Exhibit 1.1
Underwriting Agreement
March , 2001
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated
▇▇ ▇▇▇▇▇ Securities Corporation
As Representatives of the several Underwriters
c/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Introductory. Verisity Ltd., an Israeli corporation (the "Company"),
proposes to issue and sell to the several underwriters named in Schedule A
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attached hereto (the "Underwriters") an aggregate of 3,335,000 shares (the "Firm
Shares") of its Ordinary Shares, par value new Israeli shekels ("NIS") 0.01 per
share (the "Ordinary Shares"). In addition, the Company has granted to the
Underwriters an option to purchase up to an additional 500,250 Ordinary Shares
(the "Option Shares") as provided in Section 2. The Firm Shares and, if and to
the extent such option is exercised, the Option Shares are collectively called
the "Shares." ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. ("▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇▇▇▇
Incorporated and ▇▇ ▇▇▇▇▇ Securities Corporation have agreed to act as
representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the Shares.
As a part of the offering contemplated by this Underwriting Agreement
(this "Agreement"), the Representatives have agreed to reserve out of the Shares
set forth opposite their names on Schedule A, up to 167,000 shares, for sale to
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the Company's employees, officers, and directors and other parties associated
with the Company (collectively, "Participants"), as set forth in the Prospectus
under the heading "Underwriting" (the "Directed Share Program"). The Shares to
be sold by the Representatives pursuant to the Directed Share Program (the
"Directed Shares") will be sold by the Representatives pursuant to this
Agreement at the public offering price. Any Directed Shares not orally
confirmed for purchase by any Participants as of 7:00 a.m. New York time on the
first day trading of the Shares commences on the Nasdaq National Market will be
offered to the public by the Representatives as set forth in the Prospectus.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-45440), as amended, which contains a form of prospectus, subject to
completion, to be used in connection with the public offering and sale of the
Shares. Each such prospectus, subject to completion, used in connection with
such public offering is called a "preliminary prospectus." Such registration
statement, as amended, including the
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financial statements, exhibits and schedules thereto, in the form in which it
was declared effective by the Commission under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), including any information deemed to be a part thereof at the
time of effectiveness pursuant to Rule 430A under the Securities Act, is called
the "Registration Statement." Any registration statement filed by the Company
pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b)
Registration Statement," and from and after the date and time of filing of the
Rule 462(b) Registration Statement the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. Such prospectus, in the form
first used by the Underwriters to confirm sales of the Shares, is called the
"Prospectus" which term shall be deemed to include the "electronic Prospectus"
provided by the Company for use in connection with the offering of the Shares as
contemplated by Section 3(e) of this Agreement. All references in this Agreement
to the Registration Statement, the Rule 462(b) Registration Statement, a
preliminary prospectus, the Prospectus, or any amendments or supplements to any
of the foregoing, shall include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
("▇▇▇▇▇").
The Company and Verisity Design, Inc. hereby confirm their respective
agreements with the Underwriters as follows:
Section 1. Representations and Warranties of the Company.
A. Representations and Warranties of the Company. The Company and
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Verisity Design, Inc. hereby jointly and severally represent, warrant and
covenant to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied, to the
Commission's satisfaction, with all requests of the Commission for additional or
supplemental information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to ▇▇▇▇▇ (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, 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 to make the statements therein not misleading. Each preliminary
prospectus, as of its date, and the Prospectus, as amended or supplemented, as
of its date and at all subsequent times through the 30th day after the date
hereof, did not and will not contain 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 under which they were made, not misleading.
The representations and warranties set
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forth in the two immediately preceding sentences do not apply to statements in
or omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
the Representatives expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives one complete conformed copy of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Representatives have reasonably
requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the later of the Second Closing
Date (as defined below) and the completion of the Underwriters' distribution of
the Shares, any offering material in connection with the offering and sale of
the Shares other than a preliminary prospectus, the Prospectus or the
Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Shares. The Shares to be issued and sold by the
Company have been duly authorized for issuance and sale pursuant to this
Agreement and, when issued and delivered by the Company against payment therefor
as provided by this Agreement, will be validly issued, fully paid and non-
assessable and the issuance of such Shares will not be subject to any preemptive
or similar rights.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Since the respective dates as of which
information is given in the Prospectus: (i) there has been no material adverse
change, or any development that could reasonably be expected to result in a
material adverse change, in the condition, financial or otherwise, or in the
earnings, business or operations, whether or not arising from transactions in
the ordinary course of business, of the Company and its subsidiaries, considered
as one entity (any such change or effect, where the context so requires, is
called a "Material Adverse Change" or a "Material Adverse Effect"); (ii) the
Company and its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not
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in the ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except for
dividends paid to the Company or other subsidiaries, any of its subsidiaries on
any class of capital stock or repurchase or redemption by the Company or any of
its subsidiaries of any class of capital stock.
(h) Independent Accountants. Ernst & Young LLP, who have expressed their
opinion with respect to the financial statements (which term as used in this
Agreement includes the related notes thereto) and supporting schedules filed
with the Commission as a part of the Registration Statement and included in the
Prospectus, are independent public or certified public accountants as required
by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its subsidiaries as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. Any supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein. Such financial statements and supporting
schedules have been prepared in conformity with generally accepted accounting
principles as applied in the United States applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial data set
forth in the Prospectus under the captions "Summary--Summary Consolidated
Financial Data," "Selected Consolidated Financial Data" and "Capitalization"
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration Statement. The
pro forma financial information of the Company and its subsidiaries included
under the caption "Summary - Summary Consolidated Financial Data" and
"Capitalization" and elsewhere in the Prospectus and in the Registration
Statement present fairly the information contained therein, have been prepared
in accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly presented on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions and circumstances referred to therein. No other pro forma
financial information is required to be included in the Registration Statement
pursuant to Regulation S-X.
(j) Company's Accounting System. The Company and each of its subsidiaries
maintain a system of accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit the preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States applied on a
consistent basis and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed in Exhibit 21.1 to the Registration Statement.
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(l) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its subsidiaries has been duly organized and is validly
existing as a corporation or limited liability company, as the case may be, in
good standing under the laws of the jurisdiction in which it is organized with
full corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification except where the failure to
obtain such foreign qualifications and good standings would not have a Material
Adverse Effect.
(m) Capitalization of the Subsidiaries. All of the outstanding capital
shares of each subsidiary have been duly and validly authorized and issued and
are fully paid and non-assessable, and, except as otherwise set forth in the
Prospectus, all outstanding capital shares of the subsidiaries are owned by the
Company either directly or through wholly owned subsidiaries free and clear of
any security interest, claim, lien or encumbrance.
(n) No Prohibition on Subsidiaries from Paying Dividends or Making Other
Distributions. No subsidiary of the Company is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital shares, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(o) Capitalization and Other Capital Share Matters. The authorized,
issued and outstanding capital shares of the Company are as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Ordinary Shares (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Ordinary Shares have been duly authorized and validly
issued, are fully paid and non-assessable and have been issued in compliance
with United States federal and state and Israeli securities laws, except as
disclosed in the Prospectus under the caption "Management--1996 U.S. Stock
Option Plan." None of the outstanding Ordinary Shares were issued in violation
of any preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company. There are no authorized or
outstanding options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital shares of the Company or any of its
subsidiaries other than those accurately described in the Prospectus. The
description of the Company's share option, share bonus and other share incentive
plans or arrangements, and the options or other rights granted thereunder, as
set forth in the Prospectus accurately and fairly describes such plans,
arrangements, options and rights.
(p) Stock Exchange Listing. The Shares have been approved for inclusion
in the Nasdaq National Market, subject only to official notice of issuance.
(q) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or
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regulatory body is required in connection with the transactions contemplated
herein, except such as have been obtained or made under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the laws of
Israel (including, without limitation, from the Office of the Chief Scientist of
the Israeli Ministry of Industry and Trade (the "Office of the Chief
Scientist")) and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, Inc. (together with its
regulatory subsidiary, NASD Regulation, Inc., the "NASD"), and (iii) by the
federal and provincial laws of Canada.
(r) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Shares nor the consummation of any of the other
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or asset of the Company or any of its
subsidiaries pursuant to, (i) the articles of association, charter or by-laws of
the Company or any of its subsidiaries, (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to which the
Company or any of its subsidiaries is a party or bound or to which its or their
property is subject or (iii) any statute, law, rule, regulation, judgment, order
or decree applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its subsidiaries or any
of its or their properties.
(s) No Defaults or Violations. Neither the Company nor any of its
subsidiaries is in violation or default of (i) any provision of its articles of
association, charter or by-laws, (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which it is a party
or bound or to which its property is subject or (iii) any statute, law, rule,
regulation, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or such subsidiary or any of its properties, as
applicable, except any such violation or default which would not, singly or in
the aggregate, result in a Material Adverse Change except as otherwise disclosed
in the Prospectus.
(t) No Actions, Suits or Proceedings. No action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries or its or their property is
pending or, to the best knowledge of the Company, threatened that (i) could
reasonably be expected to have a Material Adverse Effect on the performance of
this Agreement or the consummation of any of the transactions contemplated
hereby or (ii) could reasonably be expected to result in a Material Adverse
Effect.
