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EXHIBIT 1.1
5,750,000 Shares
ACCORD NETWORKS LTD.
Ordinary Shares
UNDERWRITING AGREEMENT
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June , 2000
CIBC World Markets Corp.
Dain Rauscher Incorporated
U.S. Bancorp Piper Jaffray, Inc.
c/o CIBC World Markets Corp.
425 Lexington Avenue
New York, New York 10017
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
Accord Networks Ltd., an Israeli corporation (the "Company") and Gil
and Michal Rosenfeld (each a "Selling Shareholder" and together the "Selling
Shareholders"), propose, subject to the terms and conditions contained herein,
to sell to you and the other underwriters named on Schedule I to this Agreement
(the "Underwriters"), for whom you are acting as Representatives (the
"Representatives"), an aggregate of 5,000,000 shares (the "Firm Shares") of the
Company's Ordinary Shares, NIS 0.01 nominal value (the "Ordinary Shares"). Of
the 5,000,000 Firm Shares, 5,000,000 are to be issued and sold by the Company
and none are to be sold by the Selling Shareholders. The respective amounts of
the Firm Shares to be purchased by each of the several Underwriters are set
forth opposite their names on Schedule I hereto. In addition, the Company and
the Selling Shareholders propose to grant to the Underwriters an option to
purchase up to an additional 750,000 shares (the "Option Shares") of Ordinary
Shares from it for the purpose of covering over-allotments in connection with
the sale of the Firm Shares. Of the 750,000 Option Shares, 97,000 are to be
sold by the Selling Shareholders (48,500 from each Selling Shareholder) and
653,000 are to be issued and sold by the Company. The Firm Shares and the
Option Shares are together called the "Shares."
As part of the offering contemplated by this Agreement, the
Representatives have agreed to reserve out of the Firm Shares purchased by them
up to 250,000 shares (the "Directed Shares") for sale to the Company's
directors, officers, employees and other parties associated with the Company
(each, individually a "Participant" and collectively, the "Participants") under
the terms
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of the friends and family directed sales program (the "Friends and Family
Program"). Shares to be sold pursuant to the Friends and Family Program shall be
sold pursuant to this Agreement at the public offering price. Any Directed
Shares not orally confirmed for purchase by a Participant by 5:00 p.m. New York
time on the date of this Agreement will be offered to the public by the
Representatives as set forth in the Prospectus (as such term is hereinafter
defined).
1. Sale and Purchase of the Shares.
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On the basis of the representations, warranties and agreements
contained in, and subject to the terms and conditions of, this Agreement:
(a) The Company agrees to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from
the Company, at a price of $[ ] per share (the "Initial Price"),
the number of Firm Shares set forth opposite the name of such Underwriter
under the column "Number of Firm Shares to be Purchased from the Company"
on Schedule I to this Agreement, subject to adjustment in accordance with
Section 11 hereof.
(b) The Company and the Selling Shareholders grant to the several
Underwriters an option to purchase, severally and not jointly, all or any
part of the Option Shares at the Initial Price. Such Option Shares shall
be purchased first from the Selling Stockholders in equal amounts until
all of such Selling Stockholders' Option Shares have been purchased, and
then from the Company. The number of Option Shares to be purchased by
each Underwriter shall be the same percentage (adjusted by the
Representatives to eliminate fractions) of the total number of Option
Shares to be purchased by the Underwriters as such Underwriter is
purchasing of the Firm Shares. Such option may be exercised only to
cover over-allotments in the sales of the Firm Shares by the Underwriters
and may be exercised in whole or in part at any time on or before 12:00
noon, New York City time, on the business day before the Firm Shares
Closing Date (as defined below), and from time to time thereafter within
30 days after the date of this Agreement, in each case upon written,
facsimile or telegraphic notice, or verbal or telephonic notice confirmed
by written, facsimile or telegraphic notice, by the Representatives to
the Company no later than 12:00 noon, New York City time, on the business
day before the Firm Shares Closing Date or at least two business days
before the Option Shares Closing Date (as defined below), as the case may
be, setting forth the number of Option Shares to be purchased and the
time and date (if other than the Firm Shares Closing Date) of such
purchase. Upon receiving such notice from the Representatives, the
Company shall promptly communicate such notice to the Selling
Shareholders.
2. Delivery and Payment. Delivery by the Company of the Firm Shares
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to the Representatives for the respective accounts of the Underwriters, and
payment of the purchase price by certified or official bank check or checks
payable in New York Clearing House (same day) funds drawn to the order of the
Company for the shares purchased from the Company, against delivery of the
respective certificates therefor to the Representatives, shall take place at the
offices
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of CIBC World Markets Corp., One World Financial Center, New York, New York
10281, at 10:00 a.m., New York City time, on the third business day following
the date of this Agreement, or at such time on such other date, not later than
10 business days after the date of this Agreement, as shall be agreed upon by
the Company and the Representatives (such time and date of delivery and payment
are called the "Firm Shares Closing Date").
In the event the option with respect to the Option Shares is exercised
in whole or in part on one or more occasions, delivery by the Company and the
Selling Shareholders of the Option Shares to the Representatives for the
respective accounts of the Underwriters and payment of the purchase price
thereof in immediately available funds by wire transfer or by certified or
official bank check or checks payable in New York Clearing House (same day)
funds to the Company and the Selling Shareholders shall take place at the
offices of CIBC World Markets Corp. specified above at the time and on the date
(which may be the same date as, but in no event shall be earlier than, the Firm
Shares Closing Date) specified in the notice referred to in Section 1(b) (such
time and date of delivery and payment are called the "Option Shares Closing
Date"). The Firm Shares Closing Date and the Option Shares Closing Date are
called, individually, a "Closing Date" and, together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, on the day of notice of exercise of the option as described in
Section l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. Registration Statement and Prospectus; Public Offering. The
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Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission") a Registration Statement (as hereinafter
defined) on Form F-1 (No. 333-38804), including a preliminary prospectus
relating to the Shares, and such amendments thereof as may have been required to
the date of this Agreement. Copies of such Registration Statement (including
all amendments thereof) and of the related Preliminary Prospectus (as
hereinafter defined) have heretofore been delivered by the Company to you. The
term "Preliminary Prospectus" means any preliminary prospectus (as described in
Rule 430 of the Rules) included at any time as a part of the Registration
Statement or filed with the Commission by the Company with the consent of the
Representatives pursuant to Rule 424(a) of the Rules. The term "Registration
Statement" as used in this Agreement means the initial registration statement
(including all exhibits, financial schedules and information deemed to be a part
of the Registration Statement through incorporation by reference or otherwise),
as amended at the time and on the date it becomes effective (the "Effective
Date") including the information (if any) deemed to be part thereof at the time
of effectiveness pursuant to Rule 430A of the Rules. If the Company has filed
an abbreviated registration statement to register additional Shares pursuant to
Rule 462(b) under the Rules (the "462(b) Registration Statement") then any
reference herein to the Registration Statement shall also be deemed to include
such 462(b) Registration Statement. The term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
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Statement at the time of effectiveness or, if Rule 430A of the Rules is relied
on, the term Prospectus shall also include the final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules.
The Company and the Selling Shareholders understand that the
Underwriters propose to make a public offering of the Shares, as set forth in
and pursuant to the Prospectus, as soon after the Effective Date and the date of
this Agreement as the Representatives deem advisable. The Company and the
Selling Shareholders hereby confirm that the Underwriters and dealers have been
authorized to distribute or cause to be distributed each Preliminary Prospectus
and are authorized to distribute the Prospectus (as from time to time amended or
supplemented if the Company furnishes amendments or supplements thereto to the
Underwriters).
4. Representations and Warranties of the Company and the U.S.
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Subsidiary. The Company and Accord Networks, Inc., a Georgia corporation, and
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wholly-owned subsidiary of the Company (the "U.S. Subsidiary"), hereby, jointly
and severally, represent and warrant to each Underwriter as follows:
(a) On the Effective Date, the Registration Statement complied, and
on the date of the Prospectus, the date any post-effective amendment to
the Registration Statement becomes effective, the date any supplement or
amendment to the Prospectus is filed with the Commission and each Closing
Date, the Registration Statement and the Prospectus (and any amendment
thereof or supplement thereto) will comply, in all material respects,
with the applicable provisions of the Securities Act and the Rules. The
Registration Statement did not, as of the Effective Date, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and on the Effective Date and the
other dates referred to above neither the Registration Statement nor any
amendment thereof or supplement thereto, will contain any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. The Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading. When any related preliminary
prospectus was first filed with the Commission (whether filed as part of
the Registration Statement or any amendment thereto or pursuant to Rule
424(a) of the Rules) and when any amendment thereof or supplement thereto
was first filed with the Commission, such preliminary prospectus as
amended or supplemented complied in all material respects with the
applicable provisions of the Securities Act and the Rules and did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Notwithstanding the foregoing, none of the representations and warranties
in this paragraph 4(a) shall apply to statements in, or omissions from,
the Registration Statement or the Prospectus made in reliance upon, and
in conformity with, information herein or otherwise furnished in writing
by the Representatives on behalf of the several Underwriters for use in
the Registration Statement or the Prospectus. With
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respect to the preceding sentence, the Company acknowledges that the only
information furnished in writing by the Representatives on behalf of the
several Underwriters for use in the Registration Statement or the
Prospectus is the paragraph with respect to stabilization on the inside
front cover page of the Prospectus and the statements contained under the
caption "Underwriting" in the Prospectus.
