2,600,000 Shares
ADVANCED FIBRE COMMUNICATIONS, INC.
Common Stock, par value $.01 per share
UNDERWRITING AGREEMENT
_____________, 1997
____________, 1997
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Xxxxxxx & Co. International Limited
Xxxxxxx Xxxxx International
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
c/o Morgan Xxxxxxx & Co. International Limited
25 Cabot Square
Canary Wharf
Xxxxxx X00 0XX
Xxxxxxx, Xxxxxx Xxxxxxx
Dear Sirs and Mesdames:
Advanced Fibre Communications, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several Underwriters named in
Schedule II and Schedule III hereto (the "Underwriters"), and certain
stockholders of the Company (the "Selling Stockholders") named in Schedule I
hereto severally propose to sell to the several Underwriters, an aggregate of
2,600,000 shares of the Common Stock, par value $.01 per share, of the Company
(the "Firm Shares"), of which 200,000 shares are to be issued and sold by the
Company and 2,400,000 shares are to be sold by the Selling Stockholders, each
Selling Stockholder selling the amount set forth opposite such Selling
Stockholder's name in Schedule I hereto.
It is understood that, subject to the conditions hereinafter stated,
2,080,000 Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule II hereto (the "U.S. Underwriters") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 520,000 Firm Shares (the "International Shares") will be sold to the several
International Underwriters named in Schedule III hereto (the "International
Underwriters") in connection with the offering and sale of such International
Shares outside the United States and Canada to persons other than United States
and Canadian Persons. Xxxxxx Xxxxxxx & Co. Incorporated, Xxxxxxx Lynch, Pierce,
Xxxxxx & Xxxxx
Incorporated, Xxxxx & Company and Xxxxxxxxx & Xxxxx LLC shall act as
representatives (the "U.S. Representatives") of the several U.S. Underwriters,
and Xxxxxx Xxxxxxx & Co. International Limited, Xxxxxxx Xxxxx International,
Xxxxx & Company and Xxxxxxxxx & Xxxxx LLC shall act as representatives (the
"International Representatives") of the several International Underwriters.
The Selling Stockholders also propose to sell to the several U.S.
Underwriters not more than an additional 390,000 shares of the Common Stock, par
value $.01 per share, of the Company (the "Additional Shares"), if and to the
extent that the U.S. Representatives shall have determined to exercise, on
behalf of the U.S. Underwriters, the right to purchase such shares of Common
Stock granted to the U.S. Underwriters in Section 2 hereof. The Firm Shares and
the Additional Shares are hereinafter collectively referred to as the "Shares."
The shares of Common Stock, par value $.01 per share, of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "Common Stock." The Company and the Selling Stockholders are
hereinafter sometimes collectively referred to as the "Sellers."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Shares. The registration
statement contains two prospectuses to be used in connection with the offering
and sale of the Shares: the U.S. prospectus, to be used in connection with the
offering and sale of the U.S. Firm Shares and the Additional Shares in the
United States and Canada to United States and Canadian Persons, and the
international prospectus, to be used in connection with the offering and sale of
the International Shares outside the United States and Canada to persons other
than United States and Canadian Persons. The international prospectus is
identical to the U.S. prospectus except for the outside front cover page. The
registration statement as amended at the time it becomes effective, including
the information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "Securities Act"), is hereinafter referred to as the "Registration
Statement"; the U.S. prospectus and the international prospectus in the
respective forms first used to confirm sales of Shares are hereinafter referred
to as the "Prospectus." If the Company has filed an abbreviated registration
statement to register additional shares of Common Stock pursuant to Rule 462(b)
under the Securities Act (the "Rule 462 Registration Statement"), then any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462 Registration Statement.
Unless the context otherwise requires, all representations and warranties
of the Company herein shall also be deemed to be representations and warranties
with respect to all predecessor entities of the Company.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or, to the Company's
knowledge, threatened by the Commission.
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(b) (i) The Registration Statement, when it became effective, did
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 required to be stated therein or necessary to make the statements
therein not misleading, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) 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, except that the representations
and warranties set forth in this paragraph 1(b) do not apply to statements
or omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its Significant Subsidiaries, as that term is defined in Rule 1-02(w)
of Regulation S-X (each a "Subsidiary" and collectively "Subsidiaries"),
taken as a whole.
(d) Each Subsidiary of the Company, foreign and domestic, has been
duly incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the corporate
power and authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its Subsidiaries, taken as a whole. All of the outstanding shares of
capital stock of each Subsidiary of the Company have been duly authorized
and are validly issued, fully paid and non-assessable and are owned
directly (other than directors' qualifying shares) by the Company, free and
clear of any security interest, lien, encumbrance, equity, claim or adverse
interest of any nature.
