3,000,000 Shares(1)
Commtouch Software Ltd.
Ordinary Shares
PURCHASE AGREEMENT
March ___, 2000
U.S. BANCORP PIPER ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LLC
WARBURG DILLON READ LLC,
A subsidiary of UBS AG
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY
As Representatives of the several
Underwriters named in Schedule I hereto
c/o U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Commtouch Software Ltd., an Israeli company (the "Company"), and the
stockholders of the Company listed in Schedule I hereto (the "Selling
Stockholders") severally propose to sell to the several Underwriters named in
Schedule II hereto (the "Underwriters") an aggregate of 3,000,000 shares (the
"Firm Shares") of ordinary shares, nominal value NIS 0.05 per share (herein
called "Ordinary Shares"), of the Company. The Firm Shares consist of 1,669,000
authorized but unissued Ordinary Shares to be issued and sold by the Company and
1,331,000 outstanding Ordinary Shares to be sold by the Selling Shareholders.
The Company has also granted to the several Underwriters an option to purchase
up to 450,000 additional Ordinary Shares 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 and the Selling Shareholders hereby confirm their agreement
with respect to the sale of the Securities to the several Underwriters, for whom
you are acting as Representatives (the "Representatives").
Registration Statement and Prospectus. A registration statement on Form F-1
(File No. 333-________) 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 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
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(1) Plus an option to purchase up to 450,000 additional shares from the Company
to cover over-allotments.
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.
Representations and Warranties of the Company and the Selling Shareholders.
(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
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in conformity with, written information furnished to the Company by you, or by
any Underwriter through you, specifically for use in the preparation thereof.
(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. ▇▇▇▇, ▇▇▇▇▇
& ▇▇▇▇▇▇ (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 Commtouch Software Inc., a
California corporation, and Commtouch Software (UK) Ltd., an English corporation
(the "Subsidiaries"), has been duly organized and is validly existing as a
corporation under the laws of its jurisdiction of incorporation and Commtouch
Software Inc. is in good standing under the laws of California. Each of the
Company and the 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
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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 the 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 the
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 distribution of any kind with respect to its share capital
stock; and there has not been any change in the share 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 share capital
stock, of the Company or the 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
the 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 the
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 duty 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, state or foreign securities laws
or the policies underlying such 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 Memorandum of
Association or Articles of Association, 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 equity securities of the
Company, including the outstanding Ordinary Shares, are duly authorized and
validly issued, fully paid and nonassessable, have been issued in compliance
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with all Israeli and U.S. federal and state securities laws (including, without
limitation, applicable Israeli securities laws), 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 share capital 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 Memorandum of Association or
Articles of Association 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 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 shares of such stock. Except as described in the
Registration Statement and the Prospectus (and except for options granted after
the date of the Registration Statement and the Prospectus to employees of the
Company pursuant to the stock option plans described in the Registration
Statement and the Prospectus, which option grants have been disclosed to the
Representatives), there are no options, warrants, agreements, contracts or other
rights in existence to purchase or acquire from the Company or the Subsidiaries
any shares of the share capital of the Company or the Subsidiaries. The Company
has an authorized and outstanding capitalization as set forth in the
Registration Statement and the Prospectus (except for options granted after the
date of the Registration Statement and the Prospectus to employees of the
Company pursuant to the stock option plans described in the Registration
Statement and the Prospectus, which option grants have been disclosed to the
Representatives).
(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 the Subsidiaries hold, and are operating in
compliance in all material respects with, all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates and orders
of any governmental or 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 the Subsidiaries are in compliance in all material respects with
all applicable federal, state, local and foreign (including, without limitation,
Israeli, English and U.S.) laws, regulations, orders and decrees.
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(xiii) The Company and the 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 the Subsidiaries are 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 the Subsidiaries.
