EXHIBIT 1.1
8,000,000 Shares of Common Stock
PRODIGY COMMUNICATIONS CORPORATION
UNDERWRITING AGREEMENT
=========== ==== , 1999
BEAR, XXXXXXX & CO. INC.
BancBoston Xxxxxxxxx Xxxxxxxx Inc.
ING Baring Xxxxxx Xxxx LLC
Xxxxx Xxxxx Xxxxxx & Company, LLC
as Representatives of the
several Underwriters named in
Schedule I attached hereto, including
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Wit Capital Corporation, as e-Manager
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Prodigy Communications Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Company"), proposes, subject to
the terms and conditions stated herein, to issue and sell to the several
underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
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8,000,000 shares (the "Firm Shares") of its common stock, par value $.01 per
share (the "Common Stock") and, for the sole purpose of covering over-allotments
in connection with the sale of the Firm Shares, at the option of the
Underwriters, up to an additional 1,200,000 shares (the "Additional Shares") of
Common Stock. The Firm Shares and any Additional Shares purchased by the
Underwriters are referred to herein as the "Offered Shares." The Company also
proposes to issue and sell 2,000,000 shares of Common Stock (the "Telmex
Shares") to TelJfonos de MJxico, S.A. de C.V. ("Telmex") pursuant to a purchase
agreement dated the date hereof (the "Telmex Purchase Agreement") between the
Company and Telmex. The Offered Shares and the Telmex Shares are referred to
herein as the "Shares." The Shares are more fully described in the Registration
Statement referred to below.
1. Representations and Warranties of the Company. The Company represents and
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warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1 (No. 333-64233),
and may have filed an amendment or amendments thereto, for the registration
of the Shares under the Securities Act of 1933, as amended (the "Act").
Such registration statement, including the prospectuses, financial
statements and schedules, exhibits and all other documents filed as a part
thereof, as amended at the time of effectiveness of the registration
statement, including any information deemed to be a part thereof as of the
time of
effectiveness pursuant to paragraph (b) of Rule 430A or Rule 434 of the
Rules and Regulations of the Commission under the Act (the "Regulations"),
is herein called the "Registration Statement", and the prospectus relating
to the Offered Shares, in the form first filed with the Commission pursuant
to Rule 424(b) of the Regulations or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) or Rule 434 filing
is required, is herein called the "Prospectus." The term "preliminary
prospectus" as used herein means a preliminary prospectus relating to the
Offered Shares as described in Rule 430 of the Regulations.
(b) At the time of the effectiveness of the Registration Statement or
the effectiveness of any post-effective amendment to the Registration
Statement, when the Prospectus is first filed with the Commission pursuant
to Rule 424(b) or Rule 434 of the Regulations, when any supplement to or
amendment of the Prospectus is filed with the Commission and at the Closing
Date and the Additional Closing Date, if any, (as hereinafter respectively
defined), the Registration Statement and the Prospectus and any amendments
thereof and supplements thereto complied or will comply in all material
respects with the applicable provisions of the Act and the Regulations and
does not or will not contain an untrue statement of a material fact and
does not or will not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein (i) in the
case of the Registration Statement, not misleading and (ii) the case of the
Prospectus, in light of the circumstances under which they were made, not
misleading. When the preliminary prospectus dated January 26, 1999 relating
to the Offered Shares was first filed with the Commission (whether filed as
part of the registration statement for the registration of the Shares or
any amendment thereto or pursuant to Rule 424(a) of the Regulations) and
when any amendment thereof or supplement thereto was first filed with the
Commission, such preliminary prospectus and any amendments thereof and
supplements 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 and did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not
misleading. No representation and warranty is made in this subsection (b),
however, with respect to any information contained in or omitted from the
Registration Statement or the Prospectus or any related preliminary
prospectus or any amendment thereof or supplement thereto in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of any Underwriter through the Representatives as herein
stated expressly for use in connection with the preparation thereof. If
Rule 434 is used, the Company will comply with the requirements of Rule 434
other than Rule 434(a)(2) and (b)(1).
(c) PricewaterhouseCoopers LLP, who have certified certain financial
statements and supporting schedules included in the Registration Statement,
are independent public accountants as required by the Act and the
Regulations.
(d) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as set forth in
the Registration Statement and the Prospectus, there has been no material
adverse change or any development involving a prospective material adverse
change in the business, prospects,
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properties, operations, condition (financial or other) or results of
operations of the Company and its subsidiaries taken as a whole, whether or
not arising from transactions in the ordinary course of business ("Material
Adverse Effect"), and since the date of the latest balance sheet presented
in the Registration Statement and the Prospectus, neither the Company nor
any of its subsidiaries has incurred or undertaken any liabilities or
obligations, direct or contingent, whether or not arising from transactions
in the ordinary course of business, which are material to the Company and
its subsidiaries taken as a whole, except for liabilities or obligations
which are reflected in the Registration Statement and the Prospectus.
(e) This Agreement and the Telmex Purchase Agreement and the
transactions contemplated herein and therein have been duly and validly
authorized by the Company and this Agreement and the Telmex Purchase
Agreement have been duly and validly executed and delivered by the Company.
(f) Neither the Company nor any of its subsidiaries is (i) in violation
of its respective certificate of incorporation or by-laws (or other
organizational documents) or (ii) in default in the performance of any
obligation, agreement or condition contained in any agreement, instrument,
franchise, license, permit, judgment, order or decree to which the Company
or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property or assets is bound that would
result in a Material Adverse Effect.
