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EXHIBIT 1.1
__________ SHARES(1)
COMMTOUCH SOFTWARE LTD.
ORDINARY SHARES
PURCHASE AGREEMENT
_____________________, 1999
U.S. BANCORP XXXXX XXXXXXX
Prudential Securities Incorporated
Warburg Dillon Read LLC,
A subsidiary of UBS AG As Representatives of the several
Underwriters named in Schedule II hereto
c/o U.S. Bancorp Xxxxx Xxxxxxx
Xxxxx Xxxxxxx Tower
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Gentlemen:
CommTouch Software Ltd., a corporation organized under the laws of
Israel (the "Company") proposes to sell to the several Underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of __________ shares (the
"Firm Shares") of the Company's authorized but unissued ordinary shares, nominal
value New Israeli Shekels ("NIS") 1.0 per share (herein called "Ordinary
Shares"). The Company has also granted to the several Underwriters an option to
purchase up to __________ additional shares of Common Stock on the terms and for
the purposes set forth in Section 3 hereof (the "Option Shares"). The Firm
Shares and any Option Shares purchased pursuant to this Purchase Agreement are
herein collectively called the "Securities."
The Company hereby confirms its agreement with respect to the sale of
the Securities to the several Underwriters, for whom you are acting as
Representatives (the "Representatives").
1. Registration Statement and Prospectus. A registration statement on
Form F-1 (File No. 33-___________) with respect to the Securities, including a
preliminary form of prospectus, has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission; one or more amendments to such registration statement have also been
so prepared and have been, or will be, so filed; and, if the Company has elected
to rely upon Rule 462(b) of the Rules and Regulations to increase the size of
the offering registered
--------
(1) Plus an option to purchase up to ________ additional shares to cover
over-allotments.
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under the Act, the Company will prepare and file with the Commission a
registration statement with respect to such increase pursuant to Rule 462(b).
Copies of such registration statement(s) and amendments and each related
preliminary prospectus have been delivered to you.
If the Company has elected not to rely upon Rule 430A of the Rules and
Regulations, the Company has prepared and will promptly file an amendment to the
registration statement and an amended prospectus (including a term sheet meeting
the requirements of Rule 434 of the Rules and Regulations). If the Company has
elected to rely upon Rule 430A of the Rules and Regulations, it will prepare and
file a prospectus (or a term sheet meeting the requirements of Rule 434)
pursuant to Rule 424(b) that discloses the information previously omitted from
the prospectus in reliance upon Rule 430A. Such registration statement as
amended at the time it is or was declared effective by the Commission, and, in
the event of any amendment thereto after the effective date and prior to the
First Closing Date (as hereinafter defined), such registration statement as so
amended (but only from and after the effectiveness of such amendment), including
a registration statement (if any) filed pursuant to Rule 462(b) of the Rules and
Regulations increasing the size of the offering registered under the Act and
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rules 430A(b) and 434(d) of the Rules and
Regulations, is hereinafter called the "Registration Statement." The prospectus
included in the Registration Statement at the time it is or was declared
effective by the Commission is hereinafter called the "Prospectus," except that
if any prospectus (including any term sheet meeting the requirements of Rule 434
of the Rules and Regulations provided by the Company for use with a prospectus
subject to completion within the meaning of Rule 434 in order to meet the
requirements of Section 10(a) of the Rules and Regulations) filed by the Company
with the Commission pursuant to Rule 424(b) (and Rule 434, if applicable) of the
Rules and Regulations or any other such prospectus provided to the Underwriters
by the Company for use in connection with the offering of the Securities
(whether or not required to be filed by the Company with the Commission pursuant
to Rule 424(b) of the Rules and Regulations) differs from the prospectus on file
at the time the Registration Statement is or was declared effective by the
Commission, the term "Prospectus" shall refer to such differing prospectus
(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations) from and after the time such prospectus is filed with the
Commission or transmitted to the Commission for filing pursuant to such Rule
424(b) (and Rule 434, if applicable) or from and after the time it is first
provided to the Underwriters by the Company for such use. The term "Preliminary
Prospectus" as used herein means any preliminary prospectus included in the
Registration Statement prior to the time it becomes or became effective under
the Act and any prospectus subject to completion as described in Rule 430A or
434 of the Rules and Regulations.
2. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with, the
several Underwriters as follows:
(i) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission and each Preliminary
Prospectus, at the time of filing thereof, did not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that the
foregoing shall not apply to statements in or omissions from any Preliminary
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by you, or by any Underwriter through you, specifically
for use in the preparation thereof.
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(ii) As of the time the Registration Statement (or any
post-effective amendment thereto, including a registration statement (if any)
filed pursuant to Rule 462(b) of the Rules and Regulations increasing the size
of the offering registered under the Act) is or was declared effective by the
Commission, upon the filing or first delivery to the Underwriters of the
Prospectus (or any supplement to the Prospectus (including any term sheet
meeting the requirements of Rule 434 of the Rules and Regulations)) and at the
First Closing Date and Second Closing Date (as hereinafter defined), (A) the
Registration Statement and the Prospectus (in each case, as so amended and/or
supplemented) conformed or will conform in all material respects to the
requirements of the Act and the Rules and Regulations, (B) the Registration
Statement (as so amended) did not or will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (C) the Prospectus
(as so supplemented) did not or will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they are or were made, not misleading; except that the foregoing shall not apply
to statements in or omissions from any such document in reliance upon, and in
conformity with, written information furnished to the Company by you, or by any
Underwriter through you, specifically for use in the preparation thereof. If the
Registration Statement has been declared effective by the Commission, no stop
order suspending the effectiveness of the Registration Statement has been
issued, and no proceeding for that purpose has been initiated or, to the
Company's knowledge, threatened by the Commission.
(iii) The consolidated financial statements of the
Company, together with the notes thereto, set forth in the Registration
Statement and the Prospectus comply in all material respects with the
requirements of the Act and fairly present the consolidated financial condition
of the Company and its consolidated subsidiaries indicated and the results of
operations and changes in cash flows for the periods therein specified in
conformity with United States generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise stated
therein); and the supporting schedules included in the Registration Statement
present fairly the information required to be stated therein. No other financial
statements or schedules are required to be included in the Registration
Statement or Prospectus. Xxxx, Xxxxx & Xxxxxx (a member of Ernst & Young
International), which has expressed its opinion with respect to the financial
statements and schedules filed as a part of the Registration Statement and
included in the Registration Statement and the Prospectus, are independent
public accountants as required by the Act and the Rules and Regulations. The
summary financial and other data included in the Registration Statement and the
Prospectus present fairly the information shown therein and have been compiled
on a basis consistent with the financial statements presented therein.
(iv) Each of the Company and its subsidiaries has been
duly organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation. Each of the Company and its
subsidiaries has full corporate power and authority to own its properties and
conduct its business as currently being carried on and as described in the
Registration Statement and the Prospectus, and is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in which it owns
or leases real property or in which the conduct of its business makes such
qualification necessary and in which the failure to so qualify would have a
material adverse effect on the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole (a "Material Adverse Effect").
(v)Except as contemplated in the Registration Statement
and the Prospectus, subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, neither the Company
nor any of its subsidiaries has incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions, or
declared or paid any dividends or made any
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distribution of any kind with respect to its capital stock; and there has not
been any change in the capital stock (other than a change in the number of
outstanding Ordinary Shares due to the issuance of shares upon the exercise of
outstanding options or warrants), or any material change in the short-term or
long-term debt, or any issuance of options, warrants, convertible securities or
other rights to purchase the capital stock, of the Company or any of its
subsidiaries, or any change that had a Material Adverse Effect, or any
development involving a prospective Material Adverse Effect.
(vi) Except as set forth in the Registration Statement
and the Prospectus, there is not pending or, to the knowledge of the Company,
threatened or contemplated, any action, suit or proceeding to which the Company
or any of its subsidiaries is a party or to which any property or assets of the
Company or any of its subsidiaries is subject before or by any court or
governmental agency, authority or body, or any arbitrator, which might result in
a Material Adverse Effect.
(vii) There are no contracts or documents of the Company
or any of its subsidiaries that are required to be described in the Prospectus
or to be filed as exhibits to the Registration Statement by the Act or by the
Rules and Regulations that have not been so described or filed.
(viii) This Agreement has been duly authorized, executed
and delivered by the Company, and constitutes a valid, legal and binding
obligation of the Company, enforceable in accordance with its terms, except as
rights to indemnity hereunder may be limited by federal or state securities laws
and except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity. The execution, delivery and performance
of this Agreement and the consummation of the transactions herein contemplated
will not result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute, any agreement or instrument to which
the Company is a party or by which it is bound or to which any of its property
is subject, the Company's charter or by-laws, or any order, rule, regulation or
decree of any court or governmental agency or body having jurisdiction over the
Company or any of its properties; no consent, approval, authorization or order
of, or filing with, any court or governmental agency or body is required for the
execution, delivery and performance of this Agreement or for the consummation of
the transactions contemplated hereby, including the issuance or sale of the
Securities by the Company, except such as may be required under the Act or state
securities or blue sky laws; and the Company has full power and authority to
enter into this Agreement and to authorize, issue and sell the Securities as
contemplated by this Agreement.
(ix) All of the issued and outstanding shares of capital
stock of the Company, including the outstanding Ordinary Shares, are duly
authorized and validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws (including, without
limitation, applicable Israeli securities laws and the rules and regulations of
the Tel Aviv Stock Exchange), were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
the holders thereof are not subject to personal liability by reason of being
such holders; and the capital stock of the Company, including the Ordinary
Shares, conforms to the description thereof in the Registration Statement and
Prospectus. Except as otherwise stated in the Registration Statement and
Prospectus, there are no preemptive rights or other rights to subscribe for or
to purchase, or any restriction upon the voting or transfer of, any Ordinary
Shares pursuant to the Company's charter, by-laws or any agreement or other
instrument to which the Company is a party or by which the Company is bound. All
of the issued and outstanding shares of capital stock of each of the Company's
subsidiaries have been duly and validly authorized and issued and are fully paid
and nonassessable, and, except as otherwise described in the Registration
Statement and the Prospectus, the Company owns of record and beneficially, free
and clear of any security interests, claims, liens, proxies, equities or other
encumbrances, all of the issued and outstanding
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shares of such stock. Except as described in the Registration Statement and the
Prospectus, there are no options, warrants, agreements, contracts or other
rights in existence to purchase or acquire from the Company or any subsidiary of
the Company any shares of the capital stock of the Company or any subsidiary of
the Company. The Company has an authorized and outstanding capitalization as set
forth in the Registration Statement and the Prospectus.