(b) The Registration Statement is effective under the Securities Act
and no stop order preventing or suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the
Prospectus has been issued and no proceedings for that purpose have been
instituted or are overtly threatened under the Securities Act. Any
required filing of the Prospectus and any supplement thereto pursuant to
Rule 424(b) of the Rules has been or will be made in the manner and
within the time period required by such Rule 424(b).
(c) The financial statements of the Company (including all notes and
schedules thereto) included in the Registration Statement and Prospectus
present fairly the financial position, the results of operations, the
statements of cash flows and the statements of stockholders' equity and
the other information purported to be shown therein of the Company at the
respective dates and for the respective periods to which they apply; and
such financial statements and related schedules and notes have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of the results for such periods have
been made. The financial data included in the sections of the Prospectus
entitled "Prospectus Summary--Summary Consolidated Financial Data" and
"Selected Consolidated Financial Data" present fairly the information
shown therein as of the respective dates and for the respective periods
specified therein and such summary and selected financial data have been
presented on a basis consistent with the consolidated financial
statements so set forth in the Prospectus and other financial
information.
(d) Kesselman & Kesselman, a member firm of PricewaterhouseCoopers
International Limited, whose report is filed with the Commission as a
part of the Registration Statement, are and, during the periods covered
by their reports, were independent public accountants as required by the
Securities Act and the Rules.
(e) The Company is a corporation duly organized and validly
existing, and each of its subsidiaries included on Exhibit 21.1 to the
Registration Statement (each a "Significant Subsidiary") is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation. The Company and each Significant
Subsidiary is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the
business conducted by it or location of the assets or properties owned,
leased or licensed by it requires such qualification, except for such
jurisdictions where the failure to so qualify would not reasonably be
likely to have a material adverse effect on the assets or properties,
business, results of operations or financial condition of the Company (a
"Material Adverse Effect").
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The Company and each of its subsidiaries or other entity controlled
directly or indirectly by the Company (collectively, "Subsidiaries") have
all requisite corporate power and authority, and all necessary
authorizations, approvals, consents, orders, licenses, certificates and
permits of and from all governmental or regulatory bodies or any other
person or entity (collectively, the "Permits"), to own, lease and license
its assets and properties and conduct its business, all of which are
valid and in full force and effect, as described in the Registration
Statement and the Prospectus, except where the lack of such Permits,
individually or in the aggregate, would not have a Material Adverse
Effect. The Company and each of its Subsidiaries have fulfilled and
performed in all material respects all of its material obligations with
respect to such Permits and no event has occurred that allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other impairment of the rights of the Company or its
Subsidiaries thereunder, except where such revocation, termination or
other impairment would not reasonably be likely to have a Material
Adverse Effect. Except as may be required under the Securities Act and
state and foreign Blue Sky laws, no other Permits are required to enter
into, deliver and perform this Agreement and to issue and sell the
Shares, except for such Permits as have already been obtained.
(f) The Company and each of its Subsidiaries owns or possesses
adequate and enforceable rights to use all trademarks, trademark
applications, trade names, service marks, patent rights, copyrights,
patent applications, copyright applications, licenses, know-how, trade
secrets, and other similar rights and proprietary knowledge
(collectively, "Intangibles") reasonably necessary to conduct their
business as it is now conducted or described in the Prospectus as being
owned by it. Except as disclosed in the Prospectus, neither the Company
nor any of its Subsidiaries has received any notice of, or is aware of,
any infringement of or conflict with asserted rights of others with
respect to any Intangibles.
(g) The Company and each of its Subsidiaries has good and marketable
title in fee simple to all items of real property and good and marketable
title to all personal property described in the Prospectuses as being
owned by it. Any real property and buildings described in the
Prospectuses as being held under lease by the Company and each of its
Subsidiaries is held by it under valid, existing and enforceable leases,
free and clear of all liens, encumbrances, claims, security interests and
defects, except such as are described in the Registration Statement and
the Prospectus or would not be reasonably likely to have a Material
Adverse Effect.
(h) Other than as described in the Registration Statement and the
Prospectus, there are no litigation or governmental proceedings to which
the Company or its Subsidiaries is subject or which is pending or, to the
knowledge of the Company or the U.S. Subsidiary, overtly threatened,
against the Company or any of its Subsidiaries, which, individually or in
the aggregate, might have a Material Adverse Effect, affect the
consummation of this Agreement or which is required to be disclosed in
the Registration Statement and the Prospectus that is not so disclosed.
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(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
described therein, (a) there has not been any material adverse change
with regard to the assets or properties, business, results of operations
or financial condition of the Company and its Subsidiaries taken as a
whole; (b) neither the Company nor its Subsidiaries have sustained any
loss or interference with its assets, businesses or properties (whether
owned or leased) from fire, explosion, earthquake, flood or other
calamity, whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action, order or decree
which would reasonably be likely to have a Material Adverse Effect; and
(c) since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, except as reflected therein,
neither the Company nor its Subsidiaries have (i) issued any securities
(except option grants under the Company's stock option plans described in
the Prospectus and exercises of options granted thereunder) or incurred
any liability or obligation, direct or contingent, for borrowed money,
except such liabilities or obligations incurred in the ordinary course of
business, (ii) entered into any transaction not in the ordinary course of
business, or (iii) declared or paid any dividend or made any distribution
on any shares of its stock or redeemed, purchased or otherwise acquired
or agreed to redeem, purchase or otherwise acquire any shares of its
stock.
(j) There is no document, contract or other agreement of a character
required to be described in the Registration Statement or Prospectus or
to be filed as an exhibit to the Registration Statement which is not
described or filed as required by the Securities Act or Rules. Each
description of a contract, document or other agreement in the
Registration Statement and the Prospectus accurately reflects in all
material respects the terms of the underlying document, contract or
agreement. Each agreement described in the Registration Statement and
Prospectus or listed in the Exhibits to the Registration Statement is in
full force and effect and is valid and enforceable by and against the
Company or the Subsidiary, as the case may be, in accordance with its
terms, except (1) where enforceability may be limited by bankruptcy and
other creditors rights laws and general principles of equity, including
the availability of the equitable remedy of specific performance, and (2)
as described in the Prospectus. Neither the Company, any of its
Subsidiaries nor, to the Company's or the U.S. Subsidiary's knowledge,
any other party is in default in the observance or performance of any
material term or obligation to be performed by it under any such
agreement, and no event has occurred which with notice or lapse of time
or both would constitute a default by the Company or any of its
Subsidiaries, or to the Company's or the U.S. Subsidiary's knowledge, by
any other party, in any such case which default or event, individually or
in the aggregate, would have a Material Adverse Effect. No default
exists, and no event has occurred which with notice or lapse of time or
both would constitute a default, in the due performance and observance of
any term, covenant or condition, by the Company or the Subsidiary, if the
Subsidiary is a party thereto, of any other agreement or instrument to
which the Company or the Subsidiary is a party or by which it or its the
Company, the Subsidiary or their properties or business may be bound or
affected which default or event, individually or in the aggregate, would
have a Material Adverse Effect.
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(k) Neither the Company nor any of its Subsidiaries is in violation
of any term or provision of its articles of association, charter, by-
laws, or similar governing documents, or of any franchise, license,
Permit, judgment, decree, order, statute, rule or regulation, where the
consequences of such violation, individually or in the aggregate, would
have a Material Adverse Effect.