(g) The execution, delivery and performance of this Agreement and the
Telmex Purchase Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, any agreement, instrument, franchise,
license or permit to which the Company or any of its subsidiaries is a
party or by which any of such corporations or their respective properties
or assets is bound or (ii) violate or conflict with any provision of
applicable law or the certificate of incorporation or by-laws (or other
organizational documents) of the Company or any of its subsidiaries or any
judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their respective
properties or assets. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court
or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
respective properties or assets is required for the execution, delivery and
performance of this Agreement and the Telmex Purchase Agreement or the
consummation of the transactions contemplated hereby and thereby, including
the issuance, sale and delivery of the Shares to be issued, sold and
delivered by the Company hereunder and thereunder, except the registration
under the Act of the Shares and such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses and permits as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Offered Shares by the Underwriters.
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(h) All of the outstanding shares of Common Stock are duly and validly
authorized and issued, fully paid and nonassessable and were not issued and
are not now in violation of or subject to any preemptive or similar rights.
The Shares, when issued, delivered and sold in accordance with this
Agreement or the Telmex Purchase Agreement, will be duly and validly issued
and outstanding, fully paid and nonassessable, and will not have been
issued in violation of or be subject to any preemptive or similar rights.
The Company had, at September 30, 1998, an authorized and outstanding
capitalization as set forth in the Registration Statement and the
Prospectus. The Common Stock, the Firm Shares, the Additional Shares and
the Telmex Shares conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus.
(i) The outstanding 8% Contingent Convertible Notes (the "Contingent
Notes") of the Company have been duly and validly authorized, executed and
delivered by the Company and constitute valid and binding obligations of
the Company and the shares of Common Stock issuable upon conversion thereof
have been, or prior to the Closing Date will be, duly and validly
authorized and reserved for issuance upon such conversion and, upon
conversion of the Contingent Notes on the Closing Date, such shares of
Common Stock will be validly issued and outstanding, fully paid and
nonassessable and will not have been issued in violation of or be subject
to any preemptive or similar rights. All outstanding warrants (the
"Warrants") to purchase Common Stock of the Company, including without
limitation, the Contingent Warrants (as defined in the Registration
Statement) have been duly and validly authorized, executed and delivered by
the Company and constitute valid and binding obligations of the Company and
the shares of Common Stock issuable upon exercise of such Warrants have
been, or prior to the Closing Date will be, duly and validly authorized and
reserved for issuance upon such exercise and, upon payment of the exercise
price thereof upon exercise of such Warrants, such shares of Common Stock
will be validly issued and outstanding, fully paid and nonassessable and
will not have been issued in violation of or be subject to any preemptive
or similar rights. Except as described in or expressly contemplated by the
Registration Statement and the Prospectus, there are no outstanding rights
(including without limitation preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
capital stock or other equity interests in the Company or any of its
subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of
the Company or any such subsidiary, or any such convertible or exchangeable
securities or any such rights, warrants or options.
(j) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation. The Company is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or location
of its properties (owned, leased or licensed) or the nature or conduct of
its business makes such qualification necessary, except for those failures
to be so qualified or in good standing which will not, individually or in
the aggregate, have a Material Adverse Effect. The Company has all
requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits
of and from all public, regulatory or governmental agencies and
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bodies, to own, lease and operate its properties and conduct its business
as now being conducted and as described in the Registration Statement and
the Prospectus, except as would not result in a Material Adverse Effect,
and no such consent, approval, authorization, order, registration,
qualification, license or permit contains a materially burdensome
restriction not adequately disclosed in the Registration Statement and the
Prospectus. The Company has no subsidiaries which individually or in the
aggregate have any material assets or liabilities.
(k) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company is a party or to which any
property of the Company is subject or which is pending or, to the knowledge
of the Company, contemplated against the Company which might result in a
Material Adverse Effect or which is required to be disclosed in the
Registration Statement and the Prospectus, and there are no statutes,
regulations, contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement that are not described or filed as required.
(l) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the
sale or resale of the Shares.
(m) The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and the
Prospectus present fairly the consolidated financial position of the
Company, Prodigy Services Company ("PSC") and International Wireless
Incorporated ("IW") as of the dates indicated and the results of their
operations and changes in cash flows for the periods specified; except as
otherwise stated in the Registration Statement, said financial statements
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis; and the supporting schedules
included in the Registration Statement present fairly the information
required to be stated therein; and except as disclosed therein, the pro
forma financial information included in the Registration Statement and the
Prospectus has been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and the
assumptions used in the preparation thereof are, in the Company's opinion,
reasonable; and the other financial and statistical information and data
included in the Registration Statement and the Prospectus is, in all
material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
(n) Except as described in the Prospectus, no holder of securities of
the Company has any rights to the registration of securities of the Company
because of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby.
(o) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940.
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(p) The Shares have been approved for quotation subject to notice of
issuance on the National Association of Securities Dealers Automated
Quotation National Market System.
(q) No labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent; and
the Company is not aware of any existing, threatened or imminent labor
dispute or disturbance by the employees of any of its principal customers,
suppliers, contractors or providers of outsourced services that might have
a Material Adverse Effect.
(r) The Company and its subsidiaries own, possess or can acquire on
commercially reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), patents, copyrights, confidential information and
other intellectual property necessary to conduct the business now operated
by them, or presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with respect to
any intellectual property rights that, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect.
(s) The Company and its subsidiaries (i) are in compliance in all
material respects with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received all
material permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a Material Adverse
Effect.
(t) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a Material Adverse
Effect.