(x) The Securities which may be sold hereunder by the
Company have been duly authorized and, when issued, delivered and paid for in
accordance with the terms hereof, will have been validly issued and will be
fully paid and nonassessable, and the holders thereof will not be subject to
personal liability by reason of being such holders, and conforms to the
description thereof in the Registration Statement and the Prospectus. No further
approval or authority of the shareholders of the Company or the Board of
Directors of the Company is required for the sale and issuance of the Securities
hereunder.
(xi) Neither the filing of the Registration Statement
nor the offering or sale of the Securities as contemplated by this Agreement
gives rise to any rights for or relating to the registration of any Ordinary
Shares or other securities of the Company and no person or entity holds a right
to require registration under the Securities Act of shares of capital stock of
the Company at any other time, except as disclosed in the Registration Statement
and the Prospectus.
(xii) The Company and each of its subsidiaries holds,
and is operating in compliance in all material respects with, all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates and
orders of any governmental or self-regulatory body required for the conduct of
its business and all such franchises, grants, authorizations, licenses, permits,
easements, consents, certifications and orders are valid and in full force and
effect; and the Company and each of its subsidiaries is in compliance in all
material respects with all applicable federal, state, local and foreign laws,
regulations, orders and decrees.
(xiii) The Company and its subsidiaries have good and
marketable title to all property described in the Registration Statement and the
Prospectus as being owned by them, in each case free and clear of all liens,
claims, security interests or other encumbrances except such as are described in
the Registration Statement and the Prospectus; the property held under lease by
the Company and its subsidiaries is held by them under valid, subsisting and
enforceable leases with only such exceptions with respect to any particular
lease as do not interfere in any material respect with the conduct of the
business of the Company or its subsidiaries.
(xiv) The Company and each of its subsidiaries owns or
possesses all patents, patent applications, trademarks, service marks,
tradenames, trademark registrations, service xxxx registrations, copyrights,
licenses, inventions, trade secrets know-how, proprietary techniques, processes
and rights ("Intellectual Property") used in the conduct of the business of the
Company and its subsidiaries as currently carried on (including products,
services and technology contemplated by current research and development
projects) and as described in the Registration Statement and the Prospectus.
Except as stated in the Registration Statement and the Prospectus, no name which
the Company or any of its subsidiaries uses and no other aspect of the business
of the Company or any of its subsidiaries will involve or give rise to any
infringement of, or license or similar fees for, any Intellectual Property of
others material to the business or prospects of the Company and neither the
Company nor any of its subsidiaries has received any notice alleging any such
infringement or fee. To the knowledge of the Company, its Intellectual Property
is not being infringed by any third parties which infringement could reasonably
be expected, whether singly or in the aggregate, to have a Material Adverse
Effect.
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(xv) Neither the Company nor any of its subsidiaries (i)
is in violation of its respective charter, by-laws or other organizational
documents (ii) in breach of or otherwise in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note,
indenture, loan agreement or any other contract, lease or other instrument to
which any of them is subject or by which any of them may be bound, or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor has any event occurred nor condition exist that with the notice
and/or the passage of time would give rise to such a breach or default or (iii)
is in violation of any law, ordinance, government rule, regulation or court
order or decree to which any of them is subject or by which any of them may be
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, except in the case of clauses (ii) and (iii) for such
breaches, defaults or violations that individually or in the aggregate would not
have a Material Adverse Effect.
(xvi) The Company and its subsidiaries have filed all
federal, state, local and foreign income and franchise tax returns required to
be filed and are not in default in the payment of any taxes which were payable
pursuant to said returns or any assessments with respect thereto, other than any
which the Company or any of its subsidiaries is contesting in good faith.
(xvii) The Company has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Securities other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to be distributed by the
Company.
(xviii) The Securities have been duly authorized for
quotation on the NASDAQ National Market System, subject to official notice of
issuance, and, on the date the Registration Statement became or becomes
effective, the Company's Registration Statement on Form 8-A or other applicable
form under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
became or will become effective.
(xix) The Company has no subsidiary or subsidiaries and
the Company owns no capital stock or other equity or ownership or proprietary
interest in any corporation, partnership, limited liability company, joint
venture association, trust or other entity except for the subsidiaries listed in
Exhibit 21 to the Registration Statement.
(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) Other than as contemplated by this Agreement, the
Company has not incurred any liability for any finder's or broker's fee or
agent's commission in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(xxii) Neither the Company nor any of its affiliates is
presently doing business with the government of Cuba or with any person or
affiliate located in Cuba.
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(xxiii) No labor dispute with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the Company,
is threatened; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers or contractors
which could have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has violated any applicable safety or similar law applicable to its
business nor any federal or state law relating to discrimination in the hiring,
promotion or pay of employees, nor any applicable federal or state wage and
hours law, nor any provisions of the Employee Retirement Income Security Act or
the rules and regulations promulgated thereunder, the violation of any of which
could have a Material Adverse Effect. The Company is not aware of any threatened
or pending litigation between the Company or any of its subsidiaries and any of
its executive officers which, if adversely determined, could have a Material
Adverse Effect, and has no reason to believe that such officers will not remain
in the employment of the Company during the next twelve months.
(xxiv) No transaction has occurred or relationship
exists between or among the Company or any of its subsidiaries and any of their
officers or directors or any affiliate or affiliates of any such officer or
director that is required to be described in and is not described in the
Registration Statement and the Prospectus.
(xxv) The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks in such amounts as are customary in the business in which they are
engaged; and neither the Company nor any subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue their business at a cost that would not have a Material
Adverse Effect.
(xxvi) There are no affiliations with the National
Association of Securities Dealers, Inc. (the "NASD") among the Company's
officers, directors or, to the best knowledge of the Company, any five percent
or greater shareholder of the Company, except as set forth in the Registration
Statement and the Prospectus or otherwise disclosed in writing to the
Representatives.
(xxvii) Neither the Company nor any of its subsidiaries
is an "investment company" nor a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder (the "Investment Company Act").
(xxviii) Neither the Company nor any of its subsidiaries
or, to the knowledge of the Company, any other person associated with or acting
on behalf of the Company or any of its subsidiaries including, without
limitation, any director, officer, agent or employee of the Company or any of
its subsidiaries has, directly or indirectly, while acting on behalf of the
Company or any of its subsidiaries, (i) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful
payment.
(xxix) The Company has reviewed its operations and that
of its subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which the
business or operations of the Company or any of its subsidiaries will be
affected by the Year 2000 Problem (defined below). As a result of such review,
the Company has no reason to believe, and
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does not believe, that the Year 2000 Problem will have a Material Adverse
Effect, or result in any material loss or interference with the Company's
business or operations. The "Year 2000 Problem" as used herein means any
significant risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission or
other utilization of data or in the operation of mechanical or electrical
systems of any kind will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000.
(xxx) The Company does not believe that it is, and upon
the consummation of the transactions contemplated hereby and the application of
the proceeds as described in the Registration Statement and the Prospectus under
the caption "Use of Proceeds" does not believe that it will become, a "passive
foreign investment company" (herein called a PFIC) as defined in Section 1296 of
the Internal Revenue Code of 1986, as amended (herein called the Code).
(xxxi) The Company has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Ordinary Shares to facilitate the sale or resale of the Stock.
(xxxii) The Company has received from the Israel
Securities Authority an exemption from the requirement to publish a prospectus
in Israel for the offer of the Securities in the manner required by the
applicable laws of the State of Israel, which exemption was in full force and
effect on the date hereof and which shall be in full force and effect on the
date of the Prospectus, on the date that any post-effective amendment to the
Registration Statement shall become effective, when any supplement or amendment
to the Prospectus is filed with the Commission, and at each Closing Date. It is
further understood that no public offering (as defined under the laws of the
State of Israel) pursuant to the Prospectus will be made within the State of
Israel by the Company.
(xxxiii) Each of the Company and its subsidiaries is in
material compliance with all conditions and requirements stipulated by the
instruments of approval issued by the Investment Center of the Ministry of
Industry and Commerce granted entitling it or any of its operations to the
status of "approved enterprise" under Israeli law and by Israeli laws and
regulations relating to such approved enterprise status except as would not have
a Material Adverse Effect. All information supplied by the Company with respect
to such applications was true, correct and complete in all material respect when
supplied to the appropriate authorities. The Company does not know of any reason
or circumstance that would lead to revocation of its status as an "approved
enterprise."
(xxxiv) Neither the Company nor any of its subsidiaries
is in violation of any conditions or requirements stipulated by the instruments
of approval granted to any of them by the Office of the Chief Scientist in the
Ministry of Industry & Commerce, with respect to any research and development
grants given to it by such office, which violation, individually or in the
aggregate, would have a Material Adverse Effect.
(xxxv) No transfer tax, stamp duty or similar tax is
payable by or on behalf of the Underwriters in connection with: (i) the issuance
by the Company of the Stock; (ii) the purchase by the Underwriters of the Stock
from the Company; (iii) the consummation by the Company of any of its
obligations under this Agreement; or (iv) resale of the Stock by the
Underwriters in connection with the distribution contemplated hereby.