(l) Neither the execution, delivery and performance of this
Agreement by each of the Company and the U.S. Subsidiary nor the
consummation of any of the transactions contemplated hereby (including,
without limitation, the issuance and sale by the Company of the Shares)
will (A) give rise to a right to terminate or accelerate the due date of
any payment due under, or conflict with or result in the breach of any
term or provision of, or constitute a default (or an event which with
notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under (except for such consents or waivers
as may required under the securities or Blue Sky laws of the various
states or such consents or waivers as have already been obtained and are
in full force and effect), or result in the execution or imposition of
any lien, charge or encumbrance upon any properties or assets of the
Company or any of its Subsidiaries pursuant to the terms of, (i) any
indenture, mortgage, deed of trust or other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or
by which either the Company or any of its Subsidiaries or any of its
their properties or businesses is bound, or (ii) any franchise, license,
permit, judgment, decree, order, statute, rule or regulation applicable
to the Company or any of its Subsidiaries or (B) violate any provision of
the articles of associations, charter or by-laws of the Company or any of
its Subsidiaries.
(m) The Company has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus. The
certificates evidencing the Shares are in due and proper legal form and
have been duly authorized for issuance by the Company. All of the issued
and outstanding shares of Ordinary Shares have been duly and validly
issued and are fully paid and nonassessable and have been issued in
compliance with Israeli securities laws. There are no preemptive or
other similar rights to subscribe for or to purchase or acquire any
shares of Ordinary Shares of the Company or its Subsidiaries pursuant to
any statute or the Company's Articles of Association, by-laws, or similar
governing documents, or any agreement or instrument to or by which the
Company or any of its Subsidiaries is a party or bound. The Shares to be
issued and sold by the Company when issued and delivered to the
Underwriter against payment therefor pursuant to this Agreement, will be
duly and validly issued, fully paid and nonassessable and none of them
will be issued in violation of any preemptive or other similar right.
Except as disclosed in the Registration Statement and the Prospectus,
there is no outstanding option, warrant or other right calling for the
issuance of, and there is no commitment, plan or arrangement to issue,
any share of stock of the Company or its Subsidiaries or any security
convertible into, or exercisable or exchangeable for, such stock. The
Ordinary Shares and the Shares conform in all material respects to all
statements in relation thereto contained in the Registration Statement
and the Prospectus. All outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, and are fully
paid and nonassessable and are owned directly by the
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Company or by another wholly-owned subsidiary of the Company free and
clear of any security interests, liens, encumbrances, equities or claims,
other than those described in the Prospectus.
(n) All dividends and other distributions declared and payable on
the Shares may under the current laws and regulations of the State of
Israel be paid in U.S. dollars or in Israeli currency that may be
converted into foreign currency that may be freely transferred out of the
State of Israel, and, except as described in the Prospectus, all such
dividends and other distributions will not be subject to withholding or
other taxes under the laws and regulations of the State of Israel and are
otherwise free and clear of any other tax, withholding or deduction in
the State of Israel and without the necessity of obtaining any
governmental authorization in the State of Israel. There are no
restrictions on subsequent transfers of the Shares under the laws of the
State of Israel and of the United States, except as set forth in the
Prospectus. 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 stock, 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) Except as described in the Prospectus, no holder of any security
of the Company has the right to have any security owned by such holder
included in the Registration Statement or to demand registration of any
security owned by such holder during the period ending 180 days after the
date of this Agreement. Each director and executive officer of the
Company and each beneficial owner of Ordinary Shares identified in
Schedule II hereto has delivered to the Representatives his enforceable
written lock-up agreement in the form attached to this Agreement ("Lock-
Up Agreement").
(p) All necessary corporate action has been duly and validly taken
by each of the Company and the U.S. Subsidiary to authorize the
execution, delivery and performance of this Agreement and the issuance
and sale of the Shares by the Company. This Agreement has been duly and
validly authorized, executed and delivered by the Company and the U.S.
Subsidiary and constitutes legal, valid and binding obligations of the
Company enforceable against the Company and the U.S. Subsidiary in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
(q) Neither the Company nor any of its Subsidiaries are involved in
any labor dispute nor, to the knowledge of the Company and the U.S.
Subsidiary, is any such dispute threatened, which dispute would have a
Material Adverse Effect. The Company is not aware of any existing or
imminent labor disturbance by the employees of any of its principal
suppliers or contractors which would have a Material Adverse Effect. The
Company is not aware of any threatened or pending litigation between the
Company or its Subsidiaries and any of its executive officers which, if
adversely determined, could
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have a Material Adverse Effect and has no reason to believe that such
officers will not remain in the employment of the Company.
(r) No transaction has occurred between or among the Company and any
of its officers or directors or five percent shareholders or any
affiliate or affiliates of any such officer or director or five percent
shareholders that is required to be described in and is not described in
the Registration Statement and the Prospectus.
(s) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in, or which has constituted or which might reasonably
be expected to constitute, the stabilization or manipulation of the price
of the Ordinary Shares to facilitate the sale or resale of any of the
Shares.
(t) The Company and each of its Subsidiaries has filed all Israeli,
U.S. federal, state, local and foreign tax returns which are required to
be filed through the date hereof, other than those filings being
contested in good faith or for which extensions have been received, and
has paid all taxes shown on such returns and all assessments received by
it to the extent that the same are material and have become due, other
than those filings being contested in good faith or for which extensions
have been received. There are no tax audits or investigations pending,
which if adversely determined would have a Material Adverse Effect; nor,
to the best of the Company's knowledge, are there any material proposed
additional tax assessments against the Company and any of its
Subsidiaries.
(u) The Shares have been duly authorized for quotation on the
National Association of Securities Dealers Automated Quotation ("Nasdaq")
National Market System, subject to official Notice of Issuance. A
registration statement has been filed on Form 8-A pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which registration statement complies in all material respects with the
Exchange Act.
(v) [Intentionally Omitted]
(w) The books, records and accounts of the Company and its
Subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the results of
operations of, the Company and its Subsidiaries. The Company and each of
its Subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (iii) access
to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
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(x) The Company and its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are customary in the businesses in which they are engaged
or propose to engage after giving effect to the transactions described in
the Prospectus; all policies of insurance and fidelity or surety bonds
insuring the Company or any of its subsidiaries or the Company's or its
subsidiaries' respective businesses, assets, employees, officers and
directors are in full force and effect; the Company and each of its
subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and neither the Company nor any
Subsidiary of the Company has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a
Material Adverse Effect. Neither the Company nor any Subsidiary has been
denied any insurance coverage which it has sought or for which it has
applied.
(y) Each approval, consent, order, authorization, designation,
declaration or filing of, by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company and the U.S. Subsidiary of this Agreement and the
consummation of the transactions herein contemplated required to be
obtained or performed by the Company and the U.S. Subsidiary (except such
additional steps as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") or may be necessary to qualify the
Shares for public offering by the Underwriters under the state securities
or Blue Sky laws) has been obtained or made and is in full force and
effect, except for such approvals, consents, orders, authorizations,
designations, declarations or filings, the failure of which to obtain is
not reasonably likely to have a Material Adverse Effect.
(z) There are no affiliations with the NASD among the Company's or
the U.S. Subsidiary's officers, directors or, to the best of the
knowledge of the Company and the U.S. Subsidiary, any five percent or
greater stockholder of the Company, except as set forth in the
Registration Statement or otherwise disclosed in writing to the
Representatives.
(aa) (i) Each of the Company and its Subsidiaries are in compliance
in all material respects with all rules, laws and regulation relating to
the use, treatment, storage and disposal of toxic substances and
protection of health or the environment ("Environmental Law") which are
applicable to their business; (ii) neither the Company nor its
Subsidiaries has received any notice from any governmental authority or
third party of an asserted claim under Environmental Laws; (iii) each of
the Company and its Subsidiaries has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to
conduct its business and is in compliance with all terms and conditions
of any such permit, license or approval; (iv) to the Company's and the
U.S. Subsidiary's knowledge, no facts currently exist that will require
the Company or its Subsidiaries to make future material capital
expenditures to comply with Environmental Laws; and (v) no property which
is or has been owned, leased or occupied by the
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<PAGE>
Company or its Subsidiaries has been designated as a Superfund site
pursuant to the Comprehensive Environmental Response, Compensation of
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et. seq.) or
otherwise designated as a contaminated site under applicable state or
local law. Neither the Company nor any of its Subsidiaries have been
named as a "potentially responsible party" under the CER, CLA 1980.
(bb) The Company is not aware of any costs and liabilities or
potential costs and liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws, or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a Material
Adverse Effect.
(cc) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of proceeds thereof as described
in the Prospectus, will not be an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "Investment
Company Act").
(dd) Neither the Company, its Subsidiaries nor any director,
officer, agent or employee of the Company or its Subsidiaries, nor any
other person acting with the Company's knowledge, has, directly or
indirectly, while acting on behalf of the Company or its Subsidiaries,
(i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity;
(ii) made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other
unlawful payment.
