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EXHIBIT 1.2
DRAFT
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ALLIANCE FIBER OPTIC PRODUCTS, INC.
(a Delaware corporation)
o Shares of Common Stock
INTERNATIONAL PURCHASE AGREEMENT
Dated: o, 2000
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TABLE OF CONTENTS
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INTERNATIONAL PURCHASE AGREEMENT...............................................1
Section 1. Representations and Warranties......................................3
(a) Representations and Warranties by the Company........................3
(i) Compliance with Registration Requirements..................4
(ii) Independent Accountants....................................4
(iii) Financial Statements.......................................4
(iv) No Material Adverse Change in Business.....................5
(v) Good Standing of the Company...............................5
(vi) Good Standing of Subsidiary................................6
(vii) Capitalization.............................................6
(viii) Authorization of Agreement.................................6
(ix) Authorization and Description of Securities................6
(x) Absence of Defaults and Conflicts..........................6
(xi) Absence of Labor Dispute...................................7
(xii) Absence of Proceedings.....................................7
(xiii) Accuracy of Exhibits.......................................8
(xiv) Possession of Intellectual Property........................8
(xv) Absence of Further Requirements............................8
(xvi) Possession of Licenses and Permits.........................8
(xvii) Title to Property..........................................9
(xviii) Compliance with Cuba Act...................................9
(xix) Investment Company Act.....................................9
(xx) Environmental Laws.........................................9
(xxi) Registration Rights.......................................10
(b) Officer's Certificates..............................................10
Section 2. Sale and Delivery to International Managers; Closing...............10
(a) Initial Securities................................................10
(b) Option Securities.................................................10
(c) Payment...........................................................11
(d) Denominations; Registration.......................................11
Section 3. Covenants of the Company...........................................11
(a) Compliance with Securities Regulations and Commission Requests....11
(b) Filing of Amendments..............................................12
(c) Delivery of Registration Statements...............................12
(d) Delivery of Prospectuses..........................................12
(e) Continued Compliance with Securities Laws.........................12
(f) Blue Sky Qualifications...........................................13
(g) Rule 158..........................................................13
(h) Use of Proceeds...................................................13
(i) Listing...........................................................13
(j) Restriction on Sale of Securities.................................13
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(k) Reporting Requirements............................................14
(l) Compliance with NASD Rules........................................14
(m) Compliance with Rule 463..........................................14
Section 4. Payment of Expenses................................................14
(a) Expenses..........................................................14
(b) Termination of Agreement..........................................15
Section 5. Conditions of International Managers' Obligations..................15
(a) Effectiveness of Registration Statement...........................15
(b) Opinion of Counsel for Company....................................15
(c) Opinion of Counsel for International Managers.....................16
(d) Officers' Certificate.............................................16
(e) Accountant's Comfort Letter.......................................16
(f) Bring-down Comfort Letter.........................................16
(g) Approval of Listing...............................................16
(h) No Objection......................................................17
(i) Lock-up Agreements................................................17
(j) Purchase of Initial U.S. Securities...............................17
(k) Conditions to Purchase of International Option Securities.........17
(i) Officers' Certificate...................................17
(ii) Opinion of Counsel for Company..........................17
(iii) Opinion of Counsel for International Managers...........17
(iv) Bring-down Comfort Letter...............................17
(l) Additional Documents..............................................17
(m) Termination of Agreement..........................................18
Section 6. Indemnification....................................................18
(a) Indemnification of International Managers.........................18
(b) Indemnification of Company, Directors and Officers................19
(c) Actions against Parties; Notification.............................19
(d) Settlement without Consent if Failure to Reimburse................20
(e) Indemnification for Reserved Securities...........................20
Section 7. Contribution.......................................................20
Section 8. Representations, Warranties and Agreements to Survive Delivery.....22
Section 9. Termination of Agreement...........................................22
(a) Termination; General..............................................22
(b) Liabilities.......................................................22
Section 10. Default by One or More of the International Managers..............22
Section 11. Notices...........................................................23
Section 12. Parties...........................................................23
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Section 13. GOVERNING LAW AND TIME............................................24
Section 14. Effect of Headings................................................24
SCHEDULES
Schedule A - List of Underwriters...................................Sch A-1
Schedule B - Pricing Information....................................Sch B-1
Schedule C - List of Persons subject to Lock-up.....................Sch C-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel........................A-1
Exhibit B - Form of Lock-up Letter......................................C-1
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DRAFT
Draft as of 10/31/2000
ALLIANCE FIBER OPTIC PRODUCTS, INC.
(a Delaware corporation)
o Shares of Common Stock
(Par Value $.001 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
o, 2000
MERRILL LYNCH INTERNATIONAL
U.S. Bancorp Piper Jaffray Inc.
Wit SoundView Corporation
SG Securities (HK) Limited
as Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Ladies and Gentlemen:
Alliance Fiber Optic Products, Inc., a Delaware corporation (the
"Company"), confirms its agreement with Merrill Lynch International ("Merrill
Lynch") and each of the other international underwriters named in Schedule A
hereto (collectively, the "International Managers," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, U.S. Bancorp Piper Jaffray Inc., Wit SoundView
Corporation and SG Securities (HK) Limited are acting as representatives (in
such capacity, the "Lead Managers") with respect to the issue and sale by the
Company and the purchase by the International Managers, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $.001
per share, of the Company ("Common Stock") set forth in said Schedule A, and
with respect to the grant by the Company to the International Managers, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of International Managers additional shares of Common
Stock to cover over-allotments, if any. The aforesaid o shares of Common Stock
(the "Initial International Securities") to be purchased by the International
Managers and all or any part of the o shares of Common Stock subject to the
option described in Section 2(b) hereof (the "International Option Securities")
are hereinafter called, collectively, the "International Securities."