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(b)Any certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
3. Purchase, Sale and Delivery of Securities.
(a)On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to issue and sell __________ Firm Shares, and each
Selling Stockholder agrees, severally and not jointly, to sell the number of
Firm Shares set forth opposite the name of such Selling Stockholder in Schedule
I hereto, to the several Underwriters, and each Underwriter agrees, severally
and not jointly, to purchase from the Company the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto. The purchase
price for each Firm Share shall be $_____ per share. The obligation of each
Underwriter to the Company shall be to purchase from the Company that number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto. In making this Agreement, each Underwriter is contracting severally and
not jointly; except as provided in paragraph (c) of this Section 3 and in
Section 8 hereof, the agreement of each Underwriter is to purchase only the
respective number of Firm Shares specified in Schedule I.
The Firm Shares will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the purchase price
therefor by certified or official bank check or other next day funds payable to
the order of the Company, as appropriate, at the offices of U.S. Bancorp Xxxxx
Xxxxxxx, Xxxxx Xxxxxxx Tower, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, or
such other location as may be mutually acceptable, at 9:00 a.m. Central time on
the third (or if the Securities are priced, as contemplated by Rule 15c6-1(c)
under the Exchange Act, after 4:30 p.m. Eastern time, the fourth) full business
day following the date hereof, or at such other time and date as you and the
Company determine pursuant to Rule 15c6-1(a) under the Exchange Act, such time
and date of delivery being herein referred to as the "First Closing Date." If
the Representatives so elect, delivery of the Firm Shares may be made by credit
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representatives. Certificates representing the Firm Shares, in
definitive form and in such denominations and registered in such names as you
may request upon at least two business days' prior notice to the Company, will
be made available for checking and packaging not later than 10:30 a.m., Central
time, on the business day next preceding the First Closing Date at the offices
of U.S. Bancorp Xxxxx Xxxxxxx, Xxxxx Xxxxxxx Tower, 000 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx, or such other location as may be mutually acceptable.
(b)On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters an option to
purchase all or any portion of the Option Shares at the same purchase price as
the Firm Shares, for use solely in covering any over-allotments made by the
Underwriters in the sale and distribution of the Firm Shares. The option granted
hereunder may be exercised at any time (but not more than once) within 30 days
after the effective date of this Agreement upon notice (confirmed in writing) by
the Representatives to the Company setting forth the aggregate number of Option
Shares as to which the several Underwriters are exercising the option, the names
and denominations in which the certificates for the Option Shares are to be
registered and the date and time, as determined by you, when the Option Shares
are to be delivered, such time and date being herein referred to as the "Second
Closing" and "Second Closing Date", respectively; provided, however, that the
Second Closing Date shall not be earlier than the First Closing Date nor earlier
than the second business day after the date on which the option shall have been
exercised. The number of Option Shares to be purchased by each Underwriter shall
be the same percentage of the total number of Option Shares to be purchased by
the several Underwriters as the number of Firm Shares to be purchased by such
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Underwriter is of the total number of Firm Shares to be purchased by the several
Underwriters, as adjusted by the Representatives in such manner as the
Representatives deem advisable to avoid fractional shares. No Option Shares
shall be sold and delivered unless the Firm Shares previously have been, or
simultaneously are, sold and delivered.
The Option Shares will be delivered by and the Company, to you
for the accounts of the several Underwriters against payment of the purchase
price therefor by certified or official bank check or other next day funds
payable to the order of the Company, as appropriate, at the offices of U.S.
Bancorp Xxxxx Xxxxxxx, Xxxxx Xxxxxxx Tower, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxxxx, or such other location as may be mutually acceptable at 9:00 a.m.,
Central time, on the Second Closing Date. If the Representatives so elect,
delivery of the Option Shares may be made by credit through full fast transfer
to the accounts at The Depository Trust Company designated by the
Representatives. Certificates representing the Option Shares in definitive form
and in such denominations and registered in such names as you have set forth in
your notice of option exercise, will be made available for checking and
packaging not later than 10:30 a.m., Central time, on the business day next
preceding the Second Closing Date at the office of U.S. Bancorp Xxxxx Xxxxxxx,
Xxxxx Xxxxxxx Tower, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, or such
other location as may be mutually acceptable.
(c) It is understood that you, individually and not as
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment to the Company, on behalf of any Underwriter for the Securities to
be purchased by such Underwriter. Any such payment by you shall not relieve any
such Underwriter of any of its obligations hereunder. Nothing herein contained
shall constitute any of the Underwriters an unincorporated association or
partner with the Company.
(d) Notwithstanding anything else in this Agreement, the
Underwriters shall not solicit offers to purchase Securities in Israel from more
than 35 solicitees in the aggregate and will obtain confirmation from such
solicitees that they are purchasing such Securities for investment purposes only
and not with a view toward distribution or sale. On or before the date two days
after the Closing Date, provide that such date is not more than six days after
the date of this Agreement, the Underwriters shall furnish the Company, its
counsel and the Securities Authority of the State of Israel (the "ISA") with a
list of such solicitees, if any (including their name and addresses), so as to
enable the Company to comply with the terms of the exemption issued by the ISA.
4. Covenants
(a) The Company covenants and agrees with the several
Underwriters as follows:
(i)If the Registration Statement has not already been
declared effective by the Commission, the Company will use its best efforts to
cause the Registration Statement and any post-effective amendments thereto to
become effective as promptly as possible; the Company will notify you promptly
of the time when the Registration Statement or any post-effective amendment to
the Registration Statement has become effective or any supplement to the
Prospectus (including any term sheet within the meaning of Rule 434 of the Rules
and Regulations) has been filed and of any request by the Commission for any
amendment or supplement to the Registration Statement or the Prospectus or
additional information; if the Company has elected to rely on Rule 430A of the
Rules and Regulations, the Company will prepare and file a Prospectus (or term
sheet within the meaning of Rule 434 of the Rules and Regulations) containing
the information omitted therefrom pursuant to Rule 430A of the Rules and
Regulations with the Commission within the time period required by, and
otherwise in accordance with the provisions of, Rules 424(b), 430A
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and 434, if applicable, of the Rules and Regulations; if the Company has elected
to rely upon Rule 462(b) of the Rules and Regulations to increase the size of
the offering registered under the Act, the Company will prepare and file a
registration statement with respect to such increase with the Commission within
the time period required by, and otherwise in accordance with the provisions of,
Rule 462(b); the Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration Statement
or the Prospectus (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations) that, in your opinion, may be necessary or advisable
in connection with the distribution of the Securities by the Underwriters; and
the Company will not file any amendment or supplement to the Registration
Statement or Prospectus (including any term sheet within the meaning of Rule 434
of the Rules and Regulations) to which you shall reasonably object by notice to
the Company after having been furnished a copy a reasonable time prior to the
filing.
(ii) The Company will advise you, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance by the
Commission the ISA, the Tel Aviv Stock Exchange, or any Israeli or other foreign
regulatory body of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the Securities
for offering or sale in any jurisdiction, or of the initiation or threatening of
any proceeding for any such purpose; and the Company will promptly use its best
efforts to (i) prevent the issuance of any stop order or to obtain its
withdrawal if such a stop order should be issued and (ii) maintain in effect the
exemption granted by the ISA and, if such exemption shall at any time not be
effective, to obtain the reinstatement thereof at the earliest possible moment.
(iii) Within the time during which a prospectus
(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations) relating to the Securities is required to be delivered under the
Act, the Company will comply as far as it is able with all requirements imposed
upon it by the Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Securities as contemplated by the
provisions hereof and the Prospectus. If during such period any event occurs as
a result of which in the opinion of counsel for the Company or of counsel for
the Underwriters the Prospectus would include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances then existing, not misleading, or if during
such period it is in the opinion of counsel for the Company of counsel for the
Underwriters necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Act, the Company will promptly notify you and will
forthwith amend the Registration Statement or supplement the Prospectus (at the
expense of the Company) so as to correct such statement or omission or effect
such compliance.
(iv) The Company will use its best efforts to qualify
the Securities for sale under the securities laws of such jurisdictions as you
reasonably designate and to continue such qualifications in effect so long as
required for the distribution of the Securities, except that the Company shall
not be required in connection therewith to qualify as a foreign corporation or
to execute a general consent to service of process in any state. 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
Securities.
(v) The Company will furnish to the Underwriters copies
of the Registration Statement (three of which will be signed and will include
all exhibits), each Preliminary Prospectus, the Prospectus, and all amendments
and supplements (including any term sheet within the meaning of Rule 434 of the
Rules and Regulations) to such documents, in each case as soon as available and
in such quantities as you may from time to time reasonably request. Prior to the
filing thereof with the Commission, the Company
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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.
(vi) During a period of five years commencing with the
date hereof, the Company will (i) submit to the Commission quarterly reports,
which will include unaudited quarterly consolidated financial information, on
Form 6-K for the first three quarters of each fiscal year, and file its annual
report on Form 20-F within the time period prescribed under Section 13 of the
Exchange Act for the filing by domestic issuers of quarterly reports on Form
10-Q and annual reports on Form 10-K, respectively and (ii) furnish to you, and
to each Underwriter who may so request in writing, copies of all periodic and
special reports furnished to shareholders of the Company and of all information,
documents and reports filed with the Commission (including the Report on Form SR
required by Rule 463 of the Commission under the Securities Act), the Nasdaq
National Market, the NASD, the ISA or the Tel Aviv Stock Exchange. Reports to
the ISA or the Tel Aviv Stock Exchange may be furnished to you and to any such
Underwriter in Hebrew if such reports are not available in English.
(vii) The Company will make generally available to its
security holders as soon as practicable, but in any event not later than 15
months after the end of the Company's current fiscal quarter, an earnings
statement (which need not be audited) covering a 12-month period beginning after
the effective date of the Registration Statement that shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations.
