xiv) Each Selling Stockholder has full legal right, power
and authority, and any approval required by law (other than as required by the
NASD or by State securities and Blue Sky laws as to which such counsel need
express no opinion), to sell and deliver the portion of the Shares to be sold by
such Selling Stockholder.
(xv) The Custodian Agreement and the Power of Attorney executed
and delivered by each Selling Stockholder is valid and binding.
(xvi) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have acquired good
and marketable title
-17-
to the Shares being sold by each Selling Stockholder on the Closing Date, and
the Option Closing Date, as the case may be, free and clear of all liens,
encumbrances, equities and claims.
In rendering such opinion ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP may rely as to matters
governed by the laws of states other than New York, Delaware or federal laws on
local counsel in such jurisdictions, provided that in each case ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that (i) the Registration Statement, at the time it became effective under the
Act (but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act) and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that (ii) the Prospectus, at the
time it was filed with the Commission pursuant to the Rules and Regulations and
as of the Closing Date or the Option Closing Date, as the case may be, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary therein to make the statements
therein, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, supporting schedules, footnotes and other financial or statistical
information contained therein). With respect to such statement, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP may state that their belief is based upon the procedures set forth
therein, but is without independent check and verification.
(c) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of ▇▇▇▇▇▇▇ & Berlin,
Chartered, special regulatory counsel of the Company, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the effect
that the statements under the captions "Risk Factors--Government Regulatory
Policy Risks" and "Business--Regulation," insofar as such statements constitute
a summary of matters of law, fairly summarize in all material respects the
information called for with respect to such matters.
(d) The Representatives shall have received from Piper & Marbury
L.L.P., counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect specified
in subparagraphs (ii), (iii), (iv)[,] [and] (x) [and (xi)] of Paragraph (b) of
this Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion,
Piper & Marbury L.L.P. may rely as to all matters governed other than by the
laws of the State of Maryland or Federal laws on the opinions of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇▇▇ & Berlin, Chartered referred to in Paragraphs (b) and
(c), respectively, of this Section 6. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, or any amendment thereto, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) as
-18-
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact, necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to
such statement, Piper & Marbury L.L.P. may state that their belief is based upon
the procedures set forth therein, but is without independent check and
verification.
(e) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company to
the effect that, as of the Closing Date or the Option Closing Date, as the case
may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under
the Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to
Rules 424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and Prospectus
did not omit to state a material fact
-19-
required to be stated therein or necessary in order to make the statements
therein not misleading, and since the effective date of the Registration
Statement, no event has occurred which should have been set forth in a
supplement to or an amendment of the Prospectus which has not been so set forth
in such supplement or amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business.
(g) The Company and the Selling Stockholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq Stock Market.
(i) The Lockup Agreements described in Section 4 (j) are in full
force and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and to Piper & Marbury L.L.P.,
counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company and the Selling Stockholders of such
termination in writing or by facsimile transmission (upon the confirmation of
error-free transmission) at or prior to the Closing Date or the Option Closing
Date, as the case may be.
In such event, the Selling Stockholders, the Company and the Underwriters
shall not be under any obligation to each other (except to the extent provided
in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Sellers.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
-20-
8. Indemnification.
(a) The Company and the Selling Stockholders, jointly and
severally, agrees to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities to which such Underwriter
or any such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or (ii) 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; and will reimburse
each Underwriter and each such controlling person upon demand for any legal
or other expenses reasonably incurred by such Underwriter or such controlling
person in connection with investigating or defending any such loss, claim,
damage or liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any action or
proceeding; provided, however, that the Company and the Selling Stockholders
will not be liable in any such case (i) to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement, or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof or (ii) to the extent that a
copy of the final Prospectus (as then amended or supplemented) was not sent
or given by or on behalf of any Underwriter to a party at or prior to the
written confirmation of the sale of Shares to such person and if the final
Prospectus, as so amended or supplemented, would have cured the defect giving
rise to such loss, claim, damage or liability. In no event, however, shall
the aggregate liability of any Selling Stockholder for indemnification under
this Section 8(a) exceed that proportion of the total of such losses, claims,
damages or liabilities indemnified against equal to the proportion of the
total Shares sold hereunder which is being sold by such Selling Stockholder.