(u) The Company and its subsidiaries own no real property and have good
and marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries, in each case
free and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially
interfere with the use made and proposed to be
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made of such property and buildings by the Company and its subsidiaries, in
each case except as described in or contemplated by the Prospectus.
(v) The Company and each of its subsidiaries are insured by insurers
[of recognized financial responsibility] against such losses and risks and
in such amounts as the Company believes are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for;
and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not result in a Material Adverse Effect.
(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(x) Except as described in the Prospectus or the Registration Statement
(exclusive of any amendments or supplements thereto subsequent to the date
of this Agreement), the Company has not sold, issued or distributed any
shares of Common Stock during the six-month period preceding the date
hereof, including any sales pursuant to Rule 144A under, or Regulation D or
S of, the Act, other than shares issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans or
pursuant to outstanding options, rights or warrants.
(y) No relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries on the one hand, and the directors,
officers, stockholders, customers, suppliers or providers of outsourced
services of the Company or any of its subsidiaries on the other hand, which
is required by the Act to be described in the Registration Statement and
the Prospectus which is not so described.
2.Purchase, Sale and Delivery of the Shares.
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(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriters and the
Underwriters, severally and not jointly, agree to purchase from the
Company, at a purchase price per share of $__________, the number of Firm
Shares set forth opposite the respective names of the Underwriters in
Schedule I hereto plus any additional number of Shares which such
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Underwriter may become obligated to purchase pursuant to the provisions of
Section 9 hereof.
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(b) Payment of the purchase price for, and delivery of certificates
for, the Shares shall be made at the offices of X'Xxxxxxxx Graev &
Karabell, LLP, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such
other place as shall be agreed upon by the Representatives and the Company,
at 9:00 A.M. on the third or fourth business day (as permitted under Rule
15c6-1 under the Exchange Act) (unless postponed in accordance with the
provisions of Section 9 hereof), following the date of the effectiveness of
the Registration Statement (or, if the Company has elected to rely upon
Rule 430A of the Regulations, the third or fourth business day (as
permitted under Rule 15c6-1 under the Exchange Act) after the determination
of the initial public offering price of the Shares), such time and date of
payment and delivery being herein called the "Closing Date". Payment shall
be made to the Company by wire transfer in same day funds to an account
designated by the Company, against delivery to the Representatives for the
respective accounts of the Underwriters of certificates for the Shares to
be purchased by them. Certificates for the Shares shall be registered in
such name or names and in such authorized denominations as the
Representatives may request in writing at least two full business days
prior to the Closing Date. The Company will permit you to examine and
package such certificates for delivery at least one full business day prior
to the Closing Date.
(c) In addition, the Company hereby grants to the Underwriters options
to purchase up to an aggregate of 1,200,000 Additional Shares at the same
purchase price per share to be paid by the Underwriters to the Company for
the Firm Shares as set forth in this Section 2, for the sole purpose of
covering over-allotments in the sale of Firm Shares by the Underwriters.
Such options may be exercised at any time and from time to time, in whole
or in part, on or before the thirtieth day following the date of the
Prospectus, by written notice by the Representatives to the Company. Each
such notice shall set forth the aggregate number of Additional Shares as to
which an option is being exercised and the date and time, as reasonably
determined by the Representatives, when the Additional Shares are to be
delivered (each such date and time being herein sometimes referred to as
the "Additional Closing Date"); provided, however, that no Additional
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Closing Date shall be earlier than the Closing Date or earlier than the
second full business day after the date on which the option shall have been
exercised nor later than the eighth full business day after the date on
which the option shall have been exercised (unless such time and date are
postponed in accordance with the provisions of Section 9 hereof).
Certificates for Additional Shares shall be registered in such name or
names and in such authorized denominations as you may request in writing at
least two full business days prior to the applicable Additional Closing
Date. The Company will permit you to examine and package such certificates
for delivery at least one full business day prior to the applicable
Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter on an
Additional Closing Date shall be the number which bears the same ratio to the
aggregate number of Additional Shares being purchased on such Additional Closing
Date as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number increased as set forth in
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Section 9 hereof) bears to 8,000,000, subject, however, to such adjustments to
eliminate any fractional shares as the Representatives in their sole discretion
shall make.
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Payment for the Additional Shares shall be made by wire transfer in same
day funds to an account designated by the Company, and the closing shall take
place at the offices of X'Xxxxxxxx Graev & Karabell, LLP, 00 Xxxxxxxxxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or such other location as may be mutually acceptable,
upon delivery of the certificates for the Additional Shares to the
Representatives for the respective accounts of the Underwriters.
3. Offering. Upon the Representatives authorization of the release of the
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Firm Shares, the Underwriters propose to offer the Shares for sale to the public
upon the terms set forth in the Prospectus. The obligation of the Company to
sell and deliver the Firm Shares and the Additional Shares is subject to the
condition that at the Closing Date or the Additional Closing Date, as the case
may be, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and in effect or proceedings therefor initiated or
threatened.
4. Covenants of the Company. The Company covenants and agrees with the
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Underwriters that:
(a) If the Registration Statement has not yet been declared effective
the Company will use its best efforts to cause the Registration Statement
and any amendments thereto to become effective as promptly as possible, and
if Rule 430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b) or Rule 434, the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rule 424(b) or
Rule 434 within the prescribed time period and will provide evidence
satisfactory to you of such timely filing. If the Company elects to rely
on Rule 434, the Company will prepare and file a term sheet that complies
with the requirements of Rule 434.