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
the offering by the Company of an aggregate of o shares of Common Stock (the
"Initial U.S. Securities") through arrangements with certain underwriters in the
United States and Canada (the "U.S. Underwriters") for which Merrill Lynch,
Pierce, Fenner & Smith Incorporated, U.S. Bancorp Piper Jaffray Inc., Wit
SoundView Corporation, and SG Cowen Securities Corporation are acting as
representatives (the "U.S. Representatives") and the grant by the Company to the
U.S. Underwriters, acting severally and not jointly, of an option to purchase
all or any part of the U.S. Underwriters' pro rata portion
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of up to o additional shares of Common Stock solely to cover overallotments, if
any (the "U.S. Option Securities" and, together with the International Option
Securities, the "Option Securities"). The Initial U.S. Securities and U.S.
Option Securities are hereinafter called the "U.S. Securities." It is understood
that the Company is not obligated to sell and the International Managers are not
obligated to purchase, any Initial International Securities unless all of the
Initial U.S. Securities are contemporaneously purchased by the International
Managers.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters," the Initial International Securities,
and the Initial U.S. Securities are hereinafter collectively called the "Initial
Securities," and the "International Securities," and the U.S. Securities, are
hereinafter collectively called the "Securities."
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in
such capacity, the "Global Coordinator").
The Company understands that the International Managers propose to make a
public offering of the International Securities as soon as the Lead Managers
deem advisable after this Agreement has been executed and delivered.
The Company and the International Managers agree that up to o shares of the
International Securities to be purchased by the International Managers and that
up to o shares of the Initial International Securities to be purchased by the
International Managers (collectively, the "Reserved Securities") shall be
reserved for sale by the Underwriters to certain eligible employees and persons
having business relationships with the Company, as part of the distribution of
the Securities by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such eligible employees and persons having business relationships
with the Company by the end of the first business day after the date of this
Agreement, such Reserved Securities may be offered to the public as part of the
public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-45482) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two
forms of prospectus are to be used in connection with the offering and sale of
the Securities: one relating to the International Securities (the "Form of
International Prospectus") and one relating to the U.S. Securities (the "Form of
U.S.
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Prospectus"). The Form of International Prospectus is identical to the Form of
U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting." The information included in any
such prospectus or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became effective
(a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final Form of U.S.
Prospectus and the final Form of International Prospectus in the forms first
furnished to the Underwriters for use in connection with the offering of the
Securities are herein called the "U.S. Prospectus" and the "International
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
refer to the preliminary U.S. Prospectus dated o, 2000 and preliminary
International Prospectus dated o, 2000, respectively, each together with the
applicable Term Sheet and all references in this Agreement to the date of such
Prospectuses shall mean the date of the applicable Term Sheet. For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet
or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
Section 1. Representations and Warranties.
(a) Representations and Warranties by the Company The Company represents
and warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b), hereof and agrees with each U.S. Underwriter,
as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has become
effective under the 1933 Act and no stop order suspending the effectiveness of
the Registration Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of the Company, are contemplated
by the Commission, and any request on the part of the Commission for additional
information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the
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Closing Time (and, if any U.S. Option Securities are purchased, at the Date of
Delivery), the Registration Statement, the Rule 462(b) Registration Statement
and any amendments and supplements thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an 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 the Prospectuses, any
preliminary prospectuses and any supplement thereto or prospectus wrapper
prepared in connection therewith, at their respective times of issuance and at
the Closing Time, complied and will comply in all material respects with any
applicable laws or regulations of foreign jurisdictions in which the
Prospectuses and such preliminary prospectuses, as amended or supplemented, if
applicable, are distributed in connection with the offer and sale of Reserved
Securities. Neither of the Prospectuses nor any amendments or supplements
thereto (including any prospectus wrapper), at the time the Prospectuses or any
amendments or supplements thereto were issued and at the Closing Time (and, if
any U.S. Option Securities are purchased, at the Date of Delivery), included or
will include an untrue statement of a material fact or omitted or will omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. If Rule
434 is used, the Company will comply with the requirements of Rule 434 and the
Prospectuses shall not be "materially different," as such term is used in Rule
434, from the prospectuses included in the Registration Statement at the time it
became effective. The representations and warranties in this subsection shall
not apply to statements in or omissions from the Registration Statement or the
U.S. Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter through the Lead
Managers expressly for use in the Registration Statement or the U.S. Prospectus.
Each preliminary prospectus and the prospectuses 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 1933 Act, complied when so filed in all
material respects with the 1933 Act Regulations and each preliminary prospectus
and the Prospectuses delivered to the Underwriters for use in connection with
this offering was identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act and the
1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
Registration Statement and the Prospectuses, together with the related schedules
and notes, present fairly the financial position of the Company and its
consolidated subsidiary at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiary for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting
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principles ("GAAP") applied on a consistent basis throughout the periods
involved. The supporting schedules included in the Registration Statement
present fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial information
included in the Prospectuses present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and the
Prospectuses, except as otherwise stated therein, (A) there has been no material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its subsidiary
considered as one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or its subsidiary, other than those in the ordinary
course of business, which are material with respect to the Company and its
subsidiary considered as one enterprise, and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock.
