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Exhibit 1.1
3,500,000 Shares
MGC COMMUNICATIONS, INC.
Common Stock
UNDERWRITING AGREEMENT
May __, 1998
BEAR, XXXXXXX & CO. INC.
XXXXXX XXXX LLC
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies & Gentlemen:
MGC Communications, Inc., a Nevada corporation (the "Company"),
confirms its agreement with the Underwriters named in Schedule I hereto (the
"Underwriters"), for whom Bear, Xxxxxxx & Co. Inc. ("Bear Xxxxxxx") and Xxxxxx
Xxxx LLC have been duly authorized to act as representatives (the
"Representatives"), as follows:
1. Description of Securities. The Company proposes, upon the terms and
subject to the conditions set forth herein, to issue and sell to the
Underwriters an aggregate of 3,500,000 shares (the "Firm Shares") of the
Company's common stock, $0.001 par value per share (the "Common Stock"). The
Company also proposes to sell to the Underwriters, upon the terms and subject to
the conditions set forth in Section 3 hereof, up to an additional 525,000 shares
(the "Additional Shares"). The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares."
2. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder by the Commission
(the "Securities Act Regulations"; which together with the Exchange Act
Regulations (as defined below), are referred to herein as the "Regulations"), a
registration statement, as amended by certain amendments thereto, on Form S-1
(File No. 333-49085), including a preliminary prospectus, subject to completion,
relating to the Shares. The Company will next file with the Commission either
(i) prior to the effectiveness of such registration statement, a further
amendment thereto, including therein a final prospectus or (ii) after the
effectiveness of such registration statement, a final prospectus in accordance
with Rules 430A and 424(b)(1) of the Securities Act Regulations, the documents
so filed in either case to include all Rule 430A Information (as defined below)
and
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to conform, in content and form, to the last printer's proof thereof furnished
to and approved by the Underwriters immediately prior to such filing. If the
Company files a registration statement to register a portion of the Shares and
relies on Rule 462(b) for such registration statement to become effective upon
filing with the Commission (the "Rule 462 Registration Statement"), then any
reference to "Registration Statement" herein shall be deemed to be both the
registration statement referred to above and the Rule 462 Registration
Statement, as each such registration statement may be amended pursuant to the
Act.
As used in this Underwriting Agreement (the "Agreement"), (i) the term
"Effective Date" means the later of the date the registration statement is
declared effective by the Commission, or, if a post-effective amendment is filed
with respect thereto, the date of such post-effective amendment's effectiveness,
(ii) the term "Registration Statement" means the registration statement, as
amended at the time when it becomes effective or, if a post-effective amendment
is filed with respect thereto, as amended by such post-effective amendment at
the time of its effectiveness, including in each case all information
incorporated by reference therein, all Rule 430A Information deemed to be
included therein at the Effective Date pursuant to Rule 430A of the Securities
Act Regulations and all financial statements and exhibits included or
incorporated by reference therein, (iii) the term "Rule 430A Information" means
information with respect to the Shares and the public offering thereof
permitted, pursuant to the provisions of paragraph (a) of Rule 430A of the
Securities Act Regulations, to be omitted from the form of prospectus included
in the Registration Statement at the time it is declared effective by the
Commission, (iv) the term "Prospectus" means the form of final prospectus
relating to the Shares first filed with the Commission pursuant to Rule 424(b)
of the Securities Act Regulations or, if no filing pursuant to Rule 424(b) is
required, the form of final prospectus included in the Registration Statement at
the Effective Date and (v) the term "preliminary prospectus" means any
preliminary prospectus (as described in Rule 430 of the Securities Act
Regulations) with respect to the Shares that omits Rule 430A Information. Any
reference herein to the Registration Statement, the Prospectus, any amendment or
supplement thereto or any preliminary prospectus shall be deemed to refer to and
include the documents incorporated by reference therein which were filed under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations of the Commission promulgated thereunder (the "Exchange
Act Regulations"), and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement or Prospectus shall be
deemed to refer to and include the filing after the execution hereof of any
document with the Commission deemed to be incorporated by reference therein. For
purposes of this Agreement the term "subsidiary" shall mean MGC Lease
Corporation, a Nevada corporation, and shall include those corporations,
partnerships and other business entities, whether domestic or foreign, which
are, or under generally accepted accounting principles should be, consolidated
for purposes of the Company's financial reporting.
3. Purchase and Sale of the Shares. Subject to all the terms and
conditions set forth herein (i) the Company agrees to issue and sell 3,500,000
Firm Shares and, upon the basis of the representations, warranties, covenants
and agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not jointly,
to purchase from the Company, at a purchase price of
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$_____ per Share, the number of Firm Shares set forth opposite the name of such
Underwriter on Schedule I hereto (or such number of Firm Shares increased as set
forth in Section 12 hereof).
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, the Underwriters shall
have the right to purchase from the Company, solely for the purpose of covering
over-allotments in connection with sales of the Firm Shares, at a purchase price
per Share of $______, pursuant to an option (the "over-allotment option") which
may be exercised at any time and from time to time prior to 9:00 p.m., New York
City time, on the 30th day after the date of the Prospectus (or, if such 30th
day shall be a Saturday or Sunday or a holiday, on the next business day
thereafter when the New York Stock Exchange is open for trading), up to an
aggregate of 525,000 Additional Shares. Upon any exercise of the over-allotment
option, each Underwriter, severally and not jointly, agrees to purchase from the
Company the number of Additional Shares (subject to such adjustments as the
Underwriters may determine in order to avoid fractional shares) that bears the
same proportion to the aggregate number of Additional Shares to be purchased by
the Underwriters as the number of Firm Shares set forth opposite the name of
such Underwriter on Schedule I hereto (or such number of Firm Shares increased
as set forth in Section 12 hereof) bears to the aggregate number of Firm Shares.
The Company shall, concurrently with the execution of this Agreement,
deliver an agreement executed by (i) each of the directors and officers of the
Company, pursuant to which each such person agrees not to offer, sell, contract
to sell, grant any option to purchase or otherwise dispose of any Common Stock
of the Company or any securities convertible into or exercisable or exchangeable
for such Common Stock, for a period of up to 180 days after the date of the
Prospectus and (ii) each stockholder and each holder of options to purchase
Common Stock listed on Schedule II hereto pursuant to which each such person
agrees not to offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any Common Stock of the Company or any securities
convertible into or exercisable or exchangeable for such Common Stock for a
period of up to 180 days after the date of the Prospectus, in each case, subject
to certain exceptions. Notwithstanding the foregoing, during such period the
Company may (i) issue shares of its Common Stock and grant stock options
pursuant to the Company's existing Stock Option Plan (the "Stock Option Plan"),
(ii) issue shares of its Common Stock upon the exercise of an option or warrant
or the conversion of a security outstanding on the date hereof and (iii) issue
shares of its Common Stock and grant options to newly hired management level
employees consistent with past practices of the Company.
4. Offering. It is understood that the Underwriters propose to make a
public offering of their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective as in the
Representative's judgment is advisable and initially to offer the Shares for
sale to the public as set forth in the Prospectus.
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5. Delivery of the Shares and Payment Therefor. Delivery to the
Representatives of and payment for the Firm Shares shall be made at the office
of Kronish, Lieb, Weiner & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
XX 00000, at 10:00 a.m., New York City time, on May __, 1998 (the "Closing
Date"). The place of closing for the Firm Shares and the Closing Date may be
varied by agreement between the Representatives and the Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the office of Kronish,
Lieb, Weiner & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000 at
such time and on such date (the "Option Closing Date"), which may be the same as
the Closing Date but shall in no event be earlier than the Closing Date nor
earlier than two nor later than ten business days after the giving of the notice
hereinafter referred to, as shall be specified in a written notice from the
Representatives to the Company of the Representatives' determination to purchase
a number, specified in such notice, of Additional Shares. The place of closing
for any Additional Shares and the Option Closing Date for such Shares may be
varied by agreement between the Representatives and the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as the Representatives shall request prior to 9:30 a.m., New York City time, on
the second business day preceding the Closing Date or the Option Closing Date,
as the case may be. Such certificates shall be made available to the
Representatives in New York City for inspection and packaging not later than
9:30 a.m., New York City time, on the business day next preceding the Closing
Date or the Option Closing Date, as the case may be. The certificates evidencing
the Firm Shares and any Additional Shares to be purchased hereunder shall be
delivered to the Representatives on the Closing Date or the Option Closing Date,
as the case may be, against payment of the purchase price therefor by wire
transfer of immediately available funds to the Company's account, provided that
the Company shall give at least two business days' prior written notice to the
Underwriters of the information required to effect such wire transfers.
6. Covenants of the Company. The Company covenants and agrees with each
of the Underwriters as follows:
(a) The Company will, if the Registration Statement has not
heretofore become effective under the Act, file an amendment to the
Registration Statement or, if necessary pursuant to Rule 430A of the
Securities Act Regulations, file a post-effective amendment to the
Registration Statement, as soon as practicable after the execution and
delivery of this Agreement, and will use its best efforts to cause the
Registration Statement or such post-effective amendment to become
effective at the earliest possible time. If the Registration Statement
has become or becomes effective pursuant to Rule 430A of the Securities
Act Regulations, or filing of the Prospectus is otherwise required
under Rule 424(b) of the Securities Act Regulations, the Company will
file the Prospectus, properly completed, pursuant to Rule 424(b) of the
Securities Act Regulations within the time period therein prescribed
and will provide evidence
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satisfactory to the Underwriters of such timely filing. The Company in
all other respects will comply fully and in a timely manner with the
applicable provisions of Rule 424 and Rule 430A of the Securities Act
Regulations and with Rule 462 of the Securities Act Regulations, if
applicable.
