Exhibit 1.1
▇.▇. ▇▇▇▇▇▇ SECURITIES INC.
▇▇▇▇▇▇▇▇▇ & COMPANY, INC.
NET2PHONE, INC.
_____Shares of Common Stock
Underwriting Agreement
----------------------
November [__], 2003
▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇▇▇ & Company, Inc.
As Representatives of the
several Underwriters listed
in Schedule 1 hereto
c/o ▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Net2Phone, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the several Underwriters listed in Schedule 1 hereto (the
"Underwriters"), for whom you are acting as representatives (the
"Representatives"), an aggregate of 10,500,000 shares of Common Stock, par value
$0.01 per share, of the Company (the "Underwritten Shares") and, at the option
of the Underwriters, up to an additional 1,575,000 shares of Common Stock of the
Company (the "Option Shares"). The Underwritten Shares and the Option Shares are
herein referred to as the "Shares". The shares of Common Stock of the Company to
be outstanding after giving effect to the sale of the Shares are herein referred
to as the "Stock".
The Company hereby confirms its agreement with the several Underwriters
concerning the purchase and sale of the Shares, as follows:
1. Registration Statement. The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Securities Act"), a registration statement (File No.
333-110118) including a prospectus, relating to the Shares. Such registration
statement, as amended at the time it becomes effective, including the
information, if any, deemed pursuant to Rule 430A under the Securities Act to be
part of the registration statement at the time of its effectiveness ("Rule 430
Information"), is referred to herein as the "Registration Statement"; and as
used herein, the term "Preliminary Prospectus" means each prospectus included in
such registration statement (and any amendments thereto) before it becomes
effective, any prospectus filed with the Commission pursuant to Rule 424(a)
under the Securities Act and the prospectus included in the Registration
Statement at the time of its effectiveness that omits Rule 430A Information, and
the term "Prospectus" means the prospectus in the form first used to confirm
sales of the Shares. If the Company has filed an abbreviated
2
registration statement pursuant to Rule 462(b) under the Securities Act (the
"Rule 462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement. Any reference in this Agreement to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act, as of the effective date of the Registration Statement
or the date of such Preliminary Prospectus or the Prospectus, as the case may
be, and any reference to "amend", "amendment" or "supplement" with respect to
the Registration Statement, any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Exchange Act") that are deemed to
be incorporated by reference therein. Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Registration Statement
and the Prospectus.
2. Purchase of the Shares by the Underwriters. (a) The Company agrees
to issue and sell the Shares to the several Underwriters as provided in this
Agreement, and each Underwriter, on the basis of the representations, warranties
and agreements set forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the respective
number of Underwritten Shares set forth opposite such Underwriter's name in
Schedule 1 hereto at a price per share of $[_______] (the "Purchase Price").
In addition, the Company agrees to issue and sell the Option Shares to
the several Underwriters as provided in this Agreement, and the Underwriters, on
the basis of the representations, warranties and agreements set forth herein and
subject to the conditions set forth herein, shall have the option to purchase,
severally and not jointly, from the Company the Option Shares at the Purchase
Price.
If any Option Shares are to be purchased, the number of Option Shares
to be purchased by each Underwriter shall be the number of Option Shares which
bears the same ratio to the aggregate number of Option Shares being purchased as
the number of Underwritten Shares set forth opposite the name of such
Underwriter in Schedule 1 hereto (or such number increased as set forth in
Section 9 hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject, however, to
such adjustments to eliminate any fractional Shares as the Representatives in
its sole discretion shall make.
The Representatives, on behalf of the Underwriters, may exercise the
option to purchase the Option Shares at any time in whole, or from time to time
in part, on or before the thirtieth day following the date of this Agreement, by
written notice from the Representatives to the Company. Such notice shall set
forth the aggregate number of Option Shares as to which the option is being
exercised and the date and time when the Option Shares are to be delivered and
paid for which may be the same date and time as the Closing Date (as hereinafter
defined) but shall not be earlier than the Closing Date nor later than the tenth
full business day (as hereinafter defined) after the date of such notice (unless
such time and date are postponed in accordance with the provisions of Section 9
hereof). Any such notice shall be given at least two Business Days prior to the
date and time of delivery specified therein.
3
(b) The Company understands that the Underwriters intend to make a
public offering of the Shares as soon after the effectiveness of this Agreement
as in the judgment of the Representatives is advisable, and initially to offer
the Shares on the terms set forth in the Prospectus. The Company acknowledges
and agrees that the Underwriters may offer and sell Shares to or through any
affiliate of an Underwriter and that any such affiliate may offer and sell
Shares purchased by it to or through any Underwriter.
(c) Payment for the Shares shall be made by wire transfer in
immediately available funds to the account specified by the Company to the
Representatives in the case of the Underwritten Shares, at the offices of Mayer,
Brown, ▇▇▇▇ & Maw LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M. New
York City time on _____, 2003, or at such other time or place on the same or
such other date, not later than the fifth business day thereafter, as the
Representatives and the Company may agree upon in writing or, in the case of the
Option Shares, on the date and at the time and place in New York, New York
specified by the Representatives in the written notice of the Underwriters'
election to purchase such Option Shares. The time and date of such payment for
the Underwritten Shares is referred to herein as the "Closing Date" and the time
and date for such payment for the Option Shares, if other than the Closing Date,
are herein referred to as the "Additional Closing Date".
(d) Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date in definitive form registered in such
names and in such denominations as the Representatives shall request in writing,
or, if so requested by the Representatives, by book-entry through the facilities
of The Depository Trust Company, not later than two full business days prior to
the Closing Date or the Additional Closing Date, as the case may be, with any
transfer taxes payable in connection with the sale of the Shares duly paid by
the Company. The certificates for the Shares, unless delivered by book-entry
through the facilities of The Depository Trust Company, will be made available
for inspection and packaging by the Representatives at the office of ▇.▇. ▇▇▇▇▇▇
Securities Inc. set forth above not later than 1:00 P.M., New York City time, on
the business day prior to the Closing Date or the Additional Closing Date, as
the case may be.
3. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) Preliminary Prospectus. 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, complied in all material
respects with the Securities Act and did not contain any 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 made, not misleading; provided that the
Company makes no representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through
the Representatives expressly for use in any Preliminary Prospectus.
4
(b) Registration Statement and Prospectus. The Registration Statement
has been declared effective by the Commission. No order suspending the
effectiveness of the Registration Statement has been issued by the Commission
and, to the knowledge of the Company, no proceeding for that purpose has been
initiated or threatened by the Commission; as of the applicable effective date
of the Registration Statement and any amendment thereto, the Registration
Statement complied and will comply in all material respects with the Securities
Act, and did not and will not contain any 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 not misleading; and as of the applicable
filing date of the Prospectus and any amendment or supplement thereto and as of
the Closing Date and as of the Additional Closing Date, as the case may be, the
Prospectus will not contain any 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 made, not misleading; provided that the Company makes no representation and
warranty with respect to any statements or omissions made in reliance upon and
in conformity with information relating to any Underwriter furnished to the
Company in writing by such Underwriter through the Representatives expressly for
use in the Registration Statement and the Prospectus and any amendment or
supplement thereto.