(viii) The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is prevented from
becoming effective under the provisions of Section 9(a) hereof or is terminated,
will pay or cause to be paid (A) all expenses (including transfer taxes
allocated to the respective transferees) incurred in connection with the
delivery to the Underwriters of the Securities, (B) all expenses and fees
(including, without limitation, fees and expenses of the Company's accountants
and counsel but, except as otherwise provided below, not including fees of the
Underwriters' counsel) in connection with the preparation, printing, filing,
delivery, and shipping of the Registration Statement (including the financial
statements therein and all amendments, schedules, and exhibits thereto), the
Securities, each Preliminary Prospectus, the Prospectus, and any amendment
thereof or supplement thereto, and the printing, delivery, and shipping of this
Agreement and other underwriting documents, including Blue Sky Memoranda, (C)
all filing fees and fees and disbursements of the Underwriters' counsel incurred
in connection with the qualification of the Securities for offering and sale by
the Underwriters or by dealers under the securities or blue sky laws of the
states and other jurisdictions which you shall designate in accordance with
Section 4(d) hereof, (D) the fees and expenses of any transfer agent or
registrar, (E) the filing fees incident to any required review by the NASD of
the terms of the sale of the Securities, (F) listing fees, if any, and (G) all
other costs and expenses incident to the performance of its obligations
hereunder that are not otherwise specifically provided for herein. If the sale
of the Securities provided for herein is not consummated by reason of action by
the Company pursuant to Section 9(a) hereof which prevents this Agreement from
becoming effective, or by reason of any failure, refusal or inability on the
part of the Company to perform any agreement on its or their part to be
performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled by the Company is not fulfilled, the Company
will reimburse the several Underwriters for all out-of-pocket disbursements
(including fees and disbursements of counsel) incurred by the Underwriters in
connection with their investigation, preparing to market and marketing the
Securities or in contemplation of performing their obligations hereunder. The
Company shall not in any event be liable to any of the Underwriters for loss of
anticipated profits from the transactions covered by this Agreement.
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(ix) The Company will apply the net proceeds from the
sale of the Securities to be sold by it hereunder for the purposes set forth in
the Prospectus and will file such reports with the Commission with respect to
the sale of the Securities and the application of the proceeds therefrom as may
be required in accordance with Rule 463 of the Rules and Regulations.
(x) The Company will not, without your prior written
consent, for a period of 180 days after the commencement of the public offering
of the Securities by the Underwriters (the "Lock-Up Period") offer for sale,
sell, contract to sell, grant any option for the sale of or otherwise issue or
dispose of any Ordinary Shares or any securities convertible into or
exchangeable for, or any options or rights to purchase or acquire, Common Stock,
except to the Underwriters pursuant to this Agreement and except for the
issuance of options pursuant to the Company's __________ Plan (provided that no
such options shall vest and become exercisable prior to the expiration of the
Lock-Up Period) __________ Employee Stock Purchase Plan and pursuant to the
exercise of stock options or warrants outstanding on the date hereof. The
Company agrees not to accelerate the vesting of any option or warrant or the
lapse of any repurchase right prior to the expiration of the Lock-Up Period.
(xi) The Company either has caused to be delivered to
you or will cause to be delivered to you prior to the effective date of the
Registration Statement a letter (the "Lock-Up Agreement") from each of the
Company's directors, officers and other shareholders and each holder of
securities convertible into or exercisable for shares of the Company's capital
stock stating that such person agrees that, from the date of execution of this
Agreement and continuing to and including the date 180 days after the date of
the Prospectus, he or she will not publicly or privately announce any intention
to, will not allow any affiliate or subsidiary, if applicable, to, and will not
itself, without the prior written consent of U.S. Bancorp Xxxxx Xxxxxxx on
behalf of the Underwriters, (i) offer, pledge, sell, offer to sell, contract to
sell, sell any option or contract to purchase, purchase any option to sell,
grant any option, right or warrant to purchase, or otherwise transfer or dispose
of, directly or indirectly, any Ordinary Shares or any securities convertible
into, or exercisable or exchangeable for, Ordinary Shares, or (ii) enter into
any swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of any Ordinary Shares or any securities
convertible into, or exercisable or exchangeable for, Ordinary Shares (whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Ordinary Shares or such other securities, in cash or otherwise), in
each case, beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) or otherwise controlled by the
shareholder on the date of the Lock-Up Agreement or thereafter acquired;
provided, however, that, if the shareholder is an individual, the shareholder
may, without the prior written consent of U.S. Bancorp Xxxxx Xxxxxxx on behalf
of the Underwriters, transfer Ordinary Shares or any securities convertible
into, or exercisable or exchangeable for, Ordinary Shares either during his or
her lifetime or, on death, by will or intestacy to members of the shareholder's
immediate family or to trusts exclusively for the benefit of members of the
shareholder's immediate family or in connection with bona fide gifts, provided
that, prior to any such transfer, such transferee executes an agreement,
satisfactory to U.S. Bancorp Xxxxx Xxxxxxx, pursuant to which such transferee
agrees to receive and hold such shares subject to the provisions of the Lock-Up
Agreement and that there shall be no further transfer except in accordance with
the provisions of the Lock-Up Agreement. For purposes of this paragraph,
"immediate family" shall mean the shareholder's spouse, lineal descendant,
father, mother, brother or sister.
(xii) The Company has not taken and will not take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities, and has not effected any sales of Common Stock
which are required to be disclosed in response to Item 701 of Regulation S-K
under the Act which have not been so disclosed in the Registration Statement.
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(xiii) The Company will not incur any liability for any
finder's or broker's fee or agent's commission in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xiv) The Company will inform the Florida Department of
Banking and Finance at any time prior to the consummation of the distribution of
the Securities by the Underwriters if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba. Such
information will be provided within 90 days after the commencement thereof or
after a change occurs with respect to previously reported information.
(xv) The Company will use its best efforts to ensure
that it will not become a PFIC to the extent consistent with its other business
objectives. If it believes it is a PFIC, the Company will promptly notify each
U.S. holder of the Ordinary Shares (the "U.S. Holders") in order to enable U.S.
Holders to consider whether to make a QEF election or a xxxx to market election.
The Company will further comply with the applicable information reporting
requirements for U.S. Holders to make such elections.
(xvi) The Company is familiar with the Investment
Company Act and will 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.
(xvii) To the extent that, and for as long as, the laws
of Israel or any other foreign jurisdiction require any permit for approval by,
or exemption of any local authority of the transactions contemplated hereby to
be legally permitted and to remain effective, the Company will obtain and
maintain each such permit, approval or exemption valid and in full force and
effect.
(xviii) In any suit (whether in a court in the United
States or any other jurisdiction) seeking enforcement of this Agreement, or
provisions of this Agreement, (i) no defense (other than a procedural defense)
given or allowed by the laws of any other state or country shall be interposed
in any suit, action or proceeding hereon unless such defense is also given or
allowed by the laws of the State of California or of the United States, (ii) if
the plaintiffs therein seek a judgment in United States dollars, the Company
will not interpose any defense or objection to or otherwise oppose judgment, if
any, being awarded in such currency, and (iii) if the plaintiffs therein seek to
have any judgment (or any aspect thereof) awarded in foreign currency linked,
for the period from entry of such judgment until actual payment thereof in full
has been made, to the changes in the foreign currency-United States dollar
exchange rate, the Company will not interpose any defense or objection to or
otherwise oppose inclusion of such linkage in any such judgment. The Company
agrees that it will not initiate or seek to initiate any action, suit or
proceeding, in Israel or in any other jurisdiction other than the United States,
seeking damages or for the purpose of obtaining any injunction or declaratory
judgment against the enforcement of or a declaratory judgment concerning any
alleged breach by the Company of or other claim by you in respect of, this
Agreement or any of your rights under this Agreement, including without
limitation any action, suit or proceeding challenging the enforceability of or
seeking to invalidate in any respect the submission by the Company hereunder to
the jurisdiction of federal or California State courts or the designation of the
laws of the State of California as the law applicable to this Agreement.
(xix) If any payment of any sum due under this Agreement
from the Company is made to or received by the Underwriters or any controlling
person of any Underwriter in a currency other than freely transferable United
States dollars, whether by judicial judgment or otherwise, the obligations of
the Company under this Agreement shall be discharged only to the extent of the
net amount of freely transferable
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United States dollars that the Underwriters or such controlling persons, as the
case may be, in accordance with normal bank procedures, are able to lawfully
purchase with such amount of such other currency. To the extent that the
Underwriters or such controlling persons are not able to purchase sufficient
United States dollars with such amount of such other currency to discharge the
obligations of the Company to the Underwriters or such controlling persons, as
the case may be, shall not be discharged with respect to such difference, and
any such undischarged amount will be due as a separate obligation and shall not
be affected by payment or of judgment being obtained for any other sums due
under or in respect of this Agreement.
(xx) The Company will use its best efforts to effect and
maintain the quotation of the Ordinary Shares on the Nasdaq National Market.
5. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters hereunder are subject to the accuracy, as of the date
hereof and at each of the First Closing Date and the Second Closing Date (as if
made at such Closing Date), of and compliance with all representations,
warranties and agreements of the Company and the Selling Stockholders contained
herein, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., Central time, on the date of this Agreement, or such later
time and date as you, as Representatives of the several Underwriters, shall
approve and all filings required by Rules 424, 430A and 434 of the Rules and
Regulations shall have been timely made; no stop order suspending the
effectiveness of the Registration Statement or any amendment thereof shall have
been issued; no proceedings for the issuance of such an order shall have been
initiated or threatened; and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to your satisfaction.
(b) The legality and sufficiency of the sale of the Securities
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 Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation,
U.S. counsel for the Underwriters, and Xxxxx Xxxxx & Co., Israeli counsel for
the Underwriters.
(c) No Underwriter shall have advised the Company that the
Registration Statement or the Prospectus, or any amendment thereof or supplement
thereto (including any term sheet within the meaning of Rule 434 of the Rules
and Regulations), contains an untrue statement of fact which, in your opinion,
is material, or omits to state a fact which, in your opinion, is material and is
required to be stated therein or necessary to make the statements therein not
misleading.
(d) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, neither the Company nor any of its subsidiaries shall have
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions, or declared or paid any dividends or
made any distribution of any kind with respect to its capital stock; and there
shall not have been any change in the capital stock (other than a change in the
number of outstanding Ordinary Shares due to the issuance of shares upon the
exercise of outstanding options or warrants), or any material change in the
short-term or long-term debt of the Company, or any issuance of options,
warrants, convertible securities or other rights to purchase the capital stock
of the Company or any of its subsidiaries, or any material adverse change or any
development involving a prospective material adverse change (whether or not
arising in the ordinary course of business), in the general affairs, condition
(financial
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or otherwise), business, key personnel, property, prospects, net worth or
results of operations of the Company and its subsidiaries, taken as a whole,
that, in your judgment, makes it impractical or inadvisable to offer or deliver
the Securities on the terms and in the manner contemplated in the Registration
Statement or the Prospectus.