(b) The Company will promptly advise the Underwriters, and, if
requested by the Underwriters, confirm such advice in writing, (i) when
the Registration Statement, any Rule 462 Registration Statement or any
post-effective amendment thereto has become effective and if and when
the Prospectus is sent for filing pursuant to Rule 424(b) of the
Securities Act Regulations, (ii) of receipt by the Company or any
representative or attorney of the Company of any communications from
the Commission relating to the Company, the Registration Statement, any
preliminary prospectus, the Prospectus, any document incorporated by
reference therein, or the transactions contemplated by this Agreement,
including, without limitation, the receipt of a request by the
Commission for any amendment or supplement to the Registration
Statement or Prospectus, or any document incorporated by reference
therein, or the receipt of any comments from the Commission, (iii) of
the initiation or threatening of any proceedings for, or receipt by the
Company of any notice with respect to, the issuance by the Commission
of any stop order suspending effectiveness of the Registration
Statement or any post-effective amendment thereto or the issuance by
any state securities commission or other regulatory authority of any
order suspending the qualification or exemption from qualification of
the Shares for the offering or sale in any jurisdiction and (iv) during
the period when the Prospectus is required to be delivered under the
Act, of any material change in the Company's condition (financial or
otherwise), business, prospects, properties, assets, liabilities, net
worth, results of operations, cash flows or of the happening of any
event that makes any statement of a material fact made in the
Registration Statement untrue or that requires the making of any
additions to or changes in the Registration Statement in order to make
the statements therein not misleading or that makes any statement of a
material fact made in the Prospectus untrue or that requires the making
of any additions to or changes in the Prospectus necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. The Company will use its best
efforts to prevent the issuance of an order by the Commission at any
time suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto, or by any state securities commission
or other regulatory authority suspending the qualification or exemption
from qualification of the Shares and, if any such order is issued, to
obtain its withdrawal or lifting at the earliest possible time.
(c) The Company will furnish to the Underwriters without
charge up to four signed copies of the Registration Statement
(including all exhibits and all documents incorporated by reference
therein, as filed with the Commission) and four signed copies of all
amendments thereto, and the Company will furnish without charge to
those persons designated by each Underwriter such number of conformed
copies of the Registration Statement, of each preliminary prospectus,
the Prospectus and all
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amendments of and supplements to such documents, if any, as such
Underwriter may reasonably request. The Company consents to the use of
the Prospectus and any amendments or supplements thereto by any
Underwriter or any dealer, both in connection with the offering or sale
of the Shares and for such period of time thereafter as delivery of a
Prospectus is required by the Act.
(d) The Company will not file any amendment or supplement to
the Registration Statement, or any document that upon filing is deemed
to be incorporated by reference in the Registration Statement or
Prospectus or any amendment of or supplement to the Prospectus, whether
before or after the Effective Date, unless the Underwriters shall
previously have been advised thereof and shall have not objected
thereto within a reasonable time after being furnished a copy thereof.
The Company shall promptly prepare and file with the Commission, upon
the Underwriters' request, any amendment to the Registration Statement
or any supplement to the Prospectus that may be necessary or advisable
in connection with the distribution of the Shares by the Underwriters.
The Company will use its best efforts to cause any such amendment or
supplement to become effective as promptly as possible.
(e) During the time that a prospectus relating to the Shares
is required to be delivered under the Act, the Company will (i) comply
with all requirements imposed upon it by the Act and by the
Regulations, as from time to time in force, so as to permit the
continuance of sales of or dealing in the Shares as contemplated by the
provisions hereof and the Prospectus, and (ii) will file promptly all
documents required to be filed with the Commission pursuant to Section
13 or 14 of the Exchange Act and the Exchange Act Regulations. If at
any time when a prospectus relating to the Shares is required to be
delivered under the Act any event shall have occurred as a result of
which the Registration Statement or the Prospectus as then supplemented
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it shall be necessary, in the judgment
of the Company or in the reasonable opinion of either counsel to the
Company or counsel to the Underwriters, at any time to amend or
supplement the Registration Statement or Prospectus to comply with the
Act or the Regulations, or to file under the Exchange Act, so as to
comply therewith, any document incorporated by reference in the
Registration Statement or Prospectus or in any amendment or supplement
thereto, the Company will notify the Underwriters promptly and prepare
and file with the Commission an appropriate amendment or supplement (in
form and substance satisfactory to the Underwriters) so that the
statements in the Registration Statement and the Prospectus, as so
amended or supplemented, will not, in the light of the circumstances
existing as of the date the Prospectus is so delivered, be misleading,
or so to effect such compliance with the Act or the Exchange Act and
the Regulations, and the Company will use its best efforts to cause any
such amendment to the Registration Statement to be declared effective
as promptly as possible.
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(f) The Company will cooperate with the Underwriters and
Underwriters' counsel, at or prior to the time the Registration
Statement becomes effective, to qualify or register the Shares for
offering and sale and to determine the eligibility for investment of
the Shares under the securities laws of such jurisdictions as the
Underwriters may designate and to maintain such qualification or
registration in effect for so long as required for the distribution
thereof, provided, however, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would
subject it to service of process in suits or taxation, in each case,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject.
(g) The Company will make generally available (within the
meaning of Section 11(a) of the Act) to its security holders and to the
Underwriters as soon as practicable, but not later than 60 days after
the close of the period covered thereby, an earnings statement,
covering a period of at least twelve consecutive full calendar months
commencing after the effective date of the Registration Statement (but
in no event commencing later than 90 days after such date), that
satisfies the provisions of Section 11(a) of the Act and Rule 158 of
the Securities Act Regulations.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under the heading "Use of Proceeds" in the
Prospectus.
(i) The Company will do and perform all things required or
necessary to be done and performed under this Agreement by it prior to
the Closing Date and to satisfy all conditions precedent on its part to
the delivery of the Shares.
(j) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared in the ordinary course
by the Company, copies of any unaudited interim financial statements of
the Company, for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the
Prospectus.
(k) Neither the Company nor its subsidiary will take, directly
or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Shares. Except as permitted by the Act, the Company will not
distribute any Registration Statement, preliminary prospectus,
Prospectus or other offering material in connection with the offering
and sale of the Shares.
(l) The Company will cooperate and assist in any filings
required to be made with the National Association of Securities
Dealers, Inc. ("NASD") and in the performance of any due diligence
investigation by any broker/dealer participating in the sale of the
Shares.
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(m) For a period of five years from Closing Date the Company
will deliver without charge to the Representatives, promptly upon their
becoming available, copies of (i) all reports or other publicly
available information that the Company shall mail or otherwise make
available to its stockholders and (ii) all reports, financial
statements and proxy or information statements filed by the Company
with the Commission or any national securities exchange and such other
publicly available information concerning the Company or its
subsidiaries, including without limitation, press releases.
(n) Except for (i) shares of Common Stock issuable upon
exercise of outstanding warrants of the Company or upon conversion of
outstanding convertible securities of the Company, (ii) shares of
Common Stock issued and options granted pursuant to the Stock Option
Plan or (iii) shares of Common Stock issued and options granted to
newly hired management level employees consistent with past practices
of the Company, the Company will not, directly or indirectly, sell,
offer to sell, solicit an offer to buy, contract to sell, grant any
option to purchase or otherwise transfer or dispose of or register or
announce the sale or offering of any shares of capital stock of the
Company, or any securities that are convertible into or exercisable or
exchangeable for capital stock of the Company, for a period of 180 days
after the date of the Prospectus, without the prior written consent of
Bear Xxxxxxx.
(o) The Company shall cause each officer and director and each
stockholder and each holder of options to purchase Common Stock listed
on Schedule II hereto to enter into an agreement substantially in the
form set forth in Exhibit C to the effect that he, she or it will not,
for a period of up to 180 days after date of the Prospectus, offer,
sell, contract to sell, grant any option to purchase or otherwise
dispose of any shares of Common Stock (or any securities convertible
into or exercisable or exchangeable for Common Stock) or grant any
options or warrants to purchase any shares of Common Stock, without the
prior written consent of Bear Xxxxxxx.
(p) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement under the heading
"Additional Information."
(q) Prior to the Closing Date or any Option Closing Date, as
the case may be, except as may be required by law, the Company will not
(i) issue any press release or other communications relating to the
sale of the Shares, or (ii) hold any press conferences with respect to
the Company or its financial condition, results of operation, business,
properties, assets or liabilities, or the sale of the Shares, without
the prior written consent of the Representatives.