(c) Incorporated Documents. The documents incorporated by reference in
the Prospectus, when they became effective or were filed with the Commission, as
the case may be, conformed in all material respects to the requirements of the
Securities Act or the Exchange Act, as applicable, and none of such documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and any further documents so filed and incorporated by reference in the
Prospectus, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(d) Financial Statements. The consolidated financial statements and the
related notes thereto of the Company and its consolidated subsidiaries included
or incorporated by reference in the Registration Statement and the Prospectus
comply in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as applicable, and present fairly the
consolidated financial position of the Company and its subsidiaries as of the
dates indicated and the results of their operations and the changes in their
cash flows for the periods specified; such consolidated financial statements
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby, and the
supporting schedules included or incorporated by reference in the Registration
Statement present fairly the information required to be stated therein; the
other financial information included or incorporated by reference in the
Registration Statement and the Prospectus has been derived from the accounting
records of the Company and its subsidiaries and presents fairly the information
shown thereby.
5
(e) No Material Adverse Change. Since the date of the most recent
consolidated financial statements of the Company included or incorporated by
reference in the Registration Statement and the Prospectus, (i) there has not
been any change in the capital stock or long-term debt of the Company or any of
its subsidiaries, or any dividend or distribution of any kind declared, set
aside for payment, paid or made by the Company on any class of capital stock, or
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, properties, management, financial
position, stockholders' equity, results of operations or prospects of the
Company and its subsidiaries taken as a whole, or on the right, power or
authority of the Company to consummate the transactions contemplated by this
Agreement or any other Transaction Document (a "Material Adverse Effect"); (ii)
neither the Company nor any of its subsidiaries has entered into any transaction
or agreement that is material to the Company and its subsidiaries taken as a
whole or incurred any liability or obligation, direct or contingent, that is
material to the Company and its subsidiaries taken as a whole; and (iii) neither
the Company nor any of its subsidiaries has sustained any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor disturbance or dispute or
any action, order or decree of any court or arbitrator or governmental or
regulatory authority, except in each case as otherwise disclosed in the
Registration Statement and the Prospectus.
(f) Organization and Good Standing. The Company and each of its
subsidiaries have been duly organized and are validly existing and in good
standing under the laws of their respective jurisdictions of organization, are
duly qualified to do business and are in good standing in each jurisdiction in
which their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power and
authority necessary to own or hold their respective properties and to conduct
the businesses in which they are engaged, except where the failure to be so
qualified or have such power or authority would not, individually or in the
aggregate, have a Material Adverse Effect and except where the failure of any
subsidiary that is not a significant subsidiary to be duly organized or validly
existing would not, individually or in the aggregate, have a Material Adverse
Effect. The subsidiaries listed in Exhibit 21.1 to the Company's Annual Report
on Form 10-K for the year ended July 31, 2003 are the only significant
subsidiaries of the Company.
(g) Capitalization. The Company has an authorized capitalization as set
forth in the Prospectus under the heading "Capitalization"; all the outstanding
shares of capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable and are not subject to any
pre-emptive or similar rights; except as described in or expressly contemplated
by the Prospectus, there are no outstanding rights (including, without
limitation, pre-emptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Company or any of its subsidiaries, or any contract,
commitment, agreement, understanding or arrangement of any kind relating to the
issuance of any capital stock of the Company or any such subsidiary, any such
convertible or exchangeable securities or any such rights, warrants or options;
the capital stock of the Company conforms in all material respects to the
description thereof contained in the Registration Statement and the Prospectus;
and all the outstanding shares of capital stock or other equity interests of
each subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly or indirectly by the
Company, free and clear of any lien, charge, encumbrance, security interest,
restriction on voting or transfer or any other claim of any third party.
6
(h) Due Authorization. The Company has full right, power and authority
to execute and deliver this Agreement and each of the Stock Purchase Agreement,
dated as of November __, 2003, between the Company and IDT Corporation ("IDT")
and the Stock Purchase Agreement, dated as of November __, 2003, between the
Company and Liberty N2P III, Inc. ("Liberty Media") (together, the "IDT/Liberty
Agreements" and, together with this Agreement, the "Transaction Documents") and
to perform its obligations hereunder and thereunder; and all action required to
be taken for the due and proper authorization, execution and delivery of each of
the Transaction Documents and the consummation of the transactions contemplated
thereby has been duly and validly taken.
(i) Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by the Company.
(j) The Shares. The Shares to be issued and sold by the Company
hereunder have been duly authorized by the Company and, when issued and
delivered and paid for as provided herein, will be duly and validly issued and
will be fully paid and nonassessable and will conform to the descriptions
thereof in the Prospectus; and the issuance of the Shares is not subject to any
preemptive or similar rights.
(k) Other Transaction Documents. The IDT/Liberty Agreements have been
duly authorized, executed and delivered by the Company and constitutes a valid
and legally binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by equitable principles relating to enforceability.
(l) No Violation or Default. Neither the Company nor any of its
subsidiaries is (i) in violation of its charter or by-laws or similar
organizational documents; (ii) in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject; or
(iii) in violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory authority,
except for (x) any such default or violation that is described in the Prospectus
and the Registration Statement, (y) in the case of clauses (ii) and (iii) above,
any such default or violation that would not, individually or in the aggregate,
have a Material Adverse Effect and (z) in the case of clause (i) above, any such
violation by a subsidiary that is not a significant subsidiary that would not,
individually or in the aggregate, have a Material Adverse Effect.
(m) No Conflicts. The execution, delivery and performance by the
Company of each of the Transaction Documents, the issuance and sale of the
Shares and the consummation of the transactions contemplated by the Transaction
Documents will not (i) conflict with or result in a material breach or violation
of any of the terms or provisions of, or constitute a default under, or result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant to, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its significant subsidiaries is bound or to which
any of the property or assets of the Company or any of its significant
subsidiaries is subject, (ii) result in any violation of the provisions of the
charter or by-laws or similar organizational documents of the Company or any of
its significant subsidiaries or (iii) result in the violation of any law or
statute or any judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority.
7
(n) No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of each of the Transaction Documents, the issuance and sale of
the Shares and the consummation of the transactions contemplated by the
Transaction Documents, except for the registration of the Shares under the
Securities Act and such consents, approvals, authorizations, orders and
registrations or qualifications as may be required under applicable state
securities laws in connection with the purchase and distribution of the Shares
by the Underwriters or under the rules and regulations of the NASD.
(o) Legal Proceedings. Except as described in the Prospectus and the
Registration Statement, there are no legal, governmental or regulatory
investigations, actions, suits or proceedings pending to which the Company or
any of its subsidiaries is or may be a party or to which any property of the
Company or any of its subsidiaries is or may be the subject that, individually
or in the aggregate, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the ability of the Company to perform its
obligations under the Transaction Documents; no such investigations, actions,
suits or proceedings are threatened or, to the best knowledge of the Company,
contemplated by any governmental or regulatory authority or threatened by
others; and (i) there are no current or pending legal, governmental or
regulatory actions, suits or proceedings that are required under the Securities
Act to be described in the Prospectus that are not so described and (ii) there
are no statutes, regulations or contracts or other documents that are required
under the Securities Act to be filed as exhibits to the Registration Statement
or described in the Registration Statement or the Prospectus that are not so
filed or described.
(p) Independent Accountants. Ernst & Young LLP, who have certified
certain financial statements of the Company and its subsidiaries are independent
public accountants with respect to the Company and its subsidiaries as required
by the Securities Act.