(e) On each Closing Date, there shall have been furnished to
you, as Representatives of the several Underwriters, the opinion of McCutchen,
Doyle, Xxxxx & Xxxxxxx LLP, U.S. counsel for the Company, dated such Closing
Date and addressed to you, covering the matters set forth in Schedule II hereto.
In rendering such opinion such counsel may rely (i) as to matters of law
other than California and federal law, upon the opinion or opinions of local
counsel provided that the extent of such reliance is specified in such opinion
and that such counsel shall state that such opinion or opinions of local counsel
are satisfactory to them and that they believe they and you are justified in
relying thereon and (ii) as to matters of fact, to the extent such counsel deems
reasonable upon certificates of officers of the Company and its subsidiaries
provided that the extent of such reliance is specified in such opinion.
(f) On each Closing Date, there shall have been furnished to
you, as Representatives of the several Underwriters, the opinion of Naschitz,
Xxxxxxx & Co, Israeli counsel for the Company, dated such Closing Date and
addressed to you, covering the matters set forth in Schedule III hereto
In rendering such opinion such counsel may rely (i) as to matters of law
other than Israeli law, upon the opinion or opinions of local counsel provided
that the extent of such reliance is specified in such opinion and that such
counsel shall state that such opinion or opinions of local counsel are
satisfactory to them and that they believe they and you are justified in relying
thereon and (ii) as to matters of fact, to the extent such counsel deems
reasonable upon certificates of officers of the Company and its subsidiaries
provided that the extent of such reliance is specified in such opinion.
(g) On each Closing Date, there shall have been furnished to
you, as Representatives of the several Underwriters, such opinion or opinions
from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, U.S. counsel
for the several Underwriters, and Xxxxx Xxxxx & Co., Israeli counsel for the
several Underwriters, dated such Closing Date and addressed to you, with respect
to the validity of the Securities, the Registration Statement, the Prospectus
and other related matters as you reasonably may request, and such counsel shall
have received such papers and information as they request to enable them to pass
upon such matters.
(h) On each Closing Date you, as Representatives of the several
Underwriters, shall have received a letter of Xxxx, Xxxxx & Xxxxxx (a member of
Ernst & Young International), dated such Closing Date and addressed to you:
(i) confirming that they are independent public
accountants within the meaning of the Act and are in compliance with the
applicable requirements relating to the qualifications of accountants under Rule
2-01 of Regulation S-X of the Commission,
(ii) stating that, in their opinion, the audited
consolidated financial statements and schedules examined by them and included in
the Registratio Statement and the Prospectus comply in form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations,
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(iii) stating, as of the date of such letter (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date of such letter), the conclusions
and findings of said firm with respect to the financial information and other
matters covered by its letter delivered to you concurrently with the execution
of this Agreement, and the effect of the letter so to be delivered on such
Closing Date shall be to confirm the conclusions and findings set forth in such
prior letter,
(iv) stating that, at a specific date not more than five
business days prior to the date of such letter, there were any changes in the
capital stock or long-term debt of the Company or any decrease in net current
assets or shareholders' equity of the Company in each case compared with amounts
shown on the December 31, 1998 audited consolidated balance sheet included in
the Registration Statement and the Prospectus, or for the period from January 1,
1998 to such specified date there were any decreases, as compared with the
comparable period of the prior fiscal quarter, in total sales of services and
license fees, income before taxes or total or per share amounts of net income of
the Company, except in all instances for changes, decreases or increases set
forth in such letter,
(v) stating that they have carried out certain specified
procedures, not constituting an audit, with respect to certain amounts,
percentaged and financial information that are derived from the general
accounting records of the Company and are included in the Registration Statement
and the Prospectus, including the amounts, percentages and financial information
included under the captions "Summary Consolidated Financial and Operating Data,"
"Capitalization," "Selected Consolidated Financial and Operating Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and have compared such amounts, percentages and financial
information with such records of the Company and with information derived from
such records and have found them to be in agreement, excluding any questions of
legal interpretation.
(i) On each Closing Date, there shall have been furnished to
you, as Representatives of the Underwriters, a certificate, dated such Closing
Date and addressed to you, signed by the chief executive officer and by the
chief financial officer of the Company, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, in all material respects, as if made at and
as of such Closing Date, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied at or
prior to such Closing Date;
(ii) No stop order or other order suspending the
effectiveness of the Registration Statement or any amendment thereof or the
qualification of the Securities for offering or sale has been issued, and no
proceeding for that purpose has been instituted or, to the best of their
knowledge, is contemplated by the Commission or any state or regulatory body;
and
(iii) The signers of said certificate have carefully
examined the Registration Statement and the Prospectus, and any amendments
thereof or supplements thereto (including any term sheet within the meaning of
Rule 434 of the Rules and Regulations), and (A) such documents contain all
statements and information required to be included therein, the Registration
Statement, or any amendment thereof, does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and the Prospectus,
as amended or supplemented, does not include any untrue statement of material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, (B)
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since the effective date of the Registration Statement, there has occurred no
event required to be set forth in an amended or supplemented prospectus which
has not been so set forth, (C) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, neither
the Company nor any of its subsidiaries has incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions,
not in the ordinary course of business, or declared or paid any dividends or
made any distribution of any kind with respect to its capital stock, and except
as disclosed in the Prospectus, there has not been any change in the capital
stock (other than a change in the number of outstanding shares of Common Stock
due to the issuance of shares upon the exercise of outstanding options or
warrants), or any material change in the short-term or long-term debt, or any
issuance of options, warrants, convertible securities or other rights to
purchase the capital stock, of the Company, or any of its subsidiaries, or any
Material Adverse Effect or any development involving a prospective Material
Adverse Effect, and (D) except as stated in the Registration Statement and the
Prospectus, there is not pending, or, to the knowledge of the Company,
threatened or contemplated, any action, suit or proceeding to which the Company
or any of its subsidiaries is a party before or by any court or governmental
agency, authority or body, or any arbitrator, which might result in any Material
Adverse Effect.
(j) Subsequent to the execution of this Agreement or, if
earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereto) and the Prospectus (exclusive of
any supplement thereto), there shall not have been (i) any change or decrease
specified in the letter or letters referred to in subparagraph (h) of this
Section 5 or (ii) any change, or any development involving a prospective change
(including without limitation a change in management or control of the Company),
in or affecting the business or properties of the Company and its subsidiaries
the effect of which, in any case referred to in clause (i) or (ii) above, is, in
the judgment of the Representatives, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or delivery of the
Securities as contemplated in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto);
(k) At the execution of this Agreement, the Company shall have
furnished to the Representatives a letter from each director, executive officer,
shareholder and holder of securities convertible or exercisable for shares of
capital stock of the Company an executed copy of the Lock-Up Agreement addressed
to the Representatives;
(l) Prior to the commencement of the offering of the Securities,
the Securities shall have been approved for quotation on the Nasdaq National
Market, subject to official notice of issuance; and
(m) The Company shall have furnished to you and counsel for the
Underwriters such additional documents, certificates and evidence as you or they
may have reasonably requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are satisfactory
in form and substance to you and counsel for the Underwriters. The Company will
furnish you with such conformed copies of such opinions, certificates, letters
and other documents as you shall reasonably request.
6. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise (including in settlement of any litigation if such settlement is
effected with the written
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consent of the Company), insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, including the information deemed to be a part of the
Registration Statement at the time of effectiveness pursuant to Rules 430A and
434(d) of the Rules and Regulations, if applicable, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto (including any term sheet
within the meaning of Rule 434 of the Rules and Regulations), or arise out of or
are based upon 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 for any legal or other expenses
reasonably incurred by it in connection with investigating or defending against
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action 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 any
such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by you, or by any Underwriter through you,
specifically for use in the preparation thereof.
In addition to their other obligations under this Section 6(a),
the Company agrees that, as an interim measure during the pendency of 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
this Section 6(a), they will reimburse each Underwriter on a monthly basis for
all reasonable legal fees or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's obligation to reimburse the
Underwriters for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Underwriter that received such payment shall promptly return it to
the party or parties that made such payment, together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) announced from time to time
by ____________________ (the "Prime Rate"). Any such interim reimbursement
payments which are not made to an Underwriter within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement shall be in addition to any liabilities which
the Company or the Selling Stockholders may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations), or arise out of or are based upon 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, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by you, or by such Underwriter through you,
specifically for use in the preparation thereof, and will reimburse the Company
for any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending against any such loss, claim, damage, liability
or action.
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(c)Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
that it may have to any indemnified party. In case any such action 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 in, 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 after notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that if, in the sole judgment of the Representatives, it is advisable for the
Underwriters to be represented as a group by separate counsel, the
Representatives shall have the right to employ a single counsel to represent the
Representatives and all Underwriters who may be subject to liability arising
from any claim in respect of which indemnity may be sought by the Underwriters
under subsection (a) of this Section 6, in which event the reasonable fees and
expenses of such separate counsel shall be borne by the indemnifying party or
parties and reimbursed to the Underwriters as incurred (in accordance with the
provisions of the second paragraph in subsection (a) above). An indemnifying
party shall not be obligated under any settlement agreement relating to any
action under this Section 6 to which it has not agreed in writing.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above, (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Securities 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 the Company on the one hand and the Underwriters on
the other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company 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 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 Underwriters and the parties'
relevant intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (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 account of the equitable considerations
referred to in the first sentence of this subsection (d). The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against any action or claim
which is the subject of this subsection (d). Notwithstanding the provisions of
this subsection (d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages
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that such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e)The obligations of the Company under this Section 6 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 6 shall be in addition to any liability that the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company (including any person who, with
his consent, is named in the Registration Statement as about to become a
director of the Company), to each officer of the Company who has signed the
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
7. Representations and Agreements to Survive Delivery. All
representations, warranties, and agreements of the Company herein or in
certificates delivered pursuant hereto, and the agreements of the several
Underwriters and the Company contained in Section 6 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter or any controlling person thereof, or the
Company or any of its officers, directors, or controlling persons, and shall
survive delivery of, and payment for, the Securities to and by the Underwriters
hereunder.