7. Representations and Warranties. The Company represents and warrants
to each of the Underwriters that:
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(a) When the Registration Statement becomes effective, when
any post-effective amendment to the Registration Statement becomes
effective, when the Prospectus is first filed with the Commission
pursuant to Rule 424(b) of the Securities Act Regulations, when any
supplement to or amendment of the Prospectus is filed with the
Commission and at the Closing Date and during such longer period as the
Prospectus may be required to be delivered in connection with sales by
the Underwriters or a dealer, the Registration Statement (which, as
defined, includes all documents incorporated by reference therein) and,
if filed at such time, the Prospectus (which, as defined, includes all
documents incorporated by reference therein) and any amendments thereof
and supplements thereto will comply in all material respects with the
applicable provisions of the Act, the Exchange Act and the Regulations,
and such Registration Statement did not and will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and such Prospectus or supplement
thereto did not and will not contain an untrue statement of a material
fact or not omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. When any
related preliminary prospectus was first filed with the Commission
(whether filed as part of the Registration Statement or an amendment
thereof or pursuant to Rule 424(a) of the Regulations) and when any
amendment or supplement thereto was first filed with the Commission,
such preliminary prospectus and any amendment or supplement thereto
complied in all material respects with the applicable provisions of the
Act and the Regulations and did not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. No
representation or warranty is made in this subsection (a), however,
with respect to any statements in or omissions from the Registration
Statement or the Prospectus or any related preliminary prospectus or
any amendment or supplement thereto based upon and conforming with
information furnished in writing by or on behalf of the Underwriters to
the Company expressly for use therein. The Company acknowledges for all
purposes under this Agreement (including Section 10 hereof) that the
statements set forth in the last paragraph on the cover page of the
Prospectus and in the second, eighth and ninth paragraphs and the third
sentence of the seventh paragraph below the table under the caption
"Underwriting" in the Prospectus constitute the only written
information furnished to the Company by the Underwriters for use in the
Prospectus or any preliminary prospectus (or any amendments or
supplements thereto).
(b) The documents incorporated by reference in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any Preliminary Prospectus and any further documents
incorporated by reference, when they became or become effective under
the Act or were or are filed with the Commission under the Exchange
Act, as the case may be, conformed or will conform in all material
respects with the requirements of the Act or the Exchange Act, as
applicable, and the Regulations; no such document when it was or is
filed (or, if an amendment with
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respect to any such document was or is filed, when such amendment was
filed), contained an 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.
(c) There are no contracts or documents of the Company or its
subsidiary that are required to be filed as exhibits to the
Registration Statement or to any of the documents incorporated by
reference therein by the Act, the Exchange Act or by the Regulations
that have not been so filed.
(d) No stop order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of any
preliminary prospectus has been issued and no proceedings for that
purpose have been commenced or are pending before or, to the best
knowledge of the Company, are contemplated by the Commission. No stop
order suspending the sale of the Shares in any jurisdiction designated
by the Underwriters has been issued and no proceedings for that purpose
have been commenced or are pending or, to the best knowledge of the
Company, are contemplated.
(e) Each of the Company and its subsidiary (A) has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, (B) has all
requisite corporate power and authority to carry on its business as it
is currently being conducted and as described in the Registration
Statement and to own, lease and operate its properties, and (C) is duly
qualified and in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification
except, with respect to this clause (C), where failure to be so
qualified or in good standing does not and could not reasonably be
expected to (x) individually or in the aggregate, result in a material
adverse effect on the properties, business, results of operations,
condition (financial or otherwise), affairs or prospects of the Company
and its subsidiary, taken as a whole, (y) interfere with or adversely
affect the issuance or marketability of the Shares pursuant hereto or
(z) in any manner draw into question the validity of this Agreement
(any of the events set forth in clauses (x), (y) or (z), a "Material
Adverse Effect"). All of the issued and outstanding shares of capital
stock of, or other ownership interests in, the subsidiary have been
duly authorized and validly issued, and are fully paid and
non-assessable and were not issued in violation of or subject to any
preemptive or similar rights and are owned by the Company directly,
free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or other restriction on transferability or voting.
Except for the capital stock of the subsidiary owned by the Company,
neither the Company nor the subsidiary owns or holds any interest in
any corporation partnership, trust or association, joint venture or
other entity.
(f) The authorized capital stock of the Company immediately
prior to the Closing Date will consist of the following: (i) 60,000,000
shares of Common
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Stock, of which 9,185,640 shares will be issued and outstanding
immediately prior to the Closing Date and (ii) 50,000,000 shares of
preferred stock, of which 6,571,450 have been designated as 8% Series A
Convertible Preferred Stock (the "Series A Preferred Stock"), and of
which 6,571,427 shares of the Series A Preferred Stock will be issued
and outstanding immediately prior to the Closing Date. All of the
outstanding shares of capital stock of the Company have been duly
authorized, validly issued, and are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights. The
authorized capital stock of the subsidiary consists of 5,000 shares of
common stock, $.10 par value per share, all of which are issued to, and
owned of record and beneficially by, the Company. Except as set forth
in the Prospectus, there are no outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire, or
instruments convertible or exchangeable or exercisable for, any capital
stock or other equity interest in the Company or its subsidiary other
than (x) options to purchase 1,263,120 shares of Common Stock, all of
which were issued under the Stock Option Plan, (y) warrants to purchase
862,923 shares of Common Stock issued in connection with the issuance
of the Company's 13% Senior Secured Notes due 2004, and (z) 3,942,856
shares of Common Stock issuable upon conversion of the Series A
Preferred Stock. The Shares have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be validly issued, fully paid
and nonassessable and free of any preemptive or similar rights. The
authorized capital stock of the Company conforms in all respects to the
description thereof in the Registration Statement and the Prospectus.
(g) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement, and to consummate the transactions contemplated hereby,
including, without limitation, the corporate power and authority to
issue, sell and deliver the Shares as provided herein.
(h) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and
binding agreement of the Company, enforceable against it in accordance
with its terms, except insofar as indemnification and contribution
provisions may be limited by applicable law or equitable principles and
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
(i) Neither the Company nor the subsidiary is (A) in violation
of its charter or bylaws, (B) in default in the performance of any
bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which it is a party or by which it is bound
or to which any of its properties is subject, or (C) in violation of
any local, state or Federal law, statute, ordinance, rule, regulation,
requirement, judgment or court decree (including, without limitation,
the Communications Act and the rules and regulations of the FCC and
environmental laws, statutes, ordinances, rules, regulations, judgments
or court decrees) applicable
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to the Company or the subsidiary or any of their assets or properties
(whether owned or leased) other than, in the case of clauses (B) and
(C), any default or violation that could not reasonably be expected to
have a Material Adverse Effect. There exists no condition that, with
notice, the passage of time or otherwise, would constitute a default
under any such document or instrument.
(j) Neither (A) the execution, delivery or performance by the
Company of this Agreement nor (B) the issuance and sale of the Shares
will violate, conflict with or constitute a breach of any of the terms
or provisions of, or a default under (or an event that with notice or
the lapse of time, or both, would constitute a default), or require
consent under, or result in the imposition of a lien or encumbrance on
any properties of the Company or the subsidiary, or an acceleration of
any indebtedness of the Company or the subsidiary pursuant to, (i) the
charter or bylaws of the Company or the subsidiary, (ii) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement
or instrument to which the Company or the subsidiary is or may be
bound, (iii) any statute, rule or regulation applicable to the Company
or the subsidiary or any of their respective assets or properties or
(iv) any judgment, order or decree of any court or governmental agency
or authority having jurisdiction over the Company or the subsidiary or
any of their assets or properties, except that the Company has not
received written approval from the Georgia Public Service Commission as
to the sale of the Shares and except in the case of clauses (ii), (iii)
and (iv) for such violations conflicts, breaches, defaults, consents,
impositions of liens or accelerations that would not singly, or in the
aggregate, have a Material Adverse Effect. Other than as described in
the Prospectus, no consent, approval, authorization or order of, or
filing, registration, qualification, license or permit of or with, (A)
any court or governmental agency, body or administrative agency
(including, without limitation, the FCC) or (B) any other person is
required for (1) the execution, delivery and performance by the Company
of this Agreement or (2) the issuance and sale of the Shares and the
consummation of the transactions contemplated hereby or by the
Prospectus, except (x) such as have been obtained and made under the
Act and state securities or Blue Sky laws and regulations or such as
may be required by the NASD or (y) where the failure to obtain any such
consent, approval, authorization or order of, or filing registration,
qualification, license or permit would not reasonably be expected to
result in a Material Adverse Effect.
(k) There is (i) no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending or, to the best knowledge of the
Company or the subsidiary, threatened or contemplated to which the
Company or the subsidiary is a party or to which the business or
property of the Company or the subsidiary is or may be subject, (ii) no
statute, rule, regulation or order that has been enacted, adopted or
issued by any governmental agency or that has been proposed by any
governmental body and (iii) no injunction, restraining order or order
of any nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or the subsidiary is or may be
subject or to which the business, assets, or property of the Company or
the
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subsidiary are or may be subject, that, in the case of clauses (i),
(ii) and (iii) above, (x) is required to be disclosed in the
Registration Statement or the Prospectus and is not so disclosed, (y)
could reasonably be expected to, individually or in the aggregate,
result in a Material Adverse Effect or (z) might interfere with,
adversely affect or in any manner question the validity of the issuance
and sale of the Shares or any of the other transactions contemplated by
this Agreement and the Registration Statement.