(xiv) The Company and the Subsidiaries own or possess all
patents, patent applications, trademarks, service marks, tradenames, trademark
registrations, service ▇▇▇▇ 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
the 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 the
Subsidiaries uses and no other aspect of the business of the Company or the
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 the Subsidiaries has
received any notice alleging any such infringement or fee, except as to matters
that will not cause a Material Adverse Effect. 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.
(xv) Neither the Company nor the Subsidiaries (i) is in violation
of its respective Memorandum of Association, Articles of Association, charter or
by-laws, as the case may be, 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 Israeli,
English and U.S. 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.
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(xviii) The Securities have been approved for quotation upon
notice of issuance on the NASDAQ National Market.
(xix) The Company has no subsidiary or subsidiaries other than
the 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 other than
the Subsidiaries.
(xx) Each of the Company and the Subsidiaries 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.
(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 the 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
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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 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 Securities.
(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
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Israel) pursuant to the Prospectus will be made within the State of Israel by
the Company.
(xxxiii) Each of the Company and the 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 respects 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. The Company qualifies as an
"Industrial Company" within the definition of the Law for the Encouragement of
Industry (Taxes), 1969, of the State of Israel.
(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 Securities; (ii) the purchase by the Underwriters of the
Securities from the Company; (iii) the consummation by the Company of any of its
obligations under this Agreement; or (iv) assuming the Underwriters are not
subject to taxation in Israel, resale of the Securities by the Underwriters in
connection with the distribution contemplated hereby.
(xxxvi) The Company has duly and irrevocably appointed Commtouch
Software Inc., a corporation organized under the laws of the State of
California, as its agent to receive service of process in any action against it
in any United States federal or state court arising out of or in connection with
the this Agreement or the transactions contemplated hereby.
(xxxvii) The documents incorporated by reference in the
Prospectus, at the time they were or hereafter are filed with the Commission,
complied or when so filed will comply, as the case may be, in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and, when read
together and with the other information in the Prospectus and as such documents
may be modified or superseded by the Prospectus, did not and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were or are made, not misleading.
(b) Each Selling Shareholder represents and warrants to, and agrees
with, the several Underwriters as follows:
(i) Such Selling Shareholder is the record and beneficial owner
of, and has, and on the First Closing Date will have, valid and marketable title
to the Securities to be sold by such Selling Shareholder, free and clear of all
security interests, claims, liens, restrictions on transferability, legends,
proxies, equities or other encumbrances; and upon delivery of and payment for
such Securities hereunder, the several Underwriters will acquire valid and
marketable title thereto, free and clear of any security interests, claims,
liens, restrictions on transferability, legends, proxies, equities or other
encumbrances. Such Selling Shareholder is selling the Securities to be sold by
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such Selling Shareholder for such Selling Shareholder's own account and is not
selling such Securities, directly or indirectly, for the benefit of the Company,
and no part of the proceeds of such sale received by such Selling Shareholder
will inure, either directly or indirectly, to the benefit of the Company other
than as described in the Registration Statement and Prospectus.
(ii) Such Selling Shareholder has duly authorized, executed and
delivered a Custody Agreement ("Custody Agreement"), which Custody Agreement is
a valid and binding obligation of such Selling Shareholder, to Norwest Bank
Minnesota, N.A., as Custodian (the "Custodian"); pursuant to the Custody
Agreement the Selling Shareholder has placed in custody with the Custodian, for
delivery under this Agreement, the certificates representing the Securities to
be sold by such Selling Shareholder; such certificates represent validly issued,
outstanding, fully paid and nonassessable Ordinary Shares; and such certificates
were duly and properly endorsed in blank for transfer, or were accompanied by
all documents duly and properly executed that are necessary to validate the
transfer of title thereto, to the Underwriters, free of any legend, restriction
on transferability, proxy, lien or claim, whatsoever.