8. Substitution of Underwriters.
(a)If any Underwriter or Underwriters shall fail to take up and
pay for the amount of Firm Shares agreed by such Underwriter or Underwriters to
be purchased hereunder, upon tender of such Firm Shares in accordance with the
terms hereof, and the amount of Firm Shares not purchased does not aggregate
more than 10% of the total amount of Firm Shares set forth in Schedule II
hereto, the remaining Underwriters shall be obligated to take up and pay for (in
proportion to their respective underwriting obligations hereunder as set forth
in Schedule II hereto except as may otherwise be determined by you) the Firm
Shares that the withdrawing or defaulting Underwriters agreed but failed to
purchase.
(b) If any Underwriter or Underwriters shall fail to take up and
pay for the amount of Firm Shares agreed by such Underwriter or Underwriters to
be purchased hereunder, upon tender of such Firm Shares in accordance with the
terms hereof, and the amount of Firm Shares not purchased aggregates more than
10% of the total amount of Firm Shares set forth in Schedule II hereto, and
arrangements satisfactory to you for the purchase of such Firm Shares by other
persons are not made within 36 hours thereafter, this Agreement shall terminate.
In the event of any such termination the Company shall not be under any
liability to any Underwriter (except to the extent provided in Section
4(a)(viii), Section 4(b)(ii) and Section 6 hereof) nor shall any Underwriter
(other than an Underwriter who shall have failed, otherwise than for some reason
permitted under this Agreement, to purchase the amount of Firm Shares agreed by
such Underwriter to be purchased hereunder) be under any liability to the
Company (except to the extent provided in Section 6 hereof).
If Firm Shares to which a default relates are to be purchased by
the non-defaulting Underwriters or by any other party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date for not more than seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be
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effected. As used herein, the term "Underwriter" includes any person substituted
for an Underwriter under this Section 8.
9. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at 10:00 a.m., Central
time, on the first full business day following the effective date of the
Registration Statement, or at such earlier time after the effective time of the
Registration Statement as you in your discretion shall first release the
Securities for sale to the public; provided, that if the Registration Statement
is effective at the time this Agreement is executed, this Agreement shall become
effective at such time as you in your discretion shall first release the
Securities for sale to the public. For the purpose of this Section, the
Securities shall be deemed to have been released for sale to the public upon
release by you of the publication of a newspaper advertisement relating thereto
or upon release by you of telexes offering the Securities for sale to securities
dealers, whichever shall first occur. By giving notice as hereinafter specified
before the time this Agreement becomes effective, you, as Representatives of the
several Underwriters, or the Company may prevent this Agreement from becoming
effective without liability of any party to any other party, except that the
provisions of Section 4(a)(viii), Section 4(b)(ii) and Section 6 hereof shall at
all times be effective.
(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time at or prior to the First Closing Date, and the option
referred to in Section 3(b), if exercised, may be cancelled at any time prior to
the Second Closing Date, if (i) the Company shall have failed, refused or been
unable, at or prior to such Closing Date, to perform any agreement on its part
to be performed hereunder, (ii) any other condition of the Underwriters'
obligations hereunder is not fulfilled, (iii) trading on the New York Stock
Exchange or the American Stock Exchange shall have been wholly suspended, (iv)
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required, on the New York Stock
Exchange or the American Stock Exchange, by such Exchange or by order of the
Commission or any other governmental authority having jurisdiction, (v) a
banking moratorium shall have been declared by Federal or New York authorities,
or (vi) there has occurred any material adverse change in the financial markets
in the United States or an outbreak of major hostilities (or an escalation
thereof) in which the United States is involved, a declaration of war by
Congress, any other substantial national or international calamity or any other
event or occurrence of a similar character shall have occurred since the
execution of this Agreement that, in your judgment, makes it impractical or
inadvisable to proceed with the completion of the sale of and payment for the
Securities. Any such termination shall be without liability of any party to any
other party except that the provisions of Section 4(a)(viii), Section 4(b)(ii)
and Section 6 hereof shall at all times be effective.
(c) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section, the
Company and an Attorney-in-Fact, on behalf of the Selling Stockholders, shall be
notified promptly by you by telephone or telegram, confirmed by letter. If the
Company elects to prevent this Agreement from becoming effective, you and an
Attorney-in-Fact, on behalf of the Selling Stockholders, shall be notified by
the Company by telephone or telegram, confirmed by letter.
10. Default by the Company. If the Company shall fail at the First
Closing Date to sell and deliver the number of Securities which it is obligated
to sell hereunder, then this Agreement shall terminate without any liability on
the part of any non-defaulting party.
No action taken pursuant to this Section shall relieve the Company so
defaulting from liability, if any, in respect of such default.
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11. Information Furnished by Underwriters. The statements set forth in
the last paragraph of the cover page and under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitute the written information
furnished by or on behalf of the Underwriters referred to in Section 2 and
Section 6 hereof.
12. 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 the Representatives c/o U.S. Bancorp
Xxxxx Xxxxxxx, Xxxxx Xxxxxxx Tower, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000, except that notices given to an Underwriter pursuant to Section
6 hereof shall be sent to such Underwriter at the address stated in the
Underwriters' Questionnaire furnished by such Underwriter in connection with
this offering; if to the Company, shall be mailed, telegraphed or delivered to
it at ____________________ Attention: _______________; or in each case to such
other address as the person to be notified may have requested in writing. All
notices given by telegram shall be promptly confirmed by letter. Any party to
this Agreement may change such address for notices by sending to the parties to
this Agreement written notice of a new address for such purpose.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers and directors
referred to in Section 6. 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 Securities from any of
the several Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
[Signature Page Follows]
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Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement between the
Company, the Selling Stockholders and the several Underwriters in accordance
with its terms.
Very truly yours,
**[Name of Issuer]
By__________________________________
**[Title]
Confirmed as of the date first above mentioned, on behalf of themselves and the
other several Underwriters named in Schedule II
hereto.
U.S. BANCORP XXXXX XXXXXXX
By________________________________
Managing Director
Prudential Securities Incorporated
By________________________________
Managing Director
Warburg Dillon Read LLC,
A subsidiary of UBS AG
By________________________________
Managing Director
25
SCHEDULE I
Underwriter Number of Firm Shares (1)
----------- -------------------------
-----------
Total.............................................
===========
(1) The Underwriters may purchase up to an additional __________ Option
Shares, to the extent the option described in Section 3(b) of the
Agreement is exercised, in the proportions and in the manner described
in the Agreement.
26
SCHEDULE II
MATTERS TO BE COVERED IN THE OPINION OF
MCCUTCHEN, DOYLE, XXXXX & XXXXXXX, LLP
U.S. COUNSEL FOR THE COMPANY
(i) CommTouch Software Inc. ("CommTouch Inc.") is a
corporation duly organized, validly existing and in good standing under
the laws of the State of California. Each of the Company and its
subsidiaries are duly qualified to transact business and are in good
standing as a foreign corporation in each state of the United States
where the character of their activities requires such qualification,
except where the failure to be so qualified would not have a Material
Adverse Effect. CommTouch Inc. has all has full corporate power and
authority to own its properties and conduct its business as currently
being carried on and as described in the Registration Statement and the
Prospectus.
(ii) All of the issued and outstanding shares of capital stock
of CommTouch Inc. are duly authorized, validly issued, fully paid and
nonassessable, and are owned of record beneficially by the Company.
There are no outstanding securities of CommTouch Inc. convertible into
or evidencing the right to purchase or subscribe for any shares of
capital stock of CommTouch Inc., there are no outstanding or authorized
options, warrants, rights or any other agreements of any character
obligating CommTouch Inc. to issue and shares of its capital stock or
any securities convertible into or evidencing the right to purchase or
subscribe for any shares of such stock.