This indemnity agreement will be in addition to any liability which the
Company or the Selling Stockholders may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement, the Selling Stockholders, and each
person, if any, who controls the Company or the Selling Stockholders within
the meaning of the Act, against any losses, claims, damages or liabilities to
which the Company or any such director, officer, Selling Stockholder or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated
-21-
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, Selling Stockholder or controlling person in connection
with investigating or defending any such loss, claim, damage, liability,
action or proceeding; provided, however, that each Underwriter will be liable
in each case to the extent, but only to the extent, that (i) such untrue
statement or alleged untrue statement or omission or alleged omission has
been made in the Registration Statement, any Preliminary Prospectus, the
Prospectus or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof or (ii)
to the extent that a copy of the final Prospectus (as then amended or
supplemented) was not sent or given by or on behalf of any Underwriter to a
party at or prior to the written confirmation of the sale of Shares to such
person and if the final Prospectus, as so amended or supplemented, would have
cured the defect giving rise to such loss, claim, damage or liability. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which
such notice would have related and was materially prejudiced by the failure
to give such notice, but the failure to give such notice shall not relieve
the indemnifying party or parties from any liability which it or they may
have to the indemnified party for contribution or otherwise than on account
of the provisions of Section 8(a) or (b). In case any such proceeding shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party and shall pay as
incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred (or within 30 days of
presentation) the fees and expenses of the counsel retained by the
indemnified party in the event (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, (ii) the
named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due
to an actual or potential conflict of interest between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees and expenses of more
than one separate firm for all such indemnified parties.
-22-
Such firm shall be designated in writing by you in the case of parties
indemnified pursuant to Section 8(a) and by the Company and the Selling
Stockholders in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent; provided that if any
proceeding is settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding of which indemnification may be sought hereunder (whether or not
any indemnified party is an actual or potential party to such claim, action
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on
the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and the Selling Stockholders on the one hand and the Underwriters on
the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholders on
the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Stockholders bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
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 the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
The Company, the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this Section
8(d) were determined by pro rata allocation (even if all of the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred
-23-
to above in this Section 8(d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to above in this Section 8(d)
shall be deemed to include any legal or other expenses reasonably incurred by
each indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), (i)
no Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter, (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation and (iii) no Selling Stockholder shall be required to
contribute any amount in excess of the lesser of (A) that proportion of the
total of such losses, claims, damages or liabilities indemnified or
contributed against equal to the proportion of the total Shares sold
hereunder which is being sold by such Selling Shareholder, or (B) the
proceeds received by such Selling Stockholder from the Underwriters in the
Offering. The Underwriters' obligations in this Section 8(d) to contribute
are several in proportion to their respective underwriting obligations and
are not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any U.S. court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing party
and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any such
proceeding in which such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred.
The indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, or (iii) any termination of this Agreement. A successor
to any Underwriter, or to the Company, its directors or officers, or any
person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this
Section 8.
9. Default by Underwriters.
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company or a
Selling Stockholder), you, as Representatives of the Underwriters, shall use
your reasonable efforts to procure within 36 hours thereafter one or more of
the other Underwriters, or any others, to purchase from the Company and the
Selling Stockholders such amounts as may be agreed upon and upon the terms
set forth herein, the Firm Shares or Option Shares, as the case may be, which
the defaulting Underwriter or Underwriters failed to purchase. If during
such 36 hours you, as such Representatives, shall not have procured such
other Underwriters, or
-24-
any others, to purchase the Firm Shares or Option Shares, as the case may be,
agreed to be purchased by the defaulting Underwriter or Underwriters, then
(a) if the aggregate number of shares with respect to which such default
shall occur does not exceed 10% of the Firm Shares or Option Shares, as the
case may be, covered hereby, the other Underwriters shall be obligated,
severally, in proportion to the respective numbers of Firm Shares or Option
Shares, as the case may be, which they are obligated to purchase hereunder,
to purchase the Firm Shares or Option Shares, as the case may be, which such
defaulting Underwriter or Underwriters failed to purchase, or (b) if the
aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company and
the Selling Stockholders or you as the Representatives of the Underwriters
will have the right, by written notice given within the next 36-hour period
to the parties to this Agreement, to terminate this Agreement without
liability on the part of the non-defaulting Underwriters or of the Company or
of the Selling Stockholders except to the extent provided in Section 8
hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as you,
as Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. For purposes of this Agreement, the term
"Underwriter" includes any person substituted for a defaulting Underwriter.
