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Exhibit 1.2
KLWH DRAFT
1/6/00
MGC Communications, Inc.
[ ] Shares
[ ]% Series D Convertible Preferred Stock
($0.001 par value per share)
UNDERWRITING AGREEMENT
New York, New York
, 2000
Xxxxxxx Xxxxx Xxxxxx Inc.
Bear, Xxxxxxx & Co. Inc.
Xxxxxxx, Xxxxx & Co.
ING Barings LLC
Warburg Dillon Read LLC
As Representatives of the several Underwriters,
c/o Xxxxxxx Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
MGC Communications, Inc., a corporation organized under the
laws of the State of Nevada (the "Company"), proposes to sell to the several
underwriters named in Schedule I hereto (the "Underwriters"), for whom you (the
"Representatives") are acting as joint lead representatives, [ ] shares (the
"Underwritten Securities") of [ ]% Series D Convertible Preferred Stock, $ 0.001
par value per share, of the Company ("Series D Preferred Stock"). The Company
also proposes to grant to the Underwriters an option to purchase up to [ ]
additional shares of Series D Preferred Stock to cover over-allotments (the
"Option Securities"; the Option Securities, together with the Underwritten
Securities, being hereinafter called the
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"Securities"). To the extent there are no additional Underwriters listed on
Schedule I other than you, the term Representatives as used herein shall mean
you, as Underwriters, and the terms Representatives and Underwriters shall mean
either the singular or plural as the context requires. Any reference herein to
the Registration Statement, a Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or
before the Effective Date of the Registration Statement or the issue date of
such Preliminary Prospectus or the Prospectus, as the case may be; and any
reference herein to the terms "amend", "amendment" or "supplement" with respect
to the Registration Statement, any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the filing of any document under the
Exchange Act after the Effective Date of the Registration Statement, or the
issue date of any Preliminary Prospectus or the Prospectus, as the case may be,
deemed to be incorporated therein by reference. Certain terms used herein are
defined in Section 17 hereof.
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, each Underwriter as set forth below in this
Section 1.
(a) The Company and the transactions contemplated by this
Agreement meet the requirements for use of Form S-3 under the Act and
the Company has prepared and filed with the Commission a registration
statement (file number 333-91353) on Form S-3, including a related
preliminary prospectus, for registration under the Act of the offering
and sale of the Securities. The Company may have filed one or more
amendments thereto, including a related preliminary prospectus, each of
which has previously been furnished to you. The Company will next file
with the Commission one of the following: either (1) prior to the
Effective Date of such registration statement, a further amendment to
such registration statement (including the form of final prospectus) or
(2) after the Effective Date of such registration statement, a final
prospectus in accordance with Rules 430A and 424(b). In the case of
clause (2), the Company has included in such registration statement, as
amended at the Effective Date, all information (other than Rule 430A
Information) required by the Act and the rules thereunder to be
included in such registration statement and the Prospectus. As filed,
such amendment and form of final prospectus, or such final prospectus,
shall contain all Rule 430A Information, together with all other such
required information, and, except to the extent the Representatives
shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time or,
to the extent not completed at the Execution Time, shall contain only
such specific additional information and other changes (beyond that
contained in the latest Preliminary Prospectus) as the Company has
advised you, prior to the Execution Time, will be included or made
therein. Each Preliminary Prospectus and Prospectus filed as part of
such registration statement, as part of any amendment thereto or
pursuant to Rule 424, if filed by electronic transmission pursuant to
Regulation S-T under the Act, was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and
sales of the Securities (except as may be permitted by Regulation S-T
under the Securities Act).
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(b) On the Effective Date, the Registration Statement did or
will, and when the Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as defined herein)
and on any date on which Option Securities are purchased, if such date
is not the Closing Date (a "settlement date"), the Prospectus (and any
supplements thereto) will, comply in all material respects with the
applicable requirements of the Act and the Exchange Act and the
respective rules thereunder; on the Effective Date and at the Execution
Time, the Registration Statement did not or 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, on the Effective Date, the
Prospectus, if not filed pursuant to Rule 424(b), will not, and on the
date of any filing pursuant to Rule 424(b) and on the Closing Date and
any settlement date, the Prospectus (together with any supplement
thereto) will not, include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from the Registration Statement or the Prospectus (or any
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 specifically for inclusion in the
Registration Statement or the Prospectus (or any supplement thereto).
(c) Each of the Company and each subsidiary of the Company
(each a "Subsidiary" and collectively the "Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or
organized with full corporate power and authority to own or lease, as
the case may be, and to operate its properties and conduct its business
as described in the Prospectus. Each of the Company and the
Subsidiaries (x) has all authorizations, approvals, orders, licenses
and permits of and from regulatory and government officials, bodies and
tribunals, necessary to own or lease its properties or to conduct its
business as described in the Prospectus and (y) is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification, except, in
the case of clauses (x) and (y), where the failure to have such
authorizations, approvals, orders, licenses or permits or to be so
qualified could not reasonably be expected to, individually or in the
aggregate, have a material adverse effect on the condition (financial
or otherwise), prospects, earnings, business or properties of the
Company and the Subsidiaries, taken as a whole (a "Material Adverse
Effect"), whether or not arising from transactions in the ordinary
course of business, or as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).
(d) All the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and all outstanding shares of capital
stock of the Subsidiaries are owned by the Company either directly or
through wholly owned Subsidiaries free and clear of any perfected
security interest or any other security interests, claims, liens or
encumbrances. Except for the
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capital stock of the Subsidiaries, neither the Company nor any
Subsidiary owns or holds any interest in any corporation, partnership,
trust or association, joint venture or other entity.
(e) The Company's authorized equity capitalization is as set
forth in the Prospectus; the capital stock of the Company conforms in
all material respects to the description thereof contained in the
Prospectus; the outstanding shares of capital stock have been duly and
validly authorized and issued and are fully paid and nonassessable; the
Securities being sold hereunder have been duly and validly authorized,
and, when issued and delivered to and paid for by the Underwriters
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable and entitled to the rights, privileges and preferences
set forth in the Certificate of Designations filed by the Company as
exhibit 4.11 to the Registration Statement (the "Certificate of
Designation"); the Securities are duly listed for quotation, subject to
official notice of issuance, on the Nasdaq National Market; the
certificates for the Securities are in valid and sufficient form; the
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the Securities;
and, except as set forth in the Prospectus, no options, warrants or
other rights to purchase, agreements or other obligations to issue, or
rights to convert any obligations into or exchange any securities for,
shares of capital stock of or ownership interests in the Company or any
Subsidiary are outstanding.