(ee) The Company has reviewed its operations and that of its
Subsidiaries to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries have been or will be affected
by the Year 2000 Problem (that is, any significant risk that computer
hardware or software applications used by the Company and its
subsidiaries will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case
of dates or time periods occurring prior to January 1, 2000); as a result
of such review, (i) the Company has no reason to believe, and does not
believe, that (A) there are any issues related to the Year 2000 Problem
that are of a character required to be described or referred to in the
Registration Statement or Prospectus which have not been accurately
described in the Registration Statement or Prospectus and (B) the Year
2000 Problem has had or will have a Material Adverse Effect, or has
resulted or will result in any material loss or interference with the
business or operations of the Company and its subsidiaries, taken as a
whole; (ii) the Company reasonably believes, after due inquiry, that the
suppliers, vendors or other material third parties used by the Company
and its Subsidiaries have addressed the Year 2000 Problem prior to
December 31, 1999, except to the extent that a failure to address the
Year 2000 by a supplier, vendor or material third party would not be
reasonably likely to have a
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<PAGE>
Material Adverse Effect; and (iii) the Company has not expended and does
not anticipate expending any material amount of funds as a result of or
related to the evaluation and remediation of any Year 2000 Problems.
(ff) Neither the Company nor any other person associated with or
acting on behalf of the Company including, without limitation, any
director, officer, agent or employee of the Company has offered or caused
the Underwriters to offer any of the Shares to any person pursuant to the
Friends and Family 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.
(gg) Except for Israeli stamp duty, which will be paid by the
Company, no stamp or other issuance or transfer taxes or duties and,
assuming that the Underwriters are not otherwise subject to taxation in
Israel, no capital gains, income, withholding or other taxes are payable
by or on behalf of the Underwriters to the State of Israel or any
political subdivision or taxing authority thereof or therein in
connection with the sale and delivery by the Company of the Shares to or
for the respective accounts of the Underwriters.
(hh) The statements set forth in the Prospectus under the caption
"Description of Share Capital", insofar as they purport to constitute a
summary of the terms of the Shares and under the captions "Risk Factors--
We are incorporated in Israel and have important facilities and resources
located in Israel", --We rely upon tax benefits and other funding from
the State of Israel" and "--Israeli courts might not enforce judgments
rendered outside of Israel" and "United States Federal Income Tax
Consideration", "Israeli Taxation and Investment Programs", "Conditions
in Israel" and "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate
summaries of and descriptions of such terms and provisions in all
material respects.
(ii) The Company is not, at the time of its receipt of payment for
the Shares, a Passive Foreign Investment Company ("PFIC") within the
meaning of Section 1296 of the United States Internal Revenue Code of
1986, as amended, and, to the Company's or the U.S. Subsidiary's
knowledge, is not likely to become a PFIC.
(jj) The Company is in material compliance with all terms and
conditions of the laws and regulations regarding all "Approved
Enterprise" designations under the Law for Encouragement of Capital
Investments, 1959, of the State of Israel, as amended (the "Investment
Act"). The Company qualifies as an "Industrial Company" within the
definition of the Law for the Encouragement of Industry (Taxes), 1969, of
the State of Israel (the "Industry Act"). Except as described in the
Prospectus, the Company is not in material violation of any conditions or
requirements stipulated by the instruments of approval granted to it by
the Office of Chief Scientist of the Ministry of Industry & Trade and any
applicable laws and regulations, with respect to any research and
development grants given to it by such office, which violation,
individually or in the aggregate, could
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<PAGE>
have a Material Adverse Effect. All information supplied by the Company
with respect to such applications was true, correct and complete in all
material respects when supplied to the appropriate authorities.
(kk) The Company has received an exemption from the Israel
Securities Authority from the obligation to publish a prospectus under
Israeli securities law, which exemption was in full force and effect on
the date hereof and which shall be in full force and effect on the date
of the Prospectus, on the date that any post-effective amendment to the
Registration Statement shall become effective, when any supplement or
amendment to the Prospectus is filed with the Commission, and at the
Closing Date, assuming compliance by the Underwriters with the limitation
set forth in Section 3 above.
5. Representations and Warranties of the Selling Shareholders. Each
----------------------------------------------------------
of the Selling Shareholders, severally, but not jointly, hereby represents and
warrants to each Underwriter as follows:
(a) The Selling Shareholders has caused certificates for the number
of Shares to be sold by such Selling Shareholders, severally, but not
jointly, hereunder to be delivered to the American Stock Transfer & Trust
Company (the "Custodian"), endorsed in blank or with blank stock powers
duly executed, with a signature appropriately guaranteed, such
certificates to be held in custody by the Custodian for delivery,
pursuant to the provisions of this Agreement and an agreement dated June
[ ], 2000 among the Custodian and the Selling Shareholders (the
"Custody Agreement").
(b) The Selling Shareholders has granted an irrevocable power of
attorney (the "Power of Attorney") to the person named therein, on behalf
of the Selling Shareholders, to execute and deliver this Agreement and
any other document necessary or desirable in connection with the
transactions contemplated hereby and to deliver the shares to be sold by
the Selling Shareholders pursuant hereto.
(c) This Agreement, the Custody Agreement, the Power of Attorney and
the Lock-Up Agreement have each been duly authorized, executed and
delivered by or on behalf of the Selling Shareholders and, assuming due
authorization, execution and delivery by the other parties hereto,
constitutes the valid and legally binding agreement of the Selling
Shareholders, enforceable against the Selling Shareholders in accordance
with its terms.
(d) The execution and delivery by the Selling Shareholders of this
Agreement and the performance by the Selling Shareholders of its
obligations under this Agreement (i) will not contravene any provision of
applicable law, statute, regulation or filing or any agreement or other
instrument binding upon the Selling Shareholder or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
the Selling Shareholder, (ii) does not require any consent, approval,
authorization or order of or registration or filing with any court or
governmental agency or body having jurisdiction over it, except such as
may be required by the Blue Sky laws of the various states in
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<PAGE>
connection with the offer and sale of the Shares which have been or will
be effected in accordance with this Agreement, except for such consents,
approvals, authorizations, orders, registrations or filings, which have
already been obtained or made, (iii) does not and will not violate any
statute, law, regulation or filing or judgment, injunction, order or
decree applicable to the Selling Shareholder or (iv) will not result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Selling Shareholder pursuant to the terms of
any agreement or instrument to which the Selling Shareholder is a party
or by which the Selling Shareholder may be bound or to which any of the
property or assets of the Selling Shareholders is subject.
(e) The Selling Shareholder has, and on the Option Shares Closing
Date will have (provided, however, that with respect to any of the Shares
which will result from the exercise of warrants or options, the foregoing
is as of the Option Shares Closing Date only) valid and marketable title
to the Shares to be sold by the Selling Shareholder free and clear of any
lien, claim, security interest or other encumbrance, including, without
limitation, any restriction on transfer, except as otherwise described in
the Registration Statement and Prospectus.
(f) The Selling Shareholder has, and on the Option Shares Closing
Date will have (provided, however, that with respect to any of the Shares
which will result from the exercise of warrants or options, the foregoing
is as of the Option Shares Closing Date only), full legal right, power
and authorization, and any approval required by law, to sell, assign,
transfer and deliver the Shares to be sold by the Selling Shareholders in
the manner provided by this Agreement.
(g) Upon delivery of and payment for the Shares to be sold by the
Selling Shareholder pursuant to this Agreement, the several Underwriters
will receive valid and marketable title to such Shares free and clear of
any lien, claim, security interest or other encumbrance.
(h) All information relating to the Selling Shareholder furnished in
writing by the Selling Shareholder expressly for use in the Registration
Statement and Prospectus is, and on the Option Shares Closing Date will
be, true, correct, and complete, and does not, and on the Option Shares
Closing Date will not, contain any untrue statement of a material fact or
omit to state any material fact necessary to make such information not
misleading.
(i) The sales of Shares by the Selling Shareholder pursuant to this
Agreement are not prompted by the Selling Shareholder's knowledge of any
material information concerning the Company or its Subsidiaries which is
not set forth in the Prospectus.
(j) The Selling Shareholder 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 any security of the Company to facilitate the sale or resale of
the Shares.
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<PAGE>
(k) The representations and warranties of the Selling Shareholder in
the Custody Agreement are and on the Option Shares Closing Date will be,
true and correct.
(l) Neither the Selling Shareholder nor any other person associated
with or acting on behalf of the Selling Shareholder has offered or caused
the Underwriters to offer any of the Shares to any person pursuant to the
Friends and Family 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.
6. Conditions of the Underwriters' Obligations. The obligations of
-------------------------------------------
the Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
(a) Notification from the Commission that the Registration Statement
has become effective shall have been received by the Representatives and
the Prospectus shall have been timely filed with the Commission in
accordance with Section 7(a) of this Agreement.