The Company will notify you promptly (and, if requested by you will
confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission
for any amendment of or supplement to the Registration Statement or the
Prospectus or for any additional information, (iii) of the mailing or the
delivery to the Commission for filing of any amendment of or supplement to
the Registration Statement or the Prospectus, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of the
initiation, or the threatening, of any proceedings therefor, (v) of the
receipt of any comments from the Commission, and (vi) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation
or threatening of any proceeding for that purpose. If the Commission shall
propose or enter a stop order at any time, the Company will make every
reasonable effort to prevent the issuance of any such stop order and, if
issued, to obtain the lifting of such order as soon as possible. The
Company will not file any amendment to the Registration Statement or any
amendment of or supplement to the Prospectus (including the prospectus
required to be filed to Rule 424(b)or Rule 434) that differs from the
prospectus on file at the time of the effectiveness of the Registration
Statement before or after the effective date of the Registration Statement
to which the Representatives shall reasonably object in writing after being
timely furnished in advance a copy thereof.
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(b) If at any time when a prospectus relating to the Offered Shares is
required to be delivered under the Act any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would, in
the judgment of the Representatives or the Company, include an untrue
statement of a material fact or omit to state any material fact required to
be stated 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
Underwriters or the Company, at any time to amend or supplement the
Prospectus or the Registration Statement to comply with the Act or the
Regulations, the Company will notify you promptly and prepare and file with
the Commission an appropriate amendment or supplement (in form and
substance satisfactory to the Representatives) which will correct statement
or omission and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to you one signed copy of the
Registration Statement, including exhibits and all amendments thereto, and
the Company will promptly deliver to each of the Underwriters such number
of copies of any preliminary prospectus, the Prospectus, the Registration
Statement, and all amendments of and supplements to such documents, if any,
as the Representatives may reasonably request.
(d) The Company will endeavor in good faith, in cooperation with you,
at or prior to the time of effectiveness of the Registration Statement, to
qualify the Offered Shares for offering and sale under the securities laws
relating to the offering or sale of the Offered Shares of such
jurisdictions as the Representatives may designate and to maintain such
qualification in effect for so long as required for the distribution
thereof; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation or to execute a
general consent to service of process.
(e) The Company will make generally available (within the meaning of
11(a) of the Act) to its security holders and to you as soon as
practicable, but not later than 45 days after the end of its fiscal quarter
in which the first anniversary date of the effective date of the
Registration Statement occurs, an earning statement (in form complying with
the provisions of Rule 158 of the Regulations), which need not be audited,
covering a period of at least twelve consecutive months beginning after the
effective date of the Registration Statement.
(f) During the period of 180 days from the date of the Prospectus, the
Company will not, without the prior written consent of Bear, Xxxxxxx & Co.
Inc. (i) issue, sell, offer or agree to sell, grant any option for the sale
of, pledge, make any short sale, establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Securities Exchange
Act of 1934, as amended), or otherwise dispose of, any Common Stock (or any
securities convertible into, exercisable for or exchangeable for Common
Stock) of the Company or of any of its subsidiaries or (ii) enter into any
swap, derivative transaction or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, provided that the foregoing shall not
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apply to (A)
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the Offered Shares to be sold hereunder, (B) the issuance of the Common
Stock upon conversion of the Contingent Notes on the Closing Date, (C) the
issuance by the Company of shares of Common Stock upon the exercise of any
option or warrant outstanding on the date hereof and disclosed in the
Prospectus or (D) the issuance of any Common Stock or options to purchase
Common Stock subsequent to the date hereof pursuant to the 1996 Employee
Stock Option Plan, the 1999 Employee Stock Purchase Plan and the 1999
Outside Director Stock Option Plan described in the Prospectus; and the
Company has obtained the undertaking of each of its officers and directors
and such of its shareholders as have been heretofore designated by the
Representatives and listed on Schedule II attached hereto, not to engage in
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any of the aforementioned transactions on their own behalf, except as
otherwise permitted by the terms of the "lock-up" agreements agreed to by
you or your counsel.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its shareholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or
any national securities exchange.
(h) The Company will apply the proceeds from the sale of the Shares as
set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause the Shares to
qualify for inclusion in the National Association of Securities Dealers
Automated Quotation National Market System.
5. Payment of Expenses. Whether or not the transactions contemplated in
-------------------
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement, as originally filed and all amendments thereof (including all
exhibits thereto), any preliminary prospectus, the Prospectus and any amendments
or supplements thereto including, without limitation, fees and expenses of the
Company's accountants and counsel), the underwriting documents (including this
Agreement and the Agreement Among Underwriters 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 issuance, transfer
and delivery of the Shares to the Underwriters, including any transfer or other
taxes payable by the Company thereon, (iii) the qualification of the Shares
under state or foreign securities or Blue Sky laws, including the costs of
duplicating and mailing a preliminary and final "Blue Sky Survey", (iv) the fees
of counsel for the Underwriters in connection with the qualification of the
Shares under state or foreign securities or Blue Sky laws and in connection with
the review and qualification of the offering of the Shares by the National
Association of Securities Dealers Inc., and such counsel's disbursements in
relation thereto, (v) quotation of the Shares on the National Association of
Securities Dealers Automated Quotation National Market System, (vi) filing fees
of the Commission and the National Association of Securities Dealers, Inc.;
(vii) the cost of printing certificates representing the Shares and (viii) the
cost and charges of any transfer agent or registrar.