(e) The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them that is material to the business of the
Company and its Subsidiaries, in each case free and clear of any security
interest, lien, encumbrance, claim, defect or adverse interest of any
nature except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
Subsidiaries; and any real property and buildings held under lease by the
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Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries, in each case except as
described in or contemplated by the Prospectus.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock (including the Shares to be sold by
the Selling Stockholders) outstanding prior to the issuance of the Shares
have been duly authorized and are validly issued, fully paid and non-
assessable. Except as set forth in the Prospectus, neither the Company nor
any Subsidiary has outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights, convertible
securities or obligations. All outstanding shares of capital stock and
options and other rights to acquire capital stock have been issued in
compliance with the registration and qualification provisions of all
applicable securities laws and were not issued in violation of any
preemptive rights, rights of first refusal or other similar rights.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive rights, rights of first refusal or similar
rights.
(i) The Company has corporate power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Shares,
and this Agreement has been duly authorized, executed and delivered by the
Company.
(j) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or
bylaws of the Company or any Subsidiary, or any agreement or other
instrument binding upon the Company or any of its Subsidiaries that is
material to the Company and its Subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any Subsidiary, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or
Blue Sky laws of the various states and jurisdictions in connection with
the offer and sale of the Shares.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its Subsidiaries, taken as a whole, from that
set forth in the Prospectus.
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(l) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) the Company and
its Subsidiaries have not incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in the
ordinary course of business; (ii) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (iii) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and its consolidated Subsidiaries, except in each case as described
in or contemplated by the Prospectus.
(m) There are no legal, regulatory or governmental proceedings
pending or, to the Company's knowledge, threatened to which the Company or
any of its Subsidiaries is a party or to which any of the properties of the
Company or any of its Subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described or any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(n) Each of the Company and its Subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of
and from, and has made all declarations and filings with, all foreign,
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to own,
lease, license and use its properties and assets and to conduct its
business in the manner described in the Prospectus, except to the extent
that the failure to obtain or file would not, singly or in the aggregate,
have a material adverse effect on the Company and its Subsidiaries, taken
as a whole; and neither the Company nor any such Subsidiary has received
any notice of proceedings related to the revocation or modification of any
such consent, authorization, approval, order, certificate or permit which,
singly or in the aggregate, if the subject of any unfavorable decision,
ruling or finding, would result in a material adverse change in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its Subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.
(o) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(p) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
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(q) There is no legal or beneficial owner of any securities of the
Company who has any rights, not effectively satisfied or waived, to require
registration of any shares of capital stock of the Company in connection
with the filing of the Registration Statement.
(r) The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any such Subsidiary has been refused
any insurance coverage sought or applied for; and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely
affect the condition, financial or otherwise, or the earnings, business or
operations of the Company and its Subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.
(s) The Company and its Subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
(A) relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
(collectively, "Environmental Laws") and (B) relating to the manufacture
and sale of telecommunications equipment, including without limitation the
rules and regulations of the Federal Communications Commission,
(collectively, "Telecommunications Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws or Telecommunications Laws, as the case may be, to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws or Telecommunications Laws, as the
case may be, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals would not, singly or in the aggregate, have
a material adverse effect on the Company and its Subsidiaries, taken as a
whole.
(t) There are no costs or 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 on the condition, financial or otherwise, or on the earnings,
business or operations of the Company and its Subsidiaries, taken as a
whole.
(u) The Company and each of its Subsidiaries owns or possesses
adequate licenses or other rights to use all patents, patent rights,
inventions, trade secrets, copyrights, trademarks, service marks, trade
names, technology and know-how necessary to conduct its business in the
manner described in the Prospectus and, except as disclosed in the
Prospectus, neither the Company nor any of its Subsidiaries has received
any notice of infringement or conflict with, or knows of any infringement
or conflict with, asserted rights of others with
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respect to any patents, patent rights, inventions, trade secrets,
copyrights, trademarks, service marks, trade names, technology or know-how
which could result in any material adverse effect upon the Company and its
Subsidiaries, taken as a whole; and, except as disclosed in the Prospectus,
the discoveries, inventions, products or processes of the Company and its
Subsidiaries referred to in the Prospectus do not, to the best knowledge of
the Company or any of its Subsidiaries, infringe or conflict with any right
or patent of any third party, or any discovery, invention, product or
process which is the subject of a patent application filed by any third
party, known to the Company or any of its Subsidiaries which could have a
material adverse effect on the Company and its Subsidiaries, taken as a
whole.
(v) The Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(w) No material labor dispute with the employees of the Company or
any of its Subsidiaries exists, except as described in or contemplated by
the Prospectus, or, to the best knowledge of the Company, is imminent; and
the Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could result in a material adverse change
in the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its Subsidiaries, taken as a whole.