(f) There is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit thereto, which is not
described or filed as required; there is no action, suit, inquiry or
investigation, pending or threatened, by or before any court,
governmental agency, authority or body or arbitrator, including,
without limitation, before the Federal Communications Commission (the
"FCC"), or any statute, law, rule, regulation, injunction, order or
decree, in each case, affecting the business of the Company or any
Subsidiary of a character required to be described in the Registration
Statement or Prospectus which is not described; and the statements in
the Prospectus under the headings "Federal Tax Considerations,"
"Business - Government Regulation" and "Business - Legal Proceedings"
fairly summarize the matters therein described.
(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 Securities to be sold by the Company as
provided herein. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms 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. The Certificate of Designation has been
duly authorized by all necessary corporate action and any
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necessary stockholder action and, on or prior to the Closing Date, will
be duly executed by the Company and filed with the Secretary of State
of the State of Nevada and will conform in all material respects to the
description thereof in the Prospectus.
(h) Neither the Company nor any Subsidiary is and, after
giving effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the Prospectus,
will not be (x) an "investment company" as defined in the Investment
Company Act of 1940, as amended, or (y) 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.
(i) No consent, approval, authorization, filing with or order
of (i) any court or governmental agency or body (including, without
limitation, the FCC) or (ii) any other person is required in connection
with the transactions contemplated herein, except (x) such as have been
obtained under the Act, such as may be required under the blue sky laws
of any jurisdiction in connection with the purchase and distribution of
the Securities by the Underwriters in the manner contemplated herein
and in the Prospectus and such as may be required by the National
Association of Securities Dealers, Inc. ("NASD"), (y) such as have been
obtained or (z) where the failure to obtain any such consent, approval,
authorization or order or to have made any such filing would not
reasonably be expected to result in a Material Adverse Effect, whether
or not arising from transactions in the ordinary course of business.
(j) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will conflict with, result in a
breach or violation of the terms or provisions of, or a default under
(or an event that with notice or lapse of time or both would constitute
a default under) or the imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Subsidiary pursuant
to, (i) the charter or bylaws of the Company or any Subsidiary, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or any
Subsidiary is a party or by which any of them may be bound or to which
any of them or their respective property is subject, or (iii) any
statute, law, rule, regulation, judgment, order or decree applicable to
the Company or any Subsidiary of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or any Subsidiary or any of its or
their respective properties, except that the Company has not received
written approval from the Georgia Public Service Commission as to the
sale of the Securities and except in the case of clauses (ii) and (iii)
for such conflicts, breaches, violations, defaults or impositions of
liens, charges or encumbrances that would not, singly or in the
aggregate, have a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business.
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(k) Except for the selling stockholders named in the
Registration Statement, no holders of securities of the Company have
rights to the registration of such securities under the Registration
Statement.
(l) The consolidated historical financial statements and
schedules of the Company and its consolidated subsidiaries included in
the Prospectus and the Registration Statement present fairly in all
material respects the financial condition, results of operations and
cash flows of the Company as of the dates and for the periods
indicated, comply as to form with the applicable accounting
requirements of the Act and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as otherwise noted therein).
The financial information set forth under the captions "Prospectus
Summary - Summary Consolidated Financial and Operating Data,"
"Capitalization," "Selected Consolidated Financial and Operating Data"
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Prospectus and Registration Statement
fairly present, on the basis stated in the Prospectus and the
Registration Statement, the information included therein. The as
adjusted financial information included in the Prospectus and the
Registration Statement includes assumptions that provide a reasonable
basis for presenting the significant effects directly attributable to
the transactions and events described therein and the related
adjustments give appropriate effect to those assumptions. The as
adjusted information included in the Prospectus and the Registration
Statement complies as to form in all material respects with the
applicable accounting requirements of Regulation S-X under the Act and
the related adjustments have been properly applied to the historical
amounts in the compilation of such information.
(m) Except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto), (i) no action, suit,
investigation or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or
any Subsidiary or any of their respective property is pending or, to
the knowledge of the Company, threatened, (ii) no statute, rule,
regulation or order has been enacted, adopted or issued by any
governmental agency or has been proposed by any governmental body and
(iii) no injunction, restraining order or order of any nature to which
the Company or any Subsidiary is or may be subject or to which the
business, assets or property of the Company or any Subsidiary are or
may be subject, has been issued that (x) could reasonably be expected
to have a material adverse effect on the performance of this Agreement
or the consummation of any of the transactions contemplated hereby or
(y) could reasonably be expected to have a Material Adverse Effect,
whether or not arising from transactions in the ordinary course of
business.
(n) Each of the Company and each Subsidiary owns or leases all
such properties as are necessary to the conduct of its operations as
presently conducted.
(o) Neither the Company nor any Subsidiary is in violation or
default of (i) any provision of its charter or bylaws, (ii) the terms
of any indenture, contract, lease,
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mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which it is
a party or bound or to which its property is subject, or (iii) any
statute, law, rule, regulation, judgment, order or decree of any court,
regulatory body, administrative agency, governmental body, arbitrator
or other authority having jurisdiction over the Company or the
Subsidiaries or any of their properties, as applicable, except, in the
case of clauses (ii) and (iii) for any such violations or defaults that
could not reasonably be expected to have a Material Adverse Effect,
whether on not arising from transactions in the ordinary course of
business, or which are set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(p) To the knowledge of the Company, KPMG LLC and Xxxxxx
Xxxxxxxx LLP, who have certified certain financial statements of the
Company and its consolidated subsidiaries and delivered their report
with respect to the audited consolidated financial statements and
schedules included in the Prospectus, are independent public
accountants with respect to the Company within the meaning of the Act
and the applicable published rules and regulations thereunder.
(q) There are no transfer taxes or other similar fees or
charges under federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance by the Company
or sale by the Company of the Securities.
(r) Each of the Company and the Subsidiaries has filed all
foreign, federal, state and local tax returns that are required to be
filed or has requested extensions thereof (except in any case in which
the failure so to file would not have a Material Adverse Effect,
whether or not arising from transactions in the ordinary course of
business) and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent that
any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good
faith or as would not have a Material Adverse Effect, whether or not
arising from transactions in the ordinary course of business. To the
knowledge of the Company, there are no material proposed additional tax
assessments against the Company, any Subsidiary or the assets or
property of the Company or any Subsidiary.
(s) No labor problem or dispute with the employees of the
Company or any Subsidiary exists or is threatened or imminent, and the
Company is not aware of any existing or imminent labor disturbance by
the employees of any of its or the Subsidiaries' principal suppliers,
contractors or customers, that could reasonably be expected to result
in a Material Adverse Effect, whether or not arising from transactions
in the ordinary course of business; To the knowledge of the Company, no
union representation question existing with respect to the employees of
the Company or any Subsidiary that could reasonably be expected to
result in a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business; to the knowledge of
the Company, no
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collective bargaining organizing activities are taking place with
respect to the Company or any Subsidiary; none of the Company or any
Subsidiary has violated (A) any federal, state or local law or foreign
law relating to discrimination in hiring, promotion or pay of
employees, (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 clauses (A), (B) or (C) above could reasonably be expected to result
in a Material Adverse Effect, whether or not arising from transactions
in the ordinary course of business.