(v) Good Standing of the Company. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws of the
State of Delaware and has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under this Agreement;
and the Company is duly qualified as a foreign corporation to transact business
and is in good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiary. The Company's sole subsidiary,
Transian Technology Ltd. Co. (the "Subsidiary"), has been duly organized and is
validly existing as a corporation in good standing under the laws of Taiwan, has
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectuses and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect; except as otherwise disclosed in the Registration Statement, all
of the issued and outstanding capital stock of the Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is owned by
the Company free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; none of the outstanding shares of capital stock of
the Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of the Subsidiary.
(vii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectuses in the column entitled
"Actual" under the
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caption "Capitalization" (except for subsequent issuances, if any, pursuant to
this Agreement, pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectuses or pursuant to the exercise of convertible
securities or options referred to in the Prospectuses). The shares of issued and
outstanding capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or other
similar rights of any securityholder of the Company.
(viii) Authorization of Agreement. This Agreement and the
International Purchase Agreement have been duly authorized, executed and
delivered by the Company.
(ix) Authorization and Description of Securities. The Securities to be
purchased by the International Managers and the International Managers from the
Company have been duly authorized for issuance and sale to the International
Managers pursuant to this Agreement and, the International Managers pursuant to
the International Purchase Agreement, respectively, and, when issued and
delivered by the Company pursuant to this Agreement and the International
Purchase Agreement, respectively, against payment of the consideration set forth
herein and the International Purchase Agreement, respectively, will be validly
issued, fully paid and non-assessable; the Common Stock conforms to all
statements relating thereto contained in the Prospectuses and such description
conforms to the rights set forth in the instruments defining the same; no holder
of the Securities will be subject to personal liability by reason of being such
a holder; and the issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor the
Subsidiary is in violation of its charter or by-laws or in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the Company or
the Subsidiary is a party or by which either of them may be bound, or to which
any of the property or assets of the Company or the Subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults that would
not result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the International Purchase Agreement and the
consummation of the transactions contemplated in this Agreement, the
International Purchase Agreement and in the Registration Statement (including
the issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectuses under the caption "Use
of Proceeds") and compliance by the Company with its obligations under this
Agreement and the International Purchase Agreement have been duly authorized by
all necessary corporate action and do not and will not, whether with or without
the giving of notice or passage of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or the Subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens, charges
or encumbrances that would not
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result in a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or the
Subsidiary or any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or the Subsidiary or any of
their assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or the Subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the employees of
the Company or the Subsidiary exists or, to the knowledge of the Company, is
imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or the Subsidiary's principal
suppliers, manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental agency
or body, domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or the Subsidiary, which is
required to be disclosed in the Registration Statement (other than as disclosed
therein), or which might reasonably be expected to result in a Material Adverse
Effect, or which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the transactions
contemplated in this Agreement and the International Purchase Agreement or the
performance by the Company of its obligations hereunder or thereunder; the
aggregate of all pending legal or governmental proceedings to which the Company
or the Subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents which
are required to be described in the Registration Statement or the Prospectuses
or to be filed as exhibits thereto which have not been so described and filed as
required.
(xiv) Possession of Intellectual Property. The Company and the
Subsidiary own or possess, or can acquire on reasonable terms, adequate 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, trade names or
other intellectual property (collectively, "Intellectual Property") necessary to
carry on the business now operated by them, and neither the Company nor the
Subsidiary has received any notice or is otherwise aware of any infringement of
or conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company or the
Subsidiary therein, and
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which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency is necessary or
required for the performance by the Company of its obligations hereunder, in
connection with the offering, issuance or sale of the Securities under this
Agreement and the International Purchase Agreement or the consummation of the
transactions contemplated by this Agreement and the International Purchase
Agreement, except (i) such as have been already obtained or as may be required
under the 1933 Act or the 1933 Act Regulations and foreign or state securities
or blue sky laws and (ii) such as have been obtained under the laws and
regulations of jurisdictions outside the United States in which the Reserved
Securities are offered.
(xvi) Possession of Licenses and Permits. The Company and the
Subsidiary possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies necessary to
conduct the business now operated by them; the Company and the Subsidiary are in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and neither the Company nor the
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect.
(xvii) Title to Property. The Company and the Subsidiary have good and
marketable title to all real property owned by the Company and the Subsidiary
and good title to all other properties owned by them, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims, restrictions
or encumbrances of any kind except such as (a) are described in the Prospectuses
or (b) do not, singly or in the aggregate, 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 or the Subsidiary; and all of the leases and subleases
material to the business of the Company and the Subsidiary, considered as one
enterprise, and under which the Company or the Subsidiary holds properties
described in the Prospectuses, are in full force and effect, and neither the
Company nor the Subsidiary has any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or the
Subsidiary under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company or the Subsidiary to the continued
possession of the leased or subleased premises under any such lease or sublease.
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(xviii) Compliance with Cuba Act. The Company has complied with, and
is and will be in compliance with, the provisions of that certain Florida act
relating to disclosure of doing business with Cuba, codified as Section 517.075
of the Florida statutes, and the rules and regulations thereunder (collectively,
the "Cuba Act") or is exempt therefrom.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectuses will not be, an
"investment company" or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
(xx) Environmental Laws. Except as described in the Registration
Statement and except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor the Subsidiary is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and the Subsidiary have all permits,
authorizations and approvals required under any applicable Environmental Laws
and are each in compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or the Subsidiary and (D) there are no events or circumstances that
might reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or the Subsidiary
relating to Hazardous Materials or any Environmental Laws.