(x) An aggregate of at least _________________ outstanding shares of
Common Stock, and securities convertible into or exercisable or
exchangeable for at least _________ shares of Common Stock, are subject to
valid, binding and enforceable agreements (collectively, the "Lock-up
Agreements") that restrict the holders thereof from selling, making any
short sale of, granting any option for the purchase of, or otherwise
transferring or disposing of, any of such shares of Common Stock, or any
such securities convertible into or exercisable or exchangeable for Common
Stock, for a period of 90 days after the date of the Prospectus without the
prior written consent of the Company or Xxxxxx Xxxxxxx & Co. Incorporated.
(y) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject only to official notice of issuance.
(z) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba.
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2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each of
the Selling Stockholders represents and warrants to and agrees with each of the
Underwriters that:
(a) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Stockholder.
(b) The execution and delivery by such Selling Stockholder of, and
the performance by such Selling Stockholder of its obligations under, this
Agreement, the Custody Agreement signed by such Selling Stockholder and
_______________, as Custodian, relating to the deposit of the Shares to be
sold by such Selling Stockholder (the "Custody Agreement") and the Power of
Attorney appointing certain individuals as such Selling Stockholder's
attorneys-in-fact to the extent set forth therein, relating to the
transactions contemplated hereby and by the Registration Statement (the
"Power of Attorney") will not contravene any provision of applicable law,
or the certificate of incorporation or by-laws of such Selling Stockholder
(if such Selling Stockholder is a corporation), or any agreement or other
instrument binding upon such Selling Stockholder or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
such Selling Stockholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for
the performance by such Selling Stockholder of its obligations under this
Agreement or the Custody Agreement or Power of Attorney of such Selling
Stockholder, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Shares.
(c) Such Selling Stockholder has, and on the Closing Date will have,
valid title to the Shares to be sold by such Selling Stockholder and the
legal right and power, and all authorization and approval required by law,
to enter into this Agreement, the Custody Agreement and the Power of
Attorney and to sell, transfer and deliver the Shares to be sold by such
Selling Stockholder.
(d) The Shares to be sold by such Selling Stockholder pursuant to
this Agreement have been duly authorized and are validly issued, fully paid
and non-assessable.
(e) The Custody Agreement and the Power of Attorney have been duly
authorized, executed and delivered by such Selling Stockholder and are
valid and binding agreements of such Selling Stockholder.
(f) Delivery of the Shares to be sold by such Selling Stockholder
pursuant to this Agreement will pass title to such Shares free and clear of
any security interests, claims, liens, equities and other encumbrances.
(g) To the extent that any statements or omissions made in the
Registration Statement, any preliminary prospectus, the Prospectus, or any
amendment or supplement thereto, are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, (i) the Registration
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Statement, when it became effective, did 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 required to be stated
therein or necessary to make the statements therein not misleading, and
(ii) 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.
3. AGREEMENTS TO SELL AND PURCHASE. Each Seller, severally and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from the Sellers at $______ a share (the "Purchase
Price") the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
number of Firm Shares to be sold by such Seller as the number of Firm Shares set
forth in Schedules II and III hereto opposite the name of such Underwriter bears
to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Selling Stockholders
agree to sell to the U.S. Underwriters the Additional Shares, and the U.S.
Underwriters shall have a one-time right to purchase, severally and not jointly,
up to an aggregate 390,000 Additional Shares at the Purchase Price. If the U.S.
Representatives, on behalf of the U.S. Underwriters, elect to exercise such
option, the U.S. Representatives shall so notify the Company and the attorney-
in-fact for the Selling Stockholders in writing not later than 30 days after the
date of this Agreement, which notice shall specify the number of Additional
Shares to be purchased by the U.S. Underwriters and the date on which such
shares are to be purchased. Such date may be the same as the Closing Date (as
defined below) but not earlier than the Closing Date nor later than ten business
days after the date of such notice. Additional Shares may be purchased as
provided in Section 4 hereof solely for the purpose of covering over-allotments
made in connection with the offering of the Firm Shares. If any Additional
Shares are to be purchased, each Selling Stockholder agrees, severally and not
jointly, to sell to the U.S. Underwriters, and each U.S. Underwriter agrees,
severally and not jointly, to purchase the number of Additional Shares (subject
to such adjustments to eliminate fractional shares as the U.S. Representatives
may determine) that bears the same proportion to the total number of Additional
Shares to be sold by such Selling Stockholder as the number of U.S. Firm Shares
set forth in Schedule II hereto opposite the name of such U.S. Underwriter bears
to the total number of U.S. Firm Shares. The Additional Shares to be purchased
by the U.S. Underwriters hereunder and the U.S. Firm Shares are hereinafter
collectively referred to as the "U.S. Shares."