(b) No order preventing or suspending the use of any preliminary
prospectus or the Prospectus shall have been or shall be in effect and no
order suspending the effectiveness of the Registration Statement shall be
in effect and no proceedings for such purpose shall be pending before or
threatened by the Commission, and any requests for additional information
on the part of the Commission (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with
to the satisfaction of the Commission and the Representatives.
(c) The representations and warranties of the Company, the U.S.
Subsidiary and the Selling Shareholders contained in this Agreement and
in the certificates delivered pursuant to Section 6(d) shall be true and
correct when made and on and as of each Closing Date as if made on such
date. The Company and the Selling Shareholders shall have performed all
covenants and agreements and satisfied all the conditions contained in
this Agreement required to be performed or satisfied by them at or before
such Closing Date.
(d) The Representatives shall have received on each Closing Date a
certificate, addressed to the Representatives and dated such Closing
Date, of the chief executive or chief operating officer and the chief
financial officer or chief accounting officer of the Company to the
effect that (i) the signers of such certificate have carefully examined
the Registration Statement, the Prospectus and this Agreement and that
the representations and warranties of the Company in this Agreement are
true and correct on and as of such Closing Date with the same effect as
if made on such Closing Date and the Company has performed all covenants
and agreements and satisfied all conditions contained in this
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<PAGE>
Agreement required to be performed or satisfied by it at or prior to such
Closing Date, and (ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the best of their
knowledge, no proceedings for that purpose have been instituted or are
pending under the Securities Act.
(e) The Representatives shall have received on the Option Shares
Closing Date a certificate, addressed to the Representatives and dated
such Closing Date, of each Selling Shareholder, to the effect that such
Selling Shareholder has carefully examined the Registration Statement,
the Prospectus and this Agreement and that the representations and
warranties of the Selling Shareholder in this Agreement are true and
correct on and as of such Closing Date with the same effect as if made on
such Closing Date and the Selling Shareholder has performed all covenants
and agreements and satisfied all conditions contained in this Agreement
required to be performed or satisfied by it at or prior to such Closing
Date.
(f) The Representatives shall have received, at the time this
Agreement is executed and on each Closing Date a signed letter from
Kesselman & Kesselman, a member firm of PricewaterhouseCoopers
International Limited, addressed to the Representatives and dated,
respectively, the date of this Agreement and each such Closing Date, in
form and substance reasonably satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of
the Securities Act and the Rules, that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them and
stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated by reference
in the Registration Statement and the Prospectus and reported on by
them comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules;
(ii) on the basis of a reading of the amounts included in the
Registration Statement and the Prospectus under the headings
"Summary Consolidated Financial Data" and "Selected Consolidated
Financial Data," carrying out certain procedures (but not an
examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter,
a reading of the minutes of the meetings of the stockholders and
directors of the Company, and inquiries of certain officials of the
Company who have responsibility for financial and accounting matters
of the Company as to transactions and events subsequent to the date
of the latest audited financial statements, except as disclosed in
the Registration Statement and the Prospectus, nothing came to their
attention which caused them to believe that:
(A) the amounts in "Summary Consolidated Financial Data,"
and "Selected Consolidated Financial Data" included in the
Registration
-17-
<PAGE>
Statement and the Prospectus do not agree with the
corresponding amounts in the audited and unaudited financial
statements from which such amounts were derived; or
(B) with respect to the Company, there were, at a
specified date not more than three business days prior to the
date of the letter, any increases in the current liabilities
and long-term liabilities of the Company or any decreases in
net income or in working capital or the stockholders' equity in
the Company, as compared with the amounts shown on the
Company's audited balance sheet for the fiscal year ended 1999
and the three months ended March 31, 1999 included in the
Registration Statement;
(iii) they have performed certain other procedures as may be
permitted under Generally Acceptable Auditing Standards as a result
of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting,
financial or statistical information derived from the general
accounting records of the Company) set forth in the Registration
Statement and the Prospectus and reasonably specified by the
Representatives agrees with the accounting records of the Company;
and
(iv) based upon the procedures set forth in clauses (ii) and
(iii) above and a reading of the amounts included in the
Registration Statement under the headings "Summary Consolidated
Financial Data" and "Selected Consolidated Financial Data" included
in the Registration Statement and Prospectus and a reading of the
financial statements from which certain of such data were derived,
nothing has come to their attention that gives them reason to
believe that the "Summary Consolidated Financial and Other Data" and
"Selected Consolidated Financial Data" included in the Registration
Statement and Prospectus do not comply as to the form in all
material respects with the applicable accounting requirements of the
Securities Act and the Rules or that the information set forth
therein is not fairly stated in relation to the financial statements
included in the Registration Statement or Prospectus from which
certain of such data were derived are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Registration Statement and Prospectus.
References to the Registration Statement and the Prospectus in
this paragraph (f) are to such documents as amended and supplemented
at the date of the letter.
(g) The Representatives shall have received on each Closing Date
from Alston & Bird, counsel for the Company, an opinion, addressed to the
Representatives and dated such Closing Date, the form of which is
attached as Exhibit A.
---------
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<PAGE>
(h) The Representatives shall have received on each Closing Date
from Doron Cohen-David Cohen, Law Offices, Israeli counsel for the
Company, an opinion, addressed to the Representatives and dated such
Closing Date, the form of which is attached as Exhibit B.
---------
(i) [Intentionally Omitted]
(j) The Representatives shall have received on the Option Shares
Closing Date from Doron Cohen-David Cohen, Law Offices, counsel for the
Selling Shareholders, an opinion, addressed to the Representatives and
dated such Closing Date, the form of which is attached as Exhibit C.
---------
(k) All proceedings taken in connection with the sale of the Firm
Shares and the Option Shares as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives, and their
counsel and the Underwriters shall have received from Ropes & Gray,
counsel to the Underwriters, a favorable opinion, addressed to the
Representatives and dated such Closing Date, with respect to the
Registration Statement and the Prospectus, and such other related
matters, as the Representatives may reasonably request, and the Company
shall have furnished to Ropes & Gray such documents as they may
reasonably request for the purpose of enabling them to pass upon such
matters.
(l) The Representatives shall have received from Yigal Arnon & Co.,
Israeli counsel to the Underwriters, a favorable opinion addressed to the
Representatives and dated such Closing Date, with respect to the validity
of the Shares.
(m) The Representatives shall have received copies of the Lock-up
Agreements executed by each entity or person described in Section 4(p).
(n) The Company and the Selling Shareholders shall have furnished or
caused to be furnished to the Representatives such further certificates
or documents as the Representatives shall have reasonably requested.
7. Covenants of the Company.
------------------------
(a) The Company covenants and agrees as follows:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of
this Agreement, and any amendments thereto, to become effective as
promptly as possible. The Company shall prepare the Prospectus in a
form approved by the Representatives and file such Prospectus
pursuant to Rule 424(b) under the Securities Act not later than the
Commission's close of business on the second business day following
the execution and delivery of this Agreement, or, if applicable,
such earlier time as may be required by Rule 430A(a)(3) under the
Securities Act.
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<PAGE>
(ii) The Company shall promptly advise the Representatives in
writing (i) when any amendment to the Registration Statement shall
have become effective, (ii) of any request by the Commission for any
amendment of the Registration Statement or the Prospectus or for any
additional information, (iii) of the prevention or suspension of the
use of any Preliminary Prospectus or the Prospectus or of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (iv) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company shall not file any amendment of the
Registration Statement or supplement to the Prospectus unless the
Company has furnished the Representatives a copy for its review
prior to filing and shall not file any such proposed amendment or
supplement to which the Representatives reasonably object. The
Company shall use its best efforts to prevent the issuance of any
such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(iii) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the Rules,
any event occurs as a result of which the Prospectus as then amended
or supplemented would include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which
they were made not misleading, or if it shall be necessary to amend
or supplement the Prospectus to comply with the Securities Act or
the Rules, the Company promptly shall prepare and file with the
Commission, subject to the second sentence of paragraph (ii) of this
Section 7(a), an amendment or supplement which shall correct such
statement or omission or an amendment which shall effect such
compliance.
(iv) The Company shall make generally available to its
security holders and to the Representatives as soon as practicable,
but not later than 45 days after the end of the 12-month period
beginning at the end of the fiscal quarter of the Company during
which the Effective Date occurs (or 90 days if such 12-month period
coincides with the Company's fiscal year), an earning statement
(which need not be audited) of the Company, covering such 12-month
period, which shall satisfy the provisions of Section 11(a) of the
Securities Act or Rule 158 of the Rules.