(xxi) Registration Rights. There are no persons with registration
rights or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the 1933
Act.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company or the Subsidiary delivered to the Global Coordinator, the Lead Managers
or to counsel for the International Managers shall be deemed a representation
and warranty by the Company to each U.S. Underwriter as to the matters covered
thereby.
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Section 2. Sale and Delivery to International Managers; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each U.S. Underwriter, severally and not jointly, and
each U.S. Underwriter, severally and not jointly, agrees to purchase from the
Company, at the price per share set forth in Schedule B, the number of Initial
U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter, plus any additional number of Initial U.S. Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the International Managers,
severally and not jointly, to purchase up to an additional o shares of Common
Stock at the price per share set forth in Schedule B, less an amount per share
equal to any dividends or distributions declared by the Company and payable on
the Initial U.S. Securities but not payable on the U.S. Option Securities. The
option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial U.S. Securities upon notice by the Global
Coordinator to the Company setting forth the number of U.S. Option Securities as
to which the several International Managers are then exercising the option and
the time and date of payment and delivery for such U.S. Option Securities. Any
such time and date of delivery for the U.S. Option Securities (a "Date of
Delivery") shall be determined by the Global Coordinator, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the U.S. Option Securities, each of the
International Managers, acting severally and not jointly, will purchase that
proportion of the total number of U.S. Option Securities then being purchased
which the number of Initial U.S. Securities set forth in Schedule A opposite the
name of such U.S. Underwriter bears to the total number of Initial U.S.
Securities, subject in each case to such adjustments as the Global Coordinator
in its discretion shall make to eliminate any sales or purchases of fractional
shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Brown &
Wood LLP, 555 California Street, San Francisco, California 94104, or at such
other place as shall be agreed upon by the Global Coordinator and the Company,
at 7:00 A.M. (California time) on the third (fourth, if the pricing occurs after
4:30 P.M. (Eastern time) on any given day) business day after the date hereof
(unless postponed in accordance with the provisions of Section 10), or such
other time not later than ten business days after such date as shall be agreed
upon by the Global Coordinator and the Company (such time and date of payment
and delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the International Managers, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Global Coordinator and the Company, on each Date of Delivery as specified in the
notice from the Global Coordinator to the Company.
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Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Lead Managers for the respective accounts of the International Managers of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the Lead Managers, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Initial U.S. Securities and the U.S. Option Securities, if any, which it has
agreed to purchase. Merrill Lynch, individually and not as representative of the
International Managers, may (but shall not be obligated to) make payment of the
purchase price for the Initial U.S. Securities or the U.S. Option Securities, if
any, to be purchased by any U.S. Underwriter whose funds have not been received
by the Closing Time or the relevant Date of Delivery, as the case may be, but
such payment shall not relieve such U.S. Underwriter from its obligations
hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the Lead Managers may request in
writing at least one full business day before the Closing Time or the relevant
Date of Delivery, as the case may be. The certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, will be made available for
examination and packaging by the Lead Managers in The City of New York not later
than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or
the relevant Date of Delivery, as the case may be.
Section 3. Covenants of the Company. The Company covenants with each U.S.
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Global Coordinator immediately,
and confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectuses or any amended Prospectuses shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectuses or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Company will
promptly effect the filings necessary pursuant to Rule 424(b) and will take such
steps as it deems necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file such
prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global Coordinator
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectuses,
will furnish the Global Coordinator with copies of any such documents a
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reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which the Global Coordinator
or counsel for the International Managers shall object.
(c) Delivery of Registration Statements. The Company has furnished or will
deliver to the Lead Managers and counsel for the International Managers, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Lead Managers, without charge, a conformed
copy of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the International Managers. The copies of
the Registration Statement and each amendment thereto furnished to the
International Managers will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter reasonably requested, and the Company hereby consents to
the use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each U.S. Underwriter, without charge, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the U.S.
Prospectus (as amended or supplemented) as such U.S. Underwriter may reasonably
request. The U.S. Prospectus and any amendments or supplements thereto furnished
to the International Managers will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement, the
International Purchase Agreement and in the Prospectuses. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the International Managers
or for the Company, to amend the Registration Statement or amend or supplement
any Prospectus in order that the Prospectuses will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the International
Managers such number of copies of such amendment or supplement as the
International Managers may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the International Managers, to qualify the Securities for
offering and sale under the
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applicable securities laws of such states and other jurisdictions (domestic or
foreign) as the Global Coordinator may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectuses
under "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect and maintain
the quotation of the Common Stock (including the Securities) on the Nasdaq
National Market and will file with the Nasdaq National Market all documents and
notices required by the Nasdaq National Market of companies that have securities
that are traded in the over-the-counter market and quotations for which are
reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectuses, the Company will not, without the prior written
consent of the Global Coordinator, (i) directly or indirectly, 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 any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or file any
registration statement under the 1933 Act with respect to any of the foregoing
or (ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic consequence
of ownership of the Common Stock, whether any such swap or 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 Securities to be sold hereunder or under the International Purchase
Agreement, (B) any shares of Common Stock issued by the Company upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof and referred to in the Prospectuses, (C) any shares of Common
Stock issued or options to purchase Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Prospectuses or (D) any
shares of Common Stock issued pursuant to any non-employee director stock plan
or dividend reinvestment plan.
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(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(l) [Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of the
Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, legal expenses) they incur in
connection with such release.]