Each Seller hereby agrees that, without the prior written consent of Xxxxxx
Xxxxxxx & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 90 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or
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other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder or (B) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof of
which the Underwriters have been advised in writing. In addition, each Selling
Stockholder, agrees that, without the prior written consent of Xxxxxx Xxxxxxx &
Co. Incorporated on behalf of the Underwriters, it will not, during the period
ending 90 days after the date of the Prospectus, make any demand for, or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
4. TERMS OF PUBLIC OFFERING. The Sellers are advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Sellers are further
advised by you that the Shares are to be offered to the public initially at U.S.
$_________ a share (the "Public Offering Price") and to certain dealers selected
by you at a price that represents a concession not in excess of U.S. $_______ a
share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of U.S. $_______ a share,
to any Underwriter or to certain other dealers.
Each U.S. Underwriter hereby makes to and with the Sellers the
representations and agreements of such U.S. Underwriter contained in the fifth
and sixth paragraphs of Article III of the Agreement Between U.S. and
International Underwriters of even date herewith. Each International
Underwriter hereby makes to and with the Sellers the representations and
agreements of such International Underwriter contained in the seventh, eighth,
ninth, tenth and eleventh paragraphs of Article III of such Agreement Between
U.S. and International Underwriters.
5. PAYMENT AND DELIVERY. In accordance with Rule 15c6-1 under the
Exchange Act (as hereinafter defined), payment for the Firm Shares shall be made
to each Seller in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on __________, 1997 or at such
other time on the same or such other date, not later than __________, 1997 as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to each Selling Stockholder
in Federal or other funds immediately available in New York City against
delivery of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than __________, 1997 as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to
as the "Option Closing Date."
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Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Sellers to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 2:00 P.M. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act, and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations, of
the Company and its Subsidiaries, taken as a whole, from that set
forth in the Prospectus that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to market
the Shares on the terms and in the manner contemplated in the
Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date, or the
Option Closing Date, as the case may be, a certificate, dated the Closing
Date, or the Option Closing
-11-
Date, as the case may be, and signed by the Selling Stockholders (or by
their attorney-in-fact on their behalf), to the effect that the
representations and warranties of the Selling Stockholders contained in
this Agreement are true and correct as of the Closing Date, or the Option
Closing Date, as the case may be, and that each Selling Stockholder has
complied with all of the agreements and satisfied all of the conditions on
his part or her part to be performed or satisfied hereunder on or before
the Closing Date, or the Option Closing Date, as the case may be.
(d) The Underwriters shall have received on the Closing Date an
opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, outside counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State
of Delaware, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its Subsidiaries,
taken as a whole;
(ii) each Subsidiary of the Company, foreign and
domestic, has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole;
(iii) all of the outstanding shares of capital stock of
each Subsidiary of the Company have been duly authorized and are
validly issued, fully paid and non-assessable and are owned by the
Company, free and clear of any security interest, lien, encumbrance,
equity, claim or adverse interest of any nature;
(iv) the authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in
the Prospectus;
(v) the shares of Common Stock (including the Shares
to be sold by the Selling Stockholders) outstanding prior to the
issuance of the Shares to be sold by the Company have been duly
authorized and are validly issued, fully paid and non-assessable;
except as set forth in the Prospectus, neither the Company nor any
Subsidiary has outstanding any options to purchase, or any preemptive
rights or other
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rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible
securities or obligations; all outstanding shares of capital stock and
options and other rights to acquire capital stock have been issued in
compliance with the registration and qualification provisions of all
applicable securities laws and were not issued in violation of any
preemptive rights, rights of first refusal or other similar rights;
(vi) the Shares to be sold by the Company have been
duly authorized and, when issued and delivered in accordance with the
terms of this Agreement, will be validly issued, fully paid and non-
assessable, and the issuance of such Shares will not be subject to any
preemptive rights, rights of first refusal or similar rights;
vii) the Company has corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by the Company, and this
Agreement has been duly authorized, executed and delivered by the
Company;
(viii) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement will not contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company or any
Subsidiary, or, to the best of such counsel's knowledge, any agreement
or other instrument binding upon the Company or any of its
Subsidiaries that is material to the Company and its Subsidiaries,
taken as a whole, or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any Subsidiary, and no
consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states and
jurisdictions in connection with the offer and sale of the Shares;
(ix) the statements (A) in the Prospectus under the
captions "Business--Proprietary Rights and Licenses," "Business--Legal
Proceedings," "Certain Transactions," "Description of Capital Stock"
and "Shares Eligible for Sale" and (B) in the Registration Statement
in Items 14 and 15, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings referred to
therein, fairly present in all material respects the information
called for with respect to such legal matters, documents and
proceedings and fairly summarize in all material respects the matters
