Form Of Underwriting Agreement

ACT NETWORKS, INC.


3,000,000 Shares


Common Stock


UNDERWRITING AGREEMENT


June __, 1996


HAMBRECHT & QUIST LLC WESSELS, ARNOLD & HENDERSON, L.L.C.
As Representatives of the Underwriters
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104


Ladies and Gentlemen:


ACT Networks, Inc., a Delaware corporation (herein called the Company), proposes to issue and sell 1,510,000 shares of its authorized but unissued common stock, $.001 par value (herein called the Common Stock), and the stockholders of the Company named in Schedule II hereto (herein collectively called the Selling Securityholders) propose to sell an aggregate of 1,490,000 shares of Common Stock of the Company (said 3,000,000 shares of Common Stock being herein called the Underwritten Stock). The Company proposes to grant to the Underwriters (as hereinafter defined) an option to purchase up to 450,000 additional shares of Common Stock (herein called the Option Stock and with the Underwritten Stock herein collectively called the Stock). The Common Stock is more fully described in the Registration Statement and the Prospectus hereinafter mentioned.


The Company and the Selling Securityholders severally hereby confirm the agreements made with respect to the purchase of the Stock by the several underwriters, for whom you are acting, named in Schedule I hereto (herein collectively called the Underwriters, which term shall also include any underwriter purchasing Stock pursuant to Section 3(b) hereof. You represent and warrant that you have been authorized by each of the other Underwriters to enter into this Agreement on its behalf and to act for it in the manner herein provided.


1. REGISTRATION STATEMENT. The Company has filed with the Securities and Exchange Commission (herein called the Commission) a registration statement on Form S-3 (No. 333-______), including the related preliminary prospectus, for the registration under the Securities Act of 1933, as amended (herein called the Securities Act) of the Stock. Copies of such registration statement and of each amendment thereto, if any, including the related preliminary prospectus (meeting the 2 requirements of Rule 430A of the rules and regulations of the Commission) heretofore filed by the Company with the Commission have been delivered to you.


The term Registration Statement as used in this agreement shall mean such registration statement, including all exhibits and financial statements and all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, in the form in which it became effective and, in the event of any amendment thereto after the effective date of such registration statement (herein called the Effective Date), shall also mean (from and after the effectiveness of such amendment) such registration statement as so amended. The term Prospectus as used in this Agreement shall mean the prospectus relating to the Stock first filed with the Commission pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as included in the Registration Statement) and, in the event of any supplement or amendment to such prospectus after the Effective Date, shall also mean (from and after the filing with the Commission of such supplement, or the effectiveness of such amendment) such prospectus as so supplemented or amended. The term Preliminary Prospectus as used in this Agreement shall mean each preliminary prospectus included in such registration statement prior to the time it becomes effective.


The Registration Statement has been declared effective under the Securities Act, and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. The Company has caused to be delivered to you copies of each Preliminary Prospectus and has consented to the use of such copies for the purposes permitted by the Securities Act.


2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS.


(a) The Company hereby represents and warrants as follows:


(i) Each of the Company and its subsidiaries have been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has full corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement and the Prospectus and as being conducted, and is duly qualified as a foreign corporation and in good standing in all jurisdictions in which the character of the property owned or leased or the nature of the business transacted by it makes qualification necessary (except where the failure to be so qualified would not have a material adverse effect on the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole).


(ii) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change or any development involving a prospective material adverse change in the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, other than as set forth in the Registration Statement and the Prospectus, and since such dates, except in the ordinary course of


-2- 3 business, the Company nor any of its subsidiaries has entered into any material transaction not referred to in the Registration Statement and the Prospectus.


(iii) The Registration Statement and the Prospectus comply, and on the Closing Date (as hereinafter defined) and any later date on which Option Stock is to be purchased, the Prospectus will comply, in all material respects, with the provisions of the Securities Act and the rules and regulations of the Commission thereunder; on the Effective Date, the Registration Statement did not contain any untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, on the Effective Date the Prospectus did not and, on the Closing Date and any later date on which Option Stock is to be purchased, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that none of the representations and warranties in this subparagraph (iv) shall apply to statements in, or omissions from, the Registration Statement or the Prospectus made in reliance upon and in conformity with information herein or otherwise furnished in writing to the Company by or on behalf of the Underwriters for use in the Registration Statement or the Prospectus as set forth in Section 4(b) of this Agreement.