(l) There is (i) no significant unfair labor practice
complaint pending against the Company or the subsidiary nor, to the
best knowledge of the Company, threatened against any of them, before
the National Labor Relations Board, any state or local labor relations
board or any foreign labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or under
any collective bargaining agreement is so pending against the Company
or the subsidiary or, to the best knowledge of the Company, threatened
against any of them, (ii) no significant strike, labor dispute,
slowdown or stoppage pending against the Company or the subsidiary nor,
to the best knowledge of the Company, threatened against the Company or
the subsidiary and (iii) to the best knowledge of the Company, no union
representation question existing with respect to the employees of the
Company or the subsidiary that, in the case of clauses (i), (ii) or
(iii), could reasonably be expected to result in a Material Adverse
Effect. To the best knowledge of the Company, no collective bargaining
organizing activities are taking place with respect to the Company or
the subsidiary. None of the Company or the subsidiary have violated (A)
any federal, state or local law or foreign law relating to
discrimination in hiring, promotion or pay of employees (except as set
forth in the Registration Statement), (B) any applicable wage or hour
laws or (C) any provision of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or the rules and regulations
thereunder, which in the case of clause (A), (B) or (C) above could
reasonably be expected to result in a Material Adverse Effect.
(m) No employee pension benefit plan (within the meaning of
Section 3(2) of ERISA, but excluding any "multiemployer plan" within
the meaning of Section 3(37) of ERISA) established or maintained by the
Company or the subsidiary or to which the Company or the subsidiary has
made contributions, which is subject to Part 3 or Subtitle B of Title I
of ERISA, or Section 412 of the Internal Revenue Code of 1986 (the
"Code"), had an accumulated funding deficiency (as such term is defined
in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, as of the last day of the most recent plan year of such plan
heretofore ended for which an excise tax is due (or would be due if
such deficiency were not waived). Each of the Company and the
subsidiary has made all contributions required to be made by it to any
"multiemployer pension plan" (within the meaning of Section 3(37) of
ERISA). Neither the Company nor the subsidiary nor any Related Person
(as such term is defined below) has incurred, or is expecting to incur,
any withdrawal liability (determined under Section 4201 of ERISA) with
respect to any plan covered by Title IV of ERISA and in respect of
which the Company or the subsidiary or a Related Person is an
"employer" as defined in Section 3(5) of ERISA, and to the best of the
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Company's knowledge, there has not been any "reportable event" (within
the meaning of Section 4043 of ERISA and regulations thereunder, other
than an event for which the 30-day notice requirement has been waived),
or any other event or condition which presents a material risk of the
termination of any such plan, including, but not limited to, a
termination by action of the Pension Benefit Guaranty Corporation,
which termination would create a material liability of the Company or
the subsidiary or a Related Person to the Pension Benefit Guaranty
Corporation. "Related Person" shall mean any trade or business (whether
or not incorporated) which is under common control (as defined in
Section 414(b) and (c) of the Code) with the Company within the meaning
of Section 4001(b) of ERISA. As of the last day of the most recent plan
year heretofore ended of each employee benefit plan described in the
preceding sentence (other than a "multiemployer plan"), the present
value of all accrued benefits under each such employee benefit plan
(calculated on the basis of the actuarial assumptions specified in the
most recent actuarial valuation for each such plan) did not exceed the
fair market value of the assets of such plan allocable to such benefits
by more than $1,000,000. Neither any employee pension benefit plan
(excluding any "multiemployer plan" within the meaning of Section 3(37)
of ERISA) established or maintained by the Company or the subsidiary or
to which the Company or the subsidiary has made contributions, nor any
trust created thereunder, nor any trustee or administrator thereof
(including the Company), has engaged in any non-exempt prohibited
transaction (as described in Section 406 of ERISA or in Section 4975 of
the Code) that could subject the Company or the subsidiary either
directly or indirectly through an obligation to indemnify to any
material tax or material penalty on prohibited transactions imposed
under said Section 4975 of the Code or under ERISA. Each employee
benefit plan described in the preceding sentence is in compliance in
all material respects with all applicable provisions of ERISA and the
Code, except for plan amendments required or permitted by such statutes
as to which applicable grace periods for making such amendments have
not expired, and each of the Company and the subsidiary has made,
accrued or provided for all contributions heretofore required to be
made by the Company and the subsidiary and each of the Company and the
subsidiary has complied in all material respects with the continuation
coverage requirements of Title X of the Consolidated Omnibus Budget Act
of 1985, as amended. The execution and delivery of this Agreement and
the sale of the Shares will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Code.
Neither the Company nor the subsidiary has any material "expected
post-retirement benefit obligation" (within the meaning of Financial
Accounting Standards Board Statement No. 106). The consummation of the
transactions contemplated by this Agreement (including, without
limitation, the Use of Proceeds) will not result in any material
payment (including, without limitation, severance, golden parachute or
other) becoming due from the Company to any employee of the Company or
the subsidiary as a consequence of such transaction.
(n) Neither the Company nor the subsidiary has violated any
environmental, safety or similar law or regulation applicable to it or
its business or property relating to the protection of human health and
safety, the environment or
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hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), lacks any permit, license or other approval
required of it under applicable Environmental Laws or is violating any
term or condition of such permit, license or approval which could
reasonably be expected to, either individually or in the aggregate,
have a Material Adverse Effect. No facilities owned or leased by the
Company or the subsidiary, or to the best knowledge of the Company, any
facilities of any predecessor in interest of the Company or the
subsidiary, is listed or, to the best knowledge of the Company,
formally proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability
Information System, both as promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), or
on any comparable state list, or comparable local list, and the Company
has not received any written notification of potential or actual
liability, or any written request for information, pursuant to CERCLA
or any comparable state, local or foreign environmental law.
(o) Each of the Company and the subsidiary has (i) good and
marketable title to all of the properties and assets described in the
Prospectus as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except such as are described in the
Registration Statement or as would not have a Material Adverse Effect,
(ii) peaceful and undisturbed possession under all material leases to
which any of them is a party as lessee, (iii) all licenses,
certificates, permits, authorizations, approvals, franchises and other
rights from, and has made all declarations and filings with, all
federal, state and local authorities (including, without limitation,
the FCC), all self-regulatory authorities and all courts and other
tribunals (each an "Authorization") necessary to engage in the business
conducted by either of them in the manner described in the Prospectus,
except as described in the Prospectus or where failure to hold such
Authorizations would not, individually or in the aggregate, have a
Material Adverse Effect and, (iv) no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such Authorization. Except where the failure to be in full
force and effect would not have a Material Adverse Effect, all such
Authorizations are valid and in full force and effect and each of the
Company and the subsidiary is in compliance in all material respects
with the terms and conditions of all such Authorizations and with the
rules and regulations of the regulatory authorities having jurisdiction
with respect thereto. All material leases to which the Company or the
subsidiary is a party are valid and binding and no default by the
Company or the subsidiary has occurred and is continuing thereunder
and, to the best knowledge of the Company no material defaults by the
landlord are existing under any such lease that could reasonably be
expected to result in a Material Adverse Effect.
(p) Each of the Company and the subsidiary owns, possesses or
has the right to employ all patents, patent rights, licenses (including
all FCC, state, local or other jurisdictional regulatory licenses),
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential
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information, software, systems or procedures), trademarks, service
marks and trade names, inventions, computer programs, technical data
and information (collectively, the "Intellectual Property") presently
employed by them in connection with the businesses now operated by them
or which are proposed to be operated by them free and clear of and
without violating any right, claimed right, charge, encumbrance,
pledge, security interest, restriction or lien of any kind of any other
person and neither the Company nor the subsidiary has received any
notice of infringement of or conflict with asserted rights of others
with respect to any of the foregoing except as could not reasonably be
expected to have a Material Adverse Effect. The use of the Intellectual
Property in connection with the business and operations of the Company
and the subsidiary does not infringe on the rights of any person,
except as could not reasonably be expected to have a Material Adverse
Effect.
(q) Neither the Company nor the subsidiary, or to the best
knowledge of the Company, any of their respective officers, directors,
partners, employees, agents or affiliates or any other person acting on
behalf of the Company or the subsidiary has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than
legal price concessions to customers in the ordinary course of
business) to any customer, supplier, employee or agent of a customer or
supplier, official or employee of any governmental agency (domestic or
foreign), instrumentality of any government (domestic or foreign) or
any political party or candidate for office (domestic or foreign) or
other person who was, is or may be in a position to help or hinder the
business of the Company or the subsidiary (or assist the Company or the
subsidiary in connection with any actual or proposed transaction) which
(i) might subject the Company or the subsidiary, or any other
individual or entity to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (ii) if
not given in the past, might have had a Material Adverse Effect or
(iii) if not continued in the future, might have a Material Adverse
Effect.
(r) All material tax returns required to be filed by the
Company or the subsidiary in all jurisdictions have been so filed. All
taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such
entities or that are due and payable have been paid, other than those
being contested in good faith and for which adequate reserves have been
provided or those currently payable without penalty or interest. To the
best knowledge of the Company, there are no material proposed
additional tax assessments against the Company, the subsidiary or the
assets or property of the Company or the subsidiary.
(s) Neither the Company nor the subsidiary is (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), or (ii) a "holding company" or
a "subsidiary company" or an "affiliate" of a holding company within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
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(t) Except as disclosed in the Prospectus, no holders of any
securities of the Company or the subsidiary or their respective
affiliates or of any options, warrants or other convertible or
exchangeable securities of the Company or the subsidiary or their
respective affiliates are entitled to include any such securities in or
to have such securities registered under the Registration Statement.
(u) Each of the Company and the subsidiary maintains a system
of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization
and (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect thereto.