referred to therein;
(x) after due inquiry, such counsel does not know of
any legal, regulatory or governmental proceeding pending or threatened
to which the Company
-13-
or any of its Subsidiaries is a party or to which any of the
properties of the Company or any of its Subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required;
(xi) the Company is not and, after giving effect to the
offering and sale of the Shares to be sold by the Company and the
application of the proceeds thereof as described in the Prospectus,
will not be an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(xii) to the best of such counsel's knowledge, there is
no legal or beneficial owner of any securities of the Company who has
any rights, not effectively satisfied or waived, to require
registration of any shares of capital stock of the Company in
connection with the filing of the Registration Statement;
(xiii) to the best of such counsel's knowledge: (A) the
Registration Statement has become effective under the Securities Act,
no stop order proceedings with respect thereto have been instituted or
are pending or threatened under the Securities Act and nothing has
come to such counsel's attention to lead it to believe that such
proceedings are contemplated; and (B) any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) under
the Securities Act has been made in the manner and within the time
period required by such Rule 424(b);
(xiv) the Common Stock has been approved for quotation
on The Nasdaq National Market; and
(xv) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial statements
and schedules and other financial and statistical data included
therein as to which such counsel need not express any opinion) comply
as to form in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder, (B) has
no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the Registration Statement and
the Prospectus included therein at the time the Registration Statement
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (C) has no
reason to believe that (except for financial statements and schedules
and other financial and statistical data as to which such counsel need
not express any belief) the Prospectus contains any untrue statement
of a material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
-14-
(e) The Underwriters shall have received on the Closing Date an
opinion of ___________, counsel for the Selling Stockholders, dated the
Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed
and delivered by or on behalf of each of the Selling Stockholders;
(ii) the execution and delivery by each Selling
Stockholder of, and the performance by such Selling Stockholder of its
obligations under, this Agreement and the Custody Agreement and Power
of Attorney of such Selling Stockholder will not contravene any
provision of applicable law, or the certificate of incorporation or
by-laws of such Selling Stockholder (if such Selling Stockholder is a
corporation), or, to the best of such counsel's knowledge, any
agreement or, or to the best of such counsel's knowledge, any
agreement or other instrument binding upon such Selling Stockholder
or, to the best of such counsel's knowledge, any judgment, order or
decree of any governmental body or agency is required for the
performance by such Selling Stockholder of its obligations under this
Agreement or the Custody Agreement or Power of Attorney of such
Selling Stockholder, except such as may be required by the securities
or Blue Sky laws of the various states in connection with offer and
sale of the Shares;
(iii) each of the Selling Stockholders has valid title
to the Shares to be sold by such Selling Stockholder and the legal
right and power, and all authorization and approval required by law,
to enter into this Agreement and the Custody Agreement and Power of
Attorney of such Selling Stockholder and to sell, transfer and deliver
the Shares to be sold by such Selling Stockholder;
(iv) the Custody Agreement and the Power of Attorney of
each Selling Stockholder have been duly authorized, executed and
delivered by such Selling Stockholder and are valid and binding
agreements of such Selling Stockholder;
(v) delivery of the Shares to be sold by each Selling
Stockholder pursuant to this Agreement will pass title to such Shares
free and clear of any security interests, claims, liens, equities and
other encumbrances; and
(vi) such counsel, to the extent that any statements or
omissions made in the Registration Statement, and preliminary
prospectus, the Prospectus, or any amendment or supplement thereto,
are made in reliance upon and in conformity with written information
furnished to the Company by such Selling Stockholder expressly for use
therein, (A) is of the opinion that the Registration Statement and
Prospectus (except for financial statements and schedules and other
financial and statistical data included therein as to which such
counsel need not express any opinion) comply as to form in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, (B) has no reason to believe
that (except for financial statements and schedules and other
financial and statistical data as
-15-
to which such counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and (C) has no reason to believe that (except for financial
statements and schedules and other financial and statistical data as
to which such counsel need not express any belief) the Prospectus
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(f) The Underwriters shall have received on the Closing Date an
opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation,
counsel for the Underwriters, dated the Closing Date, covering the matters
referred to in subparagraphs (vi), (vii), (ix) (but only as to the
statements in the Prospectus under "Description of Capital Stock" and
"Underwriters") and (xv) of paragraph (d) above.
With respect to subparagraph (xv) of paragraph (d) above, Xxxxxxx,
Phleger & Xxxxxxxx LLP and Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification, except as specified. With respect to paragraph (e) above,
____________ may rely upon an opinion or opinions of counsel for any
Selling Stockholders and, with respect to factual matters and to the extend
such counsel deems appropriate, upon the representations of each Selling
Stockholder contained herein and in the Custody Agreement and Power of
Attorney of such Selling Stockholder and in other documents and
instruments; PROVIDED that (A) each such counsel for the Selling
Stockholders is satisfactory to your counsel, (B) a copy of each opinion so
relied upon is delivered to you and is in form and substance satisfactory
to your counsel, (C) copies of such Custody Agreements and Powers of
Attorney and of any such other documents and instruments shall be delivered
to you and shall be in form and substance satisfactory to your counsel and
(D) ___________________ shall state in their opinion that they are
justified in relying on each such other opinion.