(iii) Such Selling Shareholder has the power and authority to
enter into this Agreement and to sell, transfer and deliver the Securities to be
sold by such Selling Shareholder; and such Selling Shareholder has duly
authorized, executed and delivered to ▇▇▇▇▇ ▇▇▇▇▇▇, as attorney-in-fact (the
"Attorney-in-Fact"), an irrevocable power of attorney (a "Power of Attorney")
authorizing and directing the Attorney-in-Fact to effect the sale and delivery
of the Securities being sold by such Selling Shareholder, to enter into this
Agreement and to take all such other action as may be necessary hereunder.
(iv) This Agreement, the Custody Agreement and the Power of
Attorney have each been duly authorized, executed and delivered by or on behalf
of such Selling Shareholder and each constitutes a valid and binding agreement
of such Selling Shareholder, enforceable in accordance with its terms, except as
rights to indemnity hereunder or thereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or laws affecting the rights of creditors generally
and subject to general principles of equity. The execution and delivery of this
Agreement, the Custody Agreement and the Power of Attorney and the performance
of the terms hereof and thereof and the consummation of the transactions herein
and therein contemplated will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any agreement or
instrument to which such Selling Shareholder is a party or by which such Selling
Shareholder is bound, or any law, regulation, order or decree applicable to such
Selling Shareholder; 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, the Custody Agreement and the Power
of Attorney or for the consummation of the transactions contemplated hereby and
thereby, including the sale of the Securities being sold by such Selling
Shareholder, except such as may be required under the Act or state securities
laws or blue sky laws.
(v) Such Selling Shareholder 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 such
Selling Shareholder.
(vi) Such Selling Shareholder has reviewed the Registration
Statement and the Prospectus and to the best knowledge of such Selling
Shareholder neither the Registration Statement nor the Prospectus contains any
10
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
regarding such Selling Shareholder, the other Selling Shareholders, the Company
or otherwise.
(vii) To the best knowledge of such Selling Shareholder, the
representations and warranties of the Company contained in paragraph (a) of this
Section 2 are true and correct.
(c) 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;
any certificate signed by or on behalf of any Selling Shareholders as such and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by such Selling Shareholder to each Underwriter as
to the matters covered thereby.
3. Purchase, Sale and Delivery of Securities.
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 1,669,000 Firm Shares, and each Selling Shareholder
agrees, severally and not jointly, to sell the number of Firm Shares set forth
opposite the name of such Selling Shareholder on Schedule I hereto, to the
several Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company and the Selling Shareholders the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule II hereto. The
purchase price for each Firm Share shall be **[$__________] per share. The
obligation of each Underwriter to each of the Company and the Selling
Shareholders shall be to purchase from each of the Company and the Selling
Shareholders that number of Firm Shares (to be adjusted by the Representatives
to avoid fractional shares) which represents the same proportion of the number
of Firm Shares to be sold by each of the Company and the Selling Shareholders
pursuant to this Agreement as the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule II hereto represents to the total number of
Firm Shares to be purchased by all Underwriters pursuant to this Agreement. 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 II.
The Firm Shares will be delivered by the Company and the Custodian 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 or the Custodian, as appropriate, at the
offices of U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, 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 and the Custodian, will be made available for checking and packaging not
11
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 ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, or such other location as may be mutually
acceptable.
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
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 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 at the offices of U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, 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 ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, or such other location
as may be mutually acceptable.
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 or the Selling Shareholders, 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 or any Selling Shareholder.
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, the Underwriters shall furnish the Company, its counsel and the Securities
12
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 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,
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
13
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 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, or the ISA. Reports to the ISA 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
14
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 or the Selling Shareholders to perform any agreement on their part to be
performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled by the Company or the Selling Shareholders 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.
(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 90 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, Ordinary Shares, except to the
Underwriters pursuant to this Agreement and except for the issuance of options
pursuant to the Company's 1996 CSI Stock Option Plan, 1999 Israeli Share Option
Plan, 1999 Nonemployee Directors Plan and the 1999 Employee Stock Purchase Plan
(each as described in the Registration Statement and the Prospectus) (the
"Plans") and pursuant to the exercise of stock options or warrants outstanding
on the date hereof; provided, that no such option shall vest and become
exercisable prior to the end of the Lock-Up Period. 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 **[Selling
Shareholders] stating that such person agrees that, from the date of execution
15
of this Agreement and continuing to and including the date 90 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇
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 ▇▇▇▇▇ ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇, 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 Ordinary Shares 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.