11
6. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company herein contained, as of the date hereof and as of the
Closing Date (for purposes of this Section 6 "Closing Date" shall refer to the
Closing Date for the Firm Shares and any Additional Closing Date, if different,
for the Additional Shares), to the absence from any certificates, opinions,
written statements or letters furnished to you or to X'Xxxxxxxx Graev &
Karabell, LLP ("Underwriters' Counsel") pursuant to this Section 6 of any
misstatement or omission, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than, if pricing pursuant to Rule 430A, 5:30 P.M., New York time, on the
date of this Agreement or, if pricing pursuant to a pricing amendment ,
12:00 P.M., New York time on the date an amendment to the Registration
Statement containing the public offering price has been filed with the
Commission, or at such later time and date as shall have been consented to
in writing by the Representatives; if the Company shall have elected to
rely upon Rule 430A or Rule 434 of the Regulations, the Prospectus shall
have been filed with the Commission in a timely fashion in accordance with
Section 4(a) hereof; and, 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.
(b) At the Closing Date you shall have received the opinion of Xxxx and
Xxxx LLP, counsel for the Company, dated the Closing Date addressed to the
Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
(i) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation. Each of the
Company and its subsidiaries is duly qualified and in good standing as
a foreign corporation in each jurisdiction listed in a schedule to
such opinion, which the character or location of its properties
(owned, leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures to be so
qualified or in good standing which will not, individually or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries taken as a whole. The Company has all requisite
corporate power and authority to own, lease and operate its respective
properties and conduct its business as described in the Registration
Statement and the Prospectus.
(ii) The Company has authorized capital stock as set forth in the
Registration Statement and the Prospectus. All of the outstanding
shares of Common Stock (including the shares of Common Stock issued on
the Closing Date upon conversion of the Contingent Notes) are duly and
validly authorized and issued, are fully paid and nonassessable and
were not issued in violation of or subject to any preemptive or
similar rights under Delaware law, the certificate of incorporation of
the Company or any agreement filed as an exhibit to the Registration
Statement. The Shares to be delivered on the Closing Date have
12
been duly and validly authorized and, when delivered by the Company in
accordance with this Agreement or the Telmex Purchase Agreement, as
applicable, will be duly and validly issued, fully paid and
nonassessable and the issuance of the Shares is not subject to any
preemptive or similar rights under Delaware law, the certificate of
incorporation of the Company or any agreement filed as an exhibit to
the Registration Statement. The Common Stock, the Firm Shares and the
Additional Shares conform to the descriptions thereof contained in the
Registration Statement and the Prospectus.
(iii) All outstanding Warrants to purchase Common Stock of the
Company, including without limitation, the Contingent Warrants, have
been duly and validly authorized, executed and delivered by the
Company and constitute valid and binding obligations of the Company,
and the shares of Common Stock issuable upon exercise of such Warrants
have been duly and validly authorized and reserved for issuance upon
such exercise and, upon payment of the exercise price thereof upon
exercise of such Warrants, such shares of Common Stock will be validly
issued and outstanding, fully paid and nonassessable and the issuance
of such shares is not subject to any currently existing preemptive or
similar rights under Delaware law, the certificate of incorporation of
the Company or any agreement filed as an exhibit to the Registration
Statement.
(iv) This Agreement and the Telmex Purchase Agreement have been
duly and validly authorized, executed and delivered by the Company.
(v) To our knowledge: (A) there is no litigation or governmental
or other action, suit, proceeding or investigation before any court or
before or by any public, regulatory or governmental agency or body
pending, threatened against, or involving the properties or business
of, the Company or any of its subsidiaries, which is of a character
required to be disclosed in the Registration Statement and the
Prospectus which has not been properly disclosed therein and (B) there
are no statutes, regulations contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(vi) The execution, delivery and performance of this Agreement
and the Telmex Purchase Agreement and the consummation of the
transactions contemplated hereby and thereby by the Company do not and
will not (A) conflict with or result in a breach of any of the terms
and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any agreement, instrument, franchise,
license or permit filed as an exhibit to the Registration Statement or
(B) violate or conflict with any provision of applicable law or the
certificate of incorporation or by-laws of the Company, or, to the
knowledge of such counsel, any judgment, decree or order of any court
or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its properties or assets. No
consent,
13
approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental, or
regulatory agency or body having jurisdiction over the Company or any
of its properties or assets is required for the execution, delivery
and performance of this Agreement or the Telmex Purchase Agreement or
the consummation of the transactions contemplated hereby or thereby,
except for (1) such as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Offered Shares by the Underwriters (as to which such counsel need
express no opinion) and (2) such as have been made or obtained under
the Act.
(vii) The statements (A) in the Prospectus under the captions
"Description of Capital Stock" and "Shares Eligible for Future Sale"
and (B) in the Registration Statement in Item 14, in each case insofar
as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to therein.
(viii) The Company is not, and upon consummation of the
transactions contemplated hereby, will not be, an "investment company"
as such term is defined in the Investment Company Act of 1940, as
amended.
(ix) The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial
statements and schedules and other financial data included therein, as
to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the
Regulations.
(x) The Registration Statement is effective under the Act, and,
to the knowledge of such counsel (A) no stop order suspending the
effectiveness of the Registration Statement or any post-effective
amendment thereof has been issued and (B) no proceedings therefor have
been initiated or threatened by the Commission; and all filings
required by Rule 424(b) of the Regulations have been made.
(xi) To such counsel's knowledge, no holder of any security of
the Company has any right, not effectively satisfied or waived, to
require inclusion of shares of Common Stock or any other security of
the Company in the Registration Statement.