(m) Compliance with Rule 463. The Company will file with the Commission
such reports on Form SR as may be required pursuant to Rule 463 of the 1933 Act
Regulations.
Section 4. Payment of Expenses. (a) Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the International Managers and the
International Managers, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus, any Term
Sheets and of the Prospectuses and any amendments or supplements thereto, (vii)
the preparation, printing and delivery to the Underwriters of copies of the Blue
Sky Survey and any supplement thereto, (viii) the fees and expenses of any
transfer agent or registrar for the Securities and (ix) the filing fees incident
to, and the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities (x) the fees and
expenses incurred in connection with the inclusion of the Securities in the
Nasdaq National Market and all costs and expenses of the Underwriters, including
the fees and disbursements of counsel for the Underwriters, in connection with
matters related to the Reserved Securities which are designated by the Company
for sale to employees and others having a business relationship with the
Company.
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(b) Termination of Agreement. If this Agreement is terminated by the Lead
Managers in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the International Managers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the International Managers.
Section 5. Conditions of International Managers' Obligations. The obligations of
the several International Managers hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or the Subsidiary delivered
pursuant to the provisions hereof, to the performance by the Company of its
covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the International Managers. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) Opinion of Counsel for Company At Closing Time, the Lead Managers
shall have received the favorable opinion, dated as of Closing Time, of
Pillsbury Madison & Sutro LLP, counsel for the Company, in form and substance
satisfactory to counsel for the International Managers, together with signed or
reproduced copies of such letter for each of the other International Managers to
the effect set forth in Exhibit A hereto and to such further effect as counsel
to the International Managers may reasonably request.
(c) Opinion of Counsel for International Managers. At Closing Time, the
Lead Managers shall have received the favorable opinion, dated as of Closing
Time, of Brown & Wood LLP , counsel for the International Managers, together
with signed or reproduced copies of such letter for each of the other
International Managers with respect to the matters set forth in clauses (i),
(ii), (v), (vi) (solely as to preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Company), (viii) through
(x), inclusive, (xii), (xiv) (solely as to the information in the Prospectus
under "Description of Capital Stock--Common Stock") and the penultimate
paragraph of Exhibit A hereto. In giving such opinion such counsel may rely, as
to all matters governed by the laws of jurisdictions other than the law of the
State of New York, the federal law of the United States, and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Lead Managers. Such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and the Subsidiary and
certificates of public officials.
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(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and the Subsidiary considered as one enterprise,
whether or not arising in the ordinary course of business, and the Lead Managers
shall have received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Section 1(a) hereof
are true and correct with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or are contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Lead Managers shall have received from PricewaterhouseCoopers LLP
a letter dated such date, in form and substance satisfactory to the Lead
Managers, together with signed or reproduced copies of such letter for each of
the other International Managers 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 Prospectuses.
(f) Bring-down Comfort Letter. At Closing Time, the Lead Managers shall
have received from PricewaterhouseCooper LLP a letter, dated as of Closing Time,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(g) Approval of Listing At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(h) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement, the Lead Managers
shall have received an agreement substantially in the form of Exhibit B hereto
signed by the persons listed on Schedule C hereto.
(j) Purchase of Initial International Securities. Contemporaneously with
the purchase by the International Managers of the Initial U.S. Securities under
this Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(k) Conditions to Purchase of U.S. Option Securities. In the event that
the International Managers exercise their option provided in Section 2(b) hereof
to purchase all or
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any portion of the U.S. Option Securities, the representations and warranties of
the Company contained herein and the statements in any certificates furnished by
the Company or the Subsidiary hereunder shall be true and correct as of each
Date of Delivery and, at the relevant Date of Delivery, the Lead Managers shall
have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company confirming that the
certificate delivered at the Closing Time pursuant to Section 5(d) hereof
remains true and correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of
Pillsbury Madison & Sutro LLP, counsel for the Company, in form and substance
satisfactory to counsel for the International Managers, dated such Date of
Delivery, relating to the U.S. Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by Section
5(b) hereof.
(iii) Opinion of Counsel for International Managers. The favorable
opinion of Brown & Wood LLP, counsel for the International Managers, dated such
Date of Delivery, relating to the U.S. Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from PricewaterhouseCooper
LLP, in form and substance satisfactory to the Lead Managers and dated such Date
of Delivery, substantially in the same form and substance as the letter
furnished to the Lead Managers pursuant to Section 5(f) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph shall be a
date not more than five days prior to such Date of Delivery.
(l) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the International Managers shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the Lead
Managers and counsel for the International Managers.
(m) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several International Managers to purchase the relevant
Option Securities, may be terminated by the Lead Managers by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination shall be without liability of any party to any
other party except as provided in
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Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such
termination and remain in full force and effect.
Section 6. Indemnification.
(a) Indemnification of International Managers. The Company agrees to
indemnify and hold harmless each U.S. Underwriter and each person, if any, who
controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable laws
or regulations of foreign jurisdictions where Reserved Securities have been
offered and (B) any untrue statement or alleged untrue statement of a material
fact included in the supplement or prospectus wrapper material distributed in 6
in connection with the reservation and sale of the Reserved Securities to
eligible employees, related persons and business associates of the Company, or
the omission or alleged omission therefrom of a material fact necessary to make
the statements therein, when considered in conjunction with the Prospectuses or
preliminary prospectuses, not misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission or in connection with any violation of the nature referred
to in Section 6(a)(ii)(A) hereof; provided that (subject to Section 6(d) below)
any such settlement is effected with the written consent of the Company;
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission or in connection with
any violation of the nature referred to in
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Section 6(a)(ii)(A) hereof, to the extent that any such expense is not paid
under (i), (ii) or (iii) above; and
provided, however, that this indemnity agreement shall not apply to
any loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any U.S. Underwriter through the Lead Managers expressly for use in
the Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto).