(u) All Necessary Permits, Etc. The Company and each of its subsidiaries
possess such valid and current certificates, authorizations or permits issued by
the appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct their respective businesses, and neither the Company nor
any of its subsidiaries has received any notice of proceedings relating to the
revocation or modification of, or non-compliance with, any such certificate,
authorization or permit which, singly or in the
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aggregate, if the subject of an unfavorable decision, ruling or finding, could
result in a Material Adverse Change.
(v) Title to Properties. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as owned in
the financial statements referred to in Section 1(h) above (or elsewhere in the
Prospectus), in each case free and clear of any security interest, mortgage,
lien, encumbrance, equity, claim and other defect, except such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company or such subsidiary. The real property, improvements, equipment and
personal property held under lease by the Company or any of its subsidiaries are
held under valid and enforceable leases, with such exceptions as are not
material and do not materially interfere with the use made or proposed to be
made of such real property, improvements, equipment or personal property by the
Company or such subsidiary.
(w) Tax Law Compliance. The Company and each of its subsidiaries have
filed all necessary U.S. federal and state, all necessary Israeli and all other
necessary foreign income and franchise tax returns and have paid all taxes
required to be paid by any of them and, if due and payable, any related or
similar assessment, fine or penalty levied against any of them. The Company has
made adequate charges, accruals and reserves in the applicable financial
statements referred to in Section 1(h) above in respect of all United States
federal and state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries has not been
finally determined. The Company is not aware of any tax deficiency that has been
or might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(x) Intellectual Property Rights. Each of the Company and each of its
subsidiaries owns or possesses adequate rights to use all patents, patent rights
or licenses, inventions, collaborative research agreements, trade secrets, know-
how, trademarks, service marks, trade names and copyrights which are necessary
to conduct its businesses as described in the Registration Statement and the
Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Material Adverse Change. There is no
claim being made against the Company regarding patents, patent rights or
licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company and its
subsidiaries do not in the conduct of their business as now or proposed to be
conducted as described in the Prospectus infringe or conflict with any right or
patent of any third party, or any discovery, invention, product or process which
is the subject of a patent application filed by any third party, known to the
Company or any of
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its subsidiaries, which such infringement or conflict is reasonably likely to
result in a Material Adverse Change.
(y) Year 2000. There are no Year 2000 issues related to the Company, or
any of its subsidiaries, that (i) are of a character required to be described or
referred to in the Registration Statement or the Prospectus by the Securities
Act which have not been accurately described in the Registration Statement or
the Prospectus or (ii) might reasonably be expected to result in any Material
Adverse Change or that might materially affect their properties, assets or
rights.
(z) No Transfer Taxes or Other Fees. There are no transfer taxes or other
similar fees or charges under U.S. Federal law or the laws of any U.S. state, or
any political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares, except for such taxes, fees or charges as would not result in a
Material Adverse Change. Except for Israeli stamp duty, there are no taxes or
other similar fees, duties or charges required to be paid to any Israeli taxing
authority in connection with the execution and delivery of this Agreement or the
issuance, sale and delivery by the Company of the Shares in the manner
contemplated in this Agreement.
(aa) Company Not an "Investment Company." The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and immediately after
receipt of payment for the Shares will not be, an "investment company" or an
entity "controlled" by an "investment company" within the meaning of the
Investment Company Act and will conduct its business in a manner so that it will
not become subject to the Investment Company Act.
(bb) Company Not a "Passive Foreign Investment Company." The Company does
not believe that, upon the consummation of the transactions contemplated hereby
and the application of the proceeds as described in the Prospectus under the
caption "Use of Proceeds," it will become a passive foreign investment company
(a "PFIC") as defined in Section 1296 of the Code. The Company shall use its
best efforts to avoid becoming a PFIC.
(cc) Insurance. The Company and each of its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as the Company, after
consultation with its insurance brokers, believes to be reasonable, including,
but not limited to, policies covering real and personal property owned or leased
by the Company and its subsidiaries against theft, damage, destruction, acts of
vandalism and earthquakes, general liability and directors and officers
liability. The Company has no reason to believe that it or any subsidiary will
not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar institutions
as may be necessary or appropriate to conduct its business as now conducted and
at a cost that would not result in a Material Adverse Change. Neither the
Company nor any of its subsidiaries has been denied any insurance coverage which
it has sought or for which it has applied.
(dd) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is
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imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, subcontractors,
authorized dealers or international distributors that might be expected to
result in a Material Adverse Change.
(ee) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Ordinary Shares to facilitate the sale or resale of the Shares.
(ff) Lock-Up Agreements. Each officer and director of the Company, each
beneficial owner of one or more percent of the outstanding issued share capital
of the Company and each shareholder having registration rights has agreed to
sign an agreement substantially in the form attached hereto as Exhibit A (the
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"Lock-Up Agreements"). The Company has provided to counsel for the Underwriters
a complete and accurate list of all securityholders of the Company and the
number and type of securities held by each securityholder. The Company has
provided to counsel for the Underwriters true, accurate and complete copies of
all of the Lock-Up Agreements presently in effect or effected hereby. The
Company hereby represents and warrants and agrees that during the 180 days
following the date of the Prospectus (the "Lock-Up Period"), the Company will
not (i) release any of its officers, directors or other securityholders from any
market stand-off agreements currently existing or hereafter effected or (ii)
consent to the removal of any transfer-restrictive legend from any certificate
representing any Ordinary Shares, in each case without the prior written consent
of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The Company has issued irrevocable instructions to its
transfer agent and registrar not to permit the transfer of any Ordinary Shares
outstanding on the date hereof during the Lock-Up Period, except with the
written consent of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(gg) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any of its subsidiaries or
any other person required to be described in the Prospectus which have not been
described as required.
(hh) No Unlawful Contributions or Other Payments. Neither the Company,
any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(ii) Environmental Laws. (i) The Company is in compliance with all rules,
laws and regulations relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company is not currently aware that it
will be required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability
9
Act of 1980, as amended (42 U.S.C. (S) 9601, et seq.), or otherwise designated
-- ---
as a contaminated site under applicable state or local law.
(jj) ERISA Compliance . The Company and each of its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company, its subsidiaries or their "ERISA Affiliates" (as defined below) and
intended to be qualified under Section 401(a) of the Code (as defined herein)
are in compliance in all material respects with ERISA. "ERISA Affiliate" means,
with respect to the Company or a subsidiary, any member of any group of
organizations described in Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company or such subsidiary
is a member. No "reportable event" (as defined under ERISA) has occurred or is
reasonably expected to occur with respect to any "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates. No "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates, if such "employee
benefit plan" were terminated, would have any "amount of unfunded benefit
liabilities" (as defined under ERISA). Neither the Company, its subsidiaries
nor any of their ERISA Affiliates has incurred or reasonably expects to incur
any liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained by
the Company, its subsidiaries or any of their ERISA Affiliates that is intended
to be qualified under Section 401(a) of the Code is so qualified and nothing has
occurred, whether by action or failure to act, which would cause the loss of
such qualification.
(kk) Consents Required in Connection with the Directed Share Program. No
consent, approval, authorization or order of, or qualification with, any
governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered.
(ll) No Improper Influence in Connection with the Directed Share Program.
The Company has not offered, or caused the Representatives to offer, Shares to
any person pursuant to the Directed Share Program with the specific intent to
unlawfully influence (i) a customer or supplier of the Company to alter the
customer's or supplier's level or type of business with the Company or (ii) a
trade journalist or publication to write or publish favorable information about
the Company or its products.
(mm) Israeli Securities Law Exemption. The offer and sale of the Shares is
exempt from the prospectus requirements under the Israel Securities Law, 5728-
1968, and the regulations promulgated thereunder, provided however, that (i) the
offering and sale in Israel of Shares as described in the Prospectus under the
Directed Shares Program is made pursuant to all of the terms and conditions of
the exemption granted to the Company by the Israeli securities authority, and
(ii) in the event of any other offering or sale of Shares in Israel (if any),
such offering shall be made in compliance with all requirements of the Israeli
Securities Law, including requirements relating to the exemptions contained
therein.
(nn) Approved Enterprise Status. The Company has satisfied and will
continue to satisfy all conditions and requirements of (i) the instruments of
approval
10
entitling it or any of its operations to the status of "Approved Enterprise"
under Israeli Law for the Encouragement of Capital Investments, 1959, and (ii)
the applicable Israeli laws and regulations. All information supplied by the
Company with respect to its applications for Approved Enterprise status was
true, correct and complete in all material respects when supplied to the
appropriate authorities.
(oo) Office of Chief Scientist. The Company has satisfied and will
continue to satisfy all conditions and requirements of the instruments of
approval granted to it by the Office of Chief Scientist and any applicable laws
and regulations including the Law for the Encouragement of Industrial Research
and Development, 1984, with respect to any research and development grants given
to it by such office, and is in full compliance with the repayment of all
royalties, interest and penalties due under such laws and regulations. All
information supplied by the Company with respect to such applications was true,
correct and complete in all material respects when supplied to the appropriate
authorities.