(q) Title to Real and Personal Property. Other than as set forth in the
Prospectus and the Registration Statement, the Company and its subsidiaries have
good and marketable title in fee simple to, or have valid rights to lease or
otherwise use, all items of real and personal property that are material to the
respective businesses of the Company and its subsidiaries, in each case free and
clear of all liens, encumbrances, claims and defects and imperfections of title
except those that (i) do not materially interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries or (ii) could
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
8
(r) Title to Intellectual Property. Other than as set forth in the
Prospectus and the Registration Statement, the Company and its subsidiaries own
or possess adequate rights to use all patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service ▇▇▇▇ registrations,
copyrights, licenses and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) necessary for the conduct of their respective businesses; and the
conduct of their respective businesses will not conflict in any respect with any
such rights of others, except, in each case, as would not reasonably be expected
to have a Material Adverse Effect, and the Company and its subsidiaries have not
received any notice of any claim of infringement or conflict with any such
rights of others.
(s) No Undisclosed Relationships. No relationship, direct or indirect,
exists between or among the Company, IDT, Liberty Media or any of its other
subsidiaries, on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries, on the other,
that is required by the Securities Act to be described in the Registration
Statement and the Prospectus and that is not so described.
(t) Investment Company Act. The Company is not and, after giving effect
to the offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be required to register as an
"investment company" or an entity "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder (collectively, "Investment Company
Act").
(u) Public Utility Holding Company Act. Neither the Company nor any of
its significant subsidiaries is a "holding company" or a "subsidiary company" of
a holding company or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(v) Taxes. The Company and its subsidiaries have paid all material
federal, state, local and foreign taxes and filed all tax returns required to be
paid or filed through the date hereof; and except as otherwise disclosed in the
Prospectus, there is no material tax deficiency that has been, or could
reasonably be expected to be, asserted against the Company or any of its
subsidiaries or any of their respective properties or assets.
(w) Licenses and Permits. Other than as set forth in the Prospectus and
the Registration Statement, the Company and its subsidiaries possess all
licenses, certificates, permits and other authorizations issued by, and have
made all declarations and filings with, the appropriate federal, state, local or
foreign governmental or regulatory authorities that are necessary for the
ownership or lease of their respective properties or the conduct of their
respective businesses as described in the Registration Statement and the
Prospectus, except where the failure to possess or make the same would not,
individually or in the aggregate, have a Material Adverse Effect; and except as
described in the Prospectus, neither the Company nor any of its subsidiaries has
received notice of any material revocation or material adverse modification of
any such license, certificate, permit or authorization or has any reason to
believe that any such license, certificate, permit or authorization will not be
renewed in the ordinary course.
9
(x) No Labor Disputes. No labor disturbance by or dispute with
employees of the Company or any of its subsidiaries exists or, to the best
knowledge of the Company, is contemplated or threatened.
(y) Compliance With Environmental Laws. The Company and its
subsidiaries (i) are in compliance with any and all applicable federal, state,
local and foreign laws, rules, regulations, decisions and orders relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively, "Environmental
Laws"); (ii) have received and are in compliance with all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses; and (iii) have not received notice of any actual or
potential liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or contaminants,
except, in the case of clauses (i), (ii) or (iii), for any such failure to
comply, or failure to receive required permits, licenses or approvals, or
liability as would not, individually or in the aggregate, have a Material
Adverse Effect.
(z) Compliance With ERISA. Each employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is maintained, administered or contributed to by the
Company or any of its affiliates for employees or former employees of the
Company and its affiliates has been maintained in material compliance with its
terms and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Internal Revenue Code of
1986, as amended (the "Code"); except as would not have a Material Adverse
Effect, no prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any such plan excluding
transactions effected pursuant to a statutory or administrative exemption; and
for each such plan that is subject to the funding rules of Section 412 of the
Code or Section 302 of ERISA, no "accumulated funding deficiency" as defined in
Section 412 of the Code has been incurred, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these purposes
accrued but unpaid contributions) exceeds the present value of all benefits
accrued under such plan determined using reasonable actuarial assumptions.
(aa) Compliance With Telecommunications Laws. Other than as set forth
in the Prospectus and the Registration Statement, the Company and its
subsidiaries (i) are in compliance with all federal, state and foreign laws,
rules and regulations governing telecommunications matters (collectively
"Telecommunications Laws"), and (ii) have obtained all licenses, permits,
authorizations and approvals (collectively "Telecommunications Permits") from
and made all filings with the Federal Communications Commission (the "FCC") and
all other federal, state and international regulatory agencies having regulatory
jurisdiction over telecommunications matters necessary for the Company and its
subsidiaries to conduct their business as described in the Prospectus, except,
in each case, as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(bb) Accounting Controls. The Company and its significant subsidiaries
maintain systems of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability;
(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 the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
10
(cc) Insurance. The Company and its subsidiaries have insurance
covering their respective properties, operations, personnel and businesses,
including business interruption insurance, which insurance is in amounts and
insures against such losses and risks as are reasonably adequate to protect the
Company and its subsidiaries and their respective businesses; and neither the
Company nor any of its significant subsidiaries has (i) received notice from any
insurer or agent of such insurer that capital improvements or other expenditures
are required or necessary to be made in order to continue such insurance or (ii)
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 at
reasonable cost from similar insurers as may be necessary to continue its
business.
(dd) No Unlawful Payments. Neither the Company nor any of its
subsidiaries nor, to the best knowledge of the Company, any director, officer,
agent, employee or other person associated with or acting on behalf of the
Company or any of its subsidiaries has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.
(ee) No Restrictions on Subsidiaries. No subsidiary of the Company is
currently prohibited, directly or indirectly, under any agreement or other
instrument to which it is a party or is subject, from paying any dividends to
the Company, from making any other distribution on such subsidiary's capital
stock, from repaying to the Company any loans or advances to such subsidiary
from the Company or from transferring any of such subsidiary's properties or
assets to the Company or any other subsidiary of the Company.
(ff) No Broker's Fees. Neither the Company nor any of its subsidiaries
is a party to any contract, agreement or understanding with any person (other
than this Agreement) that would give rise to a valid claim against the Company
or any of its subsidiaries or any Underwriter for a brokerage commission,
finder's fee or like payment in connection with the offering and sale of the
Shares.
(gg) No Registration Rights. No person has the right to require the
Company or any of its subsidiaries to register any securities for sale under the
Securities Act by reason of the filing of the Registration Statement with the
Commission or the issuance and sale of the Shares.
(hh) No Stabilization. The Company has not taken, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares.
11
(ii) Business With Cuba. The Company has complied with all provisions
of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida) relating
to doing business with the Government of Cuba or with any person or affiliate
located in Cuba.
(jj) Margin Rules. Neither the issuance, sale and delivery of the
Shares nor the application of the proceeds thereof by the Company as described
in the Registration Statement and the Prospectus will violate Regulation T, U or
X of the Board of Governors of the Federal Reserve System or any other
regulation of such Board of Governors.
(kk) Forward-Looking Statements. No forward-looking statement (within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Registration Statement and the Prospectus has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good
faith.
(ll) Statistical and Market Data. Nothing has come to the attention of
the Company that has caused the Company to believe that the statistical and
market-related data included in the Registration Statement and the Prospectus is
not based on or derived from sources that are reliable and accurate in all
material respects.
(mm) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. There is and has been no failure on the part
of the Company or any of the Company's directors or officers, in their
capacities as such, to comply with any provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002 and the rules and regulations promulgated in connection therewith (the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act"), including but nor limited to Section 402 related to loans
and Sections 302 and 906 related to certifications.