(v) Each of the Company and the subsidiary maintains insurance
covering its properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in
accordance with customary industry practice to protect the Company, the
subsidiary and their respective businesses. Neither the Company nor the
subsidiary has received notice from any insurer or agent of such
insurer that substantial capital improvements or other expenditures
will have to be made in order to continue such insurance. All such
insurance is outstanding and duly in force on the date hereof, subject
only to changes made in the ordinary course of business, consistent
with past practice, which do not, singly or in the aggregate,
materially alter the coverage thereunder or the risks covered thereby.
(w) Neither the Company nor the subsidiary has taken, directly
or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Shares. Except as permitted by the Act, the Company has not
distributed any Registration Statement, preliminary prospectus,
Prospectus or other offering material in connection with the offering
and sale of the Shares other than through the Underwriters.
(x) Subsequent to the respective dates as of which information
is given in the Registration Statement and up to the Closing Date,
except as set forth in the Registration Statement, there has not been
any material adverse change in the business, prospects, properties,
assets, liabilities, operations, condition (financial or otherwise),
results of operations or cash flows of the Company and the subsidiary,
taken as a whole, whether or not arising from transactions in the
ordinary course of business, and since the date of the latest balance
sheet included in the Registration Statement, neither the Company nor
the subsidiary has incurred or undertaken any liabilities or
obligations, direct or contingent, which are material to the Company
and the subsidiary, taken as a whole, except for liabilities or
obligations which were
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incurred or undertaken in the ordinary course of business or are
reflected in the Registration Statement and the Prospectus. Subsequent
to the dates as of which information is given in the Registration
Statement and the Prospectus, except as disclosed therein, there has
not been any decrease in the capital stock of the Company, any increase
in long-term indebtedness or any material increase in short-term
indebtedness of the Company or the subsidiary or any payment or
declaration to pay any dividends or any other distribution with respect
to the capital stock of the Company.
(y) To the best knowledge of the Company, KPMG Peat Marwick
LLC and Xxxxxx Xxxxxxxx LLP, whose reports are included or incorporated
by reference in the Registration Statement, are or have been
independent certified public accountants with regard to the Company as
required by the Act and the Securities Act Regulations.
(z) The historical financial statements of the Company and the
related notes and schedules included in the Registration Statement and
the Prospectus comply in all material respects with the requirements of
the Act and the Securities Act Regulations, including, without
limitation, Regulation S-X, and present fairly the financial position
of the Company or the Company and the subsidiary, as the case may be,
as of the dates indicated and the results of operations and cash flows
of the Company or the Company and the subsidiary, as the case may be,
for the periods therein specified. Such financial statements (including
the related notes and schedules) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified, subject in the case of
interim statements to normal year-end audit adjustments. Since the date
of the latest of such financial statements, except as disclosed in the
Prospectus, there has been no material adverse change in the financial
position, results of operations or business of the Company and the
subsidiary, taken as a whole.
(aa) The financial information of the Company and the
subsidiary set forth in the Prospectus under the captions "Summary of
Prospectus -- Summary Historical Financial and Operating Data,"
"Capitalization," "Dilution," "Selected Historical Financial and
Operating Data," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" has been fairly stated in all
material respects in relation to the relevant financial statements of
the Company and the subsidiary and from which such information has been
derived.
(bb) The as adjusted financial information and the related
notes thereto included in the Registration Statement have been prepared
in accordance with the Commission's rules and guidelines with respect
to as adjusted financial statements, have been properly compiled on the
as adjusted basis described therein and, in the opinion of the Company,
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
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(cc) The Company's Common Stock has been designated for
inclusion on the National Association of Securities Dealers Automated
Quotations National Market System ("NASDAQ/NMS") at the time the
Registration Statement becomes effective under the Act, subject only to
official notice of issuance.
(dd) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between the Company and any
other person that would give rise to a valid claim against the Company
or any of the Underwriters for a brokerage commission, finder's fee or
like payment in connection with the issuance, purchase and sale of the
Shares.
(ee) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(ff) Each of the Shares and this Agreement, as or when
executed and delivered, will conform in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(gg) Each holder of either (i) options to purchase in excess
of an aggregate of 5000 shares of Common Stock or (ii) options to
purchase in excess of an aggregate of 1000 shares (if such options are
vested or will be vested prior to 180 days after the date hereof) is
listed on Schedule II to this Agreement. The stockholders listed on
Schedule II hold in excess of 98% of the outstanding Common Stock and
in excess of 98% of the outstanding Series A Preferred Stock.
The Company acknowledges that each of the Underwriters and, for
purposes of the opinions to be delivered to the Underwriters pursuant to Section
9 hereof, counsel to the Company and counsel to the Underwriters, will rely upon
the accuracy and truth of the foregoing representations and hereby consents to
such reliance.
8. Payment of Expenses. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay and be responsible for all costs,
expenses, fees and taxes incident to the performance of the obligations of the
Company hereunder, including in connection with: (i) printing, duplicating,
filing and distributing the Registration Statement, as originally filed and all
amendments thereto (including, without limitation, financial statements and all
exhibits thereto), each preliminary prospectus, the Prospectus and any
amendments thereof or supplements thereto, the underwriting documents (including
this Agreement) and all other documents related to the public offering of the
Shares (including those supplied to the Underwriters in quantities as
hereinabove stated); (ii) the preparation (including, without limitation,
duplication costs) and delivery of all preliminary and final Blue Sky memoranda
prepared and delivered in connection herewith; (iii) the registration with the
Commission (including all filing fees incident thereto) and the issuance,
transfer and delivery of the Shares
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to the Underwriters, including, without limitation, the fees of the transfer
agent and registrar for the Company, the cost of its personnel and other
internal costs, the costs of printing and engraving the certificates
representing the Shares and any transfer or other taxes payable thereon; (iv)
the qualification or registration of the Shares for offering and sale under
state and foreign securities or Blue Sky laws, including, without limitation,
the costs of printing and mailing preliminary and final Blue Sky memoranda and
the reasonable fees and disbursements of Underwriters' counsel in relation
thereto; (v) the fees, disbursements and expenses of the Company's counsel and
accountants; (vi) the filing, registration, review and clearance of the terms of
the public offering of the Shares with and by the NASD including, in each case,
any filing fees and fees and disbursements of Underwriters' counsel in
connection therewith; and (vii) "roadshow" travel and other expenses incurred in
connection with the marketing and sale of the Shares (other than out-of-pocket
expenses incurred by the Underwriters for travel, meals and lodging).
9. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase and pay for the Firm Shares and the Additional
Shares, as provided herein, shall be subject to the absence from any
certificates, opinions, written statements or letters furnished pursuant to this
Section 9 to the Underwriters or to Underwriters' counsel of any misstatement or
omission and to the satisfaction of each of the following additional conditions,
except that with respect to the Additional Shares, references to the Closing
Date shall mean the Option Closing Date:
(a) All of the representations and warranties of the Company
contained herein shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of
the date hereof and the Closing Date, respectively. The Company shall
have performed or complied with all of the agreements herein contained
and required to be performed or complied with by it at or prior to the
Closing Date.
(b) The Registration Statement shall have become effective (or
if a post-effective amendment is required to be filed pursuant to Rule
430A under the Securities Act Regulations, such post effective
amendment shall become effective) not later than 5:00 P.M., New York
City time, on the date of this Agreement or at such later time and date
as shall have been consented to in writing by the Representatives. At
or prior to the Closing Date no stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereof
shall have been issued and no proceedings therefor shall have been
initiated or threatened by the Commission, and every request for
additional information on the part of the Commission (including,
without limitation, any request or comment with respect to the
Registration Statement, the Prospectus or any document incorporated by
reference therein) shall have been complied with in all material
respects. No stop order suspending the sale of the Shares in any
jurisdiction designated by the Representatives shall have been issued
and no proceedings for that purpose shall have been commenced or be
pending or, to the best knowledge of the Company, be contemplated.
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(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of the Shares; and no action, suit or proceeding shall have
been commenced and be pending against or affecting or, to the best
knowledge of the Company, threatened against, the Company or the
subsidiary before any court or arbitrator or any governmental body,
agency or official that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect.
(d) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, and except as disclosed
therein or contemplated thereby, (i) there shall not have been any
material adverse change, or any development that is reasonably likely
to result in a material adverse change, in the capital stock or the
long-term debt, or material increase in the short-term debt, of the
Company and the subsidiary from that set forth in the Registration
Statement and the Prospectus, (ii) no dividend or distribution of any
kind shall have been declared, paid or made by the Company on any class
of its capital stock and (iii) neither the Company nor the subsidiary
shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the
Company and the subsidiary, taken as a whole, and that are required to
be disclosed on a balance sheet or notes thereto in accordance with
generally accepted accounting principles and are not disclosed on the
latest balance sheet or notes thereto included in the Registration
Statement and the Prospectus. Since the date hereof and since the dates
as of which information is given in the Registration Statement and the
Prospectus, there shall not have occurred any Material Adverse Effect.
(e) The Underwriters shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by (i) Xxxxx X.
Xxxxxxxxxx, President and Chief Executive Officer and (ii) Xxxxx X.
Sunbury, Chief Financial Officer of the Company in form and substance
reasonably satisfactory to the Underwriters, confirming, as of the
Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d)
of this Section 9 and that, as of the Closing Date, the obligations of
the Company to be performed hereunder on or prior thereto have been
duly performed and stating that each signer of such certificate has
examined the Registration Statement and the Prospectus and (A) as of
the date of such certificate, such documents do not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein (in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading and (B) since
the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Registration Statement or
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not untrue or misleading in
any material respect, and (C) there has been no document required to be
filed under the Exchange Act and the Exchange Act Regulations that upon
such filing would be incorporated by reference into the Prospectus that
has not been so filed.