(v) The Company agrees to comply with the reporting
requirements of the Securities Exchange Act of 1934, which reports
shall be prepared (i) in conformity with generally accepted
accounting principles in the State of Israel ("Israel GAAP") which
as of the date hereof is identical in all material respects as
applied to the company to generally accepted accounting principles
in the U.S. ("U.S. GAAP") or (ii) in conformity with U.S. GAAP.
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<PAGE>
(vi) The Company shall furnish to the Representatives and
counsel for the Underwriters, without charge, as many signed (or
conformed) copies of the Registration Statement (including all
exhibits thereto and amendments thereof) as the Representatives may
reasonably request, and to each other Underwriter a conformed copy
of the Registration Statement (without exhibits thereto) and all
amendments thereof and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Securities Act or the
Rules, as many copies of the Prospectus and any amendments thereof
and supplements thereto as the Representatives may reasonably
request.
(vii) The Company shall cooperate with the Representatives and
their counsel in endeavoring to qualify the Shares for offer and
sale in connection with the offering under the laws of such
jurisdictions as the Representatives may designate and shall
maintain such qualifications in effect so long as required for the
distribution of the Shares; provided, however, that the Company
shall not be required in connection therewith, as a condition
thereof, to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction or subject itself
to taxation as doing business in any jurisdiction.
(viii) Without the prior written consent of CIBC World
Markets Corp., for a period of 180 days after the date of this
Agreement, the Company and each of its individual directors and
executive officers shall not issue, sell or register with the
Commission (other than on Form S-8 or on any successor form), or
otherwise dispose of, directly or indirectly, any equity securities
of the Company (or any securities convertible into, exercisable for
or exchangeable for equity securities of the Company), except for
the issuance of the Shares pursuant to the Registration Statement
and the issuance of stock options and/or shares pursuant to the
Company's existing stock option plans or bonus plan as described in
the Registration Statement and the Prospectus. In the event that
during this period, (i) any stock options are issued pursuant to the
Company's existing stock option plans or bonus plan that are
exercisable during such 180 day period or (ii) any registration is
effected on Form S-8 or on any successor form relating to shares
issuable upon the exercise of stock options that are exercisable
during such 180 period, the Company shall obtain the written
agreement of such grantee or purchaser or holder of such registered
securities that, for a period of 180 days after the date of this
Agreement, such person will not, without the prior written consent
of CIBC World Markets Corp., offer for sale, sell, distribute, grant
any option for the sale of, or otherwise dispose of, directly or
indirectly, or exercise any registration rights with respect to, any
shares of Ordinary Shares (or any securities convertible into,
exercisable for, or exchangeable for any shares of Ordinary Shares)
owned by such person. Notwithstanding the foregoing, during such
period the Company may issue shares of Ordinary Shares in connection
with acquisitions of other businesses, products or technologies,
provided, that, the recipient of the Ordinary Shares in any such
acquisition shall agree in writing to
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<PAGE>
be bound by all of the restrictions and other provisions applicable
to the Company under this Section 7(a)(viii).
(ix) On or before completion of this offering, the Company
shall make all filings required under applicable securities laws and
by the Nasdaq National Market (including any required registration
under the Exchange Act).
(x) The Company will apply the net proceeds from the offering
of the Shares in the manner set forth under "Use of Proceeds" in the
Prospectus.
(xi) The Company will comply with all applicable securities
laws and other applicable laws, rules and regulations in each
foreign jurisdiction in which the Directed Shares are offered in
connection with the Friends and Family Program.
(xii) The Company will ensure that the Directed Shares will be
restricted, to the extent required by the NASD or the NASD rules,
from sale, transfer, assignment, pledge or hypothecation for a
period of three months following the date of the effectiveness of
the Registration Statement. The Representatives will notify the
Company as to which Participants, if any, will need to be so
restricted. The Company shall direct the transfer agent to place
stop transfer restrictions upon such securities for such period of
time.
(b) The Company and the U.S. Subsidiary each agrees to pay, or
reimburse if paid by the Representatives, whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated, all
costs and expenses incident to the performance of the obligations of the
Company and the U.S. Subsidiary under this Agreement including those
relating to: (i) the preparation, printing, filing and distribution of
the Registration Statement including all exhibits thereto, each
preliminary prospectus, the Prospectus, all amendments and supplements to
the Registration Statement and the Prospectus, and the printing, filing
and distribution of this Agreement; (ii) the preparation and delivery of
certificates for the Shares to the Underwriters; (iii) the registration
or qualification of the Shares for offer and sale under the securities or
Blue Sky laws of the various jurisdictions referred to in Section
7(a)(vi), including the reasonable fees and disbursements of counsel for
the Underwriters in connection with such registration and qualification
and the preparation, printing, distribution and shipment of preliminary
and supplementary Blue Sky memoranda; (iv) the furnishing (including
costs of shipping and mailing) to the Representatives and to the
Underwriters of copies of each preliminary prospectus, the Prospectus and
all amendments or supplements to the Prospectus, and of the several
documents required by this Section to be so furnished, as may be
reasonably requested for use in connection with the offering and sale of
the Shares by the Underwriters or by dealers to whom Shares may be sold;
(v) the filing fees of the NASD in connection with its review of the
terms of the public offering and reasonable fees and disbursements of
counsel for the Underwriters in connection with such review; (vi)
inclusion of the Shares for quotation on the Nasdaq
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National Market; and (vii) all stamp duty and transfer taxes, if
any, with respect to the issuance, sale and delivery of the Shares
by the Company to the Underwriters (viii) payments to counsel for
costs incurred by the Underwriters in connection with the Friends
and Family Program and payment of any stamp duties, similar taxes or
duties or other taxes, if any, incurred by the Underwriters in
connection with the Friends and Family Program. Subject to the
provisions of Section 10, the Underwriters agree to pay, whether or
not the transactions contemplated hereby are consummated or this
Agreement is terminated, all costs and expenses incident to the
performance of the obligations of the Underwriters under this
Agreement not payable by the Company pursuant to the preceding
sentence, including, without limitation, the fees and disbursements
of counsel for the Underwriters.
8. Indemnification.
----------------
(a) The Company, and the U.S. Subsidiary agree, jointly and
severally, to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
against any and all losses, claims, damages and liabilities, joint or
several (including any reasonable investigation, legal and other expenses
incurred in connection with any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other Federal or state law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Prospectus dated June 8, 2000, the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto, or in any
Blue Sky application or other information or other documents executed by
the Company and filed in any state or other jurisdiction to qualify any
or all of the Shares under the securities laws thereof (any such
application, document or information being hereinafter referred to as a
"Blue Sky Application") or arise out of or are based upon 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)
in whole or in part upon any breach of the representations and warranties
set forth in Section 4 hereof, or (iii) in whole or in part upon any
failure of the Company to perform any of its obligations hereunder or
under law; provided, however, that such indemnity shall not inure to the
benefit of any Underwriter (or any person controlling such Underwriter)
on account of any losses, claims, damages or liabilities if such untrue
statement or omission or alleged untrue statement or omission was made in
such Preliminary Prospectus, the Registration Statement or the
Prospectus, or such amendment or supplement thereto, or in any Blue Sky
Application in reliance upon and in conformity with information furnished
in writing to the Company by the Representatives on behalf of any
Underwriter specifically for use therein. This indemnity agreement will
be in addition to any liability which the Company and the U.S. Subsidiary
and Selling Shareholders may otherwise have. The indemnity agreement
provided in this Section 8(a) with respect to any Preliminary Prospectus
shall not inure to the benefit of any Underwriter who failed to timely
deliver a Prospectus, as then amended or supplemented (a "Recirculated
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<PAGE>
Prospectus"), to the person asserting any losses, claims, damages or
liabilities caused by any untrue statement or alleged untrue statement of
a material fact contained in such Preliminary Prospectus, 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, if such material misstatement or omission or alleged
material misstatement or omission was cured in the Recirculated
Prospectus and such Recirculated Prospectus was required by law to be
delivered at or prior to the written confirmation of sale to such person,
provided that, (i) the misstatement or omission cured in the Recirculated
-------------
Prospectus had been brought to the attention of the Representatives and
their counsel prior to the execution of this Agreement, and (ii) the
Representatives have had an opportunity to notify the Underwriters of the
need for recirculation of the Prospectus and the need to institute
procedures demonstrating that a copy of the Recirculated Prospectus has
been mailed to each purchaser with the written confirmation of sale.