(t) The Company and each Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which
they are engaged; all policies of insurance and fidelity or surety
bonds insuring the Company or any Subsidiary or their respective
businesses, assets, employees, officers and directors are in full force
and effect; the Company and the Subsidiaries are in compliance with the
terms of such policies and instruments in all material respects; and
there are no claims by the Company or any Subsidiary under any such
policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; neither
the Company nor any Subsidiary has been refused any insurance coverage
sought or applied for; and neither the Company nor any 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 have a Material Adverse Effect,
whether or not arising from transactions in the ordinary course of
business.
(u) No Subsidiary is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any
other distribution on such Subsidiary's capital stock, from repaying to
the Company any loans or advances to such Subsidiary from the Company
or from transferring any of such Subsidiary's property or assets to the
Company or any other Subsidiary, except as described in or contemplated
by the Prospectus.
(v) The Company and the Subsidiaries possess all licenses,
certificates, permits and other authorizations ("Licenses") issued by,
and have made all declarations and filings with, the appropriate
federal, state or foreign regulatory authorities, including, without
limitation, the FCC, necessary to conduct their respective businesses,
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any License
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to have a
Material Adverse Effect, whether or not arising from transactions in
the ordinary course of business; the Company and the Subsidiaries have
fulfilled or performed all of their obligations with respect to all
Licenses possessed by any of them, except where the failure to so
fulfill and perform would not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect, whether or not arising
from transactions in the ordinary
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course of business, or as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto); no event has occurred
which allows, or after notice or lapse of time, or both, would allow,
revocation or termination of any License or result in any other
material impairment of the rights of any holder of such License, except
where such revocation or termination would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect,
whether or not arising from transactions in the ordinary course of
business, or as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto); and the Licenses contain no
restrictions on the Company or any Subsidiary except where such
restrictions would not reasonably be expected to have a Material
Adverse Effect, whether or not arising from transactions in the
ordinary course of business, or as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).
(w) The Company and the 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) The Company has not taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(y) The Company and the Subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received and are in
compliance with all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses and (iii) have not received notice of any actual or
potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants, except where such non-compliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals, or liability would not, individually or in the
aggregate, have a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business. Neither the Company
nor any Subsidiary has been named as a "potentially responsible party"
under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.
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(z) In the ordinary course of its business, the Company
periodically reviews the effect of Environmental Laws on the business,
operations and properties of the Company and the Subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (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). On the basis of such review, the Company
has reasonably concluded that such associated costs and liabilities
would not, singly or in the aggregate, have a Material Adverse Effect,
whether or not arising from transactions in the ordinary course of
business.
(aa) 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 any Subsidiary or to which the Company or any 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
Subsidiaries 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 any 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 any Subsidiary or a Related Person is
an "employer" as defined in Section 3(5) of ERISA, and to the 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
any 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 any Subsidiary or
to which the Company or any
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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 any 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 XXXXX. 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 Subsidiaries has made, accrued or provided for all contributions
heretofore required to be made by the Company and the Subsidiaries and
each of the Company and the Subsidiaries 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 Securities will not
involve any prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code. Neither the Company nor any
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 provisions of the
Prospectus described under the heading "How We Intend to Use the
Proceeds of this Offering") 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 any
Subsidiary as a consequence of such transaction.
(bb) The Company and the Subsidiaries own, possess, license or
have other rights to use, on reasonable terms, all patents, patent
applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the conduct
of the Company's business as now conducted or as proposed in the
Prospectus to be conducted 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 none of the
Company or any 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, whether or not arising from transactions in the
ordinary course of business. The use of the Intellectual Property in
connection with the business and operations of the Company and the
Subsidiaries does not infringe on the rights of any person, except as
could not reasonably be expected to have a Material Adverse Effect,
whether or not arising from transactions in the ordinary course of
business.
(cc) None of the Company or any Subsidiary, or to the
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 any Subsidiary has,
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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 any
Subsidiary (or assist the Company or any Subsidiary in connection with
any actual or proposed transaction) which (i) might subject the Company
or any 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.
(dd) The Company (i) does not have any material lending or
other relationship with any bank or lending affiliate of Xxxxxxx Xxxxx
Barney Holdings Inc. and (ii) does not intend to use any of the
proceeds from the sale of the Securities hereunder to repay any
outstanding debt owed to any affiliate of Xxxxxxx Xxxxx Xxxxxx Holdings
Inc.
(ee) The Company and the Subsidiaries have implemented a
comprehensive, detailed program to analyze and address the risk that
the computer hardware and software used by them may be unable to
recognize and properly execute date-sensitive functions involving
certain dates prior to and any dates after December 31, 1999 (the "Year
2000 Problem"). The Company and the Subsidiaries have not experienced
any Year 2000 Problems and the Company is not aware, after due inquiry,
of any Year 2000 Problems at any supplier, vendor, customer or
financial service organization used or serviced by the Company and the
Subsidiaries, other than Year 2000 Problems which will not have a
Material Adverse Effect. The Company is in compliance with the
Commissions Release No. 333-7558 related to Year 2000 disclosure.
(ff) The Company has complied with all of its obligations as
set forth in (i) the Warrant Registration Rights Agreement, dated as of
September 29, 1997, by and among the Company, Bear, Xxxxxxx & Co. Inc.
and Xxxxxx Xxxx LLC, (ii) the Stockholders Agreement, dated as of
November 26, 1997, by and among the Company and the persons listed
therein, (iii) the Series B Preferred Stock Registration Rights
Agreement, dated as of May 4, 1999, as amended to date, by and among
the Company and the persons listed therein, and (iv) the Agreement and
Plan of Merger, dated as of March 15, 1999, by and among the Company,
XX.Xxx, Inc., MGC XX.Xxx, Inc., Xxxxxxx Xxxxxx and Xxxxx Xxxxxxxx.
(gg) Each holder of five percent or more of the total issued
and outstanding capital stock of the Company (assuming conversion of
all outstanding shares of the Company's Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock) is listed on Schedule
II to this Agreement.
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(hh) The addressable line estimates included in the Prospectus
are based on or derived from independent sources which the Company
believes to be reliable and accurate.
(ii) None of (x) the issuance of the Securities, (y) the
conversion of the Series D Preferred Stock into Common Stock in
accordance with the terms of the Certificate of Designation or (z) the
issuance of shares of Common Stock as payment of dividends on the
Series D Preferred Stock in accordance with the terms of the
Certificate of Designation will result in any holder of any outstanding
security convertible into or exchangeable for Common Stock or any
option, right or warrant to purchase Common Stock or any security
convertible into or exchangeable for Common Stock being entitled to
purchase additional shares of Common Stock or to purchase shares of
Common Stock at a lower price per share upon exercise, conversion or
exchange of such outstanding security.
Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by the Company, as to matters covered thereby, to each Underwriter.
2. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees, to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company at a purchase price of
$[ ] per share, the amount of the Underwritten Securities set forth opposite
such Underwriter's name in Schedule I hereto.
(a) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company hereby
grants an option to the several Underwriters to purchase, severally and
not jointly, up to [ ] Option Securities at the same purchase price per
share as the Underwriters shall pay for the Underwritten Securities.
Said option may be exercised only to cover over-allotments in the sale
of the Underwritten Securities by the Underwriters. Said option may be
exercised in whole or in part at any time (but not more than once) on
or before the 30th day after the date of the Prospectus upon written or
telegraphic notice by the Representatives to the Company setting forth
the number of shares of the Option Securities as to which the several
Underwriters are exercising the option and the settlement date. The
number of Option Securities to be purchased by each Underwriter shall
be the same percentage of the total number of shares of the Option
Securities to be purchased by the several Underwriters as such
Underwriter is purchasing of the Underwritten Securities, subject to
such adjustments as you in your absolute discretion shall make to
eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at
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10:00 AM, New York City time, on [ ] , 2000, or at such time on such later
date not more than three Business Days after the foregoing date as the
Representatives shall designate, which date and time may be postponed by
agreement between the Representatives and the Company or as provided in Section
9 hereof (such date and time of delivery and payment for the Securities being
herein called the "Closing Date"). Delivery of the Securities shall be made to
the Representatives for the respective accounts of the several Underwriters
against payment by the several Underwriters through the Representatives of the
purchase price thereof to or upon the order of the Company by wire transfer
payable in same-day funds to an account specified by the Company. Delivery of
the Underwritten Securities and the Option Securities shall be made through the
facilities of The Depository Trust Company unless the Representatives shall
otherwise instruct.
If the option provided for in Section 2(b) hereof is exercised
after the third Business Day prior to the Closing Date, the Company will deliver
the Option Securities (at the expense of the Company) to the Representatives, at
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, on the date specified by the
Representatives (which shall be within three Business Days after exercise of
said option) for the respective accounts of the several Underwriters, against
payment by the several Underwriters through the Representatives of the purchase
price thereof to or upon the order of the Company by wire transfer payable in
same-day funds to the accounts specified by the Company. If settlement for the
Option Securities occurs after the Closing Date, the Company will deliver to the
Representatives on the settlement date for the Option Securities, and the
obligation of the Underwriters to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several
Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment to
the Registration Statement or supplement to the Prospectus or any Rule
462(b) Registration Statement unless the Company has furnished you a
copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object.
Subject to the foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Company will
cause the Prospectus, properly completed, and any supplement thereto to
be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The Company
will promptly advise the Representatives (1) when the Registration
Statement, if not effective at the Execution Time, shall have become
effective, (2) when
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the Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b) or when any Rule
462(b) Registration Statement shall have been filed with the
Commission, (3) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have been
filed or become effective, (4) of any request by the Commission or its
staff for any amendment of the Registration Statement, or any Rule
462(b) Registration Statement, or for any supplement to the Prospectus
or for any additional information, (5) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (6) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the institution or
threatening of any proceeding for such purpose. The Company will use
its best efforts to prevent the issuance of any such stop order or the
suspension of any such qualification and, if issued, to obtain as soon
as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material
fact 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 to amend the Registration Statement or supplement the
Prospectus to comply with the Act or the Exchange Act or the respective
rules thereunder, the Company promptly will (1) notify the
Representatives of such event, (2) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this
Section 5, an amendment or supplement which will correct such statement
or omission or effect such compliance and (3) supply any supplemented
Prospectus to you in such quantities as you may reasonably request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.
(d) The Company will furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Act, as many copies of each Preliminary
Prospectus and the Prospectus and any supplement thereto as the
Representatives may reasonably request. The Company will pay the
expenses of printing or other production of all documents relating to
the offering.
(e) The Company will cooperate and assist in any filings
required to be made with the NASD and in the performance of any due
diligence investigation by any broker/dealer participating in the sale
of the Securities.
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(f) The Company will arrange, if necessary, for the
qualification of the Securities for sale under the laws of such
jurisdictions as the Representatives may designate, will maintain such
qualifications in effect so long as required for the distribution of
the Securities and will pay any fee of the NASD, in connection with its
review of the offering; provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action that would subject it to
taxation or to service of process in suits, other than those arising
out of the offering or sale of the Securities, in any jurisdiction
where it is not now so subject.
(g) The Company will not, without the prior written consent of
Xxxxxxx Xxxxx Xxxxxx Inc., offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to
cash settlement or otherwise) by the Company or any affiliate of the
Company or any person in privity with the Company or any affiliate of
the Company) directly or indirectly, including the filing (or
participation in the filing) of a registration statement with the
Commission in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the
meaning of Section 16 of the Exchange Act, any other shares of capital
stock of the Company or any securities convertible into, or exercisable
or exchangeable for, such capital stock or publicly announce an
intention to effect any such transaction, for a period of 90 days after
the date of this Agreement, provided, however, that (i) the Company may
issue and sell common stock, $0.001 par value per share, of the Company
("Common Stock") pursuant to any employee stock option plan, stock
ownership plan or dividend reinvestment plan of the Company in effect
at the Execution Time, (ii) the Company may issue Common Stock issuable
upon the conversion of securities or the exercise of warrants
outstanding at the Execution Time, (iii) the Company may issue and sell
up to [ ] shares of Common Stock, which have been registered by the
Company on the Registration Statement, (iv) the Company may issue
Common Stock upon the conversion of shares of Series D Preferred Stock
and as payment of dividends on shares of Series D Preferred Stock, all
in accordance with the terms of the Certificate of Designation, (v) the
Company may offer to issue, but may not issue, Common Stock to any one
or more Persons in connection with the acquisition by the Company, by
consolidation, merger, sale or otherwise, of all or any portion of the
assets or outstanding voting securities of such Person, and (vi) the
Company may file one registration statement under the Act relating to
the sale of Common Stock in connection with the exercise of demand
registration rights by stockholders of the Company which have been
granted demand registration rights by the Company pursuant to one or
more written agreements entered into prior to the date of this
Agreement, and otherwise in accordance with the provisions of such
agreements; provided, however, that such registration statement shall
not be declared effective until the expiration of the period of 90 days
after the date of this Agreement.
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(h) The Company will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(i) The Company will apply the proceeds from the sale of the
Securities as set forth under the heading "How We Intend to Use the
Proceeds of this Offering" in the Prospectus.
(j) 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 Securities.
(k) 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.