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(f) At the Closing Date, the Underwriters shall have received
the opinion of Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C., counsel
for the Company, dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriters and Underwriters' counsel,
to the effect set forth in Exhibit A hereto.
(g) At the Closing Date, the Underwriters shall have received
the opinion of Xxxxxx Xxxx & Xxxxxx LLP, special regulatory counsel for
the Company, dated the date of its delivery, addressed to the
Underwriters and in form and substance satisfactory to the
Underwriters' counsel, to the effect set forth in Exhibit B hereto.
(h) At the time this Agreement is executed and at the Closing
Date the Underwriters shall have received from Xxxxxx Xxxxxxxx LLP,
independent certified public accountants for the Company, dated as of
the date of this Agreement and as of the Closing Date, a customary
comfort letter addressed to the Underwriters and in form and substance
satisfactory to the Underwriters and counsel to the Underwriters with
respect to the financial statements and certain financial information
of the Company together with the subsidiary contained in the
Registration Statement and the Prospectus.
(i) Kronish, Lieb, Wiener & Xxxxxxx LLP shall have been
furnished with such documents, in addition to those set forth above, as
they may reasonably require for the purpose of enabling them to review
or pass upon the matters referred to in this Section 9 and in order to
evidence the accuracy, completeness or satisfaction in all material
respects of any of the representations, warranties or conditions herein
contained.
(j) On or prior to the Closing Date, the Underwriters shall
have received the executed agreements referred to in Section 6(o)
hereof.
(k) Prior to the Closing Date, the Company and the subsidiary
shall have furnished to the Underwriters such further information,
certificates and documents as the Underwriters may reasonably request.
If any of the conditions specified in this Section 9 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the
Underwriters or to Underwriters' counsel pursuant to this Section 9 shall not be
reasonably satisfactory in form and substance to the Underwriters and to
Underwriters' counsel, all of the obligations of the Underwriters hereunder may
be cancelled by the Underwriters at, or at any time prior to, the Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, telecopy, telex or telegraph, confirmed in writing.
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10. Indemnification.
(a) The Company agrees to indemnify and hold harmless (i) each
of the Underwriters, (ii) each person, if any, who controls any of the
Underwriters within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and (iii) the respective officers, directors,
partners, employees, representatives and agents of any of the
Underwriters or any controlling person to the fullest extent lawful,
from and against any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to attorneys' fees and
any and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement as originally filed or any
amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any supplement thereto or amendment thereof, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of the preliminary prospectus
or the Prospectus, in light of the circumstances under which they were
made) not misleading; provided, however, that the Company will not be
liable in any such case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of the Underwriters expressly for use therein. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have, including, under this Agreement.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to
attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or
litigation, commenced or threatened, or any claim whatsoever and any
and all amounts paid in settlement of any claim or litigation), joint
or several, to which they or any of them may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement, as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any amendment thereof
or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to
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make the statements therein, in the light of the circumstances under
which they were made, not misleading, in each case to the extent, but
only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter expressly for use
therein; provided, however, that in no case shall any Underwriter be
liable or responsible for any amount in excess of the discounts and
commissions received by such Underwriter, as set forth on the cover
page of the Prospectus. This indemnity agreement will be in addition to
any liability which any Underwriter may otherwise have, including under
this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify
each party against whom indemnification is to be sought in writing of
the commencement thereof (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section 10 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case (and
where the Underwriters are the indemnified parties, Bear Xxxxxxx shall
have the right to select such counsel for the Underwriters), but the
fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in
connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to take charge of the defense
of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all
of the indemnifying parties (in which case the indemnifying party or
parties shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events
such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under
subsection (a) or (b) above, shall only be liable for the legal
expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action
is brought. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written
consent; provided, however, that such consent was not unreasonably
withheld.
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11. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 10
is for any reason held to be unavailable from the Company or is
insufficient to hold harmless a party indemnified thereunder, the
Company and the Underwriters shall contribute to the aggregate losses,
claims, damages, liabilities and expenses of the nature contemplated by
such indemnification provision (including any investigation, legal and
other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted,
but after deducting in the case of losses, claims, damages, liabilities
and expenses suffered by the Company, any contribution received by the
Company from persons, other than the Underwriters, who may also be
liable for contribution, including persons who control the Company
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act) to which the Company and any of the Underwriters may be
subject, in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Underwriters from the sale of
the Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party
not having received notice as provided in Section 10, in such
proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the
Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriters shall be deemed
to be in the same proportion as (x) the total proceeds from the sale of
Shares (net of discounts but before deducting expenses) received by the
Company and (y) the underwriting discounts and commissions received by
the Underwriters, respectively, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault of the Company
and of the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 11 were determined
by pro rata allocation or by any other method of allocation which does
not take into account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 11, (i) in no case shall
any Underwriter be required to contribute any amount in excess of the
amount by which the underwriting discount applicable to the Shares
purchased by such Underwriter pursuant to this Agreement exceeds the
amount of any damages which such Underwriter has otherwise been
required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 11, (A)
each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the
respective officers, directors, partners, employees, representatives
and agents of any of the Underwriters or any controlling person shall
have the same rights to contribution as such Underwriters, and each
person,
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if any, who controls the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as the Company, subject in each case to clauses (i) and
(ii) of this Section 11. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this
Section 11, notify such party or parties from whom contribution may be
sought, but the failure to so notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 11 or otherwise.
No party shall be liable for contribution with respect to any action or
claim settled without its prior written consent; provided, however,
that such written consent was not unreasonably withheld.
12. Substitution of Underwriters.
(a) If any Underwriter shall default in its
obligation to purchase Shares hereunder, and if the total
number of Shares with respect to which such default relates do
not (after giving effect to arrangements, if any, made
pursuant to subsection (b) below) exceed 10% of the total
number of Shares which the Underwriters have agreed to
purchase hereunder, then such Shares to which the default
relates shall be purchased by the non-defaulting Underwriters.
(b) In the event that such default relates to more
than 10% of the total number of Shares, the non-defaulting
Underwriters may in their discretion arrange for themselves or
for another party or parties to purchase the Shares to which
such default relates on the terms contained herein. In the
event that within five (5) calendar days after such a default
the non-defaulting Underwriters do not arrange for the
purchase of the Shares to which such default relates as
provided in this Section 12, this Agreement and the
obligations of the Underwriters to purchase, and of the
Company to sell, the Shares shall thereupon terminate without
liability on the part of the Company with respect thereto
(except in each case as provided in Sections 8, 10(a) and 11)
or the Underwriters (except as provided in Sections 10(b) and
11), but nothing in this Agreement shall relieve a defaulting
Underwriter of its liability, if any, to the other
Underwriters and the Company for damages occasioned by its
default hereunder.
(c) In the event that the Shares to which the default
relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or
parties as aforesaid, the Underwriters or the Company shall
have the right to postpone the Closing Date for a period not
exceeding five (5) business days in order to effect whatever
changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any
amendment or supplement to the Registration Statement or the
Prospectus which, in the opinion of Underwriters' counsel,
may, thereby be made necessary or advisable. The term
"Underwriter" as used in this Agreement shall include any
party substituted
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under this Section 12 with like effect as if it had originally
been a party to this Agreement with respect to such Shares.
13. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective when the
Underwriters and the Company shall have received notification
of the effectiveness of the Registration Statement. Until this
Agreement becomes effective as aforesaid, it may be terminated
by the Company by notifying the Underwriters or by the
Underwriters by notifying the Company. Notwithstanding the
foregoing, the provisions of this Section 13 and of Sections
8, 10 and 11 shall at all times be in full force and effect.
(b) The Underwriters shall have the right to
terminate this Agreement at any time prior to the Closing Date
by notice to the Company from the Underwriters, without
liability (other than with respect to Sections 10 and 11) on
the Underwriters' part to the Company if, on or prior to such
date, (i) the Company shall have failed, refused or been
unable to perform in any material respect any agreement on its
part to be performed hereunder, (ii) any other condition to
the obligations of the Underwriters hereunder as provided in
Section 9 is not fulfilled when and as required in any
material respect, (iii) in the reasonable judgment of the
Underwriters any material adverse change shall have occurred
since the respective dates as of which information is given in
the Registration Statement in the condition (financial or
otherwise), business, properties, assets, liabilities,
prospects, net worth, results of operations or cash flows of
the Company and the subsidiary taken as a whole, or (iv)(A)
any domestic or international event or act or occurrence has
materially disrupted, or in the opinion of the Underwriters
will in the immediate future materially disrupt, the market
for the Company's securities or for securities in general; or
(B) trading in securities generally on the New York or
American Stock Exchanges shall have been suspended or
materially limited, or minimum or maximum prices for trading
shall have been established, or maximum ranges for prices for
securities shall have been required, on such exchange, or by
such exchange or other regulatory body or governmental
authority having jurisdiction; or (C) a banking moratorium
shall have been declared by Federal or state authorities, or a
moratorium in foreign exchange trading by major international
banks or persons shall have been declared; or (D) there is an
outbreak or escalation of armed hostilities involving the
United States on or after the date hereof, or if there has
been a declaration by the United States of a national
emergency or war, the effect of which shall be, in the
Underwriters' judgment, to make it inadvisable or
impracticable to proceed with the offering or delivery of the
Shares on the terms and in the manner contemplated in the
Registration Statement; or (E) there shall have been such a
material adverse change in general economic, political or
financial conditions or if the effect of international
conditions on the financial markets in the United States
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shall be such as, in the Underwriters' judgment, makes it
inadvisable or impracticable to proceed with the delivery of
the Shares as contemplated hereby.