4. Further Agreements of the Company. The Company covenants and agrees
with each Underwriter that:
(a) Effectiveness of the Registration Statement. The Company will file
the final Prospectus with the Commission within the time periods specified by
Rule 424(b) and Rule 430A under the Securities Act and to file promptly all
reports and any definitive proxy or information statements required to be filed
by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Shares; and the Company will furnish copies of the Prospectus to the
Underwriters in New York City prior to 10:00 A.M., New York City time, on the
business day next succeeding the date of this Agreement in such quantities as
the Representatives may reasonably request.
(b) Delivery of Copies. The Company will deliver, without charge, (i)
to the Representatives, three signed copies of the Registration Statement as
originally filed and each amendment thereto, in each case including all exhibits
and consents filed therewith and documents incorporated by reference therein;
and (ii) to each Underwriter (A) a conformed copy of the Registration Statement
as originally filed and each amendment thereto (without exhibits) and (B) during
the Prospectus Delivery Period, as many copies of the Prospectus (including all
amendments and supplements thereto and documents incorporated by reference
therein) as the Representatives may reasonably request. As used herein, the term
"Prospectus Delivery Period" means such period of time after the first date of
the public offering of the Shares as in the opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to be
delivered in connection with sales of the Shares by any Underwriter or dealer.
12
(c) Amendments or Supplements. Before filing any amendment or
supplement to the Registration Statement or the Prospectus, whether before or
after the time that the Registration Statement becomes effective, the Company
will furnish to the Representatives and counsel for the Underwriters a copy of
the proposed amendment or supplement for review and will not file any such
proposed amendment or supplement to which the Representatives reasonably
objects.
(d) Notice to the Representatives. The Company will advise the
Representatives promptly, and confirm such advice in writing, (i) when the
Registration Statement has become effective; (ii) when any amendment to the
Registration Statement has been filed or becomes effective; (iii) when any
supplement to the Prospectus or any amendment to the Prospectus has been filed;
(iv) of any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or the receipt of any
comments from the Commission relating to the Registration Statement or any other
request by the Commission for any additional information; (v) of the issuance by
the Commission of any order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of any Preliminary Prospectus or
the Prospectus or the initiation or threatening of any proceeding for that
purpose; (vi) of the occurrence of any event within the Prospectus Delivery
Period as a result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing when the Prospectus is delivered to a purchaser, not
misleading; and (vii) of the receipt by the Company of any notice with respect
to any suspension of the qualification of the Shares for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and the Company will use its best efforts to prevent the issuance of
any such order suspending the effectiveness of the Registration Statement,
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or suspending any such qualification of the Shares and, if any such order is
issued, will obtain as soon as possible the withdrawal thereof.
(e) Ongoing Compliance of the Prospectus. If during the Prospectus
Delivery Period (i) any event shall occur or condition shall exist as a result
of which the Prospectus as then amended or supplemented would include 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 existing when the Prospectus is delivered to a
purchaser, not misleading or (ii) it is necessary to amend or supplement the
Prospectus to comply with law, the Company will immediately notify the
Underwriters thereof and forthwith prepare and, subject to paragraph (c) above,
file with the Commission and furnish to the Underwriters and to such dealers as
the Representatives may designate, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances existing
when the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law.
(f) Blue Sky Compliance. The Company will qualify the Shares for offer
and sale under the securities or Blue Sky laws of such jurisdictions as the
Representatives shall reasonably request and will continue such qualifications
in effect so long as required for distribution of the Shares; provided that the
Company shall not be required to (i) qualify as a foreign corporation or other
entity or as a dealer in securities in any such jurisdiction where it would not
otherwise be required to so qualify, (ii) file any general consent to service of
process in any such jurisdiction or (iii) subject itself to taxation in any such
jurisdiction if it is not otherwise so subject.
13
(g) Earning Statement. The Company will make generally available to its
security holders and the Representatives as soon as practicable an earning
statement that satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Commission promulgated thereunder covering a period of at
least twelve months beginning with the first fiscal quarter of the Company
occurring after the "effective date" (as defined in Rule 158) of the
Registration Statement.
(h) Clear Market. For a period of 90 days after the date of the
Prospectus, the Company will not (i) offer, pledge, announce the intention to
sell, sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase
or otherwise transfer or dispose of, directly or indirectly, any shares of Stock
or any securities convertible into or exercisable or exchangeable for Stock or
(ii) enter into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Stock or such other securities, in cash or otherwise, without the prior
written consent of ▇.▇. ▇▇▇▇▇▇ Securities Inc., other than (w) the Shares to be
sold hereunder, (x) shares to be issued to IDT and Liberty pursuant to the
IDT/Liberty Agreements, as described in the Registration Statement, (y) shares
to be issued to employees of the Company pursuant to stock bonuses to such
employees for the fiscal year ended July 31, 2003, in the same amounts (on a
per-employee basis) as have previously been disclosed to the Representatives in
writing, and (z) any shares of Stock of the Company issued upon the exercise of
options granted under existing employee stock option plans.
(i) Use of Proceeds. The Company will apply the net proceeds from the
sale of the Shares as described in the Prospectus under the heading "Use of
Proceeds".
(j) No Stabilization. The Company will not take, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares.
(k) Listing of Shares. The Company will file the Notification Form:
Listing of Additional Shares, and make such other filings required by the rules
of the National Association of Securities Dealers Automated Quotations National
Market (the "Nasdaq National Market") to be made with the Nasdaq National Market
in connection with the sale of the Shares by the Company hereunder.
5. Conditions of Underwriters' Obligations. The obligation of each
Underwriter to purchase the Underwritten Shares on the Closing Date or the
Option Shares on the Additional Closing Date, as the case may be, as provided
herein is subject to the performance by the Company of its covenants and other
obligations hereunder and to the following additional conditions:
14
(a) Registration Compliance; No Stop Order. The Registration Statement
(or if a post-effective amendment thereto is required to be filed under the
Securities Act, such post-effective amendment) shall have become effective, and
the Representatives shall have received notice thereof, not later than 5:00
P.M., New York City time, on the date hereof; no order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceeding for such purpose shall be pending before or threatened by the
Commission; the Prospectus shall have been timely filed with the Commission
under the Securities Act and in accordance with Section 4(a) hereof; and all
requests by the Commission for additional information shall have been complied
with to the reasonable satisfaction of the Representatives.
(b) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct on the date hereof and
on and as of the Closing Date or the Additional Closing Date, as the case may
be; and the statements of the Company and its officers made in any certificates
delivered pursuant to this Agreement shall be true and correct on and as of the
Closing Date or the Additional Closing Date, as the case may be.
(c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement, no event or condition of a type described in Section
3(e) hereof shall have occurred or shall exist, which event or condition is not
described in the Prospectus (excluding any amendment or supplement thereto) and
the effect of which in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the offering, sale or delivery of
the Shares on the Closing Date or the Additional Closing Date, as the case may
be, on the terms and in the manner contemplated by this Agreement and the
Prospectus.
(d) Officer's Certificate. The Representatives shall have received on
and as of the Closing Date or the Additional Closing Date, as the case may be, a
certificate of the chief financial officer or chief accounting officer of the
Company and one additional senior executive officer of the Company who is
reasonably satisfactory to the Representatives (i) confirming that such officers
have carefully reviewed the Registration Statement and the Prospectus and, to
the knowledge of such officers after reasonable inquiry, the representation set
forth in Section 3(b) hereof is true and correct, (ii) confirming that the other
representations and warranties of the Company in this Agreement are true and
correct and that the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date and (iii) to the effect set forth in paragraphs (a), (c) and
(d) above.