The Company and the U.S. Subsidiary each agrees to indemnify and
hold harmless the Representatives and each person, if any, who controls
any Representative within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act against any and all losses, claims,
damages, expenses and liabilities (including any reasonable
investigation, legal and other expenses incurred in connection with, and
any amount paid in settlement of, any action, suit or proceeding or any
claim asserted) (i) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any material
prepared by or with the consent of the Company or the U.S. Subsidiary for
distribution to Participants in connection with the Friends and Family
Program or arising out of or based upon 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) arising out
of or based upon the failure of any Participant to pay for and accept
delivery of Directed Shares otherwise reserved for such Participant
pursuant to the Friends and Family Program, and (iii) related to arising
out of, or in connection with the Friends and Family 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 gross negligence of the Representatives.
(b) Each Selling Shareholder agrees, severally, but not jointly, to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and all
losses, claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection
with any action, suit or proceeding or any claim asserted), to which
they, or any of them, may become subject under the Securities Act, the
Exchange Act or other Federal or state law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Prospectus
dated June 8, 2000, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto, or in any Blue Sky application
or other information or other documents executed
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<PAGE>
by the Company and filed in any state or other jurisdiction to qualify
any or all of the Shares under the securities laws thereof (any such
application document or information being hereinafter referred to as a
"Blue Sky Application") or arise out of or are based upon 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)
in whole or in part upon any breach of the representations and warranties
set forth in Section 5 hereof, or (iii) in whole or in apart upon any
failure of the Company to perform any of its obligations hereunder or
under law; provided, however, that such indemnity shall not inure to the
benefit of any Underwriter (or any person controlling such Underwriter)
on account of any losses, claims, damages or liabilities if such untrue
statement or omission or alleged untrue statement or omission was made in
such Preliminary Prospectus, the Registration Statement or the
Prospectus, or such amendment or supplement thereto, or in any blue Sky
Application in reliance upon and in conformity with information furnished
in writing to the Company by the Representatives on behalf of any
Underwriter specifically for use therein. Notwithstanding the foregoing,
a Selling Shareholder shall be liable hereunder only in respect of untrue
statements or omissions or alleged untrue statement or omission was made
in such preliminary Prospectus, the Registration Statement or the
Prospectus or any amendment or supplement thereof or in any Blue Sky
Application in reliance upon and in conformity with information furnished
writing tot he Company by such Selling Shareholder specifically for use
therein, and the liability of any Selling Shareholder pursuant to the
provisions of Section 8(b) shall be limited to an amount equal to the
aggregate net proceeds received by such Selling Shareholder form the sale
of the Shares by the Selling Shareholders hereunder. This indemnity
agreement will be in addition to any liability which the Company and the
U.S. Subsidiary and Selling Shareholders may otherwise have. The
indemnity agreement provided in this Section 8(b) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter
who failed to timely deliver a Recirculated Prospectus to the person
asserting any losses, claims, damages or liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in
such Preliminary Prospectus, 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, fi such
material misstatement or omission or alleged material misstatement or
omission was cured in the Recirculated Prospectus and such Recirculated
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person, and provided that, (I) the
-------- ----
misstatement or omission cured in the Recirculated Prospectus had been
brought to the attention of the Representatives and their counsel prior
to the execution of this Agreement, and (ii) the Representatives have had
an opportunity to notify the Underwriters so the need for recirculation
of the Prospectus and the need to institute procedures demonstrating that
a copy of the Recirculated Prospectus has been mailed to each purchaser
with the written confirmation of sale.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Selling Shareholders and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each director of the
Company, and each officer of the Company, to the
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<PAGE>
same extent as the foregoing indemnity from the Company, the U.S.
Subsidiary and the Selling Shareholders to each Underwriter, but only
insofar as such losses, claims, damages or liabilities arise out of or
are based upon any untrue statement or omission or alleged untrue
statement or omission which was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, contained in the (i) concession and reallowance
figures appearing under the caption "Underwriting" and (ii) the
stabilization information contained under the caption "Underwriting" in
the Prospectus; provided, however, that the obligation of each
Underwriter to indemnify the Company or the Selling Shareholders
(including any controlling person, director or officer thereof) shall be
limited to the net proceeds received by the Company from such
Underwriter.
(d) Any party that proposes to assert the right to be indemnified
under this Section will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which
a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such
action, suit or proceeding, enclosing a copy of all papers served. No
indemnification provided for in Section 8(a), 8(b) or 8(c) shall be
available to any party who shall fail to give notice as provided in this
Section 8(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by
the failure to give such notice. In case any such action, suit or
proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof and the approval by the indemnified party of
such counsel, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, except as provided
below and except for the reasonable costs of investigation subsequently
incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless one of the
following three conditions are met, in which case the fees and expenses
of counsel shall be at the expense of the indemnifying parties: (i) the
employment of counsel by such indemnified party has been authorized in
writing by the indemnifying parties, (ii) the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or in addition to those
available to the indemnifying party (in which case the indemnifying
parties shall not have the right to direct the defense of such action on
behalf of the indemnified party) or (iii) the indemnifying parties shall
not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in which case,
if such indemnified party notifies the indemnifying party in writing that
it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party, it being
understood, however,
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<PAGE>
that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for all such indemnified
parties, which firm shall be designated in writing by the
Representatives, of the indemnified parties under this Section 8 consist
of any Underwriter or any of their respective controlling persons, or by
the Company, if the indemnified parties under this Section 8 consist of
the Company or any of the Company's directors, officers or controlling
persons (unless the indemnified party shall be advised by such counsel
that the various indemnified parties may have one or more legal defenses
available to it which are different from the other indemnified parties).
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(a), 8(b) and 8(c), shall use its best efforts to
cooperate with the indemnifying party in the defense of any such action
or claim (unless indemnified party shall be advised by such counsel that
the various indemnified parties may have one or more legal defenses
available to it which are different from the other indemnified parties
(in which case the indemnifying parties may be liable for more than one
separate firm of attorneys)). An indemnifying party shall not be liable
for any settlement of any action, suit, proceeding or claim effected
without its written consent, which consent shall not be unreasonably
withheld or delayed.
9. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnification provided for
in Section 8(a), 8(b) or 8(c) is due in accordance with its terms but for
any reason is held to be unavailable to or insufficient to hold harmless
an indemnified party under Section 8(a), 8(b) or 8(c), then each
indemnifying party shall contribute to the aggregate losses, claims,
damages and liabilities (including any investigation, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but
after deducting any contribution received by any person entitled
hereunder to contribution from any person who may be liable for
contribution) to which the indemnified party may be subject in such
proportion as is appropriate to reflect the relative benefits received by
the Company, the U.S. Subsidiary and the Selling Shareholders on the one
hand and the Underwriters on the other from the offering of the Shares
or, if such allocation is not permitted by applicable law in such
proportion as is appropriate to reflect not only the relative benefits
referred to above, but also the relative fault of the Company, the U.S.
Subsidiary and the Selling Shareholders on the one hand and the
Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative
benefits received by the Company, the U.S. Subsidiary, and the Selling
Shareholders on the one hand and the Underwriters on the other hand shall
be deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company or the Selling Shareholders
(with amounts received by the Company deemed to be received by the U.S.
Subsidiary), as set forth in the table on the cover page of the
Prospectus, bear to (y) the underwriting discounts and commissions
received by the Underwriters, as set forth in the table on the cover page
of
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<PAGE>
the Prospectus. The relative fault of the Company, the U.S. Subsidiary
and the Selling Shareholders, on the one hand, or the Underwriters, on
the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact related
to information supplied by the Company, the U.S. Subsidiary or the
Selling Shareholders, on the one hand, or the Underwriters, on the other
hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the U.S. Subsidiary, the Selling Shareholders and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 9 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. Notwithstanding the
provisions of this Section 9, (i) in no case shall any Underwriter
(except as may be provided in the Agreement Among Underwriters) be liable
or responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder; (ii)
the Company and the U.S. Subsidiary shall be liable and responsible for
any amount in excess of such underwriting discount; and (iii) in no case
shall the Selling Shareholders be liable and responsible for any amount
in excess of the aggregate net proceeds of the sale of Shares received by
the Selling Shareholders; provided, however, that 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.
For purposes of this Section 9, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each person, if any, who controls
the Company within the meaning of the Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, each officer of the Company and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) in the immediately
preceding sentence of this Section 9. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action,
suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this
Section, notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties from whom
contribution may be sought shall not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may
have hereunder or otherwise than under this Section. No party shall be
liable for contribution with respect to any action, suit, proceeding or
claim settled without its written consent. The Underwriter's obligations
to contribute pursuant to this Section 9 are several in proportion to
their respective underwriting commitments and not joint. The Selling
Shareholders' obligations to contribute pursuant to this Section 9 are
several in proportion to their respective obligations to sell Shares
hereunder and not joint.