(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 ▇▇▇▇ to market election. The
Company will further comply with the applicable information reporting
requirements for U.S. Holders to make such elections.
16
(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 Minnesota, 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 Minnesota State courts or the designation of the laws of the State of
Minnesota 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 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.
17
(b) Each Selling Shareholder covenants and agrees with the several
Underwriters as follows:
(i) Except as otherwise agreed to by the Company and the Selling
Shareholder, such Selling Shareholder will pay all taxes, if any, on the
transfer and sale, respectively, of the Securities being sold by such Selling
Shareholder, the fees of such Selling Shareholder's counsel and such Selling
Shareholder's proportionate share (based upon the number of Securities being
offered by such Selling Shareholder pursuant to the Registration Statement) of
all costs and expenses (except for legal and accounting expenses and fees of the
registrar and transfer agent) incurred by the Company pursuant to the provisions
of Section 4(a)(viii) of this Agreement; provided, however, that each Selling
Shareholder severally agrees to reimburse the Company for any reimbursement made
by the Company to the Underwriters pursuant to Section 4(a)(viii) hereof to the
extent such reimbursement resulted from the failure or refusal on the part of
such Selling Shareholder to comply under the terms or fulfill any of the
conditions of this Agreement.
(ii) If this Agreement shall be terminated by the Underwriters
because of any failure, refusal or inability on the part of such Selling
Shareholder to perform any agreement on such Selling Shareholder's part to be
performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled by such Selling Shareholder is not fulfilled,
such Selling Shareholder agrees to reimburse the several Underwriters for all
out-of-pocket disbursements (including fees and disbursements of counsel for the
Underwriters) 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 Selling Shareholder
shall not in any event be liable to any of the Underwriters for loss of
anticipated profits from the transactions covered by this Agreement.
(iii) The Securities to be sold by such Selling Shareholder,
represented by the certificates on deposit with the Custodian pursuant to the
Custody Agreement of such Selling Shareholder, are subject to the interest of
the several Underwriters and the other Selling Shareholders; the arrangements
made for such custody are, except as specifically provided in the Custody
Agreement, irrevocable; and the obligations of such Selling Shareholder
hereunder shall not be terminated, except as provided in this Agreement or in
the Custody Agreement, by any act of such Selling Shareholder, by operation of
law, whether by the liquidation, dissolution or merger of such Selling
Shareholder, by the death of such Selling Shareholder, or by the occurrence of
any other event. If any Selling Shareholder should liquidate, dissolve or be a
party to a merger or if any other such event should occur before the delivery of
the Securities hereunder, certificates for the Securities deposited with the
Custodian shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such liquidation, dissolution, merger or
other event had not occurred, whether or not the Custodian shall have received
notice thereof.
(iv) Selling Shareholder 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 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 Ordinary Shares which, if effected by the Company,
would be required to be disclosed in response to Item 701 of Regulation S-K.
(v) Such Selling Shareholder shall immediately notify you if any
event occurs, or of any change in information relating to such Selling
Shareholder or the Company or any new information relating to the Company or
relating to any matter stated in the Prospectus or any supplement thereto
18
(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations), which results in the Prospectus (as supplemented) including an
untrue statement of a material fact or omitting to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(vi) 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 Minnesota or of the United States, (ii) if the plaintiffs therein
seek a judgment in United States dollars, the Selling Shareholders 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 Selling Shareholders will not interpose any defense or objection to or
otherwise oppose inclusion of such linkage in any such judgment. The Selling
Shareholders 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 Selling Shareholders 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
Selling Shareholders hereunder to the jurisdiction of federal or Minnesota State
courts or the designation of the laws of the State of Minnesota as the law
applicable to this Agreement.