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and representatives of the
Company, representatives of the independent public accountants for the Company
and the Underwriters at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, no facts have come to the
attention of such counsel which would lead such counsel to believe that either
the Registration Statement at the time it became effective (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), or any
amendment thereof made prior to the Closing Date as of the date
14
of such amendment, contained an untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus as of its date (or
any amendment thereof or supplement thereto made prior to the Closing Date as of
the date of such amendment or supplement) and as of the Closing Date contained
or contains an untrue statement of a material fact or omitted or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no belief or
opinion with respect to the financial statements and schedules and other
financial or statistical data included therein).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States, the
General Corporation Law of the State of Delaware and the laws of the
Commonwealth of Massachusetts, to the extent such counsel deems proper and to
the extent specified in such opinion, if at all, upon an opinion or opinions (in
form and substance reasonably satisfactory to Underwriters' Counsel) of other
counsel reasonably acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem proper, on
certificates of officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the Company and
its subsidiaries, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel. The opinion of such counsel for
the Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and, in their opinion, you and they are justified
in relying thereon.
The opinion of Xxxx and Xxxx LLP described in this Section 6(b) shall
be rendered to the Underwriters at the request of the Company and shall so state
therein.
(c) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and
the Underwriters shall have received from said Underwriters' Counsel a
favorable opinion, dated as of the Closing Date with respect to the
issuance and sale of the Shares, the Registration Statement and the
Prospectus and such other related matters as the Representatives may
reasonably require, and the Company shall have furnished to Underwriters'
Counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(d) At the Closing Date you shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date to the effect that (i) the condition set forth in
subsection (a) of this Section 6 has been satisfied, (ii) as of the date
hereof and as of the Closing Date the representations and warranties of the
Company set forth in Section 1 hereof are accurate, (iii) the sale of the
Telmex Shares pursuant to the Telmex Purchase Agreement and the Company
shall have received $_____ as a result of such sale and (iv) as of the
Closing Date the obligations of the Company to be performed hereunder on or
prior thereto have been duly performed and subsequent to the respective
dates as of which information is given with the Registration Statement and
the Prospectus the Company and its subsidiaries have not sustained any
material loss or interference with their respective businesses or
properties
15
from fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse
change, or any development involving a material adverse change, in the
business prospects, properties, operations, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries
taken as a whole, except in each case as described in or contemplated by
the Prospectus.
(e) At the time this Agreement is executed and at the Closing Date, you
shall have received a letter, from PricewaterhouseCoopers LLP, independent
public accountants for the Company and PSC, dated, respectively, as of the
date of this Agreement and as of the Closing Date addressed to the
Underwriters and in form and substance satisfactory to the Representatives,
to the effect that: (i) they are independent certified public accountants
with respect to the Company and PSC within the meaning of the Act and the
Regulations and stating that the answer to Item 10 of the Registration
Statement is correct insofar as it relates to them; (ii) stating that, in
their opinion, the financial statements and schedules of the Company and
PSC included in the Registration Statement and the Prospectus and covered
by their opinion therein comply as to form in all material respects with
the applicable accounting requirements of the Act and the applicable
published rules and regulations of the Commission thereunder; (iii) on the
basis of procedures consisting of a reading of the latest available
unaudited interim consolidated financial statements of the Company, and its
subsidiaries, a reading of the minutes of meetings and consents of the
shareholders and boards of directors of the Company and its subsidiaries
and the committees of such boards subsequent to December 31, 1997,
inquiries of officers and other employees of the Company and its
subsidiaries who have responsibility for financial and accounting matters
of the Company and its subsidiaries with respect to transactions and events
subsequent to December 31, 1997 and other specified procedures and
inquiries to a date not more than five days (three days in the case of the
letter delivered on the Closing Date) prior to the date of such letter,
nothing has come to their attention that would cause them to believe that:
(A) the unaudited consolidated financial statements and schedules of the
Company presented in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the applicable published rules and regulations
of the Commission thereunder or that such unaudited consolidated financial
statements are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that
of the audited consolidated financial statements of the Company included in
the Registration Statement and the Prospectus; (B) with respect to the
period subsequent to September 30, 1998 there were, as of the date of the
most recent available monthly consolidated financial statements of the
Company and its subsidiaries, if any, and as of a specified date not more
than five days (three days in the case of the letter delivered on the
Closing Date) prior to the date of such letter, any changes in the capital
stock or long-term indebtedness of the Company or any decrease in the net
current assets or stockholders' equity of the Company, in each case as
compared with the amounts shown in the most recent balance sheet presented
in the Registration Statement and the Prospectus, except for changes or
decreases which the Registration Statement and the Prospectus disclose have
occurred or may occur or which are set forth in such letter; or (C) that
during the period from October 1, 1998 to the date of the most recent
available monthly consolidated financial statements
16
of the Company and its subsidiaries, if any, and to a specified date not
more than five days (three days in the case of the letter delivered on the
Closing Date) prior to the date of such letter, there was (1) any decrease,
as compared with the corresponding period in the prior fiscal year, in
total revenues, or any increase, as compared with the corresponding period
in the prior fiscal year, in operating loss or the total or per share net
loss or (2) any decrease, as compared with the corresponding period in the
prior fiscal quarter, in Prodigy Internet service revenues, except in any
such case for decreases or increases which the Registration Statement and
the Prospectus disclose have occurred or may occur or which are set forth
in such letter; (iv) nothing has come to their attention that would cause
them to believe that the pro forma financial information included in the
Registration Statement do not comply in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such financial information; and (v) stating
that they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, and other financial information
pertaining to the Company and its subsidiaries set forth in the
Registration Statement and the Prospectus, which have been specified by you
prior to the date of this Agreement, to the extent that such amounts,
numbers, percentages, and information may be derived from the general
accounting and financial records of the Company and its subsidiaries or
from schedules furnished by the Company, and excluding any questions
requiring an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries, and other
appropriate procedures specified by you set forth in such letter, and found
them to be in agreement.