(e) Comfort Letters. On the date of this Agreement and on the Closing
Date or the Additional Closing Date, as the case may be, Ernst & Young LLP shall
have furnished to the Representatives, at the request of the Company, letters,
dated the respective dates of delivery thereof and addressed to the
Underwriters, in form and substance reasonably satisfactory to the
Representatives, containing statements and information of the type customarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained or incorporated
by reference in the Registration Statement and the Prospectus; provided, that
the letter delivered on the Closing Date or the Additional Closing Date, as the
case may be, shall use a "cut-off" date no more than three business days prior
to such Closing Date or such Additional Closing Date, as the case may be.
15
(f) Opinion of Counsel for the Company. ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇,
special securities counsel for the Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, regulatory
counsel for the Company, and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, General Counsel of the Company,
each shall have furnished to the Representatives, at the request of the Company,
their written opinions, dated the Closing Date or the Additional Closing Date,
as the case may be, and addressed to the Underwriters, substantially in the
forms attached as Annex A hereto.
(g) Opinion of Counsel for the Underwriters. The Representatives shall
have received on and as of the Closing Date or the Additional Closing Date, as
the case may be, an opinion of Mayer, Brown, ▇▇▇▇ & Maw LLP, counsel for the
Underwriters, with respect to such matters as the Representatives may reasonably
request, and such counsel shall have received such documents and information as
they may reasonably request to enable them to pass upon such matters.
(h) No Legal Impediment to Issuance. No action shall have been taken
and no statute, rule, regulation or order shall have been enacted, adopted or
issued by any federal, state or foreign governmental or regulatory authority
that would, as of the Closing Date or the Additional Closing Date, as the case
may be, prevent the issuance or sale of the Shares; and no injunction or order
of any federal, state or foreign court shall have been issued that would, as of
the Closing Date or the Additional Closing Date, as the case may be, prevent the
issuance or sale of the Shares.
(i) Good Standing. The Representatives shall have received on and as of
the Closing Date or the Additional Closing Date, as the case may be,
satisfactory evidence of the good standing of the Company and its significant
subsidiaries in their respective jurisdictions of organization and their good
standing as foreign entities in such other jurisdictions as the Representatives
may reasonably request, in each case in writing or any standard form of
telecommunication from the appropriate Governmental Authorities of such
jurisdictions.
(j) Listing of Shares. The Company shall have filed the Notification
Form: Listing of Additional Shares, and made such other filings required by the
rules of the Nasdaq National Market to be made with the Nasdaq National Market
in connection with the sale of the Shares by the Company hereunder and there
shall be no impediment to the trading of the Shares on the Nasdaq National
Market immediately following the Closing Date or Additional Closing Date, as the
case may be.
(k) Lock-up Agreements. The "lock-up" agreements, each substantially in
the form of Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions of
shares of Stock or certain other securities, delivered to you on or before the
date hereof, shall be in full force and effect on the Closing Date or Additional
Closing Date, as the case may be.
(l) IDT/Liberty Agreements. The IDT/Liberty Agreements shall have been
consummated and pursuant thereto, each of IDT and Liberty shall have purchased,
at the public offering price, 1,250,000 shares, subject to a maximum investment
of $10,000,000.
16
(m) Additional Documents. On or prior to the Closing Date or the
Additional Closing Date, as the case may be, the Company shall have furnished to
the Representatives such further certificates and documents as the
Representatives may reasonably request.
All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
6. Indemnification and Contribution.
(a) Indemnification of the Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter, its affiliates, directors and
officers and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages and liabilities (including,
without limitation, legal fees and other expenses incurred in connection with
any suit, action or proceeding or any claim asserted, as such fees and expenses
are incurred), joint or several, that arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) or any Preliminary Prospectus, or caused by any omission or alleged
omission to state therein 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 made, not misleading, except insofar as such
losses, claims, damages or liabilities arise out of, or are based upon, any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with any information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the
Representatives expressly for use therein, it being understood and agreed that
the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below.
(b) Indemnification of the Company. Each Underwriter agrees, severally
and not jointly, to indemnify and hold harmless the Company, its directors, its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the indemnity set forth in
paragraph (a) above, but only with respect to any losses, claims, damages or
liabilities that arise out of, or are based upon, any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with any information relating to such Underwriter furnished to the
Company in writing by such Underwriter through the Representatives expressly for
use in the Registration Statement and the Prospectus (or any amendment or
supplement thereto) or any Preliminary Prospectus, it being understood and
agreed upon that the only such information furnished by any Underwriter consists
of the following information in the Prospectus furnished on behalf of each
Underwriter: the concession and reallowance figures appearing in the fourth
paragraph under the caption "Underwriting", the information contained in the
7th, 8th, 9th and 14th paragraphs under the caption "Underwriting".
17
(c) Notice and Procedures. If any suit, action, proceeding (including
any governmental or regulatory investigation), claim or demand shall be brought
or asserted against any person in respect of which indemnification may be sought
pursuant to either paragraph (a) or (b) above, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnification may
be sought (the "Indemnifying Person") in writing; provided that the failure to
notify the Indemnifying Person shall not relieve it from any liability that it
may have under this Section 6 except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by such
failure; and provided, further, that the failure to notify the Indemnifying
Person shall not relieve it from any liability that it may have to an
Indemnified Person otherwise than under this Section 6. If any such proceeding
shall be brought or asserted against an Indemnified Person and it shall have
notified the Indemnifying Person thereof, the Indemnifying Person shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others entitled to indemnification pursuant to this
Section 6 that the Indemnifying Person may designate in such proceeding and
shall pay the fees and expenses of such counsel related to such proceeding, as
incurred. In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed to the contrary; (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person
shall have reasonably concluded, based on the written advice of counsel to the
Indemnified Person, that there may be legal defenses available to it that are
different from or in addition to those available to the Indemnifying Person; or
(iv) the named parties in any such proceeding (including any impleaded parties)
include both the Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood and
agreed that the Indemnifying Person shall not, in connection with any proceeding
or related proceeding in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Indemnified Persons, and that all such fees and expenses shall be paid or
reimbursed as they are incurred. Any such separate firm for any Underwriter, its
affiliates, directors and officers and any control persons of such Underwriter
shall be designated in writing by ▇.▇. ▇▇▇▇▇▇ Securities Inc. and any such
separate firm for the Company, its directors, its officers who signed the
Registration Statement and any control persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested that an Indemnifying Person reimburse the
Indemnified Person for fees and expenses of counsel as contemplated by this
paragraph, the Indemnifying Person shall be liable for any monetary settlement
of any proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by the Indemnifying Person of such
request and (ii) the Indemnifying Person shall not have reimbursed the
Indemnified Person in accordance with such request prior to the date of such
settlement. No Indemnifying Person shall, without the written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnification could have been sought hereunder by such Indemnified
Person, unless such settlement (x) includes an unconditional release of such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (y) does not include any statement as to or any admission of
fault, culpability or a failure to act by or on behalf of any Indemnified
Person.