(b) Indemnification of Company, Directors and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary U.S. prospectus or
the U.S. Prospectus (or any amendment or supplement thereto) in reliance upon
and in conformity with written information furnished to the Company by such U.S.
Underwriter through the Lead Managers expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the U.S.
Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof
19
<PAGE> 24
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a request
in writing, to indemnify and hold harmless the Underwriters from and against any
and all losses, liabilities, claims, damages and expenses incurred by them as a
result of the failure of eligible employees, related persons and business
associates of the Company to pay for and accept delivery of Reserved Securities
which, by the end of the first business day following the date of this
Agreement, were subject to a properly confirmed agreement to purchase.
Section 7. Contribution. If the indemnification provided for in Section 6 hereof
is for any reason unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the International Managers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
International Managers on the other hand in connection with the statements or
omissions, or in connection with any violation of the nature referred to in
Section 6(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
International Managers on the other hand in connection with the offering of the
U.S. Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the International
Managers, in each case as set forth on the cover of the U.S. Prospectus, or, if
Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover.
20
<PAGE> 25
The relative fault of the Company on the one hand and the International
Managers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the International Managers and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission or any violation of the nature referred to in
Section 6(a)(ii)(A) hereof.
The Company and the International Managers agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the International Managers were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the U.S. Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
U.S. Underwriter has otherwise been required to pay by reason of any 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 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The
International Managers' respective obligations to contribute pursuant to this
Section 7 are several in proportion to the number of Initial U.S. Securities set
forth opposite their respective names in Schedule A hereto and not joint.
Section 8. Representations, Warranties and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or the Subsidiary submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the International Managers.
21
<PAGE> 26
Section 9. Termination of Agreement.
(a) Termination; General. The Lead Managers may terminate this Agreement,
by notice to the Company, at any time at or prior to Closing Time (i) if there
has been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the U.S. Prospectus, any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and the Subsidiary
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial markets,
any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Lead Managers,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the Nasdaq National Market,
or if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal, New York or Taiwan authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
Section 10. Default by One or More of the International Managers. If one or more
of the International Managers shall fail at Closing Time or a Date of Delivery
to purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Lead Managers shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting International Managers, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the Lead
Managers shall not have completed such arrangements within such 24-hour period,
then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the
non-defaulting International Managers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting International Managers, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
U.S. Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of the
International Managers to purchase and of the Company to sell the Option
Securities to be purchased
22
<PAGE> 27
and sold on such Date of Delivery shall terminate without liability on the part
of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
International Managers to purchase and the Company to sell the relevant U.S.
Option Securities, as the case may be, either the Lead Managers or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "U.S. Underwriter" includes
any person substituted for a U.S. Underwriter under this Section 10.
Section 11. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to the International Managers
shall be directed to the Lead Managers at Merrill Lynch at 4 World Financial
Center, Floor 12, New York, New York 10080 and 3300 Hillview Avenue, Suite 150,
Palo Alto, California 94304, attention of George C. Francisco IV; and notices to
the Company shall be directed to it at 735 North Pastoria Avenue, Sunnyvale,
California 94085, attention of 6.
Section 12. Parties. This Agreement shall each inure to the benefit of and be
binding upon the International Managers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
International Managers and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the International Managers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any U.S. Underwriter shall be deemed to be a successor by reason merely of such
purchase.
Section 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 14. Effect of Headings. The Article and Section headings herein and the
Table of Contents are for convenience only and shall not affect the construction
hereof.
23
<PAGE> 28
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the International Managers and the Company in accordance with its terms.
Very truly yours,
ALLIANCE FIBER OPTIC PRODUCTS, INC.
By:
-------------------------------------
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
MERRILL LYNCH INTERNATIONAL
U.S. BANCORP PIPER JAFFRAY INC.
WIT SOUNDVIEW CORPORATION
SG SECURITIES (HK) LIMITED
By: MERRILL LYNCH INTERNATIONAL
By:
-------------------------------------
Authorized Signatory
For themselves and as Lead Managers of the other International Managers
named in Schedule A hereto.
24
<PAGE> 29
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ ------------
<S> <C>
Merrill Lynch International...............................................
U.S. Bancorp Piper Jaffray Inc............................................
Wit SoundView Corporation.................................................
SG Securities (HK) Securities.............................................
Total.....................................................................
</TABLE>
Sch A-1
<PAGE> 30
SCHEDULE B
ALLIANCE FIBER OPTIC PRODUCTS, INC.
o Shares of Common Stock
(Par Value $.001 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $o.
2. The purchase price per share for the U.S. Securities to be paid by the
several International Managers shall be $o, being an amount equal to the initial
public offering price set forth above less $o per share; provided that the
purchase price per share for any U.S. Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be reduced
by an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial U.S. Securities but not payable on the U.S.
Option Securities.
Sch B-1
<PAGE> 31
SCHEDULE C
List of persons and entities
subject to lock-up
Sch C-1
<PAGE> 32
EXHIBIT A
FORM OF OPINION OF PILLSBURY MADISON & SUTRO LLP
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectuses in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the U.S. Purchase Agreement and the International Purchase Agreement or pursuant
to reservations, agreements or employee benefit plans referred to in the
Prospectuses or pursuant to the exercise of convertible securities or options
referred to in the Prospectuses); the shares of issued and outstanding capital
stock have been duly authorized and validly issued and are fully paid and
non-assessable; and none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights of any
securityholder of the Company.