(f) Prior to the Closing Date the Company shall have furnished to you
such further information, certificates and documents as you may reasonably
request.
(g) You have shall received from each person who is a director or
officer of the Company or such shareholder as have been heretofore
designated by the Representatives and listed on Schedule II hereto an
-----------
agreement to the effect that such person will not, directly or indirectly,
without the prior written consent of Bear Xxxxxxx & Co. Inc., offer, sell,
offer or agree to sell, grant any option to purchase, pledge, make any
short sale, establish an open "put equivalent position" within the meaning
of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended), or
otherwise dispose of, any Common Stock (or any securities convertible into,
exercisable for or exchangeable for Common Stock) of the Company or of any
of its subsidiaries or (ii) enter into any swap, derivative transaction or
other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether any
such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise,
for a period of 180 days after the date of the Prospectus and containing
such exceptions and other terms as have been agreed to by you or your
counsel.
(h) The closing of the sale of the Telmex Shares shall be consummated
concurrently with or prior to the closing of the sale of the Offered Shares
and the Company shall have received $____ per share or $_____ in the
aggregate with respect thereto.
17
(i) At the Closing Date, the Shares shall have been approved for
quotation on the National Association of Securities Dealers Automated
Quotation National Market System.
If any of the conditions specified in this Section 6 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 you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to the Representatives
and to their counsel, all obligations of the Underwriters hereunder may be
cancelled by the Representatives at, or at any time prior to, the Closing Date
and the obligations of the Underwriters to purchase the Additional Shares may be
cancelled by the Representatives at, or at any time prior to, the Additional
Closing Date. Notice of such cancellation shall be given to the Company in
writing, or by telephone, telex or telegraph, confirmed in writing.
7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including
but not limited to attorneys' fees and any and all expenses whatsoever
incurred in investigating, preparing or defending against any 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 for the registration of the Shares, 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 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 any Underwriter through the Representatives 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, each of the directors of the Company, each
of the officers of the Company who shall have signed the Registration
Statement, and each other 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 as
incurred (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any
18
litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), jointly 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 for the registration of the
Shares, 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 make the statements therein 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 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 any Underwriter through the
Representatives expressly for use therein; provided, however, that in no
-------- -------
case shall any Underwriter be liable or responsible for any amount in
excess of the underwriting discount applicable to the Shares purchased by
such Underwriter hereunder. This indemnity will be in addition to any
liability which any Underwriter may otherwise have including under this
Agreement. The Company acknowledges that the statements set forth in the
last paragraph of the cover page, the last paragraph on the inside cover of
the Prospectus relating to stabilization and in the sixth, seventh and
tenth paragraphs and the first sentence of the ninth paragraph under the
caption "Underwriting" in the Prospectus constitute the only information
furnished in writing by or on behalf of any Underwriter expressly for use
in the registration statement relating to the Shares as originally filed or
in any amendment thereof, any related preliminary prospectus or the
Prospectus or in any amendment thereof or supplement thereto, as the case
may be.
(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 7). 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, 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 and the payment
of the fees and expenses of such counsel shall have been authorized in
writing by one of the indemnifying parties in connection with the defense
of such action, (ii) the indemnifying parties shall not have retained
counsel to have 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
19
different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying 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 shall be
borne by the indemnifying parties; provided, however, that the indemnifying
party shall not, in respect of the legal expenses of any indemnified party
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for all such indemnified parties
and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Bear, Xxxxxxx & Co.
Inc., in the case of parties indemnified pursuant to Section 7 (a), and by
the Company, in the case of parties indemnified pursuant to Section 7 (b).
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 written consent; provided, however, that such
-------- -------
consent was not unreasonably withheld.
8. Contribution. In order to provide for contribution in circumstances in
------------
which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party 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, officers of the
Company who signed the Registration Statement and directors of the Company) as
incurred to which the Company and one or more of the Underwriters may be
subject, in such proportions as is appropriate to reflect the relative benefits
received by the Company and the Underwriters from the offering 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 7 hereof, 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 offering (net of underwriting discounts and
commissions 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 8 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the
20
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter be liable or responsible
for any amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, 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. Notwithstanding the provisions of this Section 8 and the
preceding sentence, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. For purposes of this Section 8, each person, if any, who controls an
Underwriter 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 such Underwriter, 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, each officer of the Company who
shall have signed the Registration Statement and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to clauses (i) and (ii) of this Section 8. 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, notify each party or parties from whom
contribution may be sought, but the omission 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 8 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its consent; provided, however, that such consent was not unreasonably
-------- -------
withheld.
9. Default by an Underwriter.
--------------------------
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default
relates do not (after giving effect to arrangements, if any, made by you
pursuant to subsection (b) below) exceed in the aggregate 10% of the number
of Firm Shares or Additional Shares, to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to the
respective proportions which the numbers of Firm Shares set forth opposite
their respective names in Schedule I hereto bear to the aggregate number of
----------
Firm Shares set forth opposite the names of the non-defaulting
Underwriters.