18
(d) Contribution. If the indemnification provided for in paragraphs (a)
and (b) above is unavailable to an Indemnified Person or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Shares or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
but also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
respective proportions as the net proceeds (before deducting expenses) received
by the Company from the sale of the Shares and the total underwriting discounts
and commissions received by the Underwriters in connection therewith, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate offering price of the Shares. The relative fault of the Company on the
one hand and the Underwriters on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) Limitation on Liability. The Company and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
6 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an Indemnified Person as a result of the
losses, claims, damages and liabilities referred to in paragraph (d) above shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Person in connection with any such
action or claim. Notwithstanding the provisions of this Section 6, in no event
shall an Underwriter be required to contribute any amount in excess of the
amount by which the total underwriting discounts and commissions received by
such Underwriter with respect to the offering of the Shares 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 Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 6 are several
in proportion to their respective purchase obligations hereunder and not joint.
(f) Non-Exclusive Remedies. The remedies provided for in this Section 6
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any Indemnified Person at law or in equity.
19
7. Effectiveness of Agreement. This Agreement shall become effective
upon the later of (i) the execution and delivery hereof by the parties hereto
and (ii) receipt by the Company and the Representatives of notice of the
effectiveness of the Registration Statement (or, if applicable, any
post-effective amendment thereto).
8. Termination. This Agreement may be terminated in the absolute
discretion of the Representatives, by notice to the Company, if after the
execution and delivery of this Agreement and prior to the Closing Date or, in
the case of the Option Shares, prior to the Additional Closing Date trading
generally shall have been suspended or materially limited on or by any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade; (ii) trading of any
securities issued or guaranteed by the Company shall have been suspended on any
exchange or in any over-the-counter market; (iii) a general moratorium on
commercial banking activities shall have been declared by federal or New York
State authorities; or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis,
either within or outside the United States, that, in the judgment of the
Representatives, is material and adverse and makes it impracticable or
inadvisable to proceed with the offering, sale or delivery of the Shares on the
Closing Date or the Additional Closing Date, as the case may be, on the terms
and in the manner contemplated by this Agreement and the Prospectus.
9. Defaulting Underwriter. (a) If, on the Closing Date or the
Additional Closing Date, as the case may be, any Underwriter defaults on its
obligation to purchase the Shares that it has agreed to purchase hereunder on
such date, the non-defaulting Underwriters may in their discretion arrange for
the purchase of such Shares by other persons satisfactory to the Company on the
terms contained in this Agreement. If, within 36 hours after any such default by
any Underwriter, the non-defaulting Underwriters do not arrange for the purchase
of such Shares, then the Company shall be entitled to a further period of 36
hours within which to procure other persons satisfactory to the non-defaulting
Underwriters to purchase such Shares on such terms. If other persons become
obligated or agree to purchase the Shares of a defaulting Underwriter, either
the non-defaulting Underwriters or the Company may postpone the Closing Date or
the Additional Closing Date, as the case may be, for up to five full business
days in order to effect any changes that in the opinion of counsel for the
Company or counsel for the Underwriters may be necessary in the Registration
Statement and the Prospectus or in any other document or arrangement, and the
Company agrees to promptly prepare any amendment or supplement to the
Registration Statement and the Prospectus that effects any such changes. As used
in this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context otherwise requires, any person not listed in
Schedule 1 hereto that, pursuant to this Section 9, purchases Shares that a
defaulting Underwriter agreed but failed to purchase.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or the Additional
Closing Date, as the case may be, does not exceed one-eleventh of the aggregate
number of Shares to be purchased on such date, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of
Shares that such Underwriter agreed to purchase hereunder on such date plus such
Underwriter's pro rata share (based on the number of Shares that such
Underwriter agreed to purchase on such date) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made.
20
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or the Additional
Closing Date, as the case may be, exceeds one-eleventh of the aggregate amount
of Shares to be purchased on such date, or if the Company shall not exercise the
right described in paragraph (b) above, then this Agreement or, with respect to
any Additional Closing Date, the obligation of the Underwriters to purchase
Shares on the Additional Closing Date, as the case may be, shall terminate
without liability on the part of the non-defaulting Underwriters. Any
termination of this Agreement pursuant to this Section 9 shall be without
liability on the part of the Company, except that the Company will continue to
be liable for the payment of expenses as set forth in Section 10 hereof and
except that the provisions of Section 6 hereof shall not terminate and shall
remain in effect.
(d) Nothing contained herein shall relieve a defaulting Underwriter of
any liability it may have to the Company or any non-defaulting Underwriter for
damages caused by its default.
10. Payment of Expenses. (a) Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated
for any reason other than the default of the Underwriters, the Company will pay
or cause to be paid all costs and expenses incident to the performance of its
obligations hereunder, including without limitation, (i) the costs incident to
the authorization, issuance, sale, preparation and delivery of the Shares and
any taxes payable in that connection; (ii) the costs incident to the
preparation, printing and filing under the Securities Act of the Registration
Statement, the Preliminary Prospectus and the Prospectus (including all
exhibits, amendments and supplements thereto) and the distribution thereof;
(iii) the costs of reproducing and distributing each of the Transaction
Documents; (iv) the fees and expenses of the Company's counsel and independent
accountants; (v) the fees and expenses incurred in connection with the
registration or qualification and determination of eligibility for investment of
the Shares under the laws of such jurisdictions as the Representatives may
designate and the preparation, printing and distribution of a Blue Sky
Memorandum (including the related fees and expenses of counsel for the
Underwriters); (vi) the cost of preparing stock certificates; (vii) the costs
and charges of any transfer agent and any registrar; (viii) all expenses and
application fees incurred in connection with any filing with, and clearance of
the offering by, the National Association of Securities Dealers, Inc.; (ix) all
expenses incurred by the Company in connection with any "road show" presentation
to potential investors; and (x) all expenses and application fees related to the
listing of the Shares on the Nasdaq National Market.
(b) If (i) this Agreement is terminated pursuant to Section 8, (ii) the
Company for any reason fails to tender the Shares for delivery to the
Underwriters or (iii) the Underwriters decline to purchase the Shares for any
reason permitted under this Agreement, the Company agrees to reimburse the
Underwriters for all out-of-pocket costs and expenses (including the fees and
expenses of their counsel) reasonably incurred by the Underwriters in connection
with this Agreement and the offering contemplated hereby.
21
11. 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 the officers and directors and any controlling persons
referred to in Section 6 hereof. Nothing in this Agreement is intended or shall
be construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
No purchaser of Shares from any Underwriter shall be deemed to be a successor
merely by reason of such purchase.
12. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Underwriters
contained in this Agreement or made by or on behalf of the Company or the
Underwriters pursuant to this Agreement or any certificate delivered pursuant
hereto shall survive the delivery of and payment for the Shares and shall remain
in full force and effect, regardless of any termination of this Agreement or any
investigation made by or on behalf of the Company or the Underwriters.
13. Certain Defined Terms. For purposes of this Agreement, (a) except
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act; (b) the term "business day" means
any day other than a day on which banks are permitted or required to be closed
in New York City; and (c) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act .
14. Miscellaneous. (a) Authority of the Representatives. Any action by
the Underwriters hereunder may be taken by ▇.▇. ▇▇▇▇▇▇ Securities Inc. on behalf
of the Underwriters, and any such action taken by ▇.▇. ▇▇▇▇▇▇ Securities Inc.
shall be binding upon the Underwriters.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted and
confirmed by any standard form of telecommunication. Notices to the Underwriters
shall be given to the Representatives c/o ▇.▇. ▇▇▇▇▇▇ Securities Inc., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (fax: (▇▇▇) ▇▇▇-▇▇▇▇); Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇. Notices to the Company shall be given to it at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (fax: ▇▇▇-▇▇▇-▇▇▇▇); Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(d) Counterparts. This Agreement may be signed in counterparts (which
may include counterparts delivered by any standard form of telecommunication),
each of which shall be an original and all of which together shall constitute
one and the same instrument.