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 Shareholders contained herein, to the
performance by the Company and the Selling Shareholders of their 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
Securities, 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 Faegre & ▇▇▇▇▇▇ LLP, U.S. counsel
for the Underwriters, and ▇▇▇▇▇ ▇▇▇▇▇ & Co., Israeli counsel for the
Underwriters.
19
(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 share capital; and there
shall not have been any change in the share capital (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 equity
securities 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 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,
▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, U.S. 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 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, ▇▇▇▇▇▇▇ &
Co, Israeli counsel for the Company, dated such Closing Date and addressed to
you, covering the matters set forth in Schedule IV 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
Faegre & ▇▇▇▇▇▇ LLP, U.S. counsel for the several Underwriters, and ▇▇▇▇▇ ▇▇▇▇▇
▇▇
& ▇▇., ▇▇▇▇▇▇▇ 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 ▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ (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
Registration Statement and the Prospectus comply in form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations,
(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 share
capital 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, 1999 audited consolidated balance sheet included in the
Registration Statement and the Prospectus, or for the period from January 1,
2000 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,
percentages 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:
21
(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) 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 share capital, and except
as disclosed in the Prospectus, there has not been any change in the share
capital (other than a change in the number of outstanding shares of 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 equity securities, 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) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, the opinion of ______________,
counsel for the Selling Shareholders, dated such Closing Date and addressed to
you, to the effect that:
(i) Each of the Selling Shareholders is the sole record and
beneficial owner of the Securities to be sold by such Selling Shareholder and
delivery of the certificates for the Securities to be sold by each Selling
Shareholder pursuant to this Agreement, upon payment therefor by the
Underwriters, will pass marketable title to such Securities to the Underwriters
and the Underwriters will acquire all the rights of such Selling Shareholder in
the Securities (assuming the Underwriters have no knowledge of an adverse
claim), free and clear of any security interests, claims, liens or other
encumbrances.
(ii) Each of the Selling Shareholders has the power and authority
to enter into the Custody Agreement, the Power of Attorney and this Agreement
and to perform and discharge such Selling Shareholder's obligations thereunder
22
and hereunder; and this Agreement, the Custody Agreements and the Powers of
Attorney have been duly and validly authorized, executed and delivered by (or by
the Attorney-in-Fact on behalf of) the Selling Shareholders and are valid and
binding agreements of the Selling Shareholders, enforceable in accordance with
their respective terms (except as rights to indemnity hereunder or thereunder
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 creditors' rights generally and subject to general
principles of equity).
(iii) The execution and delivery of this Agreement, the Custody
Agreement and the Power of Attorney and the performance of the terms hereof and
thereof and the consummation of the transactions herein and therein contemplated
will not result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute, rule or regulation, or any agreement
or instrument known to such counsel to which such Selling Shareholder is a party
or by which such Selling Shareholder is bound or to which any of its property is
subject, any such Selling Shareholder's charter or by-laws, or any order or
decree known to such counsel of any court or government agency or body having
jurisdiction over such Selling Shareholder or any of its respective properties;
and 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, the Custody Agreement and the Power of Attorney
or for the consummation of the transactions contemplated hereby and thereby,
including the sale of the Securities being sold by such Selling Shareholder,
except such as may be required under the Act or state securities laws or blue
sky laws.
(iv) Under the laws of __________________, the (i) submission by
the Selling Shareholders to the jurisdiction of any federal or state court
sitting in the City of Minneapolis, Minnesota, (ii) waiver, to the fullest
extent it may effectively do so, of any objection which the Selling Shareholders
may now or hereafter have to the laying of venue of any such proceeding and
(iii) submission by the Selling Shareholders to the exclusive jurisdiction of
such courts in any such suit, action or proceeding, are binding upon the Selling
Shareholders and, if properly brought to the attention of the court or
administrative body in accordance with the laws of _____________, would be
enforceable in any judicial or administrative proceeding in --------------.