(iii) The Registration Statement has become effective under
the Securities Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b), or if the
Rule 434 Term Sheet was used, the required filing has been made in the
manner and within the time period required by Rule 434; and, to the
best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing
the use of the Prospectus is in effect and no proceedings for that
purpose have been instituted or are pending or, to such counsel's
knowledge, are contemplated by the Commission;
(iv) The Registration Statement and the Prospectus (except as
to the financial statements and schedules and other financial data
contained therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Securities Act and with the Rules and Regulations;
(v) The registration of the Company's Ordinary Shares under
Section 12(g) of the Exchange Act has become effective;
27
(vi) The Company is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act;
(vii) Neither the issue and sale by the Company of
theSecurities sold by the Company as contemplated by this Agreement nor
the execution of this Agreement by the Company nor the consummation of
any other transactions contemplated by this Agreement will (with or
without the passage of time and/or notice) conflict with, or result in
a breach or violation of or constitute a default under (A) the Articles
of Incorporation or bylaws of CommTouch, Inc., (B) any agreement or
instrument filed as an exhibit to the Registration Statement, or known
to such counsel and made available to such Counsel in English, to which
the Company or any of such subsidiaries is a party or by which it is
bound, (C) any applicable United States federal or state law or
regulation, or (D) so far as is known to such counsel, any order, writ,
injunction or decree, of any jurisdiction, court or governmental
instrumentality applicable to the Company or any of its subsidiaries;
(viii) The information required to be set forth in the
Registration Statement in answer to Item 10 (insofar as it relates to
such counsel) of Form F-1 is to the best of such counsel's knowledge
accurately and adequately set forth therein in all material respects or
no response is required with respect to such Item, and the description
of the Option Plans and the options granted and which may be granted
thereunder set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to said plans and
options to the extent required by the Securities Act and the Rules and
Regulations;
(ix) Such counsel does not know of any franchises, contracts,
leases or other documents which in the opinion of such counsel are of a
character required to be described or referred to in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not described, referred to and filed
as required;
(x) To such counsel's knowledge, there is no pending or
threatened action, suit, investigation or proceeding before andy court
or governmental agency, authority or body or any arbitrator involving
the Company or any of its subsidiaries or any of their property or
assets of a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Prospectus, and the
statements in the Prospectus under the heading "Shares Eligible for
Future Sale" are correct in all material respects;
(xi) No consent, approval, waiver, license, authorization,
order or other action by or filing with any United States federal or
state court or governmental agency, body or authority is required in
connection with the execution and delivery by the Company of the this
Agreement or for the issue and sale of the Securities by the Company or
the consummation of any others transactions contemplated by this
Agreement, except for filings and other actions required pursuant to
the Securities Act and/or the Exchange Act, as amended, and the Rules
and Regulations, required by the NASD and such as may be required
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under state securities or blue sky laws in connection with the purchase
and distribution of the Securities by the Underwriters;
(xii) To such counsel's knowledge, the Company meets the test
to qualify as a "foreign private issuer" set forth in Rule 405, and, as
no other form is authorized or prescribed for use by the Company, the
Company meets all the conditions necessary for the use of Form F-1;
(xiii) The statements made the Prospectus under the caption
"U.S. Federal Income Taxes," to the extent that they constitute matters
of law or legal conclusions, have been reviewed by us and fairly
reflect the status of such provisions purported to be summarized and
are correct in all material aspects;
(xiv) To the best of such counsel's knowledge, 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 to any other registration statement filed by the
Company under the Securities Act;
(xv) The description of the Option Plans and options granted
and which may be granted thereunder and the options granted otherwise
than under such plans set forth in the Prospectus accurately and fairly
presents the information with respect to such plans and options;
(xvi) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries (A) is in violation of its
Memorandum or Articles of Association, or other governing documents,
(B) is in default in any material respect, and no event has occurred
which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement of other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets is
subject or (C) is in violation in any material respect of any law,
ordinance, governmental rule, regulation or court decree to which it or
its property or assets may be subject or has failed to obtain any
material license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or
to the conduct of its business, except in the case of clauses (B) and
(C) for such violations or failures that, individually or in the
aggregate, would not have a Material Adverse Effect;
(xvii) This Agreement has been duly authorized, executed,
delivered by the Company and constitutes a valid, legal and binding
obligation of the Company enforceable in accordance with its terms
(except as rights to indemnity hereunder may be limited by federal
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29
or state securities laws and except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity) and all corporate authorizations and consents
necessary for the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been given;
(xviii) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries own any real property except as
otherwise described in the Prospectus; and all real property and
buildings held under lease by CommTouch Software, Inc.and the Company's
U.S.subsidiaries are held by them under valid, subsisting and
enforceable leases, with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries;
(xix) To the best knowledge of such counsel, there are no
material contracts, indentures, mortgages, loan agreements, notes,
leases or other agreements or instruments or other documents which are
not described or referred to in or filed with the Registration
Statement and the Prospectuses; the statements in the Registration
Statement and the Prospectus, insofar as such statements refer to
material contracts, indentures, mortgages, loan agreements, notes,
leases, plans pertaining to option arrangements, employment agreements
and other agreements, arrangements or instruments to which the Company
is a party, are accurate and adequate in all material respects;
(xx) To the best knowledge of such counsel, there is no
litigation, action, suit or governmental proceeding or investigation
pending, threatened or contemplated to which the Company or any of its
subsidiaries is a party or to which any property of the Company or any
of its subsidiaries is subject or that seeks to restrain, enjoin or
prevent the execution and delivery of this Agreement, or the
consummation of the transactions contemplated thereby, or that
questions the legality or validity of any such transaction or that
seeks to recover damages or obtain other relief in connection with any
such transactions, or which would could be reasonably be expected to
have a Material Adverse Effect, if determined adversely to the Company
or its subsidiaries;
(xxi) The Company has duly and irrevocably appointed
____________, Inc., a corporation organized under the laws of the State
of California, as its agent to receive service of process in any
section against it in any federal or state court sitting in the county
of San Francisco, California arising out of or in connection with the
offering; and
(xxii) The Ordinary Shares have been duly approved for
inclusion on The Nasdaq National Market, subject to the consummation of
the transactions contemplated by this Agreement and to official notice
of issuance.
In addition to the matters set forth above, counsel rendering the
foregoing opinion shall also include a statement to the effect that nothing has
come to the attention of such counsel that leads
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30
them to believe that the Registration Statement (except as to the financial
statements and schedules and other financial data contained or incorporated by
reference therein, as to which such counsel need not express any opinion or
belief) at the Effective Date contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or financial
statements and schedules and other financial data contained or incorporated by
reference therein, as to which such counsel need not express any opinion or
belief) as of its date or at the Closing Date (or any later date on which Option
Stock is purchased), contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Counsel rendering the foregoing opinion may also rely as to questions
of law not involving the laws of the United Stated or of the State of
California, upon opinions of local counsel satisfactory in form and scope to
counsel for the Underwriters. Copies of any opinions so relied upon shall be
delivered to the Representatives and to counsel for the Underwriters and the
foregoing opinion shall also state that counsel knows of no reason the
Underwriters are not entitled to relay upon the opinions of such local counsel.
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SCHEDULE III
MATTERS TO BE COVERED IN THE OPINION OF NASCHITZ XXXXXXX & CO.,
ISRAELI COUNSEL FOR THE COMPANY AND ITS ISRAELI SUBSIDIARIES
(i) Each of the Company and its Israeli subsidiaries (the
"Israeli Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Israel, is
duly qualified to do business as a foreign corporation in each
jurisdiction in which its ownership or leasing of property or the
conduct of its business requires such qualification, except where any
failure to so qualify or be in good standing, individually or in the
aggregate, would not have a Material Adverse Effect, and has full
corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement;
(ii) All the issued and outstanding capital stock of each of
the Israeli Subsidiaries of the Company has been duly authorized and
validly issued and is fully paid and nonassessable, and is owned of
record by the Company free and clear of all liens, encumbrances and
security interests. To the best of such counsel's knowledge, no
options, warrants or other rights to purchase, agreements or other
obligations to issue other rights to convert any obligations into
shares of capital stock or ownership interests in such subsidiaries are
outstanding, except as otherwise described in the Prospectus;
(iii) The authorized capital stock of the Company consists of
_________ Ordinary Shares, nominal value NIS 1.0 per share, of which
there are outstanding ____________ shares (including, upon the issuance
and delivery thereof and payment therefor, the Securities); the capital
stock of the Company conforms as to legal matters to the description
thereof contained in the Prospectus under the caption "Description of
Capital Stock" ; proper corporate proceedings have been taken to
validly authorize such authorized capital stock; all of the outstanding
shares of such capital stock (including the Securities) have been duly
and validly issued and are fully paid and nonassessable; and no
preemptive rights of, or rights of refusal in favor of, shareholders
exist with respect to the Securities, or the issue and sale thereof,
pursuant to the Memorandum or Articles of Association and other
governing documents of the Company and, to the knowledge of such
counsel, there are no contractual preemptive rights that have not been
waived, rights of first refusal or rights of co-sale which exist with
respect to the issue and sale of the Securities, except as otherwise
described in the Prospectus;
(iv) The Securities to be issued and old by the Company
hereunder have been duly authorized and, when issued, delivered and
paid for in accordance with the terms of this Agreement, will have been
validly issued and will be fully paid and nonassessable, and the
holders thereof will not be subject to personal liability by reason of
being such holders. Except as otherwise stated in the Registration
Statement and Prospectus, there are no
32
preemptive rights or other rights to subscribe for or to purchase, or
any restriction upon the voting or transfer of, any Ordinary Shares
pursuant to the Company's charter, by-laws or any agreement or other
instrument known to such counsel to which the Company is a party or by
which the Company is bound.
(v) The information in the Registration Statement in the
Prospectus with respect to interest of named experts and counsel
(insofar as they relate to such counsel) are to the best of such
counsel's knowledge accurately and adequately set forth in all material
respects or there is no such information required with respect to such
counsel;
(vi) The description of the Option Plans and options granted
and which may be granted thereunder and the options granted otherwise
than under such plans set forth in the Prospectus accurately and fairly
presents the information with respect to such plans and options;
(vii) Neither the execution and delivery of this Agreement,
the issue and sale by the Company of the shares of Stock sold by the
Company as contemplated by this Agreement nor the consummation of any
other transactions contemplated by this Agreement will (with or without
notice and/or the passageof time) conflict with, result in a violation
of, constitute a default under or result in a breach of (A) the
Articles of Association or other governing documents of the Company or
any of its Israeli subsidiaries, (B) any agreement, indenture or
instrument known to such counsel to which the Company or any of such
subsidiaries is a party or by which it is bound or to which any of
their properties is subject, (C) any applicable law, rule, regulation,
administrative regulation or decree or (D) so far as is known to such
counsel, any order, writ, injunction or decree, or any jurisdiction,
court or governmental instrumentality;
(viii) To the best of such counsel's knowledge, the Company
and each of its subsidiaries holds, and is operating in compliance in
all material respects with, all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates and orders of any
governmental or self-regulatory body required for the conduct of its
business and all such franchises, grants, authorizations, licenses,
permits, easements, consents, certifications and orders are valid and
in full force and effect.