(pp) Encryption. The Company does not require any license from the Israeli
Ministry of Defense in order to design, develop or manufacture its current or
contemplated products, including, without limitation, any license for encryption
technology.
(qq) Other Investment Banks. The Company has not entered into any
agreement with any other investment bank or financial advisor respecting
transactions contemplated by this Underwriting Agreement, except as disclosed in
writing to counsel to the Underwriters.
Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
Section 2. Purchase, Sale and Delivery of the Shares.
(a) The Firm Shares. The Company agrees to issue and sell to the several
Underwriters the Firm Shares upon the terms herein set forth. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Shares set forth opposite their names on Schedule A. The purchase price
----------
per Firm Share to be paid by the several Underwriters to the Company shall be
$[___] per share.
(b) The First Closing Date. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made by the Company and the
Representatives at 6:00 a.m. San Francisco time, at the offices of Howard, Rice,
Nemerovski, Canady, ▇▇▇▇ & ▇▇▇▇▇▇, A Professional Corporation, Three ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ (or at such other place and time as may be
agreed upon among the Representatives and the Company), (i) on the third (3rd)
full business day following the first day that the Shares are traded on the
Nasdaq National Market, (ii) if this Agreement is executed and delivered after
1:30 P.M., San Francisco time, then on the fourth (4th) full business day
following the day that this Agreement is executed and delivered or (iii) at such
other time and date not later than seven (7) full business days
11
following the first day that the Shares are traded on the Nasdaq National Market
as the Representatives and the Company may determine (or at such time and date
to which payment and delivery shall have been postponed pursuant to Section 8
hereof), such time and date of payment and delivery being herein called the
"First Closing Date"; provided, however, that if the Company has not made
-------- --------
available to the Representatives copies of the Prospectus within the time
provided in Section 2(g) and 3(e) hereof, the Representatives may, in their sole
discretion, postpone the First Closing Date until no later than two (2) full
business days following delivery of copies of the Prospectus to the
Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the basis
of the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not jointly, up
to an aggregate of 500,250 Option Shares from the Company at the purchase price
per share to be paid by the Underwriters for the Firm Shares. The option granted
hereunder is for use by the Underwriters solely for the purpose of covering any
over-allotments made in connection with the sale and distribution of the Firm
Shares. The option granted hereunder may be exercised at any time upon notice by
the Representatives to the Company, which notice may be given at any time within
thirty (30) days from the date of this Agreement. The time and date of delivery
of the Option Shares, if subsequent to the First Closing Date, is called the
"Second Closing Date" and shall be determined by the Representatives and shall
not be earlier than three nor later than five (5) full business days after
delivery of such notice of exercise. If any Option Shares are to be purchased,
each Underwriter agrees, severally and not jointly, to purchase the number of
Option Shares (subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on Schedule A opposite the name of such Underwriter bears to the total number of
----------
Firm Shares. The Representatives may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the Company.
(d) Public Offering of the Shares. The Representatives hereby advise the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective by the Commission as the Representatives, in their sole
judgment, have determined is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made on the
First Closing Date (and, if applicable, on the Second Closing Date) by wire
transfer in immediately-available funds to the order of the Company.
It is understood that the Representatives have been authorized, for
their own accounts and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually and not as a Representative of the
Underwriters, may (but shall not be obligated to) make payment for any Shares to
be purchased by any Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but
12
any such payment shall not relieve such Underwriter from any of its obligations
under this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives, for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company
shall also deliver, or cause to be delivered a credit representing the Option
Shares the Underwriters have agreed to purchase at the First Closing Date (or
the Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00 noon
New York Time on the second (2nd) business day following the date the Shares are
released by the Underwriters for sale to the public, the Company shall deliver
or cause to be delivered copies of the Prospectus in such quantities and at such
places as the Representatives shall request.
Section 3. Covenants of the Company.
The Company further covenants and agrees with each Underwriter as
follows:
(a) Registration Statement Matters. The Company will (i) use its
reasonable best efforts to cause a registration statement on Form 8-A (the "Form
8-A Registration Statement"), as required by the Exchange Act, to become
effective simultaneously with the Registration Statement, (ii) use its best
efforts to cause the Registration Statement to become effective or, if the
procedure in Rule 430A of the Securities Act is followed, to prepare and timely
file with the Commission under Rule 424(b) promulgated under the Securities Act
a prospectus in a form approved by the Representatives containing information
previously omitted at the time of the effectiveness of the Registration
Statement in reliance on Rule 430A of the Securities Act and (iii) not file any
amendment to the Registration Statement or supplement to the Prospectus of which
the Representatives shall not previously have been advised and furnished with a
copy or to which the Representatives shall have reasonably objected in writing
or which is not in compliance with the Securities Act. If the Company elects to
rely on Rule 462(b) promulgated under the Securities Act, the Company shall file
a Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) promulgated under the Securities Act prior to the time confirmations are
sent or given, as specified by Rule 462(b)(2) promulgated under the Securities
Act, and shall pay the applicable fees in accordance with Rule 111 promulgated
under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any post-
effective amendment thereto shall have become effective, (ii) of receipt of any
comments from the
13
Commission, (iii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any additional
information and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or of the institution of any proceedings for that purpose. The
Company will use its reasonable best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus and to obtain as
soon as possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided that the
--------
Company shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. The Company will comply with the Securities Act and the Exchange Act,
and the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Representatives or counsel for the Underwriters, it becomes necessary to
amend or supplement the Prospectus in order to make the statements therein, in
the light of the circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission, and furnish at its own expense to the
Underwriters and to dealers, an appropriate amendment to the Registration
Statement or supplement to the Prospectus so that the Prospectus as so amended
or supplemented will not, in light of the circumstances when it is so delivered,
be misleading, or so that the Prospectus will comply with the law.
(e) Copies of the Prospectus and Electronic Prospectus and any Amendments
and Supplements Thereto. The Company agrees to furnish the Representatives,
without charge, during the period beginning on the date hereof and ending on the
later of the First Closing Date or such date, as in the opinion of counsel for
the Underwriters, the Prospectus is no longer required by law to be delivered in
connection with sales by an Underwriter or dealer (the "Prospectus Delivery
Period"), as many copies of the Prospectus and any amendments and supplements
thereto (including any documents incorporated or deemed incorporated by
reference therein) as the Representatives may request. The Company shall also
cause to be prepared and delivered to any Underwriter upon request, at the
Company's expense, within one (1) business day from the filing of the Prospectus
with the Commission (and again within one (1) business day after the filing of
any amendment or supplement thereto with the Commission), an Electronic
Prospectus to be used in connection with the offering and sale of the Shares. As
used herein, the term "Electronic Prospectus" means a form of
14
Prospectus, and any amendment or supplement thereto, that meets each of the
following conditions: (i) it shall be encoded in a format, satisfactory to the
Representatives, that may be transmitted electronically over the Internet or via
other online distribution to offerees and purchasers of the Shares; and (ii) it
shall disclose the same information as the paper Prospectus (or any amendment or
supplement thereto), except to the extent that graphic and image material
contained in the paper Prospectus (or such amendment or supplement) cannot be
presented in such electronic format, in which case such graphic and image
material shall be replaced in the Electronic Prospectus with a fair and accurate
narrative description or tabular representation of such material, as
appropriate. The Company hereby consents to distribution of the Electronic
Prospectus (including posting of the electronic Prospectus on the Internet) by
any of the Underwriters or their affiliates.
(f) Insurance. The Company shall (i) obtain directors and officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) cause ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ to be added
to such policy such that up to $500,000 of its expenses pursuant to Section 7(a)
shall be paid directly by such insurer.
(g) Notice of Subsequent Events. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Shares has been or is
likely to be materially affected (regardless of whether such rumor, publication
or event necessitates a supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising the Company to the effect
set forth above, forthwith prepare, consult with you concerning the substance of
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication or
event.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its securityholders and to the Representatives an
earnings statement (which need not be audited) covering a period of at least
twelve (12) months beginning after the effective date of the Registration
Statement that satisfies the provisions of Section 11(a) of the Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Exchange Act within the time periods required by the Exchange Act and the rules
of the Nasdaq National Market.
(l) Agreement Not to Offer or Sell Additional Securities. Without the
prior written consent of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the Company will not offer, sell or
contract to sell, or otherwise dispose of or enter into any transaction which is
designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective
15
economic disposition due to cash settlement or otherwise by the Company or any
affiliate of the Company or any person in privity with the Company or any
affiliate of the Company), directly or indirectly, or announce the offering of,
any other Ordinary Shares or any securities convertible into, or exchangeable
for, Ordinary Shares; provided, however, that the Company may (i) issue and sell
-------- -------
Ordinary Shares pursuant to any share option plan, share incentive plan, stock
option plan, employee share purchase plan or dividend reinvestment plan of the
Company in effect at the date of the Prospectus and described in the Prospectus
so long as none of those shares may be transferred and the Company shall enter
stop transfer instructions with its transfer agent and registrar against the
transfer of any such Ordinary Shares, (ii) the Company may issue Ordinary Shares
issuable upon the conversion of securities or the exercise of warrants
outstanding at the date of the Prospectus and described in the Prospectus, and
(iii) the Company may issue Ordinary Shares in connection with the Company's
acquisition of businesses so long as none of those shares are registered at
issuance or registered for resale within the Lock-Up Period. These restrictions
shall terminate after the close of trading of the Shares on the final day of the
Lock-Up Period.