(v) The Securities to be purchased by the International Managers and the
International Managers from the Company have been duly authorized for issuance
and sale to the Underwriters pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, respectively, and, when issued and delivered
by the Company pursuant to the U.S. Purchase Agreement and the International
Purchase Agreement, respectively, against payment of the consideration set forth
in the U.S. Purchase Agreement and the International Purchase Agreement, will be
validly issued and fully paid and non-assessable and no holder of the Securities
is or will be subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.
(vii) The Company's sole Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its
A-1
<PAGE> 33
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectuses and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of the
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and, to the best of our knowledge, is owned by the Company, free
and clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity; none of the outstanding shares of capital stock of the Subsidiary was
issued in violation of the preemptive or similar rights of any securityholder of
the Subsidiary.
(viii) The U.S. Purchase Agreement and the International Purchase Agreement
have been duly authorized, executed and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectuses pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and, to the best of our
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are pending
or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectuses and each amendment or supplement to the
Registration Statement and the Prospectuses as of their respective effective or
issue dates (other than the financial statements and supporting schedules
included therein or omitted therefrom, as to which we need express no opinion)
complied as to form in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became effective.
(xii) The form of certificate used to evidence the Common Stock complies in
all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company and the
requirements of the Nasdaq National Market.
(xiii) To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or the
Subsidiary is a party, or to which the property of the Company or the Subsidiary
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably
A-2
<PAGE> 34
be expected to materially and adversely affect the properties or assets thereof
or the consummation of the transactions contemplated in the U.S. Purchase
Agreement and International Purchase Agreement or the performance by the Company
of its obligations thereunder.
(xiv) The information in the Prospectuses under "Business--Intellectual
Property," "Business--Facilities," "Business--Legal Proceedings," "Description
of Capital Stock" and "Material United States Federal Tax Consequences to
Non-United States Holders" and in the Registration Statement under Item 14, to
the extent that it constitutes matters of law, summaries of legal matters, the
Company's charter and bylaws or legal proceedings, or legal conclusions, has
been reviewed by us and is correct in all material respects.
(xv) To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Prospectuses that are not described as
required.
(xvi) All descriptions in the Prospectuses of contracts and other documents
to which the Company or the Subsidiary are a party are accurate in all material
respects; to the best of our knowledge, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
required to be described or referred to in the Registration Statement or to be
filed as exhibits thereto other than those described or referred to therein or
filed or incorporated by reference as exhibits thereto, and the descriptions
thereof or references thereto are correct in all material respects.
(xvii) To the best of our knowledge, neither the Company nor the Subsidiary
is in violation of its charter or by-laws and no default by the Company or the
Subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectuses or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xviii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the U.S. Purchase Agreement and the International
Purchase Agreement or for the offering, issuance, sale or delivery of the
Securities.
(xix) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation of the
transactions contemplated in the U.S. Purchase Agreement, the International
Purchase Agreement and in the Registration Statement (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the
A-3
<PAGE> 35
Prospectuses under the caption "Use Of Proceeds") and compliance by the Company
with its obligations under the U.S. Purchase Agreement and the International
Purchase Agreement do not and will not, whether with or without the giving of
notice or lapse of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined in Section 1(a)(x) of the Purchase
Agreements) under or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the Subsidiary
pursuant to any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument, known to us, to
which the Company or the Subsidiary is a party or by which either of them may be
bound, or to which any of the property or assets of the Company or the
Subsidiary is subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a Material Adverse Effect), nor will
such action result in any violation of the provisions of the charter or by-laws
of the Company or the Subsidiary, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company or the Subsidiary or any of their respective properties, assets
or operations.
(xx) To the best of our knowledge, there are no persons with registration
rights or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the 1933
Act.
(xxi) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the 1940 Act.
(xxii) The statements in the Prospectuses under the captions "Risk Factors
- If we fail to protect our intellectual property rights, competitors may be
able to use our technologies, which could weaken our competitive position,
reduce our revenues or increase our costs," "Risk Factors - We may be subject to
intellectual property infringement claims that are costly to defend and could
limit our ability to use some technologies in the future," "Risk Factors - If
necessary licenses of third-party technology are not available to us or are very
expensive, we may be unable to develop new products or product enhancements,"
"Business - Intellectual Property" and "Business - Technology" (collectively the
"Intellectual Property and Technology Portions") are accurate statements or
summaries of the matters therein set forth in all material respects and nothing
has come to our attention that causes us to believe that the Intellectual
Property and Technology Portions of the Registration Statement, as of the date
the Registration Statement was declared effective, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or that the Intellectual Property and Technology Portions of the
Prospectuses (as of the date of the Prospectuses or the date of this opinion),
contain any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
A-4
<PAGE> 36
(xxiii) There are no legal or governmental proceedings pending relating to
patent rights, trade secrets, trademarks, service marks or other proprietary
information or materials of the Company which, if determined adversely to the
Company, might have a material adverse effect on the business, financial
position or results of the operations of the Company and to the best of our
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or others.
(xxiv) To our knowledge, after due inquiry, there are no contracts or other
documents relating to the Company's patents, trade secrets, trademarks, service
marks or other proprietary information or materials of a character required to
be filed as an exhibit to the Registration Statement or required to be described
in the Registration Statement or the Prospectuses that are not filed or
described as required.