(iv) The outstanding capital stock has been validly authorized, is fully paid and nonassessable, was issued in compliance with applicable federal and state securities laws, and was issued free of any preemptive right, right of first refusal or similar right. The Stock is duly and validly authorized, is (or, in the case of shares of the Stock to be sold by the Company, will be, when issued and sold to the Underwriters as provided herein) duly and validly issued, fully paid and nonassessable and conforms to the description thereof in the Prospectus. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the transfer and sale of the Stock to be sold by the Selling Securityholders or the issuance and sale of the Stock as contemplated herein. No preemptive right, or right of refusal in favor of the Company, pursuant to the Certificate of Incorporation or Bylaws of the Company exists with respect to the Stock being sold by the selling Securityholders or the issue and sale of the Stock. There is no contractual preemptive right, right of first refusal, right of co-sale or similar right which exists with respect to the Stock being sold by the Selling Securityholders or the issue and sale of the Stock that has not been waived.


(v) The Registration Statement has become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement or suspending or preventing he use of the Prospectus is in effect and no proceedings for that purpose have been instituted or are pending or contemplated by the Commission.


(vi) The execution and delivery by the Company of and the performance by the Company of its obligations under this Agreement, and the issue and sale by the Company of the shares of Stock to be sold by the Company as provided herein will not conflict with, or result in a


-3- 4 breach of, the Certificate of Incorporation or Bylaws of the Company or any material agreement or instrument to which the Company is a party or any applicable law or regulation, or any judgment, order, writ, injunction or decree, of any jurisdiction, court or governmental instrumentality.


(vii) All holders of securities of the Company having rights to the registration of shares of Common Stock, or other securities, because of the filing of the Registration Statement by the Company, have waived such rights or such rights have expired by reason of lapse of time following notification of the Company's intent to file the Registration Statement.


(viii) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated herein, except such as have been (or will before the Closing Date have been) obtained under the Securities Act, the Exchange Act (as hereinafter defined) and such as may be required under the state securities or blue sky laws and the rules and regulations of the NASD (as herein defined) in connection with the purchase and distribution of the Stock by the Underwriters.


(ix) To the Company's knowledge, neither the Company or its subsidiaries are infringing or otherwise violating any patent, copyright, trade secret, trademark, service mark, trade name, technology, know-how or other proprietary information or material of others. Except as disclosed in the Prospectus, neither the Company or any of its subsidiaries has received any notice of infringement or conflict with (and the Company knows of no conflict or infringement with) asserted rights of others with respect to any patents, copyrights, trademarks, service marks, trade names, technology or know-how which could result in any material adverse effect on the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. To the Company's knowledge, there is no infringement by others of any of the Company's or its subsidiaries' patents, copyrights, trade secrets, trademarks, service marks, trade names, technology, know-how or other proprietary information or materials which could affect materially the use thereof by the Company and its subsidiaries, taken as a whole.


(x) To the Company's knowledge, the Company and its subsidiaries own or possesses sufficient licenses or other rights to use all patents, copyrights, trade secrets, trademarks, service marks, trade names, technology, know-how or other proprietary information or materials that are material to the conduct of the business being conducted by the Company and its subsidiaries as described in the Prospectus.


(xi) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable in accordance with its terms.


(xii) There is no legal or governmental proceeding pending or, to the Company's knowledge after due inquiry, threatened to which the Company or its subsidiaries are party or to which any of the properties of the Company is subject that is required to be described in


-4- 5 the Registration Statement or the Prospectus and is not so described which (i) is likely to result in any material adverse change in the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole; or (ii) might prevent consummation of the transactions contemplated hereby. There is no statue, regulation, contract or other document that is required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement that is not described or filed.


(xiii) The Company and its subsidiaries, or resellers of the Company's products, have all necessary consents, authorizations, approvals, orders, certificates and permits of and from, and has made all declarations and filings with, all governmental authorities, to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Prospectus, except to the extent that the failure to obtain or file such would not have a material adverse effect on the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole.


(xiv) To the Company's knowledge after due inquiry, the Company and its subsidiaries (i) are in compliance with all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole.


(xv) The cost and liabilities, if any, associated with the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.


(xvi) The Company is not, and upon receipt and pending application of the net proceeds from the sale of the Stock to be sold by the Company in the manner described in the Prospectus 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.


(xvii) The Common Stock is listed on the National Association of Securities Dealers Automated Quotation ("Nasdaq") National Market.