(m) Future Reports to the Representatives. During the five (5) years
hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, shareholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the NASD or any securities exchange; and (iii) as
soon as available, copies of any report or communication of the Company mailed
generally to holders of its capital shares.
(n) Directed Share Program. The Company (i) will comply with all applicable
securities and other laws, rules and regulations in each jurisdiction in which
the Directed Shares are offered in connection with the Directed Share Program,
and (ii) will pay all reasonable fees and disbursements of counsel incurred by
the Underwriters in connection with the Directed Share Program and any stamp
duties, similar taxes or duties or other taxes, including any Israeli stamp
duty, incurred by the Underwriters in connection with the Directed Share
Program.
Section 4. Conditions of the Obligations of the Underwriters.
The obligations of the several Underwriters to purchase and pay for the
Shares as provided herein on the First Closing Date and, with respect to the
Option Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company of its covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No Objection
from the NASD. The Registration Statement shall have become effective prior to
the execution of this Agreement, or at such later date as shall be consented to
in
16
writing by you; and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been initiated
or, to the knowledge of the Company or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement, the Prospectus or otherwise) shall have
been complied with to the satisfaction of Underwriters' counsel; and the NASD
shall have raised no objection to the fairness and reasonableness of the
underwriting terms and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issuance, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section 4.
(c) No Material Adverse Change. Subsequent to the execution and delivery of
this Agreement and prior to the First Closing Date, or the Second Closing Date,
as the case may be, there shall not have been any Material Adverse Change in the
condition (financial or otherwise), earnings, operations, business of the
Company and its subsidiaries considered as one enterprise from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus.
(d) Opinion of United States Counsel for the Company. You shall have
received on the First Closing Date, or the Second Closing Date, as the case may
be, an opinion of Howard, Rice, Nemerovski, Canady, ▇▇▇▇ & Rabkin, A
Professional Corporation, U.S. counsel for the Company substantially in the form
attached hereto as Exhibit B, dated the First Closing Date, or the Second
---------
Closing Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely as to
---------
questions of law not involving the laws of the United States or the State of
California upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, and of government
officials, in which case their opinion is to state that they are so relying and
that they have no knowledge of any material misstatement or inaccuracy in any
such opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' counsel.
(e) Opinion of Israeli Counsel for the Company. You shall have received on
the First Closing Date, or the Second Closing Date, as the case may be, an
opinion of Salinger & Co. Advocates, Israeli counsel for the Company,
substantially in the form attached hereto as Exhibit C, dated the First Closing
---------
Date, or the Second Closing Date, addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit C may rely as to
questions of law not involving the laws of Israel upon opinions of local
counsel, and as to
17
questions of fact upon representations or certificates of officers of the
Company, and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to Underwriters'
counsel.
(f) Opinion of Intellectual Property Counsel for the Company. You shall
have received on the First Closing Date, or the Second Closing Date, as the case
may be, an opinion of ▇▇▇▇▇ Patent Group, intellectual property counsel for the
Company substantially in the form attached hereto as Exhibit D.
---------
(g) Opinion of United States Counsel for the Underwriters. You shall have
received on the First Closing Date or the Second Closing Date, as the case may
be, an opinion of O'Melveny & ▇▇▇▇▇ LLP, counsel for the Underwriters, in form
and substance reasonably satisfactory to the Representatives, with respect to
the sufficiency of all corporate proceedings and other legal matters relating to
this Agreement and the transactions contemplated hereby as the Representatives
may reasonably require. The Company shall have furnished to such counsel such
documents as they may have requested for the purpose of enabling them to pass
upon such matters.
(h) Opinion of Israeli Counsel for the Underwriters. You shall have
received on the First Closing Date or the Second Closing Date, as the case may
be, an opinion of Naschitz, ▇▇▇▇▇▇▇ & Co., counsel for the Underwriters,
substantially in the form attached hereto as Exhibit E. The Company shall have
---------
furnished to such counsel such documents as they have requested for the purpose
of enabling them to pass upon such matters.
(i) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
Ernst & Young LLP addressed to the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published rules and regulations
promulgated thereunder and based upon the procedures described in such letter
delivered to you concurrently with the execution of this Agreement (herein
called the "Original Letter"), but carried out to a date not more than four (4)
business days prior to the First Closing Date or the Second Closing Date, as the
case may be, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the First
Closing Date or the Second Closing Date, as the case may be, and (ii) setting
forth any revisions and additions to the statements and conclusions set forth in
the Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, operations, business prospects of the Company and its subsidiaries
considered as one enterprise from that set forth in the Registration Statement
or the Prospectus, which, in your sole judgment, is material and adverse and
that makes it, in your sole judgment, impracticable or inadvisable to proceed
with the public offering of the Shares as contemplated by the Prospectus.
18
The Original Letter from Ernst & Young LLP shall be addressed to or for
the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published rules and
regulations, (ii) refer to their opinion with respect to their examination of
the consolidated balance sheets of the Company as of December 31, 2000 and
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 2000, and
(iii) address other matters agreed upon by Ernst & Young LLP and you. In
addition, you shall have received from Ernst & Young LLP a letter addressed to
the Company and made available to you for the use of the Underwriters stating
that their review of the Company's system of internal accounting controls, to
the extent they deemed necessary in establishing the scope of their examination
of the Company's consolidated financial statements as of December 31, 2000, did
not disclose any weakness in internal controls that they considered to be a
material weakness.
(j) Officers' Certificate. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the First Closing
Date or the Second Closing Date, as the case may be, and the Company has
complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied at or prior to the First Closing Date
or the Second Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Securities Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, (a) the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and in all material respects
conformed to the requirements of the Securities Act, (b) the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
did not and do not include 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 not misleading; and (c) since the effective date of
the Registration Statement, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been so set
forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been
(a) any Material Adverse Change in the condition (financial or otherwise),
earnings, operations or business of the Company and its subsidiaries
considered as one enterprise, (b) any transaction that is material to the
Company and its
19
subsidiaries considered as one enterprise, except transactions entered into
in the ordinary course of business, (c) any obligation, direct or
contingent, that is material to the Company and its subsidiaries considered
as one enterprise, incurred by the Company or its subsidiaries, except
obligations incurred in the ordinary course of business, (d) any change in
the capital stock or outstanding indebtedness of the Company or any of its
subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (e) any dividend or distribution of any kind
declared, paid or made on the capital shares of the Company or any of its
subsidiaries, or (f) any loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries which has been sustained
or will have been sustained which has a Material Adverse Effect on the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise.
(k) Lock-Up Agreement from Certain Shareholders of the Company. The Company
shall have obtained and delivered to you an agreement substantially in the form
attached hereto as Exhibit A from each officer and director of the Company, each
---------
beneficial owner of one percent (1%) or more of the outstanding issued share
capital of the Company and each shareholder having registration rights.
(l) Stock Exchange Listing. The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(m) Compliance with Prospectus Delivery Requirements. The Company shall
have complied with the provisions of Sections 2(g) and 3(e) hereof with
respect to the furnishing of copies of the Prospectus.
(n) Additional Documents. On or before each of the First Closing Date and
the Second Closing Date, as the case may be, the Representatives and counsel for
the Underwriters shall have received such information, documents and opinions as
they may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
Section 5. Payment of Expenses.
The Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including, without limitation (i) all
expenses incident to the issuance and delivery of the Shares (including all
printing and engraving costs),
20
(ii) all fees and expenses of the registrar and transfer agent of the Shares,
(iii) all necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Shares to the Underwriters, including, without
limitation, the Israeli stamp duty, (iv) all fees and expenses of the Company's
counsel, independent public or certified public accountants, (v) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement (including financial statements,
exhibits, schedules, consents and certificates of experts), each preliminary
prospectus and the Prospectus, and all amendments and supplements thereto, and
this Agreement, (vi) all costs and expenses, not to exceed $15,000, incurred by
Underwriters counsel in connection with the Directed Share Program, (vii) all
filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Shares for offer and sale under the state securities or blue sky laws or the
provincial securities laws of Canada or any other country, and, if requested by
the Representatives, preparing and printing a "Blue Sky Survey," an
"International Blue Sky Survey" or other memorandum, and any supplements
thereto, advising the Underwriters of such qualifications, registrations and
exemptions, (viii) the filing fees incident to, and the reasonable fees and
expenses of counsel for the Underwriters in connection with, the NASD review and
approval of the Underwriters' participation in the offering and distribution of
the Shares, (ix) the fees and expenses associated with including the Shares in
the Nasdaq National Market, (x) all costs and expenses incident to the travel
and accommodation of the Company's employees on the "roadshow," and (xi) all
other fees, costs and expenses referred to in Item 13 of Part II of the
Registration Statement. Except as provided in this Section 5, Section 6, and
Section 7 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.