Any action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter
under this Agreement.
10. Notices.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied and
confirmed as follows: (i) if to the Underwriters, to BT Alex. ▇▇▇▇▇
Incorporated, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (tel: ▇▇▇-▇▇▇-▇▇▇▇;
fax: ▇▇▇-▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇ ▇▇▇▇▇▇; with a copy to BT Alex. ▇▇▇▇▇
Incorporated, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Attention: General
Counsel; (ii) if to the Company, to IDT Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (tel: ▇▇▇-▇▇▇-▇▇▇▇;
fax: ▇▇▇-▇▇▇-▇▇▇▇); with a copy to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
(tel: ▇▇▇-▇▇▇-▇▇▇▇; fax: ▇▇▇-▇▇▇-▇▇▇▇); and (iii) if to a Selling
Stockholder, to the attention of such Selling Stockholder, c/o IDT
Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (tel:
▇▇▇-▇▇▇-▇▇▇▇; fax: as provided by main operator); with a copy to ▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, as indicated above.
11. Termination.
This Agreement may be terminated by you by notice to the Sellers as
follows:
-25-
(a) at any time prior to the earlier of (i) the time the Shares
are released by you for sale by notice to the Underwriters, or (ii) 11:30
a.m. on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse change
or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, whether or
not arising in the ordinary course of business; (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of the United
States would, in your reasonable judgment, make it impracticable to market
the Shares or to enforce contracts for the sale of the Shares; (iii) trading
generally shall have been suspended or materially limited on or by, as the
case may be, any of the New York Stock Exchange, the American Stock Exchange
or the NASD; (iv) the enactment, publication, decree or other promulgation of
any statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects or may
materially and adversely affect the business or operations of the Company;
(v) declaration of a banking moratorium by United States or New York State
authorities; (vi) the suspension of trading of the Company's common stock on
Nasdaq or (vii) the taking of any action by any governmental body or agency
in respect of its monetary or fiscal affairs which in your reasonable opinion
has a material adverse effect on the securities markets in the United States;
or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Stockholders and their respective
successors, executors, administrators, heirs and assigns, and, with respect
to the indemnification and contribution obligations set forth in Section 8
hereof, the officers, directors and controlling persons referred to herein,
and no other person will have any right or obligation hereunder. No
purchaser of any of the Shares from any Underwriter shall be deemed a
successor or assign merely because of such purchase.
13. Information Provided by Underwriters.
The Company, the Selling Stockholders and the Underwriters acknowledge
and agree that the only information furnished or to be furnished by any
Underwriter to the Company for inclusion in any Prospectus or the
Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
-26-
Underwriters), legends required by Item 502(d) of Regulation S-K under the
Act and the information under the caption "Underwriting" in the Prospectus.
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 its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters in accordance with its terms.
-27-
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly
appointed as Attorney-in-Fact by such Selling Stockholder pursuant to a
validly existing and binding Power of Attorney which authorizes such
Attorney-in-Fact to take such action.
Very truly yours,
IDT Corporation
By ________________________________
Name:
Title:
Selling Stockholders listed on Schedule II
By ________________________________
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. ▇▇▇▇▇ INCORPORATED
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇▇▇▇ & COMPANY, INC.
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. ▇▇▇▇▇ Incorporated
By: __________________________________
Name:
Title:
-28-
SCHEDULE I
Schedule of Underwriters
Number of Firm
Underwriter Shares to be Purchased
----------- ----------------------
BT Alex. ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇▇▇▇▇▇ & Company, Inc.
---------
Total 4,200,000
I-1
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
Number of Firm
Selling Shareholder Shares to be Sold
------------------- -----------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 100,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 68,000
▇▇▇▇▇ ▇. ▇▇▇▇▇ 10,000
▇▇▇▇ ▇. ▇▇▇▇▇▇ 10,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 10,000
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 2,000
------
TOTAL 200,000
II-1
EXHIBIT A
IDT CORPORATION
Significant Subsidiaries Percentage Ownership by IDT
------------------------ ---------------------------
IDT International Corp.
IDT America, Corp.
IDT Internet Services, Inc.
Rock Enterprises, Inc.
Media Response, Inc.
Yovelle Renaissance Corporation
Net2Phone, Inc.
IDT Global Limited (England)
II-2