(xxv) To our knowledge, the Company is not infringing or otherwise
violating any patents, trade secrets, trademarks, service marks or other
proprietary information or materials of others.
(xxvi) To our knowledge, the Company owns or possesses sufficient licenses
or other rights to use all patents, trade secrets, trademarks, service marks or
other proprietary information or materials necessary to conduct the business now
being or proposed to be conducted by the Company as described in the
Prospectuses.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectuses or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectuses
were issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted 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.
In rendering such opinion, such counsel may rely as to matters of fact (but
not as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Such opinion shall not
state that it is to be governed or qualified by, or that it is otherwise subject
to, any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
A-5
<PAGE> 37
EXHIBIT B
6, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
U.S. Bancorp Piper Jaffray Inc
Wit SoundView Corporation
SG Cowen Securities Corporation
as Lead Managers of the several
International Managers to be named in the
within-mentioned U.S. Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4 World Financial Center, Floor 12
New York, New York 10080
Re: Proposed Public Offering by Alliance Fiber Optic Products, Inc.
---------------------------------------------------------------
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of Alliance
Fiber Optic Products, Inc., a California corporation (the "Company"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), SG Cowen Securities Corporation, U.S. Bancorp
Piper Jaffray Inc. and Wit SoundView Corporation propose to enter into a
Purchase Agreement (the "U.S. Purchase Agreement") with the Company providing
for the public offering of shares (the "Securities") of the Company's common
stock, par value $0.001 per share (the "Common Stock").
In recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder [and an officer and/or director] of the Company,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned agrees with each underwriter to
be named in the U.S. Purchase Agreement that, during a period of 180 days from
the date of the U.S. Purchase Agreement, the undersigned will not, without the
prior written consent of Merrill Lynch, directly or indirectly, (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 for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
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Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise.
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Very truly yours,
Signature:
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Print Name:
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Annex A
FORM OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(e)
We are independent public accountants with respect to the Company within
the meaning of the 1933 Act and the applicable published 1933 Act Regulations
(i) in our opinion, the audited financial statements and the related
financial statement schedules included in the Registration Statement and the
Prospectuses comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the published rules and regulations
thereunder;
(ii) on the basis of procedures (but not an examination in accordance with
generally accepted auditing standards) consisting of a reading of the unaudited
interim consolidated financial statements of the Company for the six month
period ended June 30, 1999 and the three and nine month periods ended September
30, 1999 and September 30, 2000, included in the Registration Statement and the
Prospectuses (collectively, the "Quarterly Financials"), a reading of the
minutes of all meetings of the stockholders and directors of the Company and its
subsidiary and the Audit, Compensation and __________ Committees of the
Company's Board of Directors and its subsidiary committees since July 1, 2000,
inquiries of certain officials of the Company and its subsidiary responsible for
financial and accounting matters, a review of interim financial information in
accordance with standards established by the American Institute of Certified
Public Accountants in Statement on Auditing Standards No. 71, Interim Financial
Information ("SAS 71"), with respect to the description of relevant periods and
such other inquiries and procedures as may be specified in such letter, nothing
came to our attention that caused us to believe that:
(A) the Quarterly Financials included in the Registration Statement
and the Prospectuses do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the 1933 Act Regulations
or any material modifications should be made to the unaudited consolidated
financial statements included in the Registration Statement and the Prospectuses
for them to be in conformity with generally accepted accounting principles;
(B) at a specified date not more than five days prior to the date of
this Agreement, there was any change in the stockholders equity of the Company
and its subsidiary or any decrease in the net current assets of the Company and
its subsidiary or any increase in the long-term liabilities of the Company and
its subsidiary, in each case as compared with amounts shown in the latest
balance sheet included in the Registration Statement, except in each case for
changes, decreases or increases that the Registration Statement discloses have
occurred or may occur; or
(C) for the period from September 30, 2000 to a specified date not
more than five days prior to the date of this Agreement, there was any decrease
in net revenues or total and per share amounts of net income, in each case as
compared with the comparable
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period in the preceding year, except in each case for any decreases that the
Registration Statement discloses have occurred or may occur;
(iii) based upon the procedures set forth in clause (ii) above and a
reading of the Selected Financial Data included in the Registration Statement
and a reading of the financial statements from which such data were derived,
nothing came to our attention that caused us to believe that the Selected
Financial Data included in the Registration Statement do not comply as to form
in all material respects with the disclosure requirements of Item 301 of
Regulation S-K of the 1933 Act, that the amounts included in the Selected
Financial Data are not in agreement with the corresponding amounts in the
audited consolidated financial statements for the respective periods or that the
financial statements not included in the Registration Statement from which
certain of such data were derived are not in conformity with generally accepted
accounting principles;
(iv) we have compared the information in the Registration Statement under
selected captions with the disclosure requirements of Regulation S-K of the 1933
Act and on the basis of limited procedures specified herein. Nothing came to our
attention that caused us to believe that this information does not comply as to
form in all material respects with the disclosure requirements of Items 302, 402
and 503(d), respectively, of Regulation S-K; and
(v) in addition to the procedures referred to in clause (ii) above, we
have performed other procedures, not constituting an audit, with respect to
certain amounts, percentages, numerical data and financial information appearing
in the Registration Statement, which are specified herein, and have compared
certain of such items with, and have found such items to be in agreement with,
the accounting and financial records of the Company.
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