Section 6. Reimbursement of Underwriters' Expenses.
If this Agreement is terminated by the Representatives pursuant to
Section 4, Section 8 or Section 9, or if the sale to the Underwriters of the
Shares on the First Closing Date is not consummated because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or to comply with any provision hereof, the Company agrees to reimburse the
Representatives and the other Underwriters (or such Underwriters as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by the
Representatives and the Underwriters in connection with the proposed purchase
and the offering and sale of the Shares, including, but not limited to, fees and
disbursements of counsel, printing expenses, travel and accommodation expenses,
postage, facsimile and telephone charges.
Section 7. Indemnification and Contribution.
(a) Indemnification of the Underwriters.
(1) The Company and Verisity Design, Inc., jointly and severally,
agree to indemnify and hold harmless each Underwriter, its officers and
employees, and each person, if any, who controls any Underwriter within the
meaning of the Securities Act and the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which such Underwriter or such
controlling person may become subject,
21
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A under the Securities Act, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) upon any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the Company to
perform its obligations hereunder or under law; or (v) any untrue statement or
alleged untrue statement of any material fact contained in any audio or visual
materials provided by the Company including, without limitation, slides, videos,
films or tape recordings, used in connection with the marketing of the Shares;
or (vi) any act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Shares or the
offering contemplated hereby, and which is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based upon any
matter covered by clause (i), (ii), (iii) (iv) or (v) above, provided that
--------
neither the Company nor Verisity Design, Inc. shall be liable under this clause
(vi) to the extent that a court of competent jurisdiction shall have determined
by a final judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its bad faith or willful misconduct; and to
reimburse each Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇) as such expenses are reasonably incurred by such Underwriter or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
-------- -------
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, that such loss, claim, damage, liability or expense arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representatives expressly for use in
the Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto); and provided, further, that with respect to
-------- -------
any preliminary prospectus, the foregoing indemnity agreement shall not inure to
the benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Company and Verisity Design, Inc. may otherwise have.
22
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expenses
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company and Verisity
Design, Inc. and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, hereby acknowledges that the
only information that the Underwriters have furnished to the Company expressly
for use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) are the statements set forth
in the Prospectus under the caption "Underwriting" as follows: (i) in the table
in the first paragraph, (ii) in the first, second and third sentences of the
subsection titled "Dealers' Compensation," (iii) in the subsection titled
"Discretionary Accounts," (iv) in the first sentence of the subsection titled
"Directed Share Program," (v) in the second paragraph of the subsection titled
"Online Activities" and (vi) in the first paragraph of the subsection titled
"Passive Market Making"; and the Underwriters confirm that such statements are
correct.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party shall not relieve it from any liability
hereunder to the extent it is not materially prejudiced as a proximate result of
such failure and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In case any such
action is brought against any indemnified party and such indemnified party seeks
or intends to seek indemnity from an indemnifying party, the indemnifying party
will be
23
entitled to participate in, and, to the extent that it shall elect, jointly with
all other indemnifying parties similarly notified, by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in
-------- -------
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that a conflict may
arise between the positions of the indemnifying party and the indemnified party
in conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 7 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the indemnifying
party (▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the case of Section 7(b) and Section 8),
representing the indemnified parties who are parties to such action), (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party, in each of which cases the fees and expenses
of counsel shall be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this Section 7 shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than thirty (30)
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement, compromise or consent to the entry of judgment in
any pending or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or could have
been sought hereunder by such indemnified party, unless such settlement,
compromise or consent includes (i) an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action,
suit or proceeding and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
24
(f) Contribution. If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company and Verisity Design, Inc. on the one
hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and Verisity Design, Inc. on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and Verisity
Design, Inc. on the one hand, and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds (before deducting
expenses) received by the Company from the sale of the Shares sold by it in the
offering bears to the total underwriting discounts and commissions received by
the Underwriters in connection with the sale of such Shares, in each case as
described in the Prospectus. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or Verisity Design, Inc. on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, Verisity Design, Inc. and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this Section 7(f)
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 which does not
take account of the equitable considerations referred to above in this Section
7(f). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 7(f) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (f), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this Section 7(f) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than forty-five
(45) days of invoice to the indemnifying party.
25
(h) Survival. The indemnity and contribution agreements contained in this
Section 7 and the representation and warranties set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, Verisity Design, Inc., their respective directors
or officers, or any persons controlling the Company, (ii) acceptance of any
Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter, or to the Company, its directors or
officers, Verisity Deisgn, Inc. or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 7.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and the Prospectus as required
by the Securities Act and the Exchange Act.
(j) Indemnification for Directed Share Program. The Company agrees to
indemnify and hold harmless ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and its affiliates and each
person, if any, who controls ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or its affiliates within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act ("▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Entities"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating
any such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any material prepared by or with the
consent of the Company for distribution to participants in connection with the
Directed Share Program, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; (ii) the failure of any participant to pay
for and accept delivery of Directed Shares that the participant has agreed to
purchase; or (iii) related to, arising out of, or in connection with the
Directed Share Program other than losses, claims, damages or liabilities (or
expenses relating thereto) that are finally judicially determined to have
resulted from the bad faith or willful misconduct of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Entities. The indemnity agreement set forth in this Section 7(j) shall be in
addition to any liabilities that the Company may otherwise have.
Section 8. Default of One or More of the Several Underwriters.
If, on the First Closing Date or the Second Closing Date, as the case
may be, any one or more of the several Underwriters shall fail or refuse to
purchase Shares that it or they have agreed to purchase hereunder on such date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed ten
percent (10%) of the aggregate number of the Shares to be purchased on such
date, the other Underwriters shall be obligated, severally, in the proportions
that the number of Firm Shares set forth opposite their respective names on
Schedule A bears to the aggregate number of Firm Shares set forth opposite the
----------
names of all such non-defaulting Underwriters, or in such other
26
proportions as may be specified by the Representatives with the consent of the
non-defaulting Underwriters, to purchase the Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or the Second Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
and the aggregate number of Shares with respect to which such default occurs
exceeds ten percent (10%) of the aggregate number of Shares to be purchased on
such date, and arrangements satisfactory to the Representatives and the Company
for the purchase of such Shares are not made within forty-eight (48) hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 5, and Section 7 shall at
all times be effective and shall survive such termination. In any such case
either the Representatives or the Company shall have the right to postpone the
First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
8. Any action taken under this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 9. Termination of this Agreement.
This Agreement may be terminated by the Representatives by notice
given to the Company if (a) at any time after the execution and delivery of this
Agreement and prior to the First Closing Date (i) trading or quotation in any of
the Company's securities shall have been suspended or limited by the Commission
or by the Nasdaq National Market or trading in securities generally on either
the Nasdaq National Market or the New York Stock Exchange shall have been
suspended or limited, or minimum or maximum prices shall have been generally
established on any of such stock exchanges by the Commission or the NASD; (ii) a
general banking moratorium shall have been declared by any of federal, New York
or California authorities; (iii) there shall have occurred any outbreak or
escalation of national or international hostilities or any crisis or calamity,
or any change in the United States or international financial markets, or any
substantial change or development involving a prospective change in United
States' or international political, financial or economic conditions, as in the
judgment of the Representatives is material and adverse and makes it
impracticable or inadvisable to market the Ordinary Shares in the manner and on
the terms contemplated in the Prospectus or to enforce contracts for the sale of
securities; (iv) in the reasonable judgment of the Representatives there shall
have occurred any Material Adverse Change; or (v) the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as in the judgment of the Representatives may interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured; or (b) in the
case of any of the events specified 9(a)(i)-(v), such event singly or together
with any other event, makes it, in your judgment, impracticable or inadvisable
to market the Ordinary Shares in the manner and on the terms contemplated in the
Prospectus. Any termination pursuant to this Section 9 shall be without
liability on the part of (x) the Company to any Underwriter, except that the
Company shall be obligated
27
to reimburse the expenses of the Representatives and the Underwriters pursuant
to Sections 5 and 6 hereof, (y) any Underwriter to the Company or any person
controlling the Company, or (z) of any party hereto to any other party except
that the provisions of Section 7 shall at all times be effective and shall
survive such termination.
Section 10. Representations and Indemnities to Survive Delivery.
The respective indemnities, agreements, representations, warranties
and other statements of the Company or any person controlling the company, of
its officers and of the several Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
its or their partners, officers or directors or any controlling person, as the
case may be, and will survive delivery of and payment for the Shares sold
hereunder and any termination of this Agreement.
Section 11. Notices.
All communications hereunder shall be in writing and shall be mailed,
hand delivered or telecopied and confirmed to the parties hereto as follows:
If to the Representatives:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
O'Melveny & ▇▇▇▇▇ LLP
Embarcadero Center West
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company or Verisity Design, Inc.:
Verisity Design Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
28
with a copy to:
Howard, Rice, Nemerovski, Canady, ▇▇▇▇ & Rabkin, A Professional Corporation
Three ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 12. Successors.