6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any settlement date pursuant to Section
3 hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective
prior to the Execution Time, unless the Representatives agree in
writing to a later time, the Registration Statement will become
effective not later than (i) 6:00 PM New York City time on the date of
determination of the public offering price, if such determination
occurred at or prior to 3:00 PM New York City time on such date or (ii)
9:30 AM on the Business Day following the day on which the public
offering price was determined, if such determination occurred after
3:00 PM New York City time on such date; if filing of the Prospectus,
or any supplement thereto, is required pursuant to Rule 424(b), the
Prospectus, and any such supplement, will be filed in the manner and
within the time period required by Rule 424(b); and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Company shall have requested and caused Xxxxx, Xxxx,
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C., counsel for the Company, to have
furnished to the Representatives their opinion, dated the Closing Date
and addressed to the Representatives, to the effect that:
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(i) Each of the Company and the Subsidiaries has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it
is chartered or organized, with full corporate power and
authority to own or lease, as the case may be, and to operate
its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction which requires such qualification and where the
failure to be so qualified could reasonably be expected to,
individually or in the aggregate, have a Material Adverse
Effect, whether or not arising from transactions in the
ordinary course of business.
(ii) All the outstanding shares of capital stock of
each Subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and were not
issued in violation of or subject to any preemptive or similar
rights under the Nevada Revised Statutes, or known to us,
after reasonable inquiry. All outstanding shares of capital
stock of the Subsidiaries are owned by the Company either
directly or through wholly owned Subsidiaries free and clear
of any perfected security interest and, to our knowledge,
after due inquiry, any other security interest, claim, lien or
encumbrance. Except for the capital stock of the Subsidiaries,
to our knowledge, neither the Company nor any Subsidiary owns
or holds any interest in any corporation, partnership, trust
or association, joint venture or other entity.
(iii) The Company's authorized equity capitalization
is as set forth in the Prospectus; the capital stock of the
Company conforms in all material respects to the description
thereof contained in the Prospectus; the outstanding shares of
capital stock have been duly and validly authorized and issued
and are fully paid and nonassessable; the Securities being
sold hereunder have been duly and validly authorized, and,
when issued and delivered to and paid for by the Underwriters
pursuant to this Agreement, will be validly issued, fully paid
and nonassessable and entitled to the rights, privileges and
preferences set forth in the Certificate of Designation; the
Securities are duly listed for quotation, subject to official
notice of issuance, on the Nasdaq National Market; the
certificates for the Securities are in valid and sufficient
form; the holders of outstanding shares of capital stock of
the Company are not entitled to preemptive or other rights to
subscribe for the Securities; and, to our knowledge after
reasonable inquiry, except as set forth in the Prospectus, no
options, warrants or other rights to purchase, agreements or
other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of
capital stock of or ownership interests in the Company or any
Subsidiary are outstanding.
(iv) To our knowledge, there is no pending or
threatened action, suit, investigation or proceeding by or
before any court or governmental agency, authority or body or
any arbitrator or any statute, law, rule, regulation,
injunction,
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judgement or order, in each case, affecting or involving the
Company or any Subsidiary or any of their respective property
of a character required to be disclosed in the Registration
Statement or Prospectus which is not adequately disclosed in
the Prospectus. There is no franchise, contract or other
document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an
exhibit thereto, which is not described or filed as required.
The statements in the Prospectus under the headings "Federal
Tax Considerations," "Description of Securities," "Description
of the Series D Convertible Preferred Stock" and "Business -
Legal Proceedings" fairly summarize the matters therein
described. 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.
(v) The Registration Statement has become effective
under the Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b);
to our knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued, no proceedings
for that purpose have been instituted or threatened and the
Registration Statement and the Prospectus and the documents
filed under the Act and the Exchange Act and incorporated by
reference in the Registration Statement and the Prospectus
(other than the financial statements, notes and schedules
thereto and other financial and accounting information
contained therein or incorporated therein by reference, as to
which we express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the
Exchange Act and the respective rules thereunder.
(vi) The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations
under this Agreement to consummate the transactions
contemplated hereby, including, without limitation, the
corporate power and authority to issue, sell and deliver the
Securities to be sold by the Company as provided herein. This
Agreement has been duly authorized, executed and delivered by
the Company. The Certificate of Designation has been duly
authorized by all necessary corporate action and any necessary
stockholder action, has been duly executed by the Company and
filed with the Secretary of State of the State of Nevada.
(vii) Neither the Company nor any Subsidiary is and,
after giving effect to the offering and sale of the Securities
and the application of the proceeds thereof as described in
the Prospectus, will not be (x) an "investment company" as
defined in the Investment Company Act of 1940, as amended, or
(y) a "holding company" or a "subsidiary company" or an
"affiliate" of a holding company
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within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(viii) No consent, approval, authorization, filing
with or order of any court or governmental agency or body is
required in connection with the transactions contemplated
herein, except (a) such as have been obtained under the Act,
(b) such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution
of the Securities by the Underwriters in the manner
contemplated in this Agreement and in the Prospectus and such
as may be required by the NASD (as to which we express no
opinion), (c) such as may be required from the FCC or any
State Telecommunications Agencies (as to which we express no
opinion), (d) such other approvals (specified in such opinion)
as have been obtained and (e) where the failure to obtain such
consent, approval, authorization or order would not, singly or
in the aggregate, have a Material Adverse Effect, whether or
not arising from transactions in the ordinary course of
business. To our knowledge, after reasonable inquiry, no
consents or waivers from any other person are required in
connection with the transactions contemplated herein, other
than such consents and waivers (specified in such opinion) as
have been obtained.
(ix) Neither the issue and sale of the Securities,
nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation of the terms or
provisions of, or a default under (or an event that with
notice or lapse of time or both would constitute a default
under) or the imposition of any lien, charge or encumbrance
upon any property or assets of the Company or the Subsidiaries
pursuant to, (i) the charter or bylaws of the Company or any
Subsidiary, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument
known to us to which the Company or any Subsidiary is a party
or by which any of them may be bound or to which any of them
or their respective property is subject, or (iii) any local,
state, federal or administrative statute, rule or regulation
(other than Telecommunications Laws, as to which we express no
opinion) applicable to the Company or any 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 any
Subsidiary or any of their assets or properties known to us
(other than any which may have been issued by the FCC or State
Telecommunications Agencies, as to which we express no
opinion), except in the case of clauses (ii), (iii) and (iv)
for such conflicts, breaches, violations, defaults or
impositions of liens, charges or encumbrances that would not,
singly or in the aggregate, have a Material Adverse Effect,
whether or not arising from transactions in the ordinary
course of business.