The opinions of __________________ and _________________ described in
paragraphs (d) and (e) above (and any opinions of counsel for any Selling
Stockholder referred to in the immediately preceding paragraph) shall be
rendered to the Underwriters at the request of the Company or one or more
of the Selling Stockholders, as the case may be, and shall so state
therein.
The opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP described in
paragraph (d) above shall be rendered to the Underwriters at the request of
the Company and shall so state therein.
-16-
(g) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from KPMG Peat Marwick LLP, independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus; PROVIDED that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(h) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain stockholders, each officer and
director of the Company relating to sales and certain other dispositions of
shares of Common Stock or certain other securities, delivered to you on or
before the date hereof, shall be in full force and effect on the Closing
Date.
(i) The Common Stock shall have been approved for quotation on The
Nasdaq National Market, subject only to official notice of issuance.
(j) The Company shall have complied with the provisions of
paragraph (a) of Section 7 hereof with respect to the furnishing of
Prospectuses on the business day following the date of this Agreement.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed in compliance with the provisions
hereof only if Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation,
counsel for the Underwriters, shall be reasonably satisfied that they comply in
form and scope.
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the delivery to you on the Option Closing Date of such
documents as you may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Additional Shares, other
matters related to the issuance of the Additional Shares and an opinion or
opinions of Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel for the Company, and
__________, counsel for the Selling Stockholders, in form and substance
satisfactory to Wilson, Sonsini, Xxxxxxxx & Xxxxxx, Professional Corporation,
counsel for the Underwriters.
7. COVENANTS OF THE COMPANY. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, five (5) signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 A.M. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
paragraph (c)
-17-
below, as many copies of the Prospectus and any supplements and amendments
thereto or to the Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, counsel for the Underwriters, the
Prospectus is required by law to be delivered in connection with sales by
an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation,
counsel for the Underwriters, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare, file with
the Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the Company) to
which Shares may have been sold by you on behalf of the Underwriters and to
any other dealers upon request, either amendments or supplements to the
Prospectus so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions, foreign and domestic, as
you shall reasonably request and to pay all expenses (including fees and
disbursements of counsel) in connection with such qualification and in
connection with any review of the offering of the Shares by the National
Association of Securities Dealers, Inc.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-
month period ending __________, 1998 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all
other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and
-18-
delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to
the transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or Legal Investment memorandum in connection with
the offer and sale of the Shares under state securities laws and foreign
securities laws (in connection with qualification for the Directed Share
Program requested by the Company) and all expenses in connection with the
qualification of the Shares for offer and sale under state securities laws
and foreign securities laws as provided in Section 7(d) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with
the Blue Sky or Legal Investment memorandum, (iv) all filing fees and
disbursements of counsel to the Underwriters incurred in connection with
the review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all costs and expenses
incident to listing the Shares on the Nasdaq National Market, (vi) the cost
of printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the costs
and expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the offering of the
Shares, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and
the cost of any aircraft chartered in connection with the road show, and
(ix) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided
in this Section, Section 8 entitled "Indemnity and Contribution", and the
last paragraph of Section 10 below, the Underwriters will pay all of their
costs and expenses, including fees and disbursements of their counsel,
stock transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its stockholders and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or
any national securities exchange.
(h) The Company will apply the proceeds from the sale of the Shares
as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to obtain and maintain in
effect the quotation of the Shares on The Nasdaq National Market and will
take all necessary steps to cause the Shares to be included on The Nasdaq
National Market as promptly as practicable and to maintain such inclusion
for a period of three years after the date hereof or until such earlier
date as the Shares shall be listed for regular trading privileges on The
Nasdaq National Market or another national securities exchange approved by
you.
-19-
(j) The Company will comply with all registration, filing and
reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which may from time to time be applicable to the
Company.
(k) The Company will comply with all provisions of all undertakings
contained in the Registration Statement.
(l) Prior to the Closing Date or any Option Closing Date, as the case
may be, the Company will not, directly or indirectly, issue any press
release or other communication and will not hold any press conference with
respect to the Company, or its financial condition, results of operations,
business, properties, assets, or prospects or this offering, without your
prior written consent.
(m) If at any time during such period after the first date of the
public offering of the Shares as in the opinion of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation, counsel for the Underwriters,
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Common Stock has been or is likely to be materially
affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, forthwith prepare, consult with you concerning the substance
of, and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication
or event.
(n) The Company agrees: (i) to enforce the terms of each Lock-up
Agreement, (ii) issue stop-transfer instructions to the transfer agent for
the Common Stock with respect to any transaction or contemplated
transaction that would constitute a breach of or default under the
applicable Lock-up Agreement and (iii) upon written request of Xxxxxx
Xxxxxxx & Co. Incorporated, to release from the Lock-up Agreements those
shares of Common Stock held by those holders set forth in such request. In
addition, except with the prior written consent of Xxxxxx Xxxxxxx & Co.
Incorporated, the Company agrees (i) not to amend or terminate, or waive
any right under, any Lock-up Agreement, or take any other action that would
directly or indirectly have the same effect as an amendment or termination,
or waiver of any right under, any Lock-up Agreement, that would permit any
holder of shares of Common Stock, or securities convertible into or
exercisable or exchangeable for Common Stock who is a party to a Lock-up
Agreement, to sell, make any short sale of, grant any option for the
purchase of, or otherwise transfer or dispose of, any of such shares of
Common Stock or other securities prior to the expiration of 90 days after
the date of the Prospectus, and (ii) not to consent to any sale, short
sale, grant of an option for the purchase of, or other disposition or
transfer of shares of Common Stock, or securities convertible into or
exercisable or exchangeable for Common Stock, subject to a Lock-up
Agreement.
8. INDEMNITY AND CONTRIBUTION.
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(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), 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, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein; PROVIDED, HOWEVER, that
the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased
Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of
the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such losses,
claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 7(a) hereof.
(b) Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who
sign the Registration Statement, each Underwriter and each person, if any,
who controls the Company or any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), 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, but only with reference to information relating to such
Selling Stockholder furnished in writing by or on behalf of such Selling
Stockholder expressly for use in the Registration Statement, any
preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Selling Stockholders, the directors of
the Company, the officers of the Company who sign the Registration
Statement and each person, if any, who controls the Company or any Selling
Stockholder within the meaning of either Section 15 of the Securities
-21-
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company or any Selling Stockholder to such Underwriter,
but only with reference to information relating to such Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to paragraph (a), (b) or (c) of this Section 8, such
person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for (i) the fees and expenses of more
than one separate firm (in addition to any local counsel) for all
Underwriters and all persons, if any, who control any Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its officers
who sign the Registration Statement and each person, if any, who controls
the Company within the meaning of either such Section and (iii) the fees
and expenses of more than one separate firm (in addition to any local
counsel) for all Selling Stockholders and all persons, if any, who control
any Selling Stockholder within the meaning of either such Section, and that
all such fees and expenses shall be reimbursed as they are incurred. In
the case of any such separate firm for the Underwriters and such control
persons of any Underwriters, such firm shall be designated in writing by
Xxxxxx Xxxxxxx & Co. Incorporated. In the case of any such separate firm
for the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company. In the
case of any Selling Stockholders, such firm shall be designated in writing
by the persons named as attorney-in-fact for the Selling Stockholders under
the Powers of Attorney. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph,
-22-
the indemnifying party agrees that it shall be liable for any settlement of
any proceeding effected without its written consent if (i) such settlement
is entered into more than 60 days after receipt by such indemnifying party
of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to
the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(e) To the extent the indemnification provided for in paragraph (a),
(b) or (c) of this Section 8 is unavailable to an indemnified party or
insufficient in respect of any, losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on
the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The relative benefits
received by the Sellers on the one hand and the Underwriters on the other
hand in connection with the offering of the Shares shall be deemed to be in
the same respective proportions as the net proceeds from the offering of
the Shares (before deducting expenses) received by each Seller and the
total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover of the Prospectus, bear
to the aggregate Public Offering Price of the Shares. The relative fault
of the Sellers on the one hand and 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 or the omission or alleged
omission to state a material fact relates to information supplied by the
Sellers or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 8 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(f) The Sellers and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by
PRO RATA allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (e) of
this Section 8. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding
-23-
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 8, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages
that such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
remedies provided for in this Section 8 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company and the Selling Stockholders contained in this Agreement shall
remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter, any Selling
Stockholder or any person controlling any Selling Stockholder or by or on
behalf of the Company, its officers or directors or any person controlling
the Company and (iii) acceptance of and payment for any of the Shares.
9. TERMINATION. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares that it
has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated
-24-
severally in the proportions that the number of Firm Shares set forth opposite
their respective names in Schedule II or Schedule III bears to the aggregate
number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; PROVIDED that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If, on
the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you, the Company and
the attorney-in-fact for the Selling Stockholders for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter, the
Company or any Selling Stockholder. In any such case either you or the Company
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and in the Prospectus or in any other documents or arrangements may be
effected. If, on the Option Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than one-
tenth of the aggregate number of Additional Shares to be purchased, the non-
defaulting Underwriters shall have the option to (i) terminate their obligation
hereunder to purchase Additional Shares or (ii) purchase not less than the
number of Additional Shares that such non-defaulting Underwriters would have
been obligated to purchase in the absence of such default. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of any Seller to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Sellers will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
11. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
13. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
[Signature Page follows this Page]
-25-
Very truly yours,
Advanced Fibre Communications, Inc.
By:
---------------------------------------------
Name: Xxx X. Xxxxxxx
Title: Vice President, Chief Financial
Officer
The Selling Stockholders named in Schedule I
hereto, acting severally
By:
---------------------------------------------
Attorney-in-Fact
-26-
Accepted as of the date hereof:
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
Acting severally on behalf of themselves
and the several U.S. Underwriters named in
Schedule I hereto.
By Xxxxxx Xxxxxxx & Co. Incorporated
By:
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
Xxxxxx Xxxxxxx & Co. International Limited
Xxxxxxx Xxxxx International
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
Acting severally on behalf of themselves and the
several International Underwriters named in
Schedule II hereto.
By Xxxxxx Xxxxxxx & Co. International Limited
By:
-----------------------------------------
(Attorney-in-Fact)
-27-
SCHEDULE I
NUMBER OF NUMBER OF
FIRM SHARES ADDITIONAL SHARES
TO BE SOLD TO BE SOLD
----------- -----------------
COMPANY. . . . . . . . . . . . . . . .
SELLING STOCKHOLDERS
Total. . . . . . . . . . . . . . . . . 2,600,000 390,000
------------ --------------
------------ --------------
-28-
SCHEDULE II
U.S. UNDERWRITERS
Number of
Firm Shares
Underwriter To Be Purchased
----------- ----------------
Xxxxxx Xxxxxxx & Co. Incorporated . . . . . . . . . . . .
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated. . . . . . . . . . . . . . . . . .
Xxxxx & Company. . . . . . . . . . . . . . . . . . . . . .
Xxxxxxxxx & Xxxxx LLC. . . . . . . . . . . . . . . . . . . ----------
Total . . . . . . . . . 2,080,000
-----------
-----------
SCHEDULE III
INTERNATIONAL UNDERWRITERS
Number of
Firm Shares
Underwriter To Be Purchased
----------- ----------------
Xxxxxx Xxxxxxx & Co. International Limited . . . . . . .
Xxxxxxx Xxxxx International. . . . . . . . . . . . . . .
Xxxxx & Company. . . . . . . . . . . . . . . . . . . . .
Xxxxxxxxx & Xxxxx LLC. . . . . . . . . . . . . . . . . .
----------
Total 520,000
----------
----------
-2-
EXHIBIT A
ADVANCED FIBRE COMMUNICATIONS, INC.
LOCK-UP AGREEMENT
January ___, 1997
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxxxx & Co. International Limited
Xxxxxxx Xxxxx International
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
c/o Morgan Xxxxxxx & Co. International Limited
00 Xxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxx X00 0XX
England
Dear Sirs and Mesdames:
The undersigned understands that Xxxxxx Xxxxxxx & Co. Incorporated ("Xxxxxx
Xxxxxxx") proposes to enter into an Underwriting Agreement (the "Underwriting
Agreement") with Advanced Fibre Communications, Inc., a Delaware corporation
(the "Company"), providing for the public offering (the "Public Offering") by
the several Underwriters, including Xxxxxx Xxxxxxx (the "Underwriters"), of
shares (the "Shares") of the Common Stock, par value $.01 per share, of the
Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Xxxxxx Xxxxxxx on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 90 days after the date of the final prospectus relating
to the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are now owned by the undersigned or
are hereafter acquired), or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. Notwithstanding the foregoing, if the
undersigned is an individual, he or she may transfer any shares of Common Stock
either during
his or her lifetime or on death by will or intestacy to his or her immediate
family or to a trust the beneficiaries of which are exclusively the undersigned
and/or a member or members of his or her immediate family; provided, however,
that in such case, it shall be a condition to the transfer that the transferee
execute an agreement (an original copy of which shall be provided to Xxxxxx
Xxxxxxx) stating that the transferee is receiving and holding the shares of
Common Stock transferred subject to the provisions of this Agreement, and there
shall be no further transfer of such Common Stock except in accordance with this
Agreement. For purposes of the preceding sentence, "immediate family" shall
mean spouse, lineal descendant, father, mother, brother or sister of the
transferor. In addition, the undersigned agrees that, without the prior
written consent of Xxxxxx Xxxxxxx on behalf of the Underwriters, it will not,
during the period commencing on the date hereof and ending 90 days after the
date of the Prospectus, make any demand for or exercise any right with respect
to, the registration of any shares of Common Stock or any security convertible
into or exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
This agreement shall expire by its terms if the Underwriting Agreement is
not executed on or before March 31, 1997.
Very truly yours,
---------------------------------------------
(Print name of stockholder)
---------------------------------------------
(signature)
---------------------------------------------
(name and title of signatory if applicable)
Address:
-----------------------------------
-----------------------------------
-----------------------------------