(ix) To the best of such counsel's knowledge, all holders of
securities of the Company having rights to the registration of Ordinary
Shares, or other securities, because of the filling of the Registration
Statement by the Company have waived such rights or such rights have
expired by reason of lapse of time following notification of the
Company's intent to file the Registration Statement; to the best of
such counsel's knowledge, 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
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Registration Statement except as described in the Registration
Statement; to such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Ordinary Shares
as contemplated by this Agreement gives rise to any rights for or
relating to the registration of any Ordinary Shares or other securities
of the Company, except as otherwise described in the Prospectus;
(x) No consent, approval, authorization, exemption or order of
any court or Israeli governmental agency or body or to the best of our
knowledge, any financial institution, is required for the issuance and
sale of the Stock as contemplated by this Agreement and the
consummation of the other transactions contemplated in this Agreement,
except such as have been obtained in connection with the purchase and
distribution of the Securities by the Underwriters or such consents,
approvals, authorizations, exemptions or orders, the lack of which will
not have a Material Adverse Effect; to the best knowledge of such
counsel, no proceedings to rescind or modify such consents, approvals,
authorizations, exemptions or orders have been instituted and are
pending or contemplated by any Israeli authority; a draft prospectus
has been filed with the ISA and an exemption, permitting the
publication of the Prospectus in connection with the offering
contemplated by the Registration Statement without a permit from the
ISA, has been granted;
(xi) The Registration Statement has become effective under the
Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or
threatened by the Commission.
(xii) Upon issuance and delivery of the Ordinary Shares being
sold by the Company against payment therefor pursuant to this
Agreement, the Underwriters will in each case acquire good and valid
title to such Ordinary Shares in each case (so far as it depends on the
Company) free and clear of all liens, encumbrances, equities,
preemptive rights and other claims arising through the Company; the
Ordinary Shares conform in all material respects to the description
thereof contained in the Prospectus; no further approval or authority
of the shareholders or the Board of Directors of the Company is
required for the issuance and sale of the Ordinary Shares;
(xiii) To the best of such counsel's knowledge, neither the
Company nor any Israeli Subsidiary (i) is in violation of its
Memorandum or Articles of Association, or other governing documents,
(ii) is in default in any material respect, and no event has occurred
which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement of other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets is
subject or (iii) is in violation in any material respect of any law,
ordinance, governmental rule, regulation or court decree to which it or
its property or assets may be subject or has failed to obtain any
material license, permit, certificate, franchise or other governmental
authorization or permit necessary
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34
to the ownership of its property or to the conduct of its business,
except in the case of clauses (ii) and (iii) for such violations or
failures that, individually or in the aggregate, would not have a
Material Adverse Effect;
(xiv) The Company has full power and authority to enter into
this Agreement; this Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid, legal and binding
obligation of the Company enforceable in accordance with its terms
(except as rights to indemnity hereunder may be limited by federal or
state securities laws and except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of
equity) and all corporate authorizations and consents necessary for the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been given;
(xv) The Company has all requisite corporate power and
authority to issue, sell and deliver the Ordinary Shares being issued
and sold by it in accordance with and upon the terms and conditions set
forth in this Agreement; all corporate action required to be taken by
the Company for the due and proper authorization, issuance, sale and
deposit of the Ordinary Shares, and the offering, sale and delivery of
the Ordinary Shares, has been validly and sufficiently taken; the
filing of the Registration Statement and the Prospectus with the
Commission and to the extent required, with the appropriate Israeli
authorities, has been duly authorized by and on behalf of the Company
and has been duly executed in accordance with Israeli law;
(xvi) To the best of such counsel's knowledge, neither the
Company nor any of the Israeli Subsidiaries own any real property
except as otherwise described in the Prospectus; and all real property
and buildings held under lease by the Company and the Israeli
Subsidiaries are held by them under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and the Israeli Subsidiaries.
(xvii) To the best knowledge of such counsel, there are no
material contracts, indentures, mortgages, loan agreements, notes,
leases or other agreements or instruments or other documents which are
not described or referred to in or filed with the Registration
Statement and the Prospectuses; the statements in the Registration
Statement and the Prospectus, insofar as such statements refer to the
Company's Memorandum or Articles of Association or other governing
documents or to material contracts, indentures, mortgages, loan
agreements, notes, leases, plans pertaining to option arrangements,
employment agreements and other agreements, arrangements or instruments
to which the Company is a party, are accurate and adequate in all
material respects thereunder insofar as such statements refer to
statements of Israeli law or legal conclusions;
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35
(xviii) To the best knowledge of such counsel, there is no
litigation, action, suit or governmental proceeding or investigation
pending, threatened or contemplated to which the Company or any of the
Israeli Subsidiaries is a party or to which any property of the Company
or any of the Israeli Subsidiaries is subject or that seeks to
restrain, enjoin or prevent the execution and delivery of this
Agreement, or the consummation of the transactions contemplated
thereby, or that questions the legality or validity of any such
transaction or that seeks to recover damages or obtain other relief in
connection with any such transactions, or which would could be
reasonably be expected to have a Material Adverse Effect, if determined
adversely to the Company;
(xix) The certificates for the Stock to be sold by the Company
and delivered on the Closing Date, are in due and proper form under
Israeli law;
(xx) The information required to be set forth in the
Registration Statement in response to Item 10 of Form F-1, insofar as
it relates to such counsel, is, to such counsel's knowledge, accurately
and adequately set forth therein in all material respects, or no
reponse is required with respect to such Item;
(xxi) The statements set forth in the Prospectuses describing
Israeli statutes and regulations and the statements in the Registration
Statement and the Prospectuses with respect to matters of Israeli law,
including the statements describing Israeli law under the captions
[CONFORM THE FOLLOWING LIST] "Risk Factors--Risks Related to Location
in Israel," "Dividend Policy," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Income Taxes; Effective
Corporate Tax Rate," "Management," "Description of Ordinary Shares,"
"Israeli Taxation, Foreign Exchange Regulation and Investment
Programs," "Conditions in Israel" and "Indemnification of Directors and
Officers" are insofar as they describe Israeli statutes, rules, or
legal conclusions and insofar as they describe the contents of certain
provisions of the Company's Memorandum of Association, Articles of
Association or other organizational documents, do not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(xxii) The Registration Statement and its filing with the
Commission, and the Prospectus and its filing with the appropriate
Israeli authorities, have been duly authorized by and on behalf of the
Company, and the Registration Statement has been duly executed pursuant
to such authorization, by and on behalf of the Company;
(xxiii) No Israeli stamp or other issuance or transfer taxes
or duties and capital gains, income withholding or other taxes are
payable by or on behalf of the Underwriters to any Israeli taxing
authority in connection with: (a) the issuance of the Stock; (b) the
sale and delivery by the Company of the Stock in the manner
contemplated in the Agreement; or
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36
(c) the sale and delivery outside of Israel by the Underwriters to the
initial purchasers thereof in the manner contemplated by the Agreement;
(xxiv) To the best knowledge of such counsel, there is no tax
deficiency that has been asserted against the Company or the Israeli
subsidiaries that could, if adversely determined, have a Material
Adverse Effect;
(xxv) To the best of such counsel's knowledge, neither the
Company nor any Israeli Subsidiary is in violation of any condition or
requirement stipulated by (i) the instruments of approval granted to
any of them by any Israeli authority with respect to the "approved
enterprise" status of any of its facilities or (ii) Israeli laws and
regulations relating to such approved enterprise status, which
violation, individually or in the aggregate, could have a Material
Adverse Effect; to the best of such counsel's knowledge, neither the
Company nor the Israeli Subsidiaries has received any notice of
proceeding relating to revocation or modification of the approved
enterprise status of any of its facilities which notice is currently in
effect;
(xxvi) The Company has duly and irrevocably appointed
____________, Inc., a corporation organized under the laws of the State
of California, as its agent to receive service of process in any
section against it in any federal or state court sitting in the county
of San Francisco, California arising out of or in connection with the
offering;
(xxvii) To the best of such counsel's knowledge, neither the
Company nor any Israeli Subsidiary is in violation of any conditions or
requirements stipulated by the instruments of approval granted to any
of them by the Office of the Chief Scientist in the Ministry of
Industry & Trade, with respect to any research and development grants
given to it by such office, which violation, individually or in the
aggregate, could have a Material Adverse Effect;
(xxviii) Under the laws of Israel, the submission by the
Company to the jurisdiction of any federal or state court sitting in
the county of San Francisco and the designation of the law of the state
of California to apply to this Agreement is binding upon the Company
and, if properly brought to the attention of the court or
administrative body in accordance with the laws of Israel, would be
enforceable in any judicial or administrative proceeding in Israel; and
(xxix) Such counsel does not know of any material franchises,
contracts, leases, documents or legal or governmental proceedings,
pending or threatened, which are not described or referred to in or
filed with the Registration Statement of the Prospectus;
(xxx) Subject to certain time limitations, Israeli courts are
empowered to enforce foreign (including United States) final executory
judgments for liquidated amounts in civil matters, obtained after
completion of due process before a court of competent jurisdiction
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which recognizes and enforces similar Israeli judgments, provided such
judgments or the enforcement thereof are not contrary to Israeli law,
public policy, security or the sovereignty of the State of Israel; the
enforcements of judgments is conditioned upon (a) adequate service of
process being effected and the defendant having had reasonably
opportunity to be heard, (b) such judgment having been obtained before
a court of competent jurisdiction according to the rules of private
international law prevailing in Israel (c) such judgment not being in
conflict with any other valid judgment in the same matter between the
same parties, (d) such judgment not having been obtained by fraudulent
means and (e) an action between the same parties in the same matter is
not pending in any Israeli court at the time the lawsuit is instituted
in the foreign court.
In addition to the matters set forth above, counsel rendering the
foregoing opinion shall also provide a statement to the effect that nothing has
come to the attention of such counsel that leads them to believe that the
Registration Statement (except as to the financial statements and schedules and
other financial data contained or incorporated by reference therein, as to which
such counsel need not express an opinion or belief) at the Effective Date
contained any 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 the Prospectus (except as to the financial statements
and scheduled and other financial data contained or incorporated by reference
therein, as to which such counsel need not express any opinion or belief) as of
its date or at the Closing Date (or any later date on which Option Stock is
purchased, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Counsel rendering the foregoing opinion may also rely as to questions
of law not involving the laws of the State of Israel, upon opinions of local
counsel satisfactory in form and scope to counsel for the Underwriters. Copies
of any opinions so relied upon shall be delivered to the Representatives and to
Counsel for the Underwriters and the foregoing opinion shall also state that
counsel knows of no reason the Underwriters are not entitled to rely upon the
opinions of such local counsel.
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