This Agreement will inure to the benefit of and be binding upon the
parties hereto, including any substitute Underwriters pursuant to Section 9
hereof, and to the benefit of the employees, officers and directors and
controlling persons referred to in Section 7, and to their respective
successors, and no other person will have any right or obligation hereunder.
The term "successors" shall not include any purchaser of the Shares as such from
any of the Underwriters merely by reason of such purchase.
Section 13. Partial Unenforceability.
The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of
any other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.
Section 14. Governing Law Provisions.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby
("Related Proceedings") may be instituted in the federal courts of the United
States of America located in the City and County of San Francisco or the courts
of the State of California in each case located in the City and County of San
Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted against
the Company, as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT
29
Corporation System, which currently maintains a San Francisco office at ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, as
its agent to receive service of process or other legal summons for purposes of
any such suit, action or proceeding that may be instituted in any state or
federal court in the City and County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts or any other court
of competent jurisdiction, and will not raise or claim or cause to be pleaded
any such immunity at or in respect of any such Related Proceeding (or in any
proceeding instituted to enforce the judgment of a Related Proceeding),
including, without limitation, any immunity pursuant to the United States
Foreign Sovereign Immunities Act of 1976, as amended.
Section 15. General Provisions.
This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may be executed in two or more counterparts, each one of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement may not be amended or
modified unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party whom
the condition is meant to benefit. Section headings herein are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
[The remainder of this page has been intentionally left blank.]
30
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
VERISITY LTD.
By: _____________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Chief Executive Officer
VERISITY DESIGN, INC.
By: ____________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
Representatives as of the date first above written.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ INCORPORATED
▇▇ ▇▇▇▇▇ SECURITIES CORPORATION
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
----------
By: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, INC.
By: ---------------------------
Authorized Signatory
31
SCHEDULE A
Underwriters
------------
Number of Firm
Shares To be
Underwriter Purchased
---------------------------------------------------------------------------- ------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc..................................................... [___]
▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated.................................................. [___]
▇▇ ▇▇▇▇▇ Securities Corporation............................................. [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___]....................................................................... [___]
[___] ...................................................................... [___]
---------------------------------------------------------------------------- ------------------
Total.................................................................... [___]
==================
Schedule A
Exhibit A
Form of Lock-Up Agreement and Waiver of Registration Rights
-----------------------------------------------------------
FleetBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated
▇▇ ▇▇▇▇▇ Securities Corporation
As Representatives of the Several Underwriters
c/o FleetBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Verisity, Ltd. (the "Company")
--------------
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain ordinary
shares of the Company ("Ordinary Shares") or securities convertible into or
exchangeable or exercisable for Ordinary Shares. The Company proposes to carry
out a public offering of Ordinary Shares (the "Offering") for which you will act
as the representatives (in such capacity, the "Representatives") of the
underwriters. The undersigned recognizes that the Offering will be of benefit
to the undersigned and will benefit the Company by, among other things, raising
additional capital for its operations. The undersigned acknowledges that you
and the other underwriters are relying on the representations and agreements of
the undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company with respect to the
Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any Ordinary Shares, any options or warrants to purchase any
Ordinary Shares or any securities convertible into or exchangeable for Ordinary
Shares (collectively, "Securities") now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts, provided
the donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners or shareholders of such person, provided that
the distributees thereof agree in writing to be bound by the terms of this
restriction, (iii) with respect to sales or purchases of Ordinary Shares
acquired on the open market or (iv) with the prior written consent of the lead-
managing Representative. The foregoing restrictions will terminate after the
close of trading of the Ordinary Shares on the 180th day of (and including) the
day the Ordinary Shares commenced trading on the Nasdaq National Market (the
"Lock-Up Period"). The foregoing restriction has been expressly agreed to
preclude the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition of Securities during the Lock-Up Period, even if such Securities
would be disposed of by someone other than such holder. Such prohibited hedging
or other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or index)
that included, relates to or derives any significant
part of its value from Securities. The undersigned also agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of Ordinary Shares or Securities held by the
undersigned except in compliance with the foregoing restrictions.
With respect to the Offering only, the undersigned waives any registration
rights relating to registration under the United States Securities Act of 1933,
as amended, or otherwise of any Ordinary Shares or other Securities owned either
of record or beneficially by the undersigned, including any rights to receive
notice of the Offering.
This agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assigns of the
undersigned. This agreement is made with the addressees in your capacity as
Representatives of the underwriters such that if the Representatives change,
this agreement shall be deemed to be between the undersigned and such changed
Representatives. Nothing in this Lock-Up Agreement shall constitute an offer by
the Company to sell, or create any right or obligation for the undersigned to
purchase, Ordinary Shares or Securities of the Company. In the event that (a)
the registration statement relating to the Offering has not been filed with the
United States Securities and Exchange Commission on or before December 31, 2000
or (b) subsequent to filing, such registration statement is officially withdrawn
by the Company, this Lock-Up Agreement shall be of no further force or effect.
This Lock-Up Agreement shall be governed by and construed in accordance with the
internal laws of the state of New York of the United States applicable to
agreements made and to be performed in such state.
Dated:
--------------------------
--------------------------------
Printed Name of Shareholder
By:
-----------------------------
Signature
--------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if signing
as custodian, trustee, or on behalf of an entity)
A-2
Exhibit B
Matters to be Covered in the Opinion of United States Company Counsel
---------------------------------------------------------------------
References to the Prospectus in this Exhibit B include any supplements
---------
thereto at the First Closing Date or the Second Closing Date, as applicable.
(i) Verisity Design, Inc. (the "Subsidiary") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation.
(ii) The Subsidiary has the corporate power and authority to own,
lease and operate its properties and to conduct its business as described
in the Prospectus.
(iii) Each of the Company and the Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each U.S.
state, if any, in which the ownership or leasing of its properties or the
maintenance of its employees requires such qualification, except where the
failure to be so qualified or be in good standing would not have a Material
Adverse Effect. To such counsel's knowledge, the Company does not own or
control, directly or indirectly, any corporation, association or other
entity other than Verisity Design, Inc., Verisity Design, EURL, Verisity
Design, GMBH and Verisity Design Canada, Inc.
(iv) All issued and outstanding shares of capital stock of the
Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable, and have not been issued in violation of or subject to
any preemptive right arising under its articles of incorporation or the
California General Corporation Law or, to such counsel's knowledge, any co-
sale right, right of first refusal or other similar right, other than any
registration rights described in Opinion (xix) hereof and are owned by the
Company free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest.
(v) The Subsidiary has the corporate power and authority to enter
into this Agreement.
(vi) This Agreement has been duly authorized by all necessary
corporate action on the part of the Subsidiary and has been duly executed
and delivered by the Subsidiary.
(vii) The Registration Statement has become effective under the
Securities Act and the offer and sale of the Shares have been validly
registered under the Securities Act and the applicable rules and
regulations of the Commission thereunder and, to such counsel's knowledge,
no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or
are pending or threatened under the Securities Act.
(viii) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration
B-1
Statement has become effective under the Exchange Act; the Ordinary Shares
have been validly registered under the Exchange Act and the applicable
rules and regulations of the Commission thereunder and, to such counsel's
knowledge, no stop order suspending the effectiveness of the Form 8-A
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Exchange Act.
(ix) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived therefrom as to
which such counsel need express no opinion), as of the effective date of
the Registration Statement, complied as to form in all material respects
with the requirements of the Securities Act and the applicable Rules and
Regulations.
(x) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company or the Subsidiary is a
party of a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement which are not described or referred to therein or
filed as required.
(xi) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the
Subsidiary's indemnification obligations hereunder, concerning which no
opinion need be expressed) will not (a) result in any violation of the
Subsidiary's charter or bylaws or (b) to such counsel's knowledge, result
in a material breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other evidence of
indebtedness, or any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument known to
such counsel to which the Company or the Subsidiary is a party or by which
its properties are bound, or any applicable statute, rule or regulation
known to such counsel or, to such counsel's knowledge, any order, writ or
decree of any court, government or governmental agency or body having
jurisdiction over the Company or the Subsidiary or over any of their
properties or operations.
(xii) To such counsel's knowledge, no consent, approval,
authorization or order of or qualification with any United States federal
or state court, government or governmental agency or body having
jurisdiction over the Company or the Subsidiary, or over any of their
properties or operations is necessary in connection with the consummation
by the Company or the Subsidiary of the transactions herein contemplated,
except (i) such as have been obtained under the Securities Act and the
Exchange Act, (ii) such as may be required under state or other securities
or Blue Sky laws in connection with the purchase and the distribution of
the Shares by the Underwriters, and (iii) such as may be required by the
NASD. To such counsel's knowledge, no proceedings to rescind or modify such
consents, approvals, authorizations, exemptions, orders, filings or
qualifications have been instituted and are pending or contemplated.
(xiii) To such counsel's knowledge, there are no United States federal
or state legal or governmental proceedings pending or threatened against
the Company or the Subsidiary of a character required to be disclosed in
the
B-2
Registration Statement or the Prospectus by the Securities Act, other than
those described therein.