(c) Any notice of termination pursuant to this
Section 13 shall be by telephone, telex, telephonic facsimile,
or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to
any of the provisions hereof (otherwise than pursuant to (i)
notification by the Underwriters as provided in Section 13(a)
or (ii) Section 12(b)), or if the sale of the Shares provided
for herein is not consummated because any condition to the
obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or
comply with any provision hereof, the Company will, subject to
demand by the Underwriters, reimburse the Underwriters for all
out-of-pocket expenses (including, without limitation, the
reasonable fees and expenses of Underwriters' counsel)
incurred by the Underwriters in connection herewith.
14. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the
Underwriters and the Company contained in this Agreement, including the
agreements contained in Sections 8 and 13(d), the indemnity agreements
contained in Section 10 and the contribution agreements contained in
Section 11, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any
Underwriter, any controlling person thereof or by or on behalf of the
Company or any controlling person thereof, and shall survive delivery
of and payment for the Shares to and by the Underwriters. The
representations contained in Section 7 and the agreements contained in
Sections 8, 10, 11 and 13(d) shall survive the termination of this
Agreement, including any termination pursuant to Sections 12 and 13.
15. Notice. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if
sent to the Underwriters shall be mailed, delivered, or telexed,
telegraphed or telecopied and confirmed in writing c/o Bear, Xxxxxxx &
Co. Inc. and Xxxxxx Xxxx LLC, c/o Bear, Xxxxxxx & Co. Inc., 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Corporate Finance
Department, telecopy number: (000) 000-0000; and if sent to the
Company, shall be mailed, delivered or telexed, telegraphed or
telecopied and confirmed in writing to MGC Communications, Inc., 0000
X. Xxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000, Attention: General Counsel,
telecopy number: (000) 000-0000, with a copy to Ellis, Funk, Xxxxxxxx,
Xxxxxxxx & Dokson, P.C., One Securities Centre, Suite 400, 0000
Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000, telecopy number: (000) 000-0000.
16. Parties. This Agreement shall inure solely to the benefit
of, and shall be binding upon, the Underwriters and the Company and the
controlling persons and agents referred to in Sections 10 and 11, and
their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision
herein
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contained. The term "successors and assigns" shall not include a
purchaser, in its capacity as such, of Shares from the Underwriters.
17. Construction. This Agreement shall be construed in
accordance with the internal laws of the State of New York.
18. Captions. The captions included in this Agreement are
included solely for convenience of reference and are not to be
considered a part of this Agreement.
19. Counterparts. This Agreement may be executed in various
counterparts which together shall constitute one and the same
instrument.
[Signature page to follow]
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If the foregoing correctly sets forth the
understanding among the Underwriters and the Company, please so
indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
MGC COMMUNICATIONS, INC.
By:________________________________
Name:
Title:
Accepted and agreed to as of the date first above written:
BEAR, XXXXXXX & CO. INC.
XXXXXX XXXX LLC
Acting on their own behalf and as
Representatives of the several
Underwriters referred to in the
foregoing Agreement
By: BEAR, XXXXXXX & CO. INC.
By:_________________________________
Name:
Title:
By: XXXXXX XXXX LLC
By:_________________________________
Name:
Title:
31
Schedule I
Number of Shares
Underwriter to be Purchased
Bear, Xxxxxxx & Co. Inc. ________________
Xxxxxx Xxxx LLC ________________
[OTHERS]
Total: ________________
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Schedule II
Stockholders and Option holders subject to Lockup Agreements
33
EXHIBIT A
Form of Opinion of Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
1. Each of the Company and the subsidiary is duly
organized and validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, and has all requisite
corporate power and authority to carry on its business as it is being
conducted and as described in the Registration Statement and Prospectus
and to own, lease and operate its properties, and is duly qualified and
in good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification. All of the issued
and outstanding shares of capital stock of, or other ownership
interests in, the subsidiary have been duly authorized and validly
issued, are fully paid and non-assessable and were not issued in
violation of or subject to any preemptive or similar rights under the
Nevada General Corporation Law, or known to such counsel, after
reasonable inquiry, and are owned by the Company of record, and to the
knowledge of such counsel, after reasonable inquiry, beneficially, free
and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or other restriction on transferability or voting.
Except for the capital stock of the subsidiary owned by the Company, to
such counsel's knowledge, neither the Company nor the subsidiary owns
or holds any interest in any corporation, partnership, trust or
association, joint venture or other entity.
2. All the outstanding shares of capital stock of the
Company and the subsidiary have been duly authorized, validly issued,
and are fully paid and nonassessable and were not issued in violation
of any preemptive or similar rights. The authorized, issued and
outstanding capital stock of the Company conforms in all respects to
the description thereof set forth in the Registration Statement and
Prospectus. Except as set forth in the Prospectus, there are no
outstanding subscriptions, rights, warrants, calls, commitments of sale
or options to acquire, or instruments convertible into or exercisable
or exchangeable for, any capital stock or other equity interest in the
Company or the subsidiary known to such counsel, after reasonable
inquiry. None of the outstanding shares of the capital stock of the
Company or the subsidiary were issued in violation of the registration
requirements of the Act or the registration or qualification
requirements of the applicable state securities or "Blue Sky" laws.
3. The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Underwriting Agreement to consummate the transactions contemplated
thereby, including, without limitation, the corporate power and
authority to issue, sell and deliver the Shares as provided therein.
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4. The Underwriting Agreement has been duly and
validly authorized, executed and delivered by the Company and, assuming
due execution by the other parties thereto, is the legally valid and
binding agreement of the Company.
5. The Shares have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be validly issued, fully paid
and nonassessable and, to the knowledge of such counsel after
reasonable inquiry, free of any preemptive or similar rights that
entitle or will entitle any person to acquire any Shares upon the
issuance thereof by the Company.
6. The statements under the caption "Description of
Securities" in the Prospectus, insofar as such statements constitute a
summary of documents referred to therein present a fair summary
thereof.
7. None of (A) the execution, delivery or performance
by the Company of the Underwriting Agreement or (B) the issuance and
sale of the Shares violates, conflicts with or constitutes a breach of
any of the terms or provisions of, or a default under (or an event that
with notice or the lapse of time, or both, would constitute a default),
or require consent under, or result in the imposition of a lien or
encumbrance on any properties of the Company or the subsidiary, or an
acceleration of any indebtedness of the Company or the subsidiary
pursuant to, (i) the charter or bylaws of the Company or the
subsidiary, (ii) any bond, debenture, note, indenture, mortgage, deed
of trust or other agreement or instrument known to such counsel to
which the Company or the subsidiary is a party or by which any of them
or their property is or may be bound, (iii) any local, state, federal
or administrative statute, rule or regulation applicable to the Company
or the subsidiary or any of their respective assets or properties
(except that such counsel need express no opinion as to the matters
addressed by the opinion of Xxxxxx Xxxx & Xxxxxx LLP) or (iv) any
judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company or the subsidiary or any
of their assets or properties known to such counsel (except that such
counsel need express no opinion as to the matters addressed by the
opinion of Xxxxxx Xxxx & Xxxxxx LLP), except that the Company has not
received written approval from the Georgia Public Service Commission as
to the sale of the Shares and except in the case of clauses (ii), (iii)
and (iv) for such violations, conflicts, breaches, defaults, consents,
impositions of liens or accelerations that (x) would not, singly or in
the aggregate, have a Material Adverse Effect or (y) are disclosed in
the Registration Statement. Assuming compliance with applicable state
securities and Blue Sky laws, as to which such counsel need express no
opinion, and except for the filing of a registration statement under
the Act, no consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court or
governmental agency, body or administrative agency is required for (1)
the execution, delivery and performance by the Company of the
Underwriting Agreement or (2) the issuance and sale of the Shares
except such as have been obtained and made or have been disclosed in
the Registration Statement, and except where the failure to obtain such
consents or waivers would not, singly or in the aggregate, have a
Material Adverse Effect. To such counsel's knowledge, after reasonable
inquiry, no consents or waivers from any other person are
35
required for the execution, delivery and performance by the Company of
the Underwriting Agreement or the issuance and sale of the Shares,
other than such consents and waivers as have been obtained and except
that such counsel shall not be required to express any opinion as to
the matters addressed in the opinion of Xxxxxx Xxxx & Xxxxxx LLP.
8. Neither the Company nor the subsidiary is (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended or (ii) a "holding company" or a "subsidiary company" or an
"affiliate" of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
9. No holders of any securities of the Company or the
subsidiary or their respective affiliates or of any options, warrants
or other convertible or exchangeable securities of the Company or the
subsidiary or their respective affiliates are entitled to include any
such securities in or to have such securities registered under the
Registration Statement.