-5- 6
(b) Each of the Selling Securityholders hereby represents and warrants as follows:


(i) Such Selling Securityholder has good and marketable title to all the shares of Stock to be sold by such Selling Securityholder hereunder, free and clear of all liens, encumbrances, equities, security interests and claims whatsoever, with full right and authority to deliver the same hereunder, subject, in the case of each Selling Securityholder, to the rights of U.S. Stock Transfer Corporation, as Custodian (herein called the Custodian), and that upon the delivery of and payment for such shares of the Stock hereunder, the several Underwriters will receive good and marketable title thereto, free and clear of all liens, encumbrances, equities, security interests and claims whatsoever.


(ii) Certificates in negotiable from for the shares of the Stock to be sold by such Selling Securityholder have been placed in custody under a Custody Agreement for delivery under this Agreement with the Custodian. Such Selling Securityholder specifically agrees that the shares of the Stock represented by the certificates so held in custody for such Selling Securityholder are subject to the interests of the several Underwriters and the Company, that the arrangements made by such Selling Securityholder for such custody, including the Power of Attorney provided for or referred to in such Custody Agreement, are to that extent irrevocable, and that the obligations of such Selling Securityholder shall not be terminated by any act of such Selling Securityholder or by operation of law, whether by the death or incapacity of such Selling Securityholder (or, in the case of a Selling Securityholder that is not an individual, the dissolution or liquidation of such Selling Securityholder) or the occurrence of any other event. If any such death, incapacity, dissolution, liquidation or other such event should occur before the delivery of such shares of the Stock hereunder, certificates for such shares of the Stock shall be delivered by the Custodian in accordance with the terms and conditions of this Agreement as if such death, incapacity, dissolution, liquidation or other event had not occurred, regardless of whether the Custodian shall have received notice of such death, incapacity, dissolution, liquidation or other event.


(iii) Such Selling Securityholder has reviewed the Registration Statement and Prospectus. Although such Selling Securityholder has not independently verified the accuracy or completeness of the information contained therein, nothing has come to the attention of such Selling Securityholder that would lead such Selling Securityholder to believe that (i) on the Effective Date, the Registration Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading or (ii) on the Effective Date, the Prospectus contained and, on the Closing Date and any later date on which Option Stock is to be purchased would contain any untrue statement of a material fact or omitted or would omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however that such Selling Securityholder makes no representations and warranties as to information contained in or omitted from the Registration Statement or the Prospectus made in reliance upon and in conformity with information herein or otherwise furnished in writing to the Company by or on


-6- 7 behalf of the Underwriters for use in the Registration Statement or the Prospectus as set forth in Section 4(b) of this Agreement.


(iv) All information furnished in writing by or on behalf of such Selling Securityholder for use in the Registration Statement and Prospectus is, and on the Closing Date will be, true, correct, and complete, and does not, and on the Closing Date will not, contain any untrue statement of a material fact or omit to state any material fact necessary to make such information not misleading.


(v) The execution and delivery by such Selling Securityholder of, and the performance by such Selling Securityholder of its obligations under, this Agreement, the Custody Agreement signed by such Selling Securityholder and U.S. Stock Transfer Corporation, as Custodian, relating to the deposit of the Underwritten Stock to be sold by such Selling Securityholder (the "Custody Agreement") and the Power of Attorney appointing certain individuals as such Selling Securityholder's attorneys-in-fact to the extent set forth therein, relating to the transactions contemplated hereby and by the Registration Statement (the "Power of Attorney") will not contravene any provision of applicable law, or the certificate or articles of incorporation or by-laws of such Selling Securityholder (if such Selling Securityholder is a corporation), or any material agreement or other instrument binding upon such Selling Securityholder or any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Securityholder, and no consent, approval, authorization or order of or qualification with any governmental body or agency is required for the performance by such Selling Securityholder of its obligations under this Agreement or the Custody Agreement or Power of Attorney of such Selling Securityholder, except such as may be required by the NASD (as hereinafter defined) or under the securities or Blue Sky laws of the various states in connection with the offer and sale of the Stock by the Underwriters.


(vi) Such Selling Securityholder has, and on the Closing Date will have, the legal right and power, and all authorization and approval required by law, to enter into this Agreement, the Custody Agreement, and the Power of Attorney and to sell, transfer and deliver the Stock to be sold by such Selling Securityholder.


(vii) Each of this Agreement, the Custody Agreement and the Power of Attorney has been duly authorized, executed and delivered by such Selling Securityholder and constitutes a valid and binding obligation of such Selling Securityholder enforceable in accordance with its terms.


3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.