(e) Amendments or Waivers. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
(f) Headings. The headings herein are included for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
22
If the foregoing is in accordance with your understanding, please
indicate your acceptance of this Agreement by signing in the space provided
below.
Very truly yours,
NET2PHONE, INC.
By_______________________
Title:
Accepted: __________, 2003
▇.▇. ▇▇▇▇▇▇ SECURITIES INC.
For itself and on behalf of the
several Underwriters listed
in Schedule 1 hereto.
By___________________________
Authorized Signatory
▇▇▇▇▇▇▇▇▇ & COMPANY, INC.
For itself and on behalf of the
several Underwriters listed
in Schedule 1 hereto.
By___________________________
Authorized Signatory
23
Schedule 1
Underwriter Number of Shares
----------- ----------------
▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇▇▇▇ & Partners, L.P.
----------------
Total
24
Annex A
[Form of Opinion of Outside and Inside Counsel for the Company]
(i) The Registration Statement was declared effective under the
Securities Act as of the date and time specified in such opinion; the Prospectus
was filed with the Commission pursuant to the subparagraph of Rule 424(b) under
the Securities Act specified in such opinion on the date specified therein; and
no order suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose is pending or, to the best knowledge
of such counsel, threatened by the Commission.
(ii) The Registration Statement and the Prospectus (other than the
financial statements and related schedules therein, as to which such counsel
need express no opinion) complied as of the effective date thereof and as of the
effective date of any amendment thereto, complied as of the date of the
Underwriting Agreement and comply as to form in all material respects with the
requirements of the Securities Act. The information set forth in the Prospectus
under the captions "Certain relationships and related party transactions,"
"Management and directors", "Executive compensation" and "Beneficial ownership"
comply as to form in all material respects with the applicable requirements of
the Securities Act as if such information was set forth in a prospectus included
in a registration statement on Form S-1.
(iii) The Company and each of its significant subsidiaries have been
duly organized and are validly existing and in good standing under the laws of
their respective jurisdictions of organization, are duly qualified to do
business and are in good standing in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective businesses
requires such qualification, and have all power and authority necessary to own
or hold their respective properties and to conduct the businesses in which they
are engaged, as described in the Prospectus, except where the failure to be so
qualified or have such power or authority would not, individually or in the
aggregate, have a Material Adverse Effect.
(iv) The Company has an authorized capitalization as set forth in the
Prospectus under the heading "Capitalization"; all the outstanding shares of
capital stock of the Company have been duly and validly authorized and issued
and, based upon such counsel's review of (A) the Company's audited financial
statements, on which he has no reason to believe he is not justified in relying,
and (B) such other matters on which he believes it is necessary to rely, such
shares are fully paid and non-assessable; the capital stock of the Company
conforms in all material respects to the description thereof contained in the
Registration Statement and the Prospectus; and all the outstanding shares of
capital stock or other equity interests of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
(except, in the case of any foreign subsidiary, for directors' qualifying
shares).
(v) The Company has full right, power and authority to execute and
deliver each of the Transaction Documents and to perform its obligations
thereunder; and all action required to be taken for the due and proper
authorization, execution and delivery of each of the Transaction Documents and
the consummation of the transactions contemplated thereby have been duly and
validly taken.
25
(vi) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(vii) Each of the IDT/Liberty Purchase Agreements and the Memorandum of
Understanding, dated October 29, 2003, by and between the Company and IDT, has
been duly authorized, executed and delivered by the Company and constitutes a
valid and legally binding agreement of each of the Company enforceable against
the Company in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by equitable principles relating to
enforceability.
(viii) The Shares to be issued and sold by the Company hereunder have
been duly authorized, and when delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable and the issuance of the Shares is not subject to any
preemptive or similar rights.
(ix) None of the Company, nor any of its subsidiaries is (i) in
violation of its charter or by-laws or similar organizational documents; (ii) in
default, and no event has occurred that, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its property or assets is subject and that
is filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended July 31, 2003; or (iii) to such counsel's knowledge after reasonable
inquiry, except as described in the Prospectus, in violation of any law or
statute or any judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority, except for (x) in the case of clauses (ii)
and (iii) above, any such default or violation that would not, individually or
in the aggregate, have a Material Adverse Effect and (y) in the case of clause
(i) above, any such violation by a subsidiary that is not a significant
subsidiary that would not, individually or in the aggregate, have a Material
Adverse Effect.
(x) To such counsel's knowledge after reasonable inquiry, except as
would not, individually or in the aggregate, have a Material Adverse Effect,
none of the Company, nor any of its subsidiaries is in default, and no event has
occurred that, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound or to
which any of its property or assets is subject, including, but not limited to,
any such indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument that is filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended July 31, 2003.
26
(xi) The execution, delivery and performance by the Company of each of
the Transaction Documents, the issuance and sale of the Shares being delivered
on the Closing Date or the Additional Closing Date, as the case may be, and
compliance by the Company with the terms of, and the consummation of the
transactions contemplated by, the Transaction Documents will not (i) conflict
with or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its subsidiaries is
subject and that is filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended July 31, 2003, (ii) result in any violation of the
provisions of the charter or by-laws or similar organizational documents of the
Company or any of its subsidiaries or (iii) result in the violation of any law,
statute or regulation of any governmental or regulatory authority or, to such
counsel's knowledge after reasonable investigation, any judgment or order of any
court or arbitrator or governmental or regulatory authority except, in the case
of clauses (i) and (iii) above, for such conflict, breach or violation that
would not, individually or in the aggregate, have a Material Adverse Effect.
(xii) To such counsel's knowledge after reasonable inquiry, except as
would not, individually or in the aggregate, have a Material Adverse Effect, the
execution, delivery and performance by the Company of each of the Transaction
Documents, the issuance and sale of the Shares being delivered on the Closing
Date or the Additional Closing Date, as the case may be, and compliance by the
Company with the terms of, and the consummation of the transactions contemplated
by, the Transaction Documents will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of its subsidiaries pursuant to,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject,
including, but not limited to, any such indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument that is filed as an exhibit to the
Company's Annual Report on Form 10-K for the year ended July 31, 2003.
(xiii) No consent, approval, authorization, order, registration or
qualification of or with any governmental or regulatory authority or, to the
knowledge of such counsel after reasonable inquiry, any court or arbitrator, is
required for the execution, delivery and performance by the Company of each of
the Transaction Documents, the issuance and sale of the Shares being delivered
on the Closing Date or the Additional Closing Date, as the case may be, and
compliance by the Company with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for the
registration of the Shares under the Securities Act and such consents,
approvals, authorizations, orders and registrations or qualifications as may be
required under applicable state securities laws in connection with the purchase
and distribution of the Shares by the Underwriters.
(xiv) To the knowledge of such counsel after reasonable inquiry, except
as described in the Prospectus, there are no legal, governmental or regulatory
investigations, actions, suits or proceedings pending to which the Company or
any of its subsidiaries is or may be a party or to which any property of the
Company or any of its subsidiaries is or is likely to be the subject which,
individually or in the aggregate, if determined adversely to the Company or any
of its subsidiaries, could reasonably be expected to have a Material Adverse
Effect; and to the knowledge of such counsel after reasonable inquiry, except as
described in the Prospectus, no such investigations, actions, suits or
proceedings are threatened or contemplated by any governmental or regulatory
authority or threatened by others.