10. To such counsel's knowledge, after reasonable
inquiry, there is (i) no action, suit, investigation or proceeding
(other than proceedings with respect to pending license applications)
before or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending, or threatened or
contemplated to which either the Company or the subsidiary is or may be
a party or to which the business or property of the Company or the
subsidiary is or may be subject, (ii) no statute, rule, regulation or
order that has been enacted, adopted or issued by any governmental
agency or that has been proposed by any governmental body (except that
such counsel need express no opinion with respect Telecommunications
Laws) or (iii) no injunction, restraining order or order of any nature
by a federal or state court of competent jurisdiction to which either
the Company or the subsidiary is or may be subject or to which the
business, assets or property of the Company or the subsidiary are or
may be subject has been issued that, in the case of clauses (i), (ii)
and (iii) above, (x) is required to be disclosed in the Registration
Statement or the Prospectus and is not so disclosed, (y) could
reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or (z) might interfere with,
adversely affect or in any manner question the validity of the issuance
and sale of the Shares or any of the other transactions contemplated by
the Underwriting Agreement or the Registration Statement and except
that such counsel shall not be required to express any opinion as to
the matters addressed in the opinion of Xxxxxx Xxxx & Xxxxxx LLP.
11. Except for a grant of confidentiality with
respect to portions of certain documents which are exhibits to the
Registration Statement, such counsel is not aware of any order directed
to any document incorporated by reference in the Registration Statement
which has been issued by the Commission or any challenge that has been
made by the Commission as to the accuracy or adequacy of any such
document.
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12. The Registration Statement has become effective
under the Act and, to the knowledge of such counsel, so stop order has
been issued and no proceedings for that purpose have been instituted or
threatened.
13. The Registration Statement and the Prospectus
(not including the financial statements, notes and schedules thereto
and other financial and accounting information included or incorporated
by reference therein, as to which no opinion need be expressed) comply
as to form in all material respects with the applicable requirements of
the Act and the Regulations.
14. There are no contracts or documents of the
Company or the subsidiary known to such counsel, after reasonable
inquiry, that are required to be filed as exhibits to the Registration
Statement by the Act or by the Regulations that have not been so filed.
Insofar as statements in the Prospectus (other than statements
addressed in the opinion of Xxxxxx Xxxx & Xxxxxx LLP) purport to
summarize the provisions of laws, rules, regulations, proposed rules,
proposed regulations, orders, judgments, decrees, contracts,
agreements, instruments, leases or licenses, such statements accurately
reflect the status of such provisions purported to be summarized and
are correct in all material respects.
15. The Company has authorized capital stock as set
forth in the Prospectus. All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares are duly and validly
authorized and issued, are fully paid and nonassessable and were not
issued in violation of or subject to any preemptive rights.
16. The form of certificates for the Shares conforms
to the requirements of the General Corporation Law of the State of
Nevada.
17. The Common Stock, including the Firm Shares and
the Additional Shares, is designated for inclusion on the NASDAQ/NMS.
18. The Preferred Stock has been converted into
3,942,856 shares of Common Stock.
Such counsel has participated in conferences
with officers and other representatives of the Company, representatives
of the independent certified public accountants of the Company and the
Underwriters and their representatives at which the contents of the
Prospectus and the Registration Statement and any amendment thereof or
supplement thereto and related matters were discussed and, although
such counsel has not undertaken to investigate or verify independently,
and need not assume any responsibility for, the accuracy, completeness
or fairness of the statements contained in the Prospectus and the
Registration Statement or any amendment thereof or supplement thereto
(except as indicated above), on the basis of the foregoing, no facts
have come to such counsel's attention which led such counsel to believe
that the Prospectus and the Registration Statement (or any amendment
thereof made prior to the Closing Date as of the date of such
amendment) as of its date or the Closing Date, contained an untrue
statement of a
37
material fact or omitted to state any fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading (except as
to financial statements and related notes, the financial statement
schedules and other financial data included therein).
Such counsel are members of the Bar of the
State of Georgia, and such counsel does not herein express an opinion
as to any matters governed by any laws other than the laws of the State
of Georgia, the laws of the State of Nevada governing corporations and
the Federal laws of the United States of America. In rendering this
opinion, such counsel has relied on Kronish, Lieb, Weiner & Xxxxxxx LLP
as to the laws of the State of New York.
38
EXHIBIT B
Form of Opinion of Xxxxxx Xxxx & Xxxxxx LLP
1. All of the licenses, permits and
authorizations required by the FCC for the provision of
telecommunications services by the Company and the subsidiary, as such
counsel understands those services to be provided currently based upon
the attached certificate and the Registration Statement, have been
issued to and are validly held by the Company and the subsidiary. All
of the licenses, permits and authorizations required by any "state
commissions" as defined in Section 3 of the Communications Act of 1934,
as amended (the "State Telecommunications Agencies") for the provision
of telecommunications services by the Company and the subsidiary, as
such counsel understands those services to be provided currently based
upon the attached certificate and the Registration Statement, have been
issued to and, to the best knowledge of such counsel, are validly held
by the Company and the subsidiary, except where the failure to obtain
or hold such license, permit or authority would not have a Material
Adverse Effect. All such licenses, permits and authorizations are in
full force and effect.
2. Neither the Company nor the subsidiary is
the subject of any proceeding (including a rule making proceeding),
pending complaint or investigation, or, to the best of such counsel's
knowledge, any threatened complaint or investigation, before the FCC,
or, to the best of such counsel's knowledge after oral inquiry, of any
proceeding (including a rule making proceeding), pending complaint or
investigation, or any threatened complaint or investigation, before the
State Telecommunications Agencies based, in each case, on any alleged
violation of any statutes governing the FCC or the State
Telecommunications Agencies and the rules and regulations promulgated
thereunder (the "Telecommunications Laws") by the Company or the
subsidiary in connection with their provision of or failure to provide
telecommunications services of a character required to be disclosed in
the Registration Statement which is not disclosed in the Registration
Statement.
3. The statements in the Registration
Statement under the headings of "Risk Factors - Regulation" and
"Business - Regulation" regarding the Telecommunications Laws of the
FCC or the State Telecommunications Agencies fairly and accurately
summarize the matters therein described.
4. Each of the Company and the subsidiary
has the consents, approvals, authorizations, licenses, certificates,
permits, or orders of the FCC or the State Telecommunications Agencies,
if any is required, for the consummation of the transactions
contemplated in the Registration Statement, except where the failure to
obtain the consents, approvals, authorizations, licenses, certificates,
permits or orders would not have a Material Adverse Effect.
39
5. Neither the execution and delivery of the
Underwriting Agreement nor the sale of the Shares contemplated thereby
will conflict with or result in a violation of any Telecommunications
Laws applicable to the Company or the subsidiary, except where the
conflict with or the violation of any Telecommunications Laws would not
have a Material Adverse Effect.
6. In connection with our representation of
the Company, except as disclosed in the Registration Statement or the
Prospectus, we have not become aware of any Telecommunications Laws
that could reasonably be expected to have a Material Adverse Effect on
the business of the Company as described in the Prospectus.
40
EXHIBIT C
__________ __, 1998
Bear, Xxxxxxx & Co. Inc.
Xxxxxx Xxxx, LLC
c/o Bear, Xxxxxxx & Co, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
MGC Communications, Inc.
0000 Xxxxx Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Ladies and Gentlemen:
In order to induce Bear, Xxxxxxx & Co. Inc. ("Bear
Xxxxxxx") and Xxxxxx Xxxx, LLC (together with Bear Xxxxxxx, the
"Underwriters") and MGC Communications, Inc., a Nevada corporation (the
"Company"), to enter into an underwriting agreement (the "Underwriting
Agreement") pursuant to which the Underwriters will purchase, severally
but not jointly, shares of common stock, par value $.001 per share, of
the Company ("Common Stock"), the undersigned hereby agrees that for a
period of 180 days following the date on which the Company's
registration statement on Form S-1 filed in connection with the
Company's initial public offering of Common Stock shall become
effective by order of the United States Securities and Exchange
Commission (the "Effective Date"), the undersigned will not directly or
indirectly offer to sell, sell, contract to sell, grant an option for
the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of (either pursuant to Rule 144 of the regulations
under the Securities Act of 1933, as amended, or otherwise) any shares
of Common Stock or any other securities issued by the Company
("Securities") registered in the undersigned's name or beneficially
owned by the undersigned, including without limitation, any Securities
with respect to which the undersigned becomes the registered or
beneficial owner after the date hereof, or dispose of any beneficial
interest therein without the prior written consent of Bear Xxxxxxx and
the Company.
In order to enable you to enforce the aforesaid
agreement and grant of rights, the undersigned hereby consents to the
placing of legends and stop-transfer orders with the transfer agent of
the Company's Securities with respect to any of the Securities
registered in the undersigned's name or beneficially owned by the
undersigned.
This agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving
effect to conflict of law principles. Any legal action or proceeding
with respect to this agreement shall be brought exclusively in the
courts of the State of New York residing in the Borough of Manhattan or
of the United States of America for the Southern District of New York,
and, by execution and delivery
41
of this agreement, the parties hereto hereby accept for themselves and
in respect of their property, generally and unconditionally, the
exclusive jurisdiction of the aforesaid courts.
This agreement shall be binding on the undersigned
and his, her or its respective heirs, personal representatives,
successors and assigns.
___________________________________
Signature
___________________________________
Print Name of Stockholder
___________________________________
Print Name and Title of Officer
___________________________________
Print Address
___________________________________
Print Social Security
Number or Taxpayer I.D. Number