(b) In the event that such default relates to more than 10% of the
Firm Shares or Additional Shares, as the case may be, the Representatives
may in their discretion arrange for yourself or for another party or
parties (including any non-defaulting Underwriter or Underwriters who so
agree) to purchase such Firm Shares or Additional Shares, as the case may
be, to which such default relates on the terms contained herein. In the
event that within 5 calendar days after such a default you do not arrange
for the purchase of the Firm Shares or Additional Shares, as the case may
be, to which such default relates as provided in this Section 9, this
Agreement or, in the case of a default with respect to the Additional
Shares, the obligations of the Underwriters to purchase and of the Company
to
21
sell the Additional Shares shall thereupon terminate, without liability on
the part of the Company with respect thereto (except in each case as
provided in Section 5, 7(a) and 8 hereof) or the Underwriters, but nothing
in this Agreement shall relieve a defaulting Underwriter or Underwriters of
its or their liability, if any, to the other Underwriters and the Company
for damages occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional 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
Representatives or the Company shall have the right to postpone the Closing
Date or the applicable Additional Closing Date, as the case may be, for a
period, not exceeding five 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 under this Section 9
with like effect as if it had originally been a party to this Agreement
with respect to such Firm Shares and Additional Shares.
10. 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 Section 5,
the indemnity agreements contained in Section 7 and the contribution agreements
contained in Section 8, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or any
controlling person thereof or by or on behalf of the Company, any of its
officers and directors 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 1 and the agreements contained in Sections
5, 7, 8 and 11(d) hereof shall survive the termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective, upon the later of when (i)
the Representatives and the Company shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of this
Agreement. If either the initial public offering price or the purchase
price per Share has not been agreed upon prior to 5:00 P.M., New York time,
on the fifth full business day after the Registration Statement shall have
become effective, this Agreement shall thereupon terminate without
liability to the Company or the Underwriters except as herein expressly
provided. Until this Agreement becomes effective as aforesaid, it may be
terminated by the Company by notifying you or by the Representatives
notifying the Company. Notwithstanding the foregoing, the provisions of
this Section 11 and of Section 1, 5, 7 and 8 hereof shall at all times be
in full force and effect.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the obligations of the Underwriters to
purchase Additional Shares at any
22
time prior to the applicable Additional Closing Date, as the case may be,
if (A) any domestic or international event or act or occurrence has
materially disrupted, or in the opinion of the Representatives will in the
immediate future materially disrupt, the market for the Company's
securities or securities in general; or (B) if trading on the New York or
American Stock Exchanges or the NASDAQ shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum
ranges for prices for securities shall have been required, on the New York
or American Stock Exchanges or the NASDAQ by the New York or American Stock
Exchanges, the National Association of Securities Dealers, Inc. or by order
of the Commission or any other governmental authority having jurisdiction;
or (C) if a banking moratorium has been declared by a state or federal
authority or if any new restriction materially adversely affecting the
distribution of the Firm Shares or the Additional Shares, as the case may
be, shall have become effective; or (D) (i) if the United States becomes
engaged in hostilities or there is an escalation of hostilities involving
the United States or there is a declaration of a national emergency or war
by the United States or (ii) if there shall have been such change in
political, financial or economic conditions if the effect of any such event
in (i) or (ii) as in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the offering, sale and
delivery of the Firm Shares or the Additional Shares, as the case may be,
on the terms contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, 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
Representatives as provided in Section 11(a) hereof or (ii) Section 9(b) or
11(b) hereof), 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 Representatives, reimburse the Underwriters for all out-of-pocket
expenses (including the fees and expenses of their counsel), incurred by
the Underwriters in connection herewith.
12. Notices. All communications hereunder, except as may be otherwise
-------
specifically provided herein, shall be in writing and , if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx,
Xxx Xxxx, X.X. 00000, Attention: ___________; if sent to the Company, shall be
mailed, delivered, or telegraphed and confirmed in writing to the Company, 00
Xxxxx Xxxxxxxx, Xxxxx Xxxxxx, Xxx Xxxx 00000, Attention: Chief Financial
Officer, with a copy to Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000,
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
13. Parties. This Agreement shall insure solely to the benefit of, and
-------
shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Section 7 and
8, 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 contained.
23
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Shares from any of the Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
24
If the foregoing correctly sets forth the understanding between you and the
Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
Prodigy Communications Corporation
By ________________________________________
Name:
Title:
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
BancBoston Xxxxxxxxx Xxxxxxxx Inc.
ING Baring Xxxxxx Xxxx LLC
Xxxxx Xxxxx Xxxxxx & Company, LLC
on behalf of themselves and the other
Underwriters named in Schedule I hereto, including
----------
Wit Capital Corporation, as e-Manager
BY: BEAR XXXXXXX & CO. INC.
By __________________________
Name:
Title:
25
SCHEDULE I
----------
Number of Firm
Name of Underwriter Shares to be Purchased
------------------- ------------------------
Bear, Xxxxxxx & Co. Inc
BancBoston Xxxxxxxxx Xxxxxxxx Inc.
ING Baring Xxxxxx Xxxx LLC
Xxxxx Xxxxx Xxxxxx & Company, LLC
-----------
Total......................... 8,000,000
-----------
26
SCHEDULE II
-----------
Carso Global Telecom, S.A. de C.V.
Telefonos de Mexico, S.A. de C.V.
International Business Machines Corporation
Sears, Xxxxxxx and Co.
Xxxxx X. Xxxxxxx
Xxxxx Xxxxxxxxxxxx
Xxxxxxx X. Pillar
Xxxxxxx Xxxxxxx
Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxx L'Heureux
Xxxxxx X. Pooth
Xxxxxx Xxxxx
Xxxxx X. Xxxxxxx
Xxxx Xxxx
27