(v) Such other matters as you may reasonably request.
In rendering such opinion such counsel may rely (i) as to matters
of law other than **[appropriate jurisdiction] 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.
(k) On each Closing Date, there shall have been furnished to you,
as Representatives of the several Underwriters, a certificate or certificates,
dated such Closing Date and addressed to you, signed by each of the Selling
Shareholders or such Selling Shareholder's Attorney-in-Fact to the effect that
the representations and warranties of such Selling Shareholder contained in this
Agreement are true and correct as if made at and as of such Closing Date, and
that such Selling Shareholder has complied with all the agreements and satisfied
23
all the conditions on such Selling Shareholder's part to be performed or
satisfied at or prior to such Closing Date.
(l) 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);
(m) At the execution of this Agreement, the Company shall have
furnished to the Representatives from each Selling Shareholder an executed copy
of the Lock-Up Agreement addressed to the Representatives;
(n) 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
(o) 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 and each Selling Shareholder 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 consent of the Company and/or such
Selling Shareholders, as the case may be), 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 neither the Company nor any Selling Shareholder
shall 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
24
information furnished to the Company by you, or by any Underwriter through you,
specifically for use in the preparation thereof; and further provided, however,
that in no event shall any Selling Shareholder be liable under the provisions of
this Section 6 for any amount in excess of the aggregate amount of proceeds such
Selling Shareholder received from the sale of the Securities pursuant to this
Agreement.
In addition to their other obligations under this Section 6(a), the
Company and each Selling Shareholder 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
and/or the Selling Shareholder'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 Money Rates section of
the Wall Street Journal (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 Shareholders may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company and
each Selling Shareholder against any losses, claims, damages or liabilities to
which the Company and the Selling Shareholders 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 and the Selling Shareholders for any legal or other expenses
reasonably incurred by the Company or any such Selling Shareholder in connection
with investigating or defending against any such loss, claim, damage, liability
or action.
(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
25
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 and the Selling Shareholders 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 and the
Selling Shareholders 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 and the Selling
Shareholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders 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, the Selling Shareholders 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, the Selling Shareholders 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
26
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 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 and the Selling Shareholders under
this Section 6 shall be in addition to any liability which the Company and the
Selling Shareholders 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 or any Selling Shareholder 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, the Company and
the Selling Shareholders 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, or any Selling
Shareholders or any controlling person thereof, 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 fall 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 neither the Company nor any Selling
Shareholder shall 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)
27
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 or the Selling Shareholders (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 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.
28
(c) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section, the Company and the
Attorney-in-Fact, on behalf of the Selling Shareholders, 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 the
Attorney-in-Fact, on behalf of the Selling Shareholders, shall be notified by
the Company by telephone or telegram, confirmed by letter.
10. Default by One or More of the Selling Shareholders or the Company. If
one or more of the Selling Shareholders shall fail at the First Closing Date to
sell and deliver the number of Securities which such Selling Shareholder or
Selling Shareholders are obligated to sell hereunder, and the remaining Selling
Shareholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number of Securities to be sold by all Selling Shareholders as set forth in
Schedule I, then the Underwriters may at your option, by notice from you to the
Company and the non-defaulting Selling Shareholders, either (a) terminate this
Agreement without any liability on the part of any non-defaulting party or (b)
elect to purchase the Securities which the Company and the non-defaulting
Selling Shareholders have agreed to sell hereunder.
In the event of a default by any Selling Shareholder as referred to in this
Section 10, either you or the Company or, by joint action only, the
non-defaulting Selling Shareholders shall have the right to postpone the First
Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
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 or any
Selling Shareholders so defaulting from liability, if any, in respect of such
default.
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
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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: ▇▇▇▇▇ ▇▇▇▇▇▇▇; if to any of the
Selling Shareholders, at the address of the Attorney-in-Fact as set forth in the
Powers of Attorney, 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 chancre 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
29
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.