(xiv) To such counsel's knowledge, the Subsidiary is not presently
(a) in material violation of its charter or bylaws, or (b) in material
breach of any applicable United States federal or state statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any United States federal or state court or
governmental agency or body having jurisdiction over the Company or the
Subsidiary, or over any of their properties or operations.
(xv) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Ordinary Shares or
other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company having
rights known to such counsel to registration of Ordinary Shares or other
securities, because of the filing of the Registration Statement by the
Company, have, with respect to the offering contemplated thereby, waived
such rights or such rights have expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement or have included securities in the Registration Statement
pursuant to the exercise of and in full satisfaction of such rights.
(xvi) The Company is not and, immediately after giving effect to the
offering and the sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
(xvii) The statements in the Prospectus under the caption "United
States Federal Income Tax Considerations" are accurate in all material
respects.
(xviii) There are no taxes or other similar fees, duties or charges
required to be paid to any U.S. federal or state taxing authority in
connection with the execution and delivery of this Agreement or the
issuance, sale and delivery by the Company of the Shares in the manner
contemplated in this Agreement, except for such taxes, fees, duties or
charges as would not result in a Material Adverse Change.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement and any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary
B-3
to make the statements therein not misleading, or at the First Closing Date or
the Second Closing Date, as the case may be, the Registration Statement, the
Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
B-4
Exhibit C
Matters to be Covered in the Opinion of Israeli Company Counsel
---------------------------------------------------------------
References to the Prospectus in this Exhibit C include any supplements
---------
thereto at the First Closing Date or the Second Closing Date, as applicable.
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation.
(ii) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus.
(iii) The Company is duly qualified to do business in Israel. To
such counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity other than
Verisity Design, Inc., Verisity Design, EURL, Verisity Design, GMBH and
Verisity Design Canada, Inc.
(iv) The authorized, issued and outstanding share capital of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and outstanding
shares of the Company outstanding prior to the issuance of the Shares have
been duly and validly issued and are fully paid and nonassessable, and will
not have been issued in violation of or subject to or absent a valid waiver
of any preemptive right arising under the Articles of Association or Israel
Companies Law, or, to such counsel's knowledge, any co-sale right, right of
first refusal or other similar right, other than any registration rights
described in Opinion (xix) hereof.
(v) The Firm Shares or the Option Shares, as the case may be, to be
issued by the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully
paid and nonassessable, and will not have been issued in violation of or
subject to any preemptive right arising under the Articles of Association
or Israel Companies Law, or, to such counsel's knowledge, any co-sale
right, right of first refusal or other similar right, other than any
registration rights described in Opinion (xix) hereof.
(vi) The Company has the corporate power and authority to enter into
this Agreement, and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder.
(vii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and (assuming the due authorization, execution and
delivery thereof by you) is, under Israeli law, a valid and binding
agreement of the Company, enforceable in accordance with its terms, except
as rights to indemnification hereunder may be limited by applicable law and
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by
C-1
general equitable principles (whether relief is sought in a proceeding at
law or in equity).
(viii) To such counsel's knowledge after due inquiry, no order
prohibiting the Company from offering its Ordinary Shares as described in
the Prospectus has been issued by any Israeli authority and no proceedings
for that purpose before any Israeli authority have been instituted or are
pending or threatened.
(ix) To such counsel's knowledge after due inquiry, no order
prohibiting the Company from including its Ordinary Shares in the Nasdaq
National Market or otherwise permitting them to be publicly traded has been
issued by any Israeli authority and no proceedings for that purpose before
any Israeli authority have been instituted or are pending or threatened.
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived therefrom as to
which such counsel need express no opinion), as of the effective date of
the Registration Statement complied, to the extent required and in all
material respects, with applicable Israeli law, have been duly authorized
by and on behalf of the Company, and have been duly executed by the Company
in accordance with Israeli law.
(xi) The information in the Prospectus under the captions "Risk
Factors--We are subject to anti-takeover provisions that could delay or
prevent our acquisition, even if the acquisition would be beneficial to our
shareholders," "--Risks Related to our Operations in Israel," "Dividend
Policy," "Management," "Description of Share Capital," "Israeli Taxation
and Investment Programs," "Conditions in Israel" and "Enforceability of
Civil Liabilities" and in the Registration Statement under the caption
"Item 14. Indemnification of Directors and Officers," to the extent that
it constitutes matters of law or legal conclusions, is an accurate and fair
summary of such matters and conclusions, in all material respects. The
forms of certificates evidencing the Ordinary Shares and filed as exhibits
to the Registration Statement comply with Israeli law.
(xii) The description in the Registration Statement and the
Prospectus of the Company's Memorandum and Articles of Association of the
Company and of Israeli law is an accurate and fair summary of such matters
in all material respects.
(xiii) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's Memorandum
or Articles of Association or (b) to such counsel's knowledge, result in a
material breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other evidence of
indebtedness, or any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument known to
such counsel to which the Company is a party or by which its properties are
bound, or any applicable Israeli statute, rule or regulation known to such
counsel or, to such counsel's knowledge, any order, writ
C-2
or decree of any Israeli court, government or governmental agency or body
having jurisdiction over the Company, or over any of its properties or
operations.
(xiv) To such counsel's knowledge after due inquiry, no consent,
approval, authorization or order of or qualification with any Israeli
court, government or governmental agency or body having jurisdiction over
the Company or over any of its properties or operations is necessary in
connection with the consummation by the Company of the transactions herein
contemplated, except such as have been obtained under the laws of Israel.
To such counsel's knowledge, no proceedings to rescind or modify such
consents, approvals, authorizations, exemptions, orders, filings or
qualifications have been instituted and are pending or contemplated by any
Israeli authority. The opinions given in this paragraph are made on the
assumption that (i) the offering in Israel of Shares as described in the
Prospectus under the Directed Shares Program is made pursuant to all of the
terms and conditions of the exemption granted to the Company by the Israeli
securities authority, and (ii) in the event of any other offering or sale
of Shares in Israel (if any), such offering shall be made in compliance
with all requirements of the Israeli Securities Law, including requirements
relating to the exemptions contained therein.
(xv) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company other
than those described the Registration Statement and the Prospectus.
(xvi) To such counsel's knowledge, the Company is not presently (a)
in material violation of its Memorandum of Association or Articles of
Association, or (b) in material breach of any applicable Israeli statute,
rule or regulation known to such counsel or, to such counsel's knowledge,
any order, writ or decree of any Israeli court or governmental agency or
body having jurisdiction over the Company or over any of its properties or
operations.
(xvii) To such counsel's knowledge, and in reliance upon the opinion
of the Company's U.S. counsel the form of which is attached as Exhibit B,
except as set forth in the Registration Statement and Prospectus, no
holders of Ordinary Shares or other securities of the Company have
registration rights with respect to securities of the Company and, except
as set forth in the Registration Statement and Prospectus, all holders of
securities of the Company having rights known to such counsel to
registration of Ordinary Shares or other securities, because of the filing
of the Registration Statement by the Company, have, with respect to the
offering contemplated thereby, waived such rights or such rights have
expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement.
(xviii) Except for Israeli stamp duty, there are no taxes or other
similar fees, duties or charges required to be paid to any Israeli taxing
authority in connection with the execution and delivery of this Agreement
or the issuance, sale and delivery by the Company of the Shares in the
manner contemplated in this Agreement.
(xix) The Company has the power to submit, and has taken all
necessary corporate action to submit to the jurisdiction of any state or
United
C-3
States federal court in the City and County of San Francisco or the courts
of the State of California in each case located in the City and County of
San Francisco, and has duly and irrevocably appointed Verisity Design,
Inc., as the authorized agent of the Company for the purpose described in
Section 14 of the Underwriting Agreement.
(xx) Under the laws of the State of Israel, the submission by the
Company to the jurisdiction of any federal or state court sitting in the
City and County of San Francisco or the courts of the State of California
in each case located in the City and County of San Francisco and the
designation of the law of the state of New York to apply to the
Underwriting Agreement is binding upon the Company and, subject to the
qualifications, restrictions, limitations and other conditions under
Israeli law, as described under the caption Enforceability of Civil
Liability in the Registration Statement, if properly brought to the
attention of an Israeli court or administrative body in accordance with the
laws of the State of Israel, would be enforceable in judicial proceedings
in Israel.
(xxi) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, the Company is in compliance with
all material legal conditions and requirements stipulated by the
instruments of approval entitling it or any of its operations to the status
of "Approved Enterprise" under Israeli law and by Israeli laws and
regulations relating to such Approved Enterprises status, except such non-
compliance, individually or in the aggregate, as would not reasonably be
expected to have a Material Adverse Effect.
(xxii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, the Company is not in material
violation of any material legal conditions or requirements stipulated by
the instruments of approval granted to it by the Office of Chief Scientist
in the Ministry of Industry & Trade, with respect to any research and
development grants given to it by such office, except such violations,
individually or in the aggregate, as would not reasonably be expected to
have a Material Adverse Effect.