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(x) Except as set forth in or contemplated in the
Prospectus, to our knowledge, after reasonable inquiry, (i) no
action, suit, investigation or proceeding (other than
proceedings before the FCC or State Telecommunications
Agencies, as to which we express no opinion) by or before any
court or governmental agency, authority or body or any
arbitrator involving the Company or any Subsidiary or any of
their respective property is pending or threatened (ii) no
statute, rule, regulation or order has been enacted, adopted
or issued by any governmental agency or has been proposed by
any governmental body (except that we express no opinion with
respect to Telecommunications Laws) and (iii) no injunction,
restraining order or order of any nature to which the Company
or any Subsidiary is or may be subject or to which the
business, assets, or property of the Company or any Subsidiary
are or may be subject, has been issued (other than any which
may have been issued by the FCC or State Telecommunications
Agencies, as to which we express no opinion) that (i) could
reasonably be expected to have a material adverse effect on
the performance of this Agreement or the consummation of any
of the transactions contemplated hereby or (ii) could
reasonably be expected to have a Material Adverse Effect,
whether or not arising from transactions in the ordinary
course of business.
(xi) Except for the selling stockholders named in the
Registration Statement, no holders of securities of the
Company have rights to the registration of such securities
under the Registration Statement.
(xii) We are 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.
(xiii) No holder of any outstanding shares of the
Company's capital stock are entitled to any rights pursuant to
Sections 78.3791 through 78.3793 of the Nevada Revised
Statutes.
(xiv) Based on the laws in effect on the date hereof,
the shares of Common Stock issuable as dividends on the Series
D Preferred Stock in accordance with the provisions of the
Certificate of Designation and the shares of Common Stock
issuable upon conversion of the Series D Preferred Stock in
accordance with the provisions of the Certificate of
Designation will be freely tradable securities within the
meaning of the Act assuming such shares are not held by
affiliates of the Company within the meaning of the Act.
(xv) None of the (a) issuance of the Securities, (b)
the conversion of the Series D Preferred Stock into Common
Stock in accordance with the provisions of the Certificate of
Designation or (c) the issuance of Common Stock as payment of
dividends on the Series D Preferred Stock in accordance with
the provisions
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of the Certificate of Designation will result in any holder of
any security convertible into or exchangeable for shares of
Common Stock or any outstanding option, right or warrant to
purchase shares of Common Stock or any security convertible
into or exchangeable for shares of Common Stock being entitled
to purchase additional shares of Common Stock or to purchase
shares of Common Stock at a lower price per share upon
exercise, conversion or exchange of such outstanding security.
(xvi) We have 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 we have not undertaken to investigate or verify
independently, and do 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
our attention which led us to believe that on the Effective
Date, the Execution Time or the date the Registration
Statement was last deemed amended the Registration Statement
contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the Prospectus as of its date and on the Closing Date
included or includes any untrue statement of a material fact
or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances
under which they were made, not misleading (in each case,
other than the financial statements and related notes, the
financial statement schedules and other financial and
accounting information contained therein, as to which we
express no opinion).
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other
than the State of Georgia, the laws of the State of Nevada governing
corporations or the federal laws of the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of
other counsel of good standing whom they believe to be reliable and who
are satisfactory to counsel for the Underwriters and (B) as to matters
of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the
Prospectus in this paragraph (b) include any supplements thereto at the
Closing Date.
(c) The Company shall have requested and caused Xxxxx Xxxx &
Xxxxxx LLP, telecommunications counsel for the Company, to have
furnished to the Representatives their opinion, dated the Closing Date
and addressed to the Representatives, to the effect that:
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(i) All of the licenses, permits and authorizations
required by the FCC for the provision of telecommunications
services by the Company and the Subsidiaries, as such services
are described in the Prospectus and the Registration
Statement, have been issued to and are validly held by the
Company and the Subsidiaries. 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
Subsidiaries, as such services are described in the Prospectus
and the Registration Statement, have been issued to and, to
our knowledge, are validly held by the Company and the
Subsidiaries, 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 and, to our knowledge, the Company and
the Subsidiaries are in compliance in all material respects
with each such license, permit or authorization.
(ii) Neither the Company nor any Subsidiary is the
subject of any proceeding (including a rule making
proceeding), pending complaint or investigation, or, to our
knowledge, any threatened complaint or investigation, before
the FCC, or, to our knowledge, of any proceeding (including a
rule making proceeding), pending complaint or investigation,
or any threatened complaint or investigation, before the State
Telecommunications Agencies (x) based, in each case, on any
alleged violation of any statutes governing the FCC
(including, without limitation, the Communications Act of
1934, as amended, and the Telecommunications Act of 1996, as
amended) or the State Telecommunications Agencies and the
orders, rules and regulations promulgated thereunder (the
"Telecommunications Laws") by the Company or any 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 , (y) that is likely to result
in denial of any pending application of the Company or of any
Subsidiary for any license, permit or authorization granted by
the FCC or any State Telecommunications Agencies or (z) except
for proceedings of general applicability or as set forth in
the Prospectus, that could result in the revocation,
materially adverse modification or suspension of any such
license, permit or authorization.
(iii) The statements in the Registration Statement
under the headings of "Risk Factors - Our services are highly
regulated and changes in current or future laws or regulations
could restrict the way we operate our business," "Business
Legal Proceedings" and "Business - Regulation," insofar as
such statements summarize applicable provisions of the
Telecommunications Laws or litigation arising therefrom or
related thereto, fairly and accurately summarize the matters
therein described and to our knowledge, do not omit a material
fact necessary to make the statements contained therein not
misleading.
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(iv) The Company and the Subsidiaries have 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.
(v) Neither the execution and delivery of the
Underwriting Agreement nor the sale of the Securities
contemplated thereby will conflict with or result in a
violation of any Telecommunications Laws applicable to the
Company or the Subsidiaries, except where the conflict with or
the violation of any Telecommunications Laws would not have a
Material Adverse Effect.
(vi) In connection with our representation of the
Company and the Subsidiaries, 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. The foregoing
assumes that the Company and the Subsidiaries currently are in
substantial compliance with all material Telecommunications
Laws applicable to them except as disclosed in the
Registration Statement or the Prospectus.
In rendering such opinion, such counsel may state that it
expresses no opinion with respect to matters other than those arising
under Telecommunications Laws and may rely as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of
the Company and public officials. References to the Prospectus in this
paragraph (c) include any supplements thereto at the Closing Date.