15. Agent for Service of Process; Jurisdiction. Each of the parties hereto
irrevocably (i) agrees that any legal suit, action or proceeding arising out of
or based upon this Agreement or the transactions contemplated hereby may be
instituted in any Federal or State Court in the City of Minneapolis, Minnesota,
(ii) waives, to the fullest extent it may effectively do so, any objection which
it may now or hereafter have to the laying of venue of any such proceeding and
(iii) submits to the exclusive jurisdiction of such courts in any such suit,
action or proceeding. The Company hereby designates and appoints Commtouch
Software Inc. as its authorized agent (the "Authorized Agent") upon whom process
may be served in any such action arising out of or based on this Agreement or
the transactions contemplated hereby which may be instituted in any Minnesota
Court by any Underwriter or by any person who controls any Underwriter,
expressly consents to the jurisdiction of any such court in respect of any such
action, and waives any other requirements of or objections to personal
jurisdiction with respect thereto. Such appointment shall be irrevocable unless
and until a successor authorized agent acceptable to the Underwriters in their
sole and absolute discretion shall have been appointed by the Company. The
Company represents and warrants that the Authorized Agent has agreed to act as
such agent for service at process and agrees to take any and all action,
including the filing of any and all documents and instruments, that may be
necessary to continue such appointment in full force and effect as aforesaid.
Service of process upon the Authorized Agent and written notice of such service
to the Company shall be deemed, in every respect, effective service of process
upon the Company.
16. Judgment Currency. In respect of any judgment or order given or made
for any amount due hereunder that is expressed and paid in a currency (the
"judgment currency") other than United States dollars, the Company and Selling
Shareholders, as the case may be, will indemnify each Underwriter against any
loss incurred by such Underwriter as a result of any variation as between (i)
the rate of exchange at which the United States dollar amount is converted into
the judgment currency for the purpose of such judgment or order and (ii) the
rate of exchange at which such Underwriter on the date such judgment currency is
actually received by the Underwriter is able to purchase United States dollars
with the amount of the judgment currency so received by such Underwriter. The
foregoing indemnity shall constitute a separate and independent obligation of
the Company and Selling Shareholders and shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of or conversion into United States dollars.
[Signature Page Follows]
30
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 Shareholders and the several Underwriters in accordance
with its terms.
Very truly yours,
COMMTOUCH SOFTWARE LTD.
By
-----------------------------------
Its:
-----------------------------------
SELLING SHAREHOLDERS
By
-----------------------------------
Attorney-in-Fact
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 PIPER ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LLC
INCORPORATED
WARBURG DILLON READ, LLC
a subsidiary of UBS AG
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY
BY U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇
By
--------------------------------
Managing Director
SCHEDULE I
Selling Shareholders
Number of
Firm Shares
Name to be Sold
---- ----------
Israel Growth Fund L.P. 400,000
k.t. Concord Venture Fund (Cayman), L.P. 331,810
k.t. Concord Venture Fund (Israel), L.P. 66,340
k.t. Concord Venture Advisors (Cayman), L.P. 2,719
k.t. Concord Venture Advisors (Israel), L.P. 531
▇▇▇▇▇▇ ▇▇▇▇▇▇ 100,000
▇▇▇▇ ▇▇▇ 100,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 50,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 20,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 165,000
Nomura International Plc. 31,000
Oceanic Bank and Trust Ltd. 31,800
Rumson Capital, L.L.C. 31,800
31
SCHEDULE II
List of Underwriters
Underwriter Number of Firm Shares(2)
----------- ---------------------
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.........................
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC.............................
Warburg Dillon Read, LLC...............................
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company................................
=========
Total Underwriters (_____) 3,000,000
=========
----------
(2) The Underwriters may purchase up to an additional 450,000 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.
SCHEDULE III
[To be provided]
SCHEDULE IV
[To be provided]