In addition, such counsel shall state that such counsel has
participated in telephone conferences with officials and other representatives
of the Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such telephone conferences
the contents of the Registration Statement and Prospectus and related matters
were discussed, and as to factual matters have relied upon statements made by
officials and other representatives of the Company, and although they have not
verified the accuracy or completeness of such statements or of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the First Closing Date or Second Closing Date, as the case may be, the
Registration Statement and any amendment or supplement thereto (other than the
financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel need express
no comment) contained any untrue statement of a material fact or omitted to
state a material fact that could reasonably be expected to have a Material
Adverse Effect or that is necessary to make the statements therein not
misleading, or at the First Closing Date or the Second Closing Date, as the case
may be, the Registration Statement, the
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Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
C-5
Exhibit D
Form of Opinion of Intellectual Property Counsel for the Company
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Ladies and Gentlemen:
We act as intellectual property counsel for Verisity Ltd. (the
"Company," which term includes the Company's subsidiaries for purposes of this
opinion) and in such capacity we are familiar with the technology used by the
Company in its business and the manner of its use thereof and have read the
registration statement (SEC file no. 333-_____) as amended though the date
hereof (the "Registration Statement") and the related prospectus (the
"Prospectus"), including particularly the portions of the Registration Statement
and the Prospectus referring to the Company's patents, patent rights or
licenses, trademarks or trademark rights, service marks, copyrights, maskwork
rights, collaborative research, licenses or royalty arrangements or agreements,
trade secrets, know-how or proprietary techniques, including processes and
substances, or other proprietary information or materials (collectively
"Intellectual Property") and in our opinion:
(i) The statements in the Prospectus under the captions "Risk
Factors--Risks Related to Our Dependence on Intellectual Property" and
"Business--Proprietary Rights," [conform section names to final draft of
Registration Statement and add any other applicable sections] insofar as such
statements constitute matters of law, legal conclusions or summaries of legal
matters relating to Intellectual Property, or descriptions of the Company's
Intellectual Property portfolio, accurately and fairly present and summarize, in
all material respects, the matters referred to therein.
(ii) The Company is listed in the records of the U.S. Patent and
Trademark Office (the "USPTO") as the sole holder of record of (a) each of the
patents listed on the attached Schedule A (the "U.S. Patents") and (b) each of
the U.S. patent applications listed the attached Schedule B (the "U.S.
Applications"). No third party can validly claim any ownership interest or lien
with respect to any U.S. Patent or U.S. Application. There are no material
defects in form in the preparation or filing of the U.S. Applications. The U.S.
Applications are being diligently pursued by the Company. There are no
interference proceedings pending with respect to any U.S. Patent or U.S.
Application.
(iii) The Company is listed in the records of the appropriate foreign
offices as the sole holder of record of (a) each of the foreign patents listed
on the attached Schedule C (the "Foreign Patents") and (b) each of the foreign
patent applications listed on the attached Schedule D (the "Foreign
Applications"). No third party can validly claim any ownership interest or lien
with respect to any Foreign Patent or Foreign Application. There are no
material defects of form in the preparation or filing of the Foreign
Applications. The Foreign Applications are being diligently pursued by the
Company. There are no opposition proceedings pending against any Foreign
Application.
(iv) To our knowledge there is no reason why any of the U.S. Patents
or Foreign Patents are not valid as issued. To our knowledge, there is no
reason why any patent to be issued as a result of any U.S. Application or
Foreign Application would
D-1
not be valid or would not afford the Company useful patent protection with
respect thereto. To our knowledge, the Company has complied with all
regulations, procedures and policies of the USPTO, including the duty of candor,
in the prosecution of the U.S. Patents and U.S. Applications. All material prior
art of which we are aware has been disclosed to the USPTO for consideration with
respect to the examination of the U.S. Patents and U.S. Applications.
(v) [Add name of licensor] ("Licensor") is listed in the records of
the USPTO and the appropriate foreign offices as the sole holder of record of
each of the U.S. and foreign patents listed on the attached Schedule E (the
"Licensor Patents") and each of the U.S. and foreign patent applications listed
on the attached Schedule F (the "Licensor Applications"). The Company has a
valid and enforceable license to each of the Licensor Patents and Licensor
Applications, which licenses are recorded in all appropriate patent offices.
The terms of the licenses are sufficient to permit the Company to practice the
Licensor Patents and Licensor Applications as contemplated by the Prospectus.
(vi) No third party can validly claim any ownership interest or lien
with respect to any Licensor Patent or Licensor Application, other than the
Company to the extent of its license [and describe any other exceptions with
particularity]. There are no material defects of form in the preparation or
filing of the Licensor Applications. The Licensor Applications are being
diligently pursued by the Licensor. There are no interference proceedings or
other opposition proceedings pending with respect to any Licensor Patent or
Licensor Application. To our knowledge there is no reason why any of the
Licensor Patents are not valid as issued. To our knowledge, there is no reason
why any patent to be issued as a result of any Licensor Application would not be
valid or would not afford the Licensor useful patent protection with respect
thereto. To our knowledge, the Licensor has complied with all regulations,
procedures and policies of the USPTO, including the duty of candor, in the
prosecution of the U.S. Licensor Patents and U.S. Licensor Applications. All
material prior art of which we are aware has been disclosed to the USPTO for
consideration with respect to the examination of the U.S. Licensor Patents and
U.S. Licensor Applications.
(vii) The license agreement between Licensor and [Prior Licensee],
dated _____, as amended, has been validly and effectively terminated and neither
[Prior Licensee] nor its successors or assigns retains any residual rights in
any of the Licensor Patents or Licensor Applications.
(viii) To our knowledge, the Company has not infringed, and is not
infringing, any valid patent claims of third parties.
(ix) No action, suit, claim or proceeding relating to or affecting
the Intellectual Property is pending or, to our knowledge, threatened against
the Company, and no party has proposed a license, royalty or other contractual
arrangement in lieu of asserting a potential infringement claim against the
Company, in each case other than as set forth with particularity on Schedule G.
(x) At present, the Company has not asserted and, to our knowledge,
is not contemplating the assertion of, any claim of infringement against any
third party; and the Company has not proposed and, to our knowledge, is not
contemplating the proposal of, any license, royalty or other contractual
arrangement in lieu of asserting a
D-2
potential infringement claim against any third party, in each case other than as
set forth with particularity on Schedule H.
In addition, we have reviewed the full Registration Statement and
Prospectus (including the documents incorporated therein by reference) and
participated in discussions with the Company, Company counsel, the underwriters
and underwriters counsel regarding the disclosure of Intellectual Property
matters therein and, although we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of any statements
contained in the Registration Statement or the Prospectus (other than as
specified above), and any supplements or amendments thereto, on the basis of the
foregoing, nothing has come to our attention which would lead us to believe, and
we do not believe, that either the Registration Statement (including the
documents incorporated therein by reference) or any amendments thereto, at the
time the Registration Statement or such amendments became effective, contained
an untrue statement of a material fact regarding the Company's Intellectual
Property or omitted to state a material fact regarding the Company's
Intellectual Property required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (including the
documents incorporated therein by reference), as of its date or at the date of
this letter, contained an untrue statement of a material fact regarding the
Company's Intellectual Property or omitted to state a material fact regarding
the Company's Intellectual Property necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that we express no belief as to the financial
statements or schedules or other financial or statistical data derived
therefrom, included or incorporated by reference in the Registration Statement
or the Prospectus or any amendments or supplements thereto).
We have delivered to your counsel, O'Melveny & ▇▇▇▇▇ LLP, copies of
all opinions and audit letter responses that we delivered at the Company's
request to the Company, its auditors or any other parties with respect to any
litigation or threatened litigation we are defending or prosecuting for the
Company with respect to its Intellectual Property.
D-3
Our use of the terms "known to us," "to our knowledge," or similar
phrases to qualify a statement in this opinion means that those attorneys in
this firm who have given substantive attention to the representation described
above do not, after diligent inquiry, have current actual knowledge that the
statement is inaccurate. Such terms do not include any knowledge of other
attorneys within our firm or any constructive or imputed notice of any matters
or items of information. No inference as to our knowledge of any matters
bearing on the accuracy of any such statement should be drawn from the fact of
our representation of the Company in connection with this opinion letter or in
other matters.
Sincerely,
[Name of Firm]
[Please supply draft schedules together with drafts of the opinion]
D-4
Exhibit E
Matters to be Covered in the Opinion of Underwriters' Israeli Counsel
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References to the Prospectus in this Exhibit E include any supplements
---------
thereto at the First Closing Date or the Second Closing Date, as applicable.
(i) The Shares have been duly authorized and, upon issuance and
delivery and payment therefor in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and non-
assessable.
(ii) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
In addition, although we have not participated in any conferences or
drafting sessions, we have reviewed the drafts of the Registration Statement and
have also reviewed certain documents provided by the Company. We do not pass
upon, and do not assume any responsibility for, and have not independently
checked or verified, the accuracy, completeness or fairness of the information
contained in the Registration Statement and the Prospectus. Based solely upon
our review of the drafts of the Registration Statement and certain documents
provided by the Company, we confirm that we have no reason to believe that the
Prospectus (other than the financial statements, including the notes and
schedules thereto, and the other financial and statistical data included in the
Prospectus, as to which we express no belief), on the date hereof, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
E-1