(d) The Representatives shall have received from Kronish Xxxx
Xxxxxx & Xxxxxxx LLP, counsel for the Underwriters, such opinion or
opinions, dated the Closing Date and addressed to the Representatives,
with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospectus (together with any supplement
thereto) and other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(e) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectus, any supplements to the Prospectus and this Agreement and
that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Company has
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complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or
prior to the Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included or incorporated by reference in the
Prospectus (exclusive of any supplement thereto), there has
been no material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the
Company and the Subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(f) The Company shall have requested and caused Xxxxxx
Xxxxxxxx LLP, to have furnished to the Representatives, at the
Execution Time and at the Closing Date, letters, dated respectively as
of the Execution Time and as of the Closing Date, in form and substance
satisfactory to the Representatives, confirming that they are
independent accountants within the meaning of the Act and the Exchange
Act and the respective applicable rules and regulations adopted by the
Commission thereunder and that they have performed a review of the
unaudited interim financial information of the Company for the
nine-month period ended September 30, 1999 and as at September 30,
1999, in accordance with Statement on Auditing Standards No. 71, and
stating in effect that:
(i) in their opinion the audited consolidated
financial statements and financial statement schedules
included or incorporated by reference in the Registration
Statement and the Prospectus and reported on by them comply as
to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and
the related rules and regulations adopted by the Commission;
(ii) on the basis of a reading of the latest
unaudited consolidated financial statements made available by
the Company and the Subsidiaries; their limited review, in
accordance with standards established under Statement on
Auditing Standards No. 71, of the unaudited interim financial
information for the nine-month period ended September 30,
1999, and as at September 30, 1999; carrying out certain
specified procedures (but not an examination in accordance
with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders, directors and audit
committees of the Company and the Subsidiaries; and inquiries
of certain officials of the Company who have responsibility
for financial and accounting matters of the Company and the
Subsidiaries as to transactions and
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events subsequent to September 30, 1999 nothing came to their
attention which caused them to believe that:
(1) any unaudited financial statements
included or incorporated by reference in the
Registration Statement and the Prospectus do not
comply as to form in all material respects with
applicable accounting requirements of the Act and
with the related rules and regulations adopted by the
Commission with respect to financial statements
included or incorporated by reference in quarterly
reports on Form 10-Q under the Exchange Act; and said
unaudited financial statements are not in conformity
with generally accepted accounting principles applied
on a basis substantially consistent with that of the
audited financial statements included or incorporated
by reference in the Registration Statement and the
Prospectus;
(2) with respect to the period subsequent to
September 30, 1999, there were any changes, at a
specified date not more than five days prior to the
date of the letter, in the long-term debt of the
Company and the Subsidiaries or capital stock of the
Company or decreases in the stockholders' equity of
the Company (except for activity related to warrant
exercises and employee stock option exercises) as
compared with the amounts shown on the September 30,
1999 consolidated balance sheet included or
incorporated by reference in the Registration
Statement and the Prospectus, or for the period from
October 1, 1999 to such specified date there were any
decreases, as compared with the corresponding period
in the preceding year, in operating revenues or net
loss of the Company, except in all instances for
changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an
explanation by the Company as to the significance
thereof unless said explanation is not deemed
necessary by the Representatives;
(3) the information included or incorporated
by reference in the Registration Statement and
Prospectus in response to Regulation S-K, Item 301
(Selected Financial Data), Item 302 (Supplementary
Financial Information), Item 402 (Executive
Compensation) and Item 503(d) (Ratio of Earnings to
Fixed Charges) is not in conformity with the
applicable disclosure requirements of Regulation S-K;
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its Subsidiaries) set forth in the Registration
Statement and the Prospectus and in Exhibit 12 to the
Registration Statement, including the information set forth
under the captions
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"Prospectus Summary - Summary Consolidated Financial and
Operating Data," "Capitalization," "Selected Consolidated
Financial and Operating Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in
the Prospectus, the information included in Items 1, 2, 6, 7,
7A and 11 of the Company's Annual Report on Form 10-K,
incorporated by reference in the Registration Statement and
the Prospectus, the information included in the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included in each of the Company's Quarterly
Reports on Form 10-Q, incorporated by reference in the
Registration Statement and the Prospectus, and the information
included in the press releases announcing the Company's second
quarter and third quarter results filed as exhibits to the
Company's Current Reports on Form 8-K incorporated by
reference in the Registration Statement and the Prospectus
agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation.
References to the Prospectus in this paragraph (f) include any
supplement thereto at the date of the letter.
(g) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been (x) any change or
decrease specified in the letter or letters referred to in paragraph
(f) of this Section 6 or (y) any change, or any development involving a
prospective change, in or affecting the condition (financial or
otherwise), earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement thereto)
the effect of which, in any case referred to in clause (x) or (y)
above, is, in the sole judgment of the Representatives, so material and
adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the
Registration Statement (exclusive of any amendment thereof) and the
Prospectus (exclusive of any supplement thereto).
(h) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information, certificates
and documents as the Representatives may reasonably request.
(i) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt securities
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act) or any notice given
of any intended or potential decrease in any such rating or of a
possible change in any such rating that does not indicate the direction
of the possible change.
(j) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of Exhibit A
hereto from each officer
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and director of the Company and each stockholder listed on Schedule II
hereto addressed to the Representatives.
(k) The Securities shall have been listed and admitted and
authorized for quotation on the Nasdaq National Market and satisfactory
evidence of such actions shall have been provided to the
Representatives.
(l) The Certificate of Designation shall have been filed with
the Secretary of State of the State of Nevada and satisfactory evidence
thereof shall have been provided to the Representatives.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company in
writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Kronish Xxxx Xxxxxx & Xxxxxxx LLP, counsel for the
Underwriters, at 0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, on the Closing Date.
7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof 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 other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally through Xxxxxxx Xxxxx Xxxxxx Inc. on demand for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act, against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (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 Securities as originally filed or in any amendment thereof, or in any
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
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material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
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 specifically for inclusion therein.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of
its officers who signs the Registration Statement, and each person who
controls the Company within the meaning of either the Act or the
Exchange Act to the same extent as the foregoing indemnity from the
Company to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company by or
on behalf of such Underwriter through the Representatives specifically
for inclusion in the documents referred to in the foregoing indemnity
provided, however, that in no case shall any Underwriter (except as may
be provided in any agreement among underwriters relating to the
offering of the Securities) be responsible for any amount in excess of
the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise
have. The Company acknowledges that the statements set forth in the
last paragraph of the cover page regarding delivery of the Securities
and, under the heading "Underwriting", (i) the list of Underwriters and
their respective participation in the sale of the Securities, (ii) the
sentences related to concessions and reallowances and (iii) the
paragraphs related to stabilization, syndicate covering transactions
and penalty bids in any Preliminary Prospectus and the Prospectus
constitute the only information furnished in writing by or on behalf of
the several Underwriters for inclusion in any Preliminary Prospectus or
the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party
in writing of the commencement thereof; but the failure so to notify
the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying
party shall be entitled to appoint counsel of the indemnifying party's
choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case
the
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indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or
parties except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local
counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual
or potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such
action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying
party. It is understood, however, that the Company shall, in connection
with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and
expenses of only one separate firm of attorneys (in addition to any
local counsel) at any time for all such Underwriters and controlling
persons, which firm shall be designated in writing by Xxxxxxx Xxxxx
Xxxxxx. An indemnifying party shall not be liable under this Section 8
to any indemnified party regarding any settlement or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim
or action) unless such settlement, compromise or consent is consented
to by such indemnifying party, which consent shall not be unreasonably
withheld.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company and the
Underwriters severally agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and one or more of the
Underwriters may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand
and by the Underwriters on the other from the offering of the
Securities; provided, however, that in no case shall any Underwriter
(except as may be provided in any agreement among underwriters relating
to the offering of the Securities) be responsible for any amount in
excess of the underwriting discount or commission applicable to the
Securities purchased by such Underwriter hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Underwriters severally shall contribute in
such proportion as is
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appropriate to reflect not only such relative benefits but also the
relative fault of the Company on the one hand and of the Underwriters
on the other in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be
equal to the total net proceeds from the offering (before deducting
expenses) received by it, and benefits received by the Underwriters
shall be deemed to be equal to the total underwriting discounts and
commissions, in each case as set forth on the cover page of the
Prospectus. Relative fault shall be determined by reference to, among
other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information provided by the Company on the one hand or
the Underwriters on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method
of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of
this paragraph (d), 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 8, each person who
controls an Underwriter within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the
meaning of either the Act or 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 the applicable terms and
conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
five Business Days, as the Representatives shall determine in order that the
required changes in the Registration Statement and the Prospectus or in any
other documents or arrangements may be
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effected. Nothing contained in this Agreement shall relieve any defaulting
Underwriter of its liability, if any, to the Company and any nondefaulting
Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in the Company's Common Stock shall have
been suspended by the Commission or the Nasdaq National Market or trading in
securities generally on the New York Stock Exchange or the Nasdaq National
Market shall have been suspended or limited or minimum prices shall have been
established on such Exchange or the Nasdaq National Market, (ii) a banking
moratorium shall have been declared either by federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war, or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the Representatives, impractical or inadvisable
to proceed with the offering or delivery of the Securities as contemplated by
the Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors, employees, agents or controlling persons referred to in
Section 8 hereof, and will survive delivery of and payment for the Securities.
The provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to the Xxxxxxx Xxxxx Xxxxxx Inc. General Counsel
(fax no.: (000) 000-0000) and confirmed to the General Counsel, Xxxxxxx Xxxxx
Xxxxxx Inc., at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Attention:
General Counsel; or, if sent to the Company, will be mailed, delivered or
telefaxed to MGC Communications, Inc., Attention: Chief Financial Officer (fax
no.:[ ] ) and confirmed to it at MGC Communications, Inc., 000 Xxxxx'x
Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxx 00000, Attention: Chief Financial Officer,
with a copy to Xxxxx, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C., One Securities
Centre, Suite 000, 0000 Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and no other person will have any right or obligation
hereunder.
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14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or trust
companies are authorized or obligated by law to close in New York City.
"Commission" shall mean the Securities and Exchange
Commission.
"Effective Date" shall mean each date and time that the
Registration Statement, any post-effective amendment or amendments thereto and
any Rule 462(b) Registration Statement became or become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(a) above and any preliminary prospectus included in
the Registration Statement at the Effective Date that omits Rule 430A
Information.
"Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the Execution Time
or, if no filing pursuant to Rule 424(b) is required, shall mean the form of
final prospectus relating to the Securities included in the Registration
Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution
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Time (or, if not effective at the Execution Time, in the form in which it shall
become effective) and, in the event any post-effective amendment thereto or any
Rule 462(b) Registration Statement becomes effective prior to the Closing Date,
shall also mean such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be. Such term shall include any Rule
430A Information deemed to be included therein at the Effective Date as provided
by Rule 430A.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules
under the Act.
"Rule 430A Information" shall mean information with respect to
the Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b) relating to
the offering covered by the registration statement referred to in Section 1(a)
hereof.
[Signature Pages Follow]
34
35
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters.
Very truly yours,
MGC Communications, Inc.
By: _______________________
Name:
Title:
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The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Xxxxxxx Xxxxx Xxxxxx Inc.
Bear, Xxxxxxx & Co. Inc.
Xxxxxxx, Xxxxx & Co.
ING Barings LLC
Warburg Dillon Read LLC
By: Xxxxxxx Xxxxx Xxxxxx Inc.
By:_______________________________
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
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SCHEDULE I
NUMBER OF UNDERWRITTEN SECURITIES TO
UNDERWRITERS BE PURCHASED
------------ ------------------------------------
Xxxxxxx Xxxxx Xxxxxx Inc.
Bear, Xxxxxxx & Co. Inc.
Xxxxxxx, Xxxxx & Co.
ING Barings LLC
Xxxxxxx Xxxxxx Read LLC
------------------------------------
Total................................. ====================================
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SCHEDULE II
Providence Equity Partners III L.P.
JK&B Capital, L.P.
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Exhibit A
[LETTERHEAD OF OFFICER, DIRECTOR OR MAJOR STOCKHOLDER OF CORPORATION]
MGC Communications, Inc.
Public Offering of [ ]% Series D Convertible Preferred Stock
[DATE]
Xxxxxxx Xxxxx Xxxxxx Inc.
Bear, Xxxxxxx & Co. Inc.
Xxxxxxx, Xxxxx & Co.
ING Barings LLC
Warburg Dillon Read LLC
As Representatives of the several Underwriters,
c/o Xxxxxxx Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
This letter is being delivered to you in connection with: (i)
the proposed Underwriting Agreement (the "Common Stock Underwriting Agreement"),
between MGC Communications, Inc., a Nevada corporation (the "Company"), and each
of you as representatives of a group of Underwriters named therein, relating to
an underwritten public offering of Common Stock, $0.001 par value (the "Common
Stock"), of the Company and (ii) the proposed Underwriting Agreement (the
"Preferred Stock Underwriting Agreement"), between the Company and each of you
as representatives of a group of Underwriters named therein, relating to an
underwritten public offering of ___% Series D Convertible Preferred Stock,
$0.001 par value (the "Series D Preferred Stock"), of the Company
In order to induce you and the other Underwriters to enter
into the Common Stock Underwriting Agreement and/or the Preferred Stock
Underwriting Agreement, the undersigned will not, without the prior written
consent of Xxxxxxx Xxxxx Xxxxxx Inc., offer, sell, contract to sell, pledge or
otherwise dispose of, (or enter into any transaction which is designed to, or
might reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, including the filing or participation in the filing of a
registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder with respect to, any
shares of capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect
40
any such transaction, for a period of 90 days beginning on the later of the date
the Common Stock Underwriting Agreement is executed or the date the Preferred
Stock Underwriting Agreement is executed, other than shares of Common Stock
disposed of as bona fide gifts approved by Xxxxxxx Xxxxx Xxxxxx Inc.
If for any reason both the Common Stock Underwriting Agreement
and the Preferred Stock Underwriting Agreement shall be terminated prior to the
Closing Date (as defined in the Common Stock Underwriting Agreement and
Preferred Stock Underwriting Agreement), the agreement set forth above shall
likewise be terminated.
Yours very truly,
[SIGNATURE OF OFFICER, DIRECTOR OR MAJOR
STOCKHOLDER]
[NAME AND ADDRESS OF OFFICER, DIRECTOR OR MAJOR
STOCKHOLDER]