10. Termination. This Agreement may be terminated with respect to
-----------
the
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<PAGE>
Shares to be purchased on a Closing Date by the Representatives by notifying
the Company and the U.S. Subsidiary and the Selling Shareholders at any time:
(a) in the absolute discretion of the Representatives at or before
any Closing Date: (i) if on or prior to such date, any domestic or
international event or act or occurrence has materially disrupted, or in
the opinion of the Representatives will in the future materially disrupt,
the securities markets; (ii) if there has occurred any new outbreak or
material escalation of hostilities or other calamity or crisis the effect
of which on the financial markets of the United States is such as to make
it, in the judgment of the Representatives, inadvisable to proceed with
the offering; (iii) if there shall be such a material adverse change in
general financial, political or economic conditions or the effect of
international conditions on the financial markets in the United States is
such as to make it, in the judgment of the Representatives, inadvisable
or impracticable to market the Shares; (iv) a change or development
involving a prospective change in Israeli taxation affecting the Company,
the Shares or the transfer thereof or the imposition of exchange controls
by the United States or the State of Israel, if the effect of any such
change or development specified in this clause (iv) in the judgment of
the Representatives makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered at the
Firm Shares Closing Date on the terms and in the manner contemplated; (v)
if trading in the Shares has been suspended by the Commission or trading
generally on the New York Stock Exchange, Inc., on the American Stock
Exchange, Inc. or the Nasdaq National Market has been suspended or
limited, or minimum or maximum ranges for prices for securities shall
have been fixed, or maximum ranges for prices for securities have been
required, by said exchanges or by order of the Commission, the National
Association of Securities Dealers, Inc., or any other governmental or
regulatory authority; or (vi) if a banking moratorium has been declared
by any state or Federal authority; or (vii) if, in the judgment of the
Representatives, there has occurred a Material Adverse Effect, or
(b) at or before any Closing Date, that any of the conditions
specified in Section 6 shall not have been fulfilled when and as required
by this Agreement.
If this Agreement is terminated pursuant to any of its provisions,
neither the Company, the U.S. Subsidiary nor the Selling Shareholders shall be
under any liability to any Underwriter, and no Underwriter shall be under any
liability to the Company or the U.S. Subsidiary, except that (y) if this
Agreement is terminated by the Representatives or the Underwriters because of
any failure, refusal or inability on the part of the Company or the Selling
Shareholders to comply with the terms or to fulfill any of the conditions of
this Agreement, the Company and the U.S. Subsidiary will reimburse the
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of their counsel) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder and (z) no Underwriter who shall have failed or refused to
purchase the Shares agreed to be purchased by it under this Agreement, without
some reason sufficient hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability to the Company,
the Selling Shareholders or to the other Underwriters for damages occasioned by
its failure or refusal.
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<PAGE>
11. Substitution of Underwriters. If one or more of the Underwriters
----------------------------
shall fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 10) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representatives may find one or more substitute underwriters
to purchase such Shares or make such other arrangements as the Representatives
may deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date, then
each of the nondefaulting Underwriters shall be obligated to purchase
such Shares on the terms herein set forth in proportion to their
respective obligations hereunder; provided, that in no event shall the
maximum number of Shares that any Underwriter has agreed to purchase
pursuant to Section 1 be increased pursuant to this Section 11 by more
than one-ninth of such number of Shares without the written consent of
such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that all
the Underwriters are obligated to purchase on such Closing Date, then the
Company shall be entitled to two additional business days within which it
may, but is not obligated to, find one or more substitute underwriters
reasonably satisfactory to the Representatives to purchase such Shares
upon the terms set forth in this Agreement.
In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company or the Selling
Shareholders and without liability on the part of the Company, except in both
cases as provided in Sections 7(b), 8, 9 and 10. The provisions of this
Section shall not in any way affect the liability of any defaulting Underwriter
to the Company or the nondefaulting Underwriters arising out of such default. A
substitute underwriter hereunder shall become an Underwriter for all purposes of
this Agreement.
12. Miscellaneous. The respective agreements, representations,
-------------
warranties, indemnities and other statements of the Company and the U.S.
Subsidiary or their officers, of the
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<PAGE>
Selling Shareholders and of the Underwriters set forth in or made pursuant to
this Agreement shall remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or the
Selling Shareholders or any of the officers, directors or controlling persons
referred to in Sections 8 and 9 hereof, and shall survive delivery of and
payment for the Shares. The provisions of Sections 7(b), 8, 9 and 10 shall
survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Company and the U.S. Subsidiary and the Selling Shareholders
and their respective successors and assigns, and, to the extent expressed
herein, for the benefit of persons controlling any of the Underwriters, or the
Company and the U.S. Subsidiary, and the directors and officers of the Company
and the U.S. Subsidiary, and their respective successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser of
Shares from any Underwriter merely because of such purchase.
The Representatives undertake that the Underwriters shall (i) not
offer shares of the Company to the public in Israel within the meaning of
Section 15 of the Israeli Securities Law, 1968; (ii) not offer shares of the
Company in Israel to more than 35 offerees, in the aggregate, (iii) deliver to
the Company and the Israel Securities Authority the names and addresses of all
offerees in Israel within seven (7) days of the closing of this offering; and
(iv) obtain warranties from each offeree in Israel that it is purchasing shares
for investment purposes only, and not for purposes of resale.
All notices and communications hereunder shall be in writing and
mailed or delivered or by telephone or telegraph if subsequently confirmed in
writing, (a) if to the Representatives, c/o CIBC World Markets Corp., One World
Financial Center, New York, New York 10281 Attention: Andrew Kaminsky, with a
copy Jennifer Aranoff, Legal Department, CIBC World Markets, One Financial
Center, 37th Floor, New York, NY 10281 and (b) if to the Company, the U.S.
Subsidiary and to the Selling Shareholders, to the Company's agent for service
as such agent's address appears on the cover page of the Registration Statement
with a copy to Adam Vexler, Esq., Accord Networks Ltd., 9040 Roswell Road, Suite
450, Atlanta, GA 30350-1877.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
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 New
York City or the courts of the State of New York in each case located in New
York City (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), 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
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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. The Company hereby designates and appoints the U.S.
Subsidiary, as its authorized agent (the "Authorized Agent") upon whom process
may be served in any such action arising out of or based on this Agreement or
the transactions contemplated hereby which may be instituted in any New York
Court by any Underwriters or by any person who controls any Underwriter,
expressly consents to the jurisdiction of any such court in respect of any such
action, and waives any other requirements of or objections to personal
jurisdiction with respect thereto. Such appointment shall be irrevocable unless
and until a successor authorized agent acceptable to the Underwriters in their
sole and absolute discretion shall have been appointed by the Company. The
Company represents and warrants that the Authorized Agent has agreed to act as
such agent for service at process and agrees to take any and all action,
including the filing of any and all documents and instruments, that may be
necessary to continue such appointment in full force and effect as aforesaid.
Service of process upon the Authorized Agent and written notice of such service
to the Company shall be deemed, in every respect, effective service of process
upon the Company.
In respect of any judgment or order given or made for any amount due
hereunder that is expressed and paid in a currency (the "judgment currency")
other than United States dollars, the Company and the U.S. Subsidiary will
indemnify each Underwriter against any loss incurred by such underwriter as a
result of any variation as between (i) the rate of exchange at which the United
States dollar amount is converted into the Judgment currently for the purpose of
such judgment or order and (ii) the rate of exchange at which such Underwriter
on the date such judgment currently is actually received by the Underwriter is
able to purchase United States dollars with the amount of the judgment currently
so received by such Underwriter. The foregoing indemnity shall constitute a
separate and independent obligation of the Company and the U.S. Subsidiary and
shall continue in full force and effect notwithstanding any such judgment or
order as aforesaid. The term "rate of exchange" shall include any premiums and
costs of exchange payable in connection with the purchase of the conversion into
United States dollars.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
-32-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
ACCORD NETWORKS LTD.
By
----------------------------------
Title:
ACCORD NETWORKS, INC.
By
----------------------------------
Title:
THE SELLING SHAREHOLDERS
By
----------------------------------
Name:
-------------------------------
Attorney-in-fact for
the Selling Shareholders
Confirmed:
CIBC WORLD MARKETS CORP.
--------------------------------------
Acting severally on behalf of itself
and as representative of the several
Underwriters named in Schedule I annexed
hereto.
By CIBC WORLD MARKETS CORP.
By
------------------------------------
Title:
-33-
<PAGE>
SCHEDULE I
Number of
Firm Shares to
Name Be Purchased
---- --------------
CIBC World Markets Corp.
Dain Rauscher Incorporated
U.S. Bancorp Piper Jaffray
--------------
Total
=============
-34-
<PAGE>
SCHEDULE II
Name
----
Directors and Officers
----------------------
Shareholders
------------
-35-