(a) On the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Company agrees to issue and sell 1,510,000 shares of the Underwritten Stock to the several Underwriters, each Selling Securityholder agrees to sell to the several Underwriters the number of shares of the Underwritten Stock set forth in Schedule II opposite the


-7- 8 name of such Selling Securityholder, and each of the Underwriters agrees to purchase from the Company and the Selling Securityholders the respective aggregate number of shares of Underwritten Stock set forth opposite its name in Schedule I. The price at which such shares of Underwritten Stock shall be sold by the Company and the Selling Securityholders and purchased by the several Underwriters shall be $______ per share. The obligation of each Underwriter to the Company and each of the Selling Securityholders shall be to purchase from the Company and the Selling Securityholders that number of shares of the Underwritten Stock which represents the same proportion of the total number of shares of the Underwritten Stock to be sold by each of the Company and the Selling Securityholders pursuant to this Agreement as the number of shares of the Underwritten Stock set forth opposite the name of such Underwriter in Schedule I hereto represents of the total number of shares of the Underwritten Stock to be purchased by all Underwriters pursuant to this Agreement, as adjusted by you in such manner as you deem advisable to avoid fractional shares. In making this Agreement, each Underwriter is contracting severally and not jointly; except as provided in paragraphs (b) and (c) of this Section 3, the agreement of each Underwriter is to purchase from the Company and the Selling Securityholders only the respective number of shares of the Underwritten Stock specified in Schedule I.


(b) If for any reason one or more of the Underwriters shall fail or refuse (otherwise than for a reason sufficient to justify the termination of this Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for the number of shares of the Stock agreed to be purchased by such Underwriter or Underwriters, the Company or the Selling Securityholders shall immediately give notice thereof to you, and the nondefaulting Underwriters shall have the right within twenty-four (24) hours after the receipt by you of such notice to purchase, or procure one or more other Underwriters to purchase, in such proportions as may be agreed upon between you and such purchasing Underwriter or Underwriters and upon the terms herein set forth, all or any part of the shares of the Stock which such defaulting Underwriter or Underwriters agreed to purchase. If the nondefaulting Underwriters fail so to make such arrangements with respect to all such shares and portion, the number of shares of the Stock which each nondefaulting Underwriter is otherwise obligated to purchase under this Agreement shall be automatically increased on a pro rata basis to absorb the remaining shares and portion which the defaulting Underwriter or Underwriters agreed to purchase; provided, however, that the nondefaulting Underwriters shall not be obligated to purchase the shares and portion which the defaulting Underwriter or Underwriters agreed to purchase if the aggregate number of such shares of the Stock exceeds 10% of the total number of shares of the Stock which all Underwriters agreed to purchase hereunder. If the total number of shares of Stock which the defaulting Underwriter or Underwriters agreed to purchase shall not be purchased or absorbed in accordance with the two preceding sentences, the Company and the Selling Securityholders shall have the right, within twenty-four (24) hours next succeeding the twenty-four (24) hour period above referred to, to make arrangements with other underwriters or purchasers satisfactory to you for purchase of such shares and portion on the terms herein set forth. In any such case, either you or the Company and the Selling Securityholders shall have the right to postpone the Closing Date determined as provided in Section 5 hereof for not more than seven (7) business days after the date originally fixed as the Closing Date pursuant to said Section 5 in order that any necessary changes in the


-8- 9 Registration Statement, the Prospectus or any other documents or arrangements may be made. If neither the nondefaulting Underwriters nor the Company and the Selling Securityholders shall make arrangements within the twenty-four (24) hour periods stated above for the purchase of all the shares of the Stock which the defaulting Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall be terminated without further act or deed and without any liability on the part of the Company or the Selling Securityholders to any nondefaulting Underwriter and without any liability on the part of any nondefaulting Underwriter to the Company or the Selling Securityholders. Nothing in this paragraph (b), and no action taken hereunder, shall relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.


The term "Underwriter" in this Agreement shall include any person substituted for an Underwriter under this Section 2.


(c) On the basis of the representations, warranties and covenants herein contained, and subject to the terms and conditions herein set forth, the Company grants an option to the several Underwriters to purchase, severally and not jointly, up to 450,000 shares in the aggregate of the Option Stock from the Company at the same price per share as the Underwriters shall pay for the Underwritten Stock. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Stock by the Underwriters and may be exercised in whole or in part at any time (but not more than once) on or before the thirtieth day after the date of this Agreement upon written or telegraphic notice by you to the Company setting forth the aggregate number of shares of the Option Stock as to which the several Underwriters are exercising the option. Delivery of certificates for the shares of Option Stock, and paymen ...