27
(xv) The descriptions in the Prospectus of (a) statutes, legal,
governmental and regulatory proceedings and contracts and other documents and
(b) the transactions and agreements described in the Prospectus under the
captions "Certain relationships and related party transactions," "Management's
discussion and analysis of financial condition and results of
operations--Related party transactions" and "Executive compensation" are
complete and accurate in all material respects; the statements in the Prospectus
under the heading "Business-Regulation," to the extent that they constitute
summaries of matters of law or regulation or legal conclusions, fairly summarize
the matters described therein in all material respects; and, to the best
knowledge of such counsel, (A) there are no current or pending legal,
governmental or regulatory actions, suits or proceedings that are required under
the Securities Act to be described in the Prospectus and that are not so
described and (B) to the knowledge of such counsel after reasonable inquiry,
there are no statutes, regulations or contracts and other documents that are
required under the Securities Act to be filed as exhibits to the Registration
Statement or described in the Prospectus and that have not been so filed or
described.
(xvi) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be required to register as an "investment company" or
an entity "controlled" by an "investment company" within the meaning of the
Investment Company Act.
(xvii) The documents incorporated by reference in the Prospectus or any
further amendment or supplement thereto made by the Company prior to the Closing
Date or the Additional Closing Date (the "Incorporated Documents"), as the case
may be, (other than the financial statements and related schedules therein, as
to which such counsel need express no opinion), when they became effective or
were filed with the Commission, as the case may be, complied as to form in all
material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission thereunder.
(xviii) Each of the Company and its subsidiaries owns, possesses or has
obtained all licenses, permits, certificates, consents, orders, approvals and
other authorizations from, and has made all declarations and filings with, all
Governmental Authorities (including foreign regulatory agencies), all
self-regulatory organizations and all courts and other tribunals, domestic or
foreign, necessary to own or lease, as the case may be, and to operate its
properties and to carry on its business as described in the Registration
Statement and the Prospectus, except where the failure to possess or make the
same would not, individually or in the aggregate, have a Material Adverse
Effect, and neither the Company nor any such subsidiary has received any actual
notice of any proceeding relating to revocation or modification of any such
license, permit, certificate, consent, order, approval or other authorization,
except as described in the Registration Statement and the Prospectus; and each
of the Company and its subsidiaries is in material compliance with all laws and
regulations relating to the conduct of its business as described in the
Registration Statement.
28
(xix) To the knowledge of such counsel after reasonable inquiry, each
of the Company and its subsidiaries owns, possesses or has the right to use the
Intellectual Property employed by it in connection with the business conducted
by it as of the date hereof.
(xx) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as described or referred to in the Prospectus or such as
do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, existing and
enforceable leases with such exceptions as are not material and to not interfere
with the use made or proposed to be made of such property and buildings by the
Company or its subsidiaries.
(xxi) Each of the Company and its subsidiaries is in compliance with
all Environmental Laws, except, in each case, where noncompliance, individually
or in the aggregate, would not have a material adverse effect on the Company and
its subsidiaries taken as a whole; there are no legal or governmental
proceedings pending, or to the knowledge of such counsel, threatened against or
affecting the Company or any of its subsidiaries under any Environmental Law
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(xxii) Other than as described in the Prospectus, each of the Company
and its subsidiaries (i) are in compliance with all Telecommunications Laws, and
(ii) have obtained all Telecommunications Permits necessary for the Company and
its subsidiaries to conduct their business as described in the Prospectus,
except, in each case, as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
(xxiii) In rendering such opinions, such counsel may rely as to matters
of fact on certificates of responsible officers of the Company and public
officials that are furnished to the Underwriters.
Such counsel shall also state that they have participated in
conferences with representatives of the Company and with representatives of its
independent accountants and counsel at which conferences the contents of the
Registration Statement and the Prospectus and any amendment and supplement
thereto and related matters were discussed and, although such counsel assume no
responsibility for the accuracy, completeness or fairness of the Registration
Statement, the Prospectus and any amendment or supplement thereto (except as
expressly provided above), nothing has come to the attention of such counsel to
cause such counsel to believe that the Registration Statement, at the time of
its effective date (including the information, if any, deemed pursuant to Rule
430A to be part of the Registration Statement at the time of effectiveness),
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus or any amendment or supplement thereto as
of its date and the Closing Date contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading
(other than the financial statements and other financial information contained
therein, as to which such counsel need express no belief).
29
Such counsel shall also state that they have participated in
conferences with representatives of the Company and with representatives of its
independent accountants and counsel at which conferences the contents of the
Incorporated Documents were discussed and, although such counsel assume no
responsibility for the accuracy, completeness or fairness of the Incorporated
Documents, nothing has come to the attention of such counsel to cause such
counsel to believe that the Incorporated Documents, at the time such
Incorporated Documents became effective or were filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
the light of the circumstances under which they were made (other than the
financial statements and other financial information contained therein, as to
which such counsel need express no belief).
The opinion of ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇ described above shall be
rendered to the Underwriters at the request of the Company and shall so state
therein.
30
Exhibit A
FORM OF LOCK-UP AGREEMENT
November [___], 2003
▇.▇. ▇▇▇▇▇▇ SECURITIES INC.
▇▇▇▇▇▇▇▇▇ & COMPANY, INC.
As Representatives of the
several Underwriters listed
in Schedule 1 to the Underwriting
Agreement referred to below
c/o ▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Net2Phone, Inc. --- Public Offering
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the several
Underwriters, propose to enter into an Underwriting Agreement (the "Underwriting
Agreement") with Net2Phone, Inc., a Delaware corporation (the "Company"),
providing for the public offering (the "Public Offering") by the several
Underwriters named in Schedule 1 to the Underwriting Agreement (the
"Underwriters"), of Common Stock of the Company (the "Securities"). Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Underwriting Agreement.
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Securities, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of ▇.▇. ▇▇▇▇▇▇ Securities Inc. on
behalf of the Underwriters, the undersigned will not, during the period ending
90 days after the date of the prospectus relating to the Public Offering (the
"Prospectus"), (1) offer, pledge, announce the intention to sell, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock,
$0.01 per share par value, of the Company (the "Common Stock") or any securities
convertible into or exercisable or exchangeable for Common Stock (including
without limitation, Common Stock which may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations of the Securities
and Exchange Commission and securities which may be issued upon exercise of a
stock option or warrant) or (2) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. In addition, the undersigned agrees that, without the prior
written consent of ▇.▇. ▇▇▇▇▇▇ Securities Inc. on behalf of the Underwriters, it
will not, during the period ending 90 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.
31
In furtherance of the foregoing, the Company, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Letter Agreement.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Letter Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement does
not become effective, or if the Underwriting Agreement (other than the
provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Common Stock to be sold thereunder, the
undersigned shall be released form all obligations under this Letter Agreement.
The undersigned understands that the Underwriters are entering into the
Underwriting Agreement and proceeding with the Public Offering in reliance upon
this Letter Agreement.
This lock-up agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflict of laws
principles thereof.
Very truly yours,
[NAME OF STOCKHOLDER]
By: ___________________________________
Name:
Title: