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Exhibit 1.1
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[6,000,000] SHARES
AVICI SYSTEMS INC.
COMMON STOCK, PAR VALUE $0.0001 PER SHARE
UNDERWRITING AGREEMENT
July , 2000
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July , 2000
Morgan Stanley & Co. Incorporated
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
UBS Warburg LLC
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Avici Systems Inc., a Delaware corporation (the "COMPANY"), proposes
to issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS") [6,000,000] shares (the "FIRM SHARES") of its common stock, par
value $0.0001 per share. The Company also proposes to issue and sell to the
several Underwriters not more than an additional [900,000] shares (the
"ADDITIONAL SHARES") of its common stock, par value $0.0001 per share, if and to
the extent that you, as Managers of the offering, shall have determined to
exercise, on behalf of the Underwriters, the right to purchase such shares of
common stock granted to the 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 $0.0001 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 has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. 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 prospectus in the form first
used to confirm sales of Shares is 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.
Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") has agreed to
reserve up to [900,000] of the Shares to be purchased by it under this Agreement
for sale
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to the directors, officers, employees and business associates of the Company and
other parties related to the Company (collectively, the "PARTICIPANTS"), as set
forth in the Prospectus under the heading "Underwriters" (the "DIRECTED SHARE
PROGRAM"). The Shares to be sold by Morgan Stanley and its affiliates pursuant
to the Directed Share Program are referred to hereinafter as the "DIRECTED
SHARES" and will be sold by Morgan Stanley and its affiliates pursuant to the
terms of this Agreement at the public offering price. Any Directed Shares not
confirmed for purchase by any Participants by the beginning of the first
business day after the date on which this Agreement is executed will be offered
to the public by the Underwriters as set forth in the Prospectus.
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 knowledge
of the Company, threatened by the Commission.
(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 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.
(d) The Company does not have any subsidiaries.
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(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(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 outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(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 or similar rights.
(i) There are no outstanding options or warrants to acquire shares of
capital stock of the Company except as otherwise disclosed in the
Registration Statement and the Prospectus and, with respect to options,
except as otherwise have been or will be granted under the stock plans
described in the Prospectus.
(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 by-
laws of the Company or any agreement or other instrument binding upon the
Company that is material to the Company, or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over the
Company, 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 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 from that set forth in the Prospectus, exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement.
(l) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company is a party or to
which any of the properties of the Company 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.
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(m) 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.
(n) 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.
(o) The Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"), (ii) has received all permits, licenses or other approvals required
of it under applicable Environmental Laws to conduct its business and (iii)
is in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
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.
(p) 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 Company.
(q) Except as otherwise described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
(r) 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.
(s) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (1) the Company has
not incurred any material liability or obligation, direct or contingent,
nor entered into any material transaction not in the ordinary course of
business; (2) the Company
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has not purchased any of its outstanding capital stock (other than
repurchases from [employees and] former employees in amounts not material
to the Company) nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock other than ordinary and
customary dividends; and (3) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company, except in
each case as described in the Prospectus.
(t) The Company owns or possesses, or can acquire on reasonable terms,
all material patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, the "INTELLECTUAL
PROPERTY") currently employed by it in connection with the business now
operated by it, or adequate licenses or other rights to use the same, and
the Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which,
singly or in the aggregate, would be reasonably likely to have a material
adverse effect on the Company.
(u) The Company does not own any real property; the Company has good
and marketable title to all personal property owned by it which is material
to the business of the Company, free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do
not materially affect the value of such property and do not interfere in
any material respect with the use made and currently proposed to be made of
such property by the Company; and any real property and buildings held
under lease by the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere in any material respect with the use made and currently proposed
to be made of such property and buildings by the Company, in each case
except as described in the Prospectus.
(v) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as, in the
reasonable judgement of the Company, are prudent and customary in the
business in which it is engaged; the Company has not been refused any
insurance coverage sought or applied for; and the Company has no 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 on the Company, except as
described in the Prospectus.
(w) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are
executed in accordance with the general or specific authorizations of
management; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to
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maintain asset accountability; (3) access to assets is permitted only in
accordance with the general or specific authorization of management; and
(4) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(x) The Company possesses all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its businesses, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the Company.
(y) No material labor dispute with the employees of the Company
exists, or, to the 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 have a material adverse effect on the Company.
(z) The Registration Statement, the Prospectus and any preliminary
prospectus comply, and any amendments or supplements thereto will comply,
with any applicable laws or regulations of foreign jurisdictions in which
the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share
Program.
(aa) No consent, approval, authorization or order of, or qualification
with, any governmental body or agency, other than those obtained, is
required in connection with the offering of the Directed Shares in any
jurisdiction where the Directed Shares are being offered.
(bb) The Company has not offered, or caused Morgan Stanley or its
affiliates to offer, Shares to any person pursuant to the Directed Share
Program with the specific intent to unlawfully influence (i) a customer or
supplier of the Company to alter the customer's or supplier's level or type
of business with the Company or (ii) a trade journalist or publication to
write or publish favorable information about the Company or its products.
2. Agreements to Sell and Purchase. The Company 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
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $[ ] a share (the "PURCHASE PRICE").
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On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to [900,000]
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than thirty (30) days after the date of this Agreement, which notice shall
specify the number of Additional Shares to be purchased by the 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 Underwriter agrees,
severally and not jointly, to purchase the number of Additional Shares (subject
to such adjustments to eliminate fractional shares as you may determine) that
bears the same proportion to the total number of Additional Shares to be
purchased as the number of Firm Shares set forth in Schedule I hereto opposite
the name of such Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 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, lend, 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 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 other
securities, in cash or otherwise. The foregoing sentence shall not apply to:
(A) the Shares to be sold hereunder; (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; (C) the grant of shares of Common Stock or an option to
purchase Common Stock under the stock plans described in the Prospectus,
provided, however, that (1) prior to the issuance of any shares of Common Stock,
the recipient of such shares executes and delivers to you on or prior to the
date of such issuance a "lock-up" agreement in the form of Exhibit A-2 hereto
and (2) the instrument governing any such option states that the Company shall
not issue any of the shares of Common Stock underlying such option prior to the
180th day after the date of the Prospectus unless the holder of such option
executes and delivers to you on or prior to the date of such issuance a "lock-
up" agreement in the form of Exhibit A-2 hereto or (D) [250,000] shares of
Common Stock to be issued to Williams Communications in a private placement on
the Closing Date, as defined below.
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3. Terms of Public Offering. The Company is 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 Company is further
advised by you that the Shares are to be offered to the public initially at $[
] a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected by you
at a price that represents a concession not in excess of $[ ] a share under
the Public Offering Price, and that any Underwriter may allow, and such dealers
may reallow, a concession, not in excess of $[ ] a share, to any Underwriter
or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made
to the Company 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 [August 2, 2000] [EXECUTION
PLUS FOUR DAYS], or at such other time on the same or such other date, not later
than [August 9, 2000] [EXECUTION PLUS NINE DAYS], 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 the Company 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 [September 8, 2000] [EXECUTION PLUS 30
CALENDAR DAYS PLUS 10 BUSINESS DAYS] as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the "OPTION
CLOSING DATE".
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.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company 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 4:00 p.m., Boston time, [TIME ON DATE OF EXECUTION]
(New York City time) on the date hereof.
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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 securities of the
Company 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
from that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) 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 Section 5(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 an
opinion of Testa, Hurwitz & Thibeault, 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 The
Commonwealth of Massachusetts, The Commonwealth of Virginia and the
States of Colorado and Texas.
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(ii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iii) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable;
(iv) 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 statutory preemptive right
under the General Corporation Law of the State of Delaware or, to the
knowledge of such counsel, similar contractual rights, except for such
contractual rights as have been waived with respect to the Shares
prior to the Closing Date;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) 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, to the knowledge of
such counsel, any agreement or other instrument binding upon the
Company that has been filed as an exhibit to the Registration
Statement or, to the knowledge of such counsel, any judgment, order or
decree of any governmental body, agency or court having jurisdiction
over the Company, 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 in connection with the offer and sale
of the Shares;
(vii) the statements (A) in the Prospectus under the captions
"Related Party Transactions," "Description of Capital Stock," Shares
Eligible for Future Sale" and the first, second, fourth, sixth,
seventh, tenth and eleventh paragraph under "Underwriters" 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 the information
required with respect to such legal matters, documents and proceedings
and fairly summarize in all material respects the matters required to
be disclosed therein;
(viii) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company is a party or
to which any of the properties of the Company is subject that are
required to
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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 by the Securities Act and the rules and
regulations thereunder 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;
(ix) 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; and
(x) (A) such counsel 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) nothing has
come to its attention that would cause such counsel 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) nothing has come to its attention that
would cause such counsel 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.
(d) The Underwriters shall have received on the Closing Date an
opinion of Ropes & Gray, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in Sections 5(c)(iv), 5(c)(v),
5(c)(vii) (but only as to the statements in the Prospectus under
"Description of Capital Stock" and "Underwriters") and 5(c)(x) above.
With respect to Section 5(c)(x) above, Testa, Hurwitz & Thibeault, LLP
and Ropes & Gray 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.
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(e) The Underwriters shall have received the on the Closing Date an
opinion of Hamilton, Brook, Smith & Reynolds, P.C., intellectual property
counsel for the Company, dated the Closing Date, to the effect that:
(i) To the knowledge of such counsel, neither the Registration
Statement nor the Prospectus contains any untrue statement of a
material fact with respect to the Intellectual Property owned or used
by the Company or omits to state any material fact relating to
Intellectual Property owned or used by the Company that is required to
be stated in the Registration Statement or the Prospectus or that is
necessary to make the statements therein not misleading;
(ii) To the knowledge of such counsel, there are no legal or
governmental proceedings pending relating to Intellectual Property
other than prosecution by the Company of its patent applications
before the United States Patent Office and appropriate foreign
government agencies, and to the knowledge of such counsel, no such
proceedings are threatened by governmental authorities or others;
(iii) To the knowledge of such counsel, the Company is not
infringing or otherwise violating any Intellectual Property of others
and, to the knowledge of such counsel, there are no infringements by
others of any of the Intellectual Property of the Company that would
have a material adverse effect on the business of the Company; and
(iv) To the knowledge of such counsel, the Company owns or
possesses sufficient licenses or other rights to use all Intellectual
Property necessary to conduct the business now being conducted or
proposed to be conducted by the Company as described in the
Prospectus.
In rendering such opinion, such counsel need not have conducted
any independent investigation or conducted searches to locate any
third party Intellectual Property that might impact the activities of
the Company.
The opinions of Testa, Hurwitz & Thibeault, LLP and Hamilton,
Brook, Smith & Reynolds, P.C. described in Section 5(c) and Section
5(e) above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(f) 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 Arthur Andersen 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
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information contained in the Registration Statement and the Prospectus;
provided, however, that the letter delivered on the Closing Date shall use
a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, substantially in the forms of (i)
Exhibit A-1 hereto between you and each officer and director of the
Company, (ii) Exhibit A-2 hereto between you and each other stockholder,
option holder and warrant holder of the Company (other than stockholders
that are institutional investors listed on Exhibit B), and
(iii) Exhibit A-3 hereto between you and each stockholder that is an
institutional investor listed on Exhibit B, 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.
(h) The Firm Shares shall have been accepted for listing and trading
on the Nasdaq National Market, subject to official notice of issuance.
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, the approval of the Additional Shares for listing and trading on the
Nasdaq National Market and other matters related to the issuance of the
Additional Shares.
6. 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 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
Section 6(c) 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.
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<PAGE>
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of 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 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 as you shall reasonably
request.
(e) To make generally available to the security holders of the
Company and to you as soon as practicable an earning statement covering the
twelve-month period ending [August 31], 2001 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 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) all fees and disbursements of counsel incurred by
the Underwriters in connection with the Directed Share Program and stamp
duties, similar taxes or duties or other taxes, if any, incurred by the
Underwriters in connection with the Directed Share Program, (iv) the cost
of printing or producing any Blue Sky memorandum in connection with the
offer and sale of the Shares under state securities laws and all expenses
in connection with the qualification of the Shares for offer and sale under
state securities laws as provided in Section 6(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel
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<PAGE>
for the Underwriters in connection with such qualification and in
connection with the Blue Sky memorandum, (v) all filing fees and the
reasonable 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., (vi) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all
costs and expenses incident to listing the Shares on the Nasdaq National
Market, (vii) the cost of printing certificates representing the Shares,
(vii) the costs and charges of any transfer agent, registrar or depositary,
(ix) 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 (x) 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 7 entitled "Indemnity and
Contribution", Section 8 entitled "Directed Share Program Indemnification",
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) To place stop transfer orders on any Directed Shares that have
been sold to Participants subject to the three month restriction on sale,
transfer, assignment, pledge or hypothecation imposed by NASD Regulation,
Inc. under its Interpretative Material 2110-1 on free-riding and
withholding to the extent necessary to ensure compliance with the three
month restrictions.
(h) To comply with all applicable securities and other applicable
laws, rules and regulations in each jurisdiction in which the Directed
Shares are offered in connection with the Directed Share Program.
(i) To enforce the lock-up provisions of the Fifth Amended and
Restated Investor Rights Agreement by and between the Company and certain
of its stockholders dated as of April 24, 2000, as amended, and to place
stop transfer orders on any shares of its Common Stock necessary to ensure
compliance with any lock-up provision between the Company and its
stockholders, including, without limitation, the lock-up provisions
contained in the Fifth Amended and Restated Investor Rights Agreement.
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<PAGE>
7. Indemnity and Contribution. (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 Securities Exchange Act of 1934, as amended (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 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless 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 Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company 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.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 7(a) or 7(b), 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
-17-
<PAGE>
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 the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated, in the case of parties indemnified pursuant to Section 7(a), and
by the Company, in the case of parties indemnified pursuant to Section 7(b). 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. 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.
(d) To the extent the indemnification provided for in Section 7(a) or
7(b) 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 Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(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
7(d)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters 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 Company 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 the Company 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 Company 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
-18-
<PAGE>
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the respective number of Shares they have purchased
hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 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 Section 7(d). 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 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 7, 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 7 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.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company 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 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.
8. Directed Share Program Indemnification. (a) The Company agrees
to indemnify and hold harmless Morgan Stanley and its affiliates and each
person, if any, who controls Morgan Stanley or its affiliates within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(the "MORGAN STANLEY ENTITIES"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any material prepared by or with the
consent of the Company for distribution to Participants in connection with the
Directed Share Program, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not
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<PAGE>
misleading; (ii) caused by the failure of any Participant to pay for and accept
delivery of Directed Shares that the Participant has agreed to purchase; or
(iii) related to, arising out of, or in connection with the Directed Share
Program other than losses, claims, damages or liabilities (or expenses relating
thereto) that are finally judicially determined to have resulted from the bad
faith or gross negligence of Morgan Stanley Entities.
(b) In case any proceeding (including any governmental investigation)
shall be instituted involving any Morgan Stanley Entity in respect of which
indemnity may be sought pursuant to Section 8(a), the Morgan Stanley Entity
seeking indemnity shall promptly notify the Company in writing and the Company,
upon request of the Morgan Stanley Entity, shall retain counsel reasonably
satisfactory to the Morgan Stanley Entity to represent the Morgan Stanley Entity
and any other indemnified party that the Company may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any Morgan Stanley Entity shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Morgan Stanley Entity unless (i) the Morgan
Stanley Entities and the Company 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 Company and the Morgan Stanley Entity and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The Company shall not, in
respect of the legal expenses of the Morgan Stanley Entities in connection with
any proceeding or related proceedings the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Morgan Stanley Entities. Any such firm for the Morgan Stanley
Entities shall be designated in writing by Morgan Stanley. The Company 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 Company agrees to indemnify the Morgan Stanley Entities from
and against any loss or liability by reason of such settlement or judgment. The
Company shall not, without the prior written consent of Morgan Stanley, effect
any settlement of any pending or threatened proceeding in respect of which any
Morgan Stanley Entity is or could have been a party and indemnity could have
been sought hereunder by such Morgan Stanley Entity, unless such settlement
includes an unconditional release of the Morgan Stanley Entities from all
liability on claims that are the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section 8(a) is
unavailable to a Morgan Stanley Entity or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then the Company, in lieu of
indemnifying the Morgan Stanley Entity thereunder, shall contribute to the
amount paid or payable by the Morgan Stanley Entity as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Morgan Stanley Entities on the other hand from the offering of the Directed
Shares or (ii) if the allocation provided by clause 8(c)(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 8(c)(i) above but also the
relative fault of the Company on
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<PAGE>
the one hand and of the Morgan Stanley Entities 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 Company on the one hand and of the Morgan
Stanley Entities on the other hand in connection with the offering of the
Directed Shares shall be deemed to be in the same respective proportions as the
net proceeds from the offering of the Directed Shares (before deducting
expenses) and the total underwriting discounts and commissions received by the
Morgan Stanley Entities for the Directed Shares, bear to the aggregate Public
Offering Price of the Shares. If the loss, claim, damage or liability is caused
by an untrue or alleged untrue statement of a material fact, the relative fault
of the Company on the one hand and the Morgan Stanley Entities on the other hand
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement or the omission or alleged omission relates to
information supplied by the Company or by the Morgan Stanley Entities and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(d) The Company and the Morgan Stanley Entities 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 Morgan Stanley Entities 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
Section 8(c). The amount paid or payable by the Morgan Stanley Entities as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
the Morgan Stanley Entities in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 8, no
Morgan Stanley Entity shall be required to contribute any amount in excess of
the amount by which the total price at which the Directed Shares distributed to
the public were offered to the public exceeds the amount of any damages that
such Morgan Stanley Entity has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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 Morgan Stanley
Entity at law or in equity.
(e) The indemnity and contribution provisions contained in this
Section 8 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 Morgan Stanley Entity or the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Directed 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
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<PAGE>
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
9(a)(i) through 9(a)(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 severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I 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 and the Company 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 or the Company. 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
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<PAGE>
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 the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company 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.
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<PAGE>
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.
Very truly yours,
AVICI SYSTEMS INC.
By:
----------------------------
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
J.P. MORGAN SECURITIES INC.
LEHMAN BROTHERS INC.
UBS WARBURG LLC
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: MORGAN STANLEY & CO. INCORPORATED
By:
--------------------------
Name:
Title:
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<PAGE>
SCHEDULE I
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
Morgan Stanley & Co. Incorporated
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
UBS Warburg LLC
---------------
Total ........
===============
<PAGE>
EXHIBIT A-1
FORM OF LOCK-UP LETTER
FOR
DIRECTORS AND OFFICERS
, 2000
Morgan Stanley & Co. Incorporated
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Warburg Dillon Read LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Avici Systems Inc., a Delaware corporation (the
"COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of shares
(the "SHARES") of the common stock, par value $0.0001 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 Morgan Stanley on
behalf of the Underwriters, he, she or it will not, during the period commencing
on the date hereof and ending 180 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, lend, 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 (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. The foregoing sentence shall not apply to (a) the sale of
any Shares to the Underwriters
<PAGE>
pursuant to the Underwriting Agreement, (b) transactions relating to shares of
Common Stock or other securities acquired in open market transactions after the
completion of the Public Offering, (c) transfers of shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
as a bona fide gift or gifts and (d) distributions of shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
to limited partners, members, stockholders or other similar affiliates of the
undersigned; provided, however that in each case of any transfer or distribution
pursuant to clause (c) or (d), (i) each donee or distributee shall execute and
deliver to Morgan Stanley a duplicate form of this Lock-up Letter and (ii) no
filing by any party, including any donor, donee, transferor or transferee, under
Section 16(a) of the Securities Exchange Act of 1934, as amended, shall be
required or shall be made voluntarily in connection with such transfer or
distribution, other than a filing on a Form 5 made after the expiration of the
180-day period referred to above. In addition, the undersigned agrees that,
without the prior written consent of Morgan Stanley on behalf of the
Underwriters, it will not, during the period commencing on the date hereof and
ending 180 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. The undersigned also agrees and consents to the entry of stop transfer
instructions with the transfer agent and registrar of the Company against the
transfer of the undersigned's shares of Common Stock except in compliance with
the foregoing restrictions.
The undersigned understands that the Company and the Underwriters are relying
upon this Lock-Up Agreement in proceeding toward consummation of the Public
Offering. The undersigned further understands that this Lock-Up Agreement is
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.
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 automatically terminate and be of no further effect if
(i) the Registration Statement for the Public Offering is not declared effective
by the Securities and Exchange Commission by October 31, 2000 or (ii) the
Underwriting Agreement is terminated.
Very truly yours,
-------------------------------
(Name)
-------------------------------
(Address)
<PAGE>
EXHIBIT A-2
FORM OF LOCK-UP LETTER
FOR
STOCKHOLDERS OTHER THAN
DIRECTORS, OFFICERS AND INSTITUTIONAL INVESTORS
, 2000
Morgan Stanley & Co. Incorporated
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Warburg Dillon Read LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Avici Systems Inc., a Delaware corporation (the
"COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of shares
(the "SHARES") of the common stock, par value $0.0001 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 Morgan
Stanley on behalf of the Underwriters, he, she or it will not, during the period
commencing on the date hereof and ending 180 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, lend, 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 (2) enter into any swap or other arrangement
that transfers to another,
<PAGE>
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 last reported sale price of the
Common Stock on the Nasdaq National Market is at least two times the initial
public offering price per share of the Common Stock sold in the Public Offering
for each of the twenty (20) trading days ending on the trading day immediately
preceding the 90th day after the date of the Prospectus, then twenty five
percent (25%) of the shares of Common Stock, including shares of Common Stock
issuable pursuant to securities convertible into or exercisable or exchangeable
for Common Stock, held by the undersigned on the date of the Prospectus shall be
released from the 180-day restriction described above. This early release shall
occur on: (a) the 90th day after the date of the Prospectus, if the Company
makes a public release of its quarterly or annual results during the period
beginning on the eleventh trading day after the date of the Prospectus and
ending on the day prior to the 90th day after the date of the Prospectus or (b)
if otherwise, the second trading day after the first public release by the
Company of its quarterly or annual results occurring on or after the 90th day
after the date of the Prospectus.
The restrictions in the preceding paragraph shall not apply to (a) the sale of
any Shares to the Underwriters pursuant to the Underwriting Agreement, (b)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the Public Offering, (c)
transfers of shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock as a bona fide gift or gifts and
(d) distributions of shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock to limited partners, members,
stockholders or other similar affiliates of the undersigned; provided, however
that in each case of any transfer or distribution pursuant to clause (c) or (d),
(i) each donee or distributee shall execute and deliver to Morgan Stanley a
duplicate form of this Lock-up Letter and (ii) no filing by any party, including
any donor, donee, transferor or transferee, under Section 16(a) of the
Securities Exchange Act of 1934, as amended, shall be required or shall be made
voluntarily in connection with such transfer or distribution, other than a
filing on a Form 5 made after the expiration of the 180-day period referred to
above. In addition, the undersigned agrees that, without the prior written
consent of Morgan Stanley on behalf of the Underwriters, it will not, during the
period commencing on the date hereof and ending 180 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. The undersigned also agrees and
consents to the entry of stop transfer instructions with the transfer agent and
registrar of the Company against the transfer of the undersigned's shares of
Common Stock except in compliance with the foregoing restrictions.
<PAGE>
The undersigned understands that the Company and the Underwriters are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
Public Offering. The undersigned further understands that this Lock-Up Agreement
is irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.
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 automatically terminate and be of no further effect if
(i) the Registration Statement for the Public Offering is not declared effective
by the Securities and Exchange Commission by October 31, 2000 or (ii) the
Underwriting Agreement is terminated.
Very truly yours,
-----------------------------
(Name)
-----------------------------
(Address)
<PAGE>
EXHIBIT A-3
FORM OF LOCK-UP LETTER
FOR
INSTITUTIONAL INVESTOR STOCKHOLDERS
, 2000
Morgan Stanley & Co. Incorporated
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Warburg Dillon Read LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Avici Systems Inc., a Delaware corporation (the
"COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of shares
(the "SHARES") of the common stock, par value $0.0001 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 Morgan
Stanley on behalf of the Underwriters, he, she or it will not, during the period
commencing on the date hereof and ending 180 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, lend, 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 (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
<PAGE>
by delivery of Common Stock or such other securities, in cash or otherwise.
Notwithstanding the foregoing, if the last reported sale price of the Common
Stock on the Nasdaq National Market is at least two times the initial public
offering price per share of the Common Stock sold in the Public Offering for
each of the twenty (20) trading days ending on the trading day immediately
preceding the 90th day after the date of the Prospectus, then twenty five
percent (25%) of the shares of Common Stock, including shares of Common Stock
issuable pursuant to securities convertible into or exercisable or exchangeable
for Common Stock, held by the undersigned on the date of the Prospectus shall be
released from the 180-day restriction described above. This early release shall
occur on: (a) the 90th day after the date of the Prospectus, if the Company
makes a public release of its quarterly or annual results during the period
beginning on the eleventh trading day after the date of the Prospectus and
ending on the day prior to the 90th day after the date of the Prospectus or (b)
if otherwise, the second trading day after the first public release by the
Company of its quarterly or annual results occurring on or after the 90th day
after the date of the Prospectus.
The restrictions in the preceding paragraph shall not apply to (a) the sale of
any Shares to the Underwriters pursuant to the Underwriting Agreement, (b)
transactions relating to shares of Common Stock or other securities acquired as
part of the Public Offering (other than shares of Common Stock purchased through
the Directed Share Program) or in open market transactions after the completion
of the Public Offering, (c) transfers of shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock as a
bona fide gift or gifts and (d) distributions of shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock to
limited partners, members, stockholders or other similar affiliates of the
undersigned; provided, however that in each case of any transfer or distribution
pursuant to clause (c) or (d), (i) each donee or distributee shall execute and
deliver to Morgan Stanley a duplicate form of this Lock-up Letter and (ii) no
filing by any party, including any donor, donee, transferor or transferee, under
Section 16(a) of the Securities Exchange Act of 1934, as amended, shall be
required or shall be made voluntarily in connection with such transfer or
distribution, other than a filing on a Form 5 made after the expiration of the
180-day period referred to above. In addition, the undersigned agrees that,
without the prior written consent of Morgan Stanley on behalf of the
Underwriters, it will not, during the period commencing on the date hereof and
ending 180 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. The undersigned also agrees and consents to the entry of stop transfer
instructions with the transfer agent and registrar of the Company against the
transfer of the undersigned's shares of Common Stock except in compliance with
the foregoing restrictions.
The undersigned understands that the Company and the Underwriters are relying
upon this Lock-Up Agreement in proceeding toward consummation of the Public
Offering.
<PAGE>
The undersigned further understands that this Lock-Up Agreement is irrevocable
and shall be binding upon the undersigned's heirs, legal representatives,
successors and assigns.
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 automatically terminate and be of no further effect if
(i) the Registration Statement for the Public Offering is not declared effective
by the Securities and Exchange Commission by October 31, 2000 or (ii) the
Underwriting Agreement is terminated.
Very truly yours,
---------------------------
(Name)
---------------------------
(Address)
<PAGE>
EXHIBIT B
INSTITUTIONAL INVESTORS
Amerindo Technology Growth Fund II Inc.
Litton Master Trust
Anthony Ciulla
Joaquin Garcia-Larrieu
James Stableford
Marc Weiss
The Raptor Global Fund Ltd.
The Raptor Global Fund L.P.
Tudor BVI Futures, Ltd.
Tudor Arbitrage Partners, L.P.
Spinnaker Crossover Fund, L.P.
Spinnaker Clipper Fund, L.P.
Spinnaker Crossover Institutional Fund, L